Banco del Bajío, S.A., Institución de Banca Múltiple (BBAJIOO) Earnings Call Transcript & Summary

Welcome to Banco del Bajío's Second Quarter 2025 Results Conference Call. My name is Daniela, and I will be your coordinator today. [Operator Instructions] Before we begin the call today, I would like to remind you that forward-looking statements made during today's conference call do not account for future economic circumstances, industry conditions, company performance or financial results. These statements are subject to a number of risks and uncertainties. Please note that this video conference is also being recorded. Joining us today from BanBajío are Mr. Carlos De la Cerda, Executive Vice Chairman of the Board of Directors; Mr. Edgardo del Rincon, Chief Executive Officer; Mr. Joaquin Dominguez, Chief Financial Officer; and Ms. Angelica Munoz, Investor Relations Officer. They will be available to answer your questions during the Q&A session. Today's opening remarks and presentation will be delivered by Mr. Desmond O'Shaughnessy. With that, I will turn the call over to Mr. O'Shaughnessy. Please go ahead.

Good morning to everyone, and welcome to Banco del Bajío's conference call for the second quarter of 2025. On this conference call, we'll talk about the quarterly results and the evolution of the main trends. All the information used throughout the presentation about the industry is from CNBV's data as of May, which is the most recent publicly available information. Without any further ado, let us start the presentation. To begin with, on Slide 3, we would like to briefly describe some key ratios recorded in the quarter. The loan portfolio grew 6.7% with company loans expanding by 9.5%. Total deposits grew 7%, showing sequential growth in the quarter. Regarding asset quality, the NPL ratio stood at 1.8% and the coverage ratio at 1.119x, while the cost of risk was 124 basis points. The preliminary capitalization ratio stood at 14.5%, 118 basis points lower than in the first quarter of 2025 as a result of the dividend decree. Quarterly net income was MXN 2.2 billion, yielding an ROE of 18.7%. The net interest margin was 6.1%, and efficiency ratio stood at 13.9%. Meanwhile, the ROE for the half year was 20.6%, the NIM was 6.2% and efficiency ratio was 38.1%. We would like to emphasize some key indicators from our digital transformation strategy. On Slide 4, you can note the evolution of the transactions at BanBajío. In the chart above, you can see the number of transactions on the different channels. Observe how in 2020, we have more transactions done in branches than in digital channels and how this has evolved with branch transactions decreasing in absolute terms compared to 5 years ago. On the other hand digital transactions are now by far our most important channel. The chart below depicts a similar picture with amounts transacted on each channel. The amounts transacted have increased at a compound rate of 23% over the last 5 years. Within the same time span, transactions in Bajionet increased by a multiple of 3.5x, while branches have only 1.4x. Moreover, Bajionet now accounts for 81% of all the amounts transacted compared to 64% of the second quarter of 2020. The increase in volumes and transaction made through our channels are the results of an effective digital strategy, which has led clients to be more engaged with BanBajío. This becomes evident when you see how transactions have increased compared to the growth active clients at a CAGR of 7% over the last 5 years. This evolution may be supportive of continuous growth in deposits and noninterest income. On Slide 5, we continue to observe good trends in company and consumer loans that grew 9.5% and 14.4%, respectively, while we saw contractions in government, financial institutions and mortgages. The total loan portfolio reached MXN 265 billion, an increase of 6.7% compared to the second quarter of 2024. During this quarter, it is worth mentioning that this evolution continues to be supportive of the yield of the portfolio as the bank is growing in segments with better margins. Total deposits stood at MXN 263 billion, an increase of 7% compared to the second quarter of 2024. We will provide more details about the funding structure and its strength in Slide 8. The evolution of our consumer loans portfolio without auto loans is stated on Slide 6. It accounted for MXN 7 billion, which increased by 15.1% against the second quarter of 2024. As we have mentioned in previous quarters, we see the consumer loan portfolio as a strategic asset to diversify our business. We have matched to grow these portfolios with a remarkable asset quality, better than the industry standards as shown in the charts with NPL ratios of payroll loans at 2.62%, credit cards at 2.94% and personal loans at 1.88%. We would like to highlight BanBajío's asset quality on Slide 7. As you can see in the upper chart, our NPL ratio stands at 1.83%, while our NPL adjusted stood at 2.9%. Both ratios compare better than the industry standard. The chart on the bottom right shows the evolution of the cost of risk, which stands at 124 basis points for the quarter. The coverage ratio remains strong at 1.19x. Even though we have done a cleanup of the balance sheet over the past quarters, we continue to hold MXN 650 million additional reserves in the balance sheet. The increase in cost of risk and NPL is a combination of specific cases involving corporate treasury management and on the other hand, the deterioration of the financial situation of several companies resulting from economic uncertainty. Moving on to Slide 8. Total funding stood at MXN 314 billion, an increase of 5.8% compared to the second quarter of 2024. Within the funding mix, we see how the overall mix of client deposits against institutional funding has remained stable. However, we have seen how in the last 2 years, demand deposits with cost have gained relevance against 0 cost deposits reflecting on the competition we see in the market for corporate treasuries. The funding mix now is comprised of 0 cost demand deposits up 18%, interest-bearing demand deposits at 24%, time deposits at 42% and institutional funding at 16%. On Slide 9, we can observe the evolution of our margins. The NIM for the second quarter was 6.1%, decreasing by 85 basis points year-over-year. The year-on-year reduction comes as a result of the sensitivity to rates, accounting for 47 basis points of the reduction and a negative impact on the mix which accounted for 38 basis points. We estimate our ex-ante sensitivity to rates considering the current mix of assets and liabilities to be around 21 basis points of NIM per every 100 basis point change in the benchmark rate, which would represent an impact of around MXN 738 million of revenues and MXN 465 million of net income for the full year. You will see the performance of BanBajío's revenues on Slide 10. We are presenting pro forma figures without considering the sale of nonstrategic assets in the second quarter of 2024. Total revenues decreased 2.9% pro forma compared to the second quarter of 2024 due to the reduction in interest rates. The financial margin contracted 5.4%, while noninterest income increased by 19.4% pro forma. Fees plus trading income grew strongly in the second quarter by 17.6% pro forma. The bank continues to make important progress in business like cash management fees, bank assurance, interexchange fees and POS fees growing at 53.1%, 14.7%, 9.3% and 9%, respectively. We can see the evolution of our efficiency ratio on Slide 11. It came in at 38.9% for the second quarter of 2025. BanBajío's efficiency ratio stands strong against the industry. In this second quarter, expenses grew by 7.5% year-over-year, which is less than the lower range of guidance. We continue to make efforts to bring down expense growth, and it is a priority for this year. However, the bank continues to invest in some key initiatives such as branch openings and some upgrades to the infrastructure. Slide 12 presents the evolution of the profitability metrics of BanBajío. As shown in the charts, the quarterly ROE at 18.7%, and the quarterly ROA stood at 2.3%. On a per share basis, the second quarter EPS stood at MXN 1.82, which represents an annualized earning yield of 15.2% computed with the average stock price for the second quarter. Slide 13 shows the preliminary capitalization ratio as of June of 2025 of 14.53%, of which almost all of it is core Tier 1 capital. The capitalization level decreased compared to the previous quarter as a consequence of the dividend decree and payments. Lastly, on Slides 14 and 15, we present the updated guidance for 2025. We have revised our expectations for macro estimates. Now we expect an average Banxico rate in a range between 8.25% and 8.50% and Banxico end-of-period rate between 7% and 7.25% and GDP growth from 1% to 0%. We are forecasting loan growth to be from 5% to 6%, deposits growth from 6% to 9%, net interest margin to be between 6.0% and 6.1%, expenses growing from 8% to 10% and efficiency ratio between 40% and 42%. On the other hand, we update our expectations for asset quality given the weakness in the economic environment that we're seeing in the market. We are slightly increasing the guidance for cost of risk between 100 to 110 basis points, and we expect the NPL ratio to be below 1.9%. Net income from MXN 8.5 billion to MXN 8.8 billion and an ROE from 18.5% to 19.5%. We will continue to closely monitor the evolution of the drivers for the second half of the year, and we feel comfortable to deliver on the guidance that we're providing to the market. With this, I conclude my presentation. And now we can open the call to the Q&A session.

[Operator Instructions] And our first question comes from Ernesto Gabilondo at Bank of America.

My first question will be on your long-term ROE expectation on their normalized rates. We noted that you're expecting interest rates by year-end to be at 7%, 7.25%. However, how would you see interest rates for next year? And where do you see them normalizing? Considering those assumptions, would it be reasonable to expect the year-over-year inflection point in your earnings, maybe, I would say, at the end of the first half of next year? Any color on that will be very helpful. And then my second question is on asset quality. As you mentioned, there was a deterioration in NPLs. We saw provisions doubling year-over-year and you reduced your reserve coverage ratio. So can you elaborate how much of the travel corporates have already been cleaned up? And in which type of industries or geographies where those loans -- are you perceiving any potential risk in any sector? I think that will be my 2 questions.

Thank you, Ernesto, for your questions. Regarding ROE, our position is the same that we mentioned in the previous call. As you know, when we issue our initial 2025 guidance in January, we were expecting policy rates to end the year between 8.25% and 8.5%. Our revised estimate is like from 7% to 7.25%. And of course, that is having an impact already in margins. Additionally, we are experiencing a higher cost of risk than initially planned. However, we expect to manage and gradually reduce these impacts moving into 2026. Despite this, we remain confident in our profitability outlook. For this year, we now are expecting to close above 18.5% ROE. And with capital ratios close to 14%, we see no issue in maintaining a sustainable ROE in the high teens, supported by our disciplined cost control, our standard in credit underwriting and growing the loan portfolio. So what we are seeing in the medium term and long term is an ROE in the high teens. Regarding asset quality, yes, we are seeing some deterioration in asset quality, mainly among clients in the agri business and real estate development. In some cases, these clients have been affected by the market conditions, the strong peso or a slowdown in sales, while in others, is regarding poor decisions -- poor business decisions in those businesses. As a result, we are seeing an increase in NPLs and higher cost of risk. Nevertheless, we believe that the fundamentals of the portfolio remains solid. We continue to originate credit with disciplined underwriting standards and have become even more conservative in collaterals and guarantees structures. Our goal is to gradually reduce delinquency levels and cost of risk. At the same time, we acknowledge that this is part of the [Technical Difficulty] as well. So we remain committed to some credit practices and close monitoring of the portfolio, and we're expecting to reduce quarter-by-quarter NPLs and cost of risk in the coming months.

Just a couple of follow-ups. The first one is on the interest rate policy. As you mentioned, you're expecting between 7% to 7.25% this year. Do you expect that to continue in 2026? Or you expect that we can still have some cuts in 2026? That's my first follow-up. And the second follow-up is in this agri business and real estate development, you have already cleaned up everything or there are still -- or you have created all the provisions or how much of the provisions have been created related to those sectors? And geographically, most of it is coming in the center of Mexico or you have some of these real estate developments in the north of the country?

In terms of the interest rate for 2026, there is a lot of uncertainty and how the inflection is going to behave. And also the exchange rate. But we believe there is a space to continue reducing a little bit more rates during 2026. I mean, with inflation in control around 4%, the real interest rate could be between 150 and 200 basis points in a regular environment. Regarding asset quality, what we are seeing is a reduction quarter-by-quarter in a Stage 2. So we are reviewing all the cases that we are seeing in risk to see that future transition between steps in those cases. but we're expecting to reduce little by little in the coming quarters -- starting the following quarter, the NPL formation. In terms of geography, as you know, we have very good share in the Bajío region and also in several parts of the north. So in the agri business is mainly in the Bajío region and in the real estate development sector is between the Bajío and the north.

Our next question comes from Brian Flores at Citi.

I have a question here, maybe a quick follow-up on asset quality because in the guidance, you -- I think you committed to 120% coverage. You're already at that level. So basically, what I'm trying to ask here is if the -- if that level could increase a bit, given that, as you mentioned, NPL ratio should come down going forward? That is maybe the first question. And then a second one, given -- I think the graph you put in the presentation where maybe the efficiency gains that you have been seeing are a bit slowing down. Do you see expenses a bit pressured? If you could elaborate a bit on what is driving these investments? What are the main items there? I think it would be a great color. And then a third one, if I could, if you have any insights on extraordinary dividends. I think you mentioned 18.5% as a target of ROE. I think you mentioned capital close to 14%. So just wanted to get your thoughts on if this already includes some extraordinary distributions for 2025?

Regarding coverage ratio, the idea is to maintain the same levels that we have today. As you saw in the presentation, that level is very close now to the regulatory level. So the idea is to continue around those levels. Regarding expenses, at the end of the second quarter, we are growing expenses 8.9% year-over-year. As you saw, we continue to expand our branches network. We opened already 4 new branches and the plan is to open 5 more in the coming 4 to 5 months. It is important to remember that these new branches are adding 80 to 90 basis points to the expense growth, but they also allow us to enter new markets or strength our presence in areas with good potential growth. Important also to say that they are reaching breakeven point really soon in less than 18 months. Given the current trend, we are planning to revise our full year expense guidance to 8% to 10% now. We remain very cautious in new technology projects. And we are giving priority to those new revenue streams or new infrastructure regarding functionality that can provide a better satisfaction to customers or cybersecurity strategy. So thanks to this discipline, we are expecting to continue to have a very good efficiency ratio. Now we are planning to close the year very close to 40%. For the coming years, we would like to keep the efficiency ratio in the low 40s.

And Brian, this is Carlos, Carlos De La Cerda. Regarding the dividend issued, all of our guidance ratio are calculated without considering any extraordinary dividend. Whether we decide to pay an additional dividend, that decision will be taken when we have the more clarity on the direction of the economy. So we think we will make that decision at the at the end of the third quarter of this year.

Okay. Perfect. That is super clear. If I may, I think you mentioned, Edgardo, your expectations of lower rates maybe by -- or a continuation of lower rates. Do you think that it would make sense to reduce a bit the 21 bps sensitivity you have on the NIM or you will maintain [ to have ] in the last quarters?

Brian, this is Joaquin Dominguez. We think that we maintain the sensitivity rate. And we are not doing any additional change on our portfolio of investments in order to change it. It will depend more on the growth of the deposits and the mix of the deposits and also the growth on the portfolio -- in the consumer loan portfolio. But if we'll see a change, it will be a very small change in the sensitivity.

Our next question comes from Ricardo Buchpiguel at BTG Pactual.

I have only one topic that I wanted to ask, which is loan growth. We saw downward revision in your loan growth guidance and it would be interesting if you could elaborate more on what is driving this slowdown, especially since that it seems larger than the cut in GDP forecast that you guys showed? And also if you could comment if there is any specific sectors or regions where you're seeing loan growth being a bit more challenging? And if you think that these headwinds eventually could extend into 2026 as well?

As you saw by segment, we are seeing good performance in company loans, growing almost 10% year-over-year. And it's important to say that 90% of the growth in company loans is coming from new customers with an average ticket close to MXN 20 million. So it's very well diversified. On the consumer side, the loan growth continued to be strong with more than 14% year-over-year. And we are planning to continue with that trend going forward. And now the consumer portfolio is exceeding MXN 7 billion. In contrast, we continue to intentionally reduce exposure in lower-margin segments, including government loans, in which the margins today are really, really -- very, very small and also in mortgages. So this is impacting -- has a positive impact in the yield or the loan book. It is important to highlight also that yes, we are seeing softer credit demand, mainly as a result of the slowdown in the economy and also the increase in uncertainties. So we are seeing private investment reducing in the coming months and less projects from our customers. Still, the second half of the year historically is the most relevant period for loan growth. To reach the new guidance in loan growth, we will need to grow the portfolio in approximately MXN 20 billion in the second half. Given the growth rate achieving in the last year, we consider this target to be achievable. So that is what I would like to comment. If you have any additional questions, please let us know.

Very clear. Just one quick follow-up. You mentioned that you decided to reduce exposure on this lower margin segments. The change that you saw versus the beginning of the year was higher risk on these types of loans or perhaps this lower margin even narrow margins after the year went by.

Yes. When I'm talking about lower margin [indiscernible] and related mainly to government loans in which we are seeing very, very short margins and also in mortgages. But we are continue growing company loans, mainly small and medium companies and also the consumer lending portfolio.

Our next question comes from Tito Labarta at Goldman Sachs.

A couple of questions also. I guess a bit of a couple of follow-ups. First on the asset quality. You mentioned, I guess, part of it was related to the FX appreciation in the quarter. Do you know like maybe, I don't know, what percentage or can you quantify to some extent, how much of it was related to FX? And how much of it is related to just the slower growth in the economy? So if it's just related to FX, maybe that subsides as the currency is a little bit more stable or if there's more risk just because the economic growth should continue to be at least a bit muted in the second half of the year? And then my second question, also a follow-up on the dividend. Just given you want to maintain capitalization ratio above 14%, you had 14.5% and with some pressure on profitability given lower rates and asset quality. I mean you already committed to a 50% payout of last year's earnings for this year. Do you think that 50% payout is sustainable in sort of this environment, keep trying to maintain that 14% capital ratio with ROEs in the high teens. I mean, loan growth is a little bit slower. But just how do you think about the sustainability of a 50% payout in the current environment?

Regarding your first question about the asset quality and the impact of the strong peso. Well, a few customers are seeing in the past year is a combination of higher production costs and at the same time, a strong peso that is reducing revenues. So that is impacting in general, a few customers, mainly in the agri business that they do export avocado, berries, et cetera, different products. So that is the impact that are facing a few customers. Regarding the dividend, do you want to mention, Carlos?

Yes. Historically, we have been paying out between 40% and 60% dividends. For the near future, that means next year, I don't see a problem that the bank remains paying in that range, basically 50% since we don't expect an explosion of loan growth in the economy. So we will keep monitor closely our capitalization rate and to decide year-by-year. But as of these conditions, I don't see any problem to keep paying out 50% dividend each year.

Okay. No, that's helpful. Maybe just one follow-up, Edgardo, on the asset quality. Can you remind us, I guess, maybe what percent of your loan book is agri business? And then you mentioned, I think, real estate was the other sector that had some impact. I guess what percentage is real estate? And I guess the real estate, was that more specific to a slowdown in the economy and that's related to the currency?

Yes, the agro business is around 17% of the total portfolio, and the real estate is about 7% to 8%.

Our next question comes from Neha Agarwala at HSBC.

If we can just talk a bit more about asset quality. Some of this deterioration was expected that you were mentioning that there are specific cases. Here on, do you see more such cases when you talk to your customers, do you see there other specific cases, which could be a problem in 3Q? Or do you see that most of that has been identified and you're dealing and provisioning for it already? Just wanted to get a sense of can the cost of risk version in 3Q, 4Q? Or do you think this quarter was the peak? We'll have elevated levels in the second half as well. But it seems like it should ease here on, and this was the peak. So could you just confirm that?

What we are seeing mid-2025 is, yes, specific cases, in many cases, regarding poor decisions in those customers and also the impact as we -- as I mentioned, of the strong peso in those which export to the U.S. mainly in the agro. So I mean we could have more specific cases, but we are not seeing a deterioration across all the activity in the agro or in real estate. We are continuing to see very specific cases. So we are expecting to improve quarter-by-quarter the information of new NPL and be able to reduce cost of risk by next year.

Our next question comes from Pablo Ordóñez at GBM.

My question is on your regional strategy, how is it evolving? Are you still seeing an opportunity to take market share in Mexico City, Monterrey, [indiscernible]? And also how do you see the competitive dynamics? So banks are mentioning that they are looking to grow by taking market share. So is this also considered in your lower loan growth assumptions? And in terms of profitability, are you seeing any pressure in terms of the loan rates for your commercial customers?

What we are seeing is -- I mean, we are growing very well in the metropolitan area, we opened a new region in Puebla that is part now of the metropolitan area last November, and we are growing very well in Puebla as well. So a part of the growth that you are seeing in this report is coming from the metropolitan area in which when we start the -- this strategy years ago, we had only 2.4% market share in Mexico City. Now it's above 3.1%. So we are proving well and the idea is to continue with that growth in the coming years. We are growing very well mainly in SMEs in the small and medium companies in that area, and we are opening a few branches to reinforce our presence in that region. We are maintaining very good market shares in the Bajío region in which we are already leaders in commercial lending to companies in all the states in the Bajío region. And we are continue growing and gaining market share in several states in the north of the country. About the competitive environment, yes, we are seeing a strong competition and a lot of pricing competition mainly in the loan book. And that happens always when it's harder to grow the loan portfolio, and we expect that to continue. But our competitive advantage is mainly in small and medium companies, and we are growing very well there.

Perfect. And a quick follow-up on asset quality. If we look at Banco del Bajío before the pandemic, you used to have an NPL of 1%. Now it's a little bit below 3%. How should we think long term the Banco del Bajío in terms of the risk appetite and the recurring levels of NPLs? Where do you feel comfortable with?

Yes, Pablo. In that, let's say, assumption, we need to consider that we are growing faster, the consumer portfolio. And by definition, that has an NPL -- a higher NPL, but also a higher margin. So yes, the idea is to reduce NPLs mainly in companies, in company loans. And we believe that in the coming quarters, we are going to see a normalized NPL for companies.

Our next question comes from Yuri Fernandes at JPMorgan.

If I may, a few follow-ups here. On asset quality, if you can comment a little bit on collaterals, especially the government guarantees that you have. I think asset quality has become a topic, right, and this is we're seeing. This is not only for you, we also saw more misses on other players that reported already. So if you can comment on the collateral or the government guarantees on things like that can work and help you to offset some of those problems. Then my second the question is regarding government loan. I think this is also an industry topic, right? The industry has not been growing in that portfolio [indiscernible] gaining some market share there. Can you explain why the product become less attractive over the years, like why spreads are compressed so much and nobody like many players are kind of reducing their exposure to the government lending in Mexico. And finally, a third here, just quickly on know your clients at money laundering given all the noises you saw. If you can comment briefly on any initiatives the bank has been doing restrain your internal controls?

We continue to have very good collaterals and also guarantees from [indiscernible] and development banks and also real estate guarantee. So in several cases, of course, where we are taking legal action and we are expecting to recover in the coming months by that channel. So the strategy to have a very strong collaterals in loans continue, and that has been also the case for BanBajío. Your second question was about?

Government loans.

The government loans.

The government loans, what we are seeing today is a margin that in many cases, is less than 50 basis points. So the value of those loans compared to the value that we can get in company loans is very small. So it's not attractive for us. So we rather continue growing higher-margin segments other than government loans. That is the main reason.

I would like to add about government loans that they are usually very long term. It's normal that they ask for 20-year loans. And also, what usually happens -- you get a very small margin, sometimes way less than the 50 basis points that Edgardo was mentioning. But also after a couple of years, they pay -- they usually repay you or prepay you that loan to restructure a bigger debt. And it's a dynamic that we don't like and we don't think it creates value within the bank. That's why we decided to restrain -- strongly restrain our government loans.

Regarding your question about money laundering, BanBajío has always had a very strong institutional vision that is focused on regulatory compliance, transparent collaboration with authorities, always the rates that we have from the CNBV are very good and very robust internal controls. Our AML and KYC framework includes segregation of tourists between front and the back office. We employ very well-trained personnel, automated systems and a second line of defense with decision-making autonomy to monitor clients and transactions. So we have been doing for years investments in technology that enable digital KYC records, real-time alerts and risk-based customers assessments. Also, the bank is enforcing strict documentation and due diligence protocols, especially when we open new accounts. And also, we are using third-party companies do visit the address of the customers to ensure the existence of those customers. And also, we are updating customer profiles continuously to prevent suspicious activity. So our compliance culture is rooted in ethics, accountability and proactive risk management, and we are planning to continue with that and, of course, reinforce that activity.

Our next question comes from Andres Soto at Santander.

I have a follow-up question regarding cost of risk outlook. You had mentioned your expectation for this to improve next year. I would like to understand what type of GDP growth are you looking for in 2026? Or what are the drivers for recovery in some specific sectors that you guys may participate?

There is a lot of uncertainty at this moment, Andres, in terms of GDP. Yes, we're expecting a recovery from 2025 in which we are expecting 0 growth in GDP. So with that, we expect to grow the loan book a little bit more than this year, but it's very difficult to forecast at this moment. So we rather wait until we have more clarity about the [ TAM and ] negotiations, the final impact of the tariffs between the U.S. and Mexico and all the political uncertainty that is now -- that we are having now in Mexico. So we are a little bit concerned about private investment. And we believe we need to wait a little bit to forecast with more clarity 2026. So yes, we expect to grow a little bit more because the base of 2025 will be really a good comparison.

Absolutely. My question was more related to cost of risk, if the improvement in cost of risk was something sector, specifically in specific or it was related to the overall economy. But on that note, I also had a follow-up question to your previous answer. Can you give us a sense of what percentage of your loan portfolio has any type of collateral?

Yes, Andres. As I mentioned, we are talking mainly in terms of activity about agro business and real estate development. And the collateral level of the band is around 80%, and it has been at that level for a while.

Our next question comes from [indiscernible] at HSBC.

I want to understand this 80% collateral you have. Typically, what is the amount of time it takes to recover money from the collateral on stress loans?

Yes. The collaterals that we have, for example, guarantees from the government is immediately. And we are using, of course, that possibility. In terms of collaterals that we need to recover when we take a legal action that would take a few months in some cases, a couple of years.

Understood. That's very helpful. And in terms of -- can I just follow up on the asset quality again? When I look at your commentary and the numbers, thank you for the commentary on how you expect the asset quality to trend over the next few quarters. But if you could help us maybe in your experience, compare it with some previous asset quality cycles that you've seen? And what is it that you see that gives you confidence that this is probably not the sort of stressful asset...

Yes. The main reason why is -- what we are seeing is very specific cases, but we have not seen a trend across all these segments regarding those activities that we are seeing today with more concentration of problems. So we continue to have many, many customers that are -- that have a very good payment behavior. So that is the main reason why we continue to see that this is not a formation of NPL across all the segments. We are seeing specific cases with problems.

Understood. And final question, in your NII -- in your NIM contraction, you mentioned 38 bps is due to changes in mix. If you could please double click on that and help me understand what exactly this change in mix is? That's my last question.

Yes, this is Joaquin Dominguez. When we refer to mix is a combination of several items. So first of all, as we have been paying dividends, we reduced the amount of productive assets. So the reduced -- this amount implies less interest rates, so less interest that affect the NIM. The second part is that we grow more in deposits than in loans. So the excess of liquidity was invested in securities. The yield of the securities is lower than the yield of the loan portfolio. So the impact in the NIM is that reduced the NIM and also we call it as a mix effect. And finally, the cost of funding specifically demand deposits with cost increased a little bit. So it affects because the total cost of funding and it also impacted the cost of funding and the mix.

Our next question comes from [indiscernible].

I am from Camissa Asset Management. Just 3 questions on my side. If I could just understand the recalibration in your deposit growth outlook, I mean typically in high uncertainty results in individuals and corporates maybe retaining greater cash balances? I mean, why are you seeing the need to reduce your deposit growth outlook. Second question, just understanding the portion of your loan book that's exposed to exporters and how you're thinking about managing any tariff-related risks that might that might impact those exporters business projects? And then just third question, one of the earlier attendees queried the possibility of extraordinary dividends. I'd just like to understand in terms of capital allocation decisions, if you do result in a situation where you have excess capital, how do you think about share buybacks versus extraordinary dividends and why you may or may not prioritize either of those options?

Regarding the mix in deposits, what we are seeing is a very good level of transactions from customers, and that is improving operational deposits. We are now doing 26 million transactions per month, and that is the average of the second quarter '25. And to give you an idea, that is more -- 47% more transactions than 3 years ago. But in digital channels, we are growing in that same period, more than 100%, 103%. So that is having an important impact in deposits from customers, mainly customers, mainly companies. And that is reducing need, for example, to capture deposits from interbank loans or repos. So if you see the mix of transactions, we are now depending more on customer deposits than institutional deposits. So that is the change in mix that we are seeing. Regarding buybacks, we are not planning at this moment any activity of buyback in the case of the capital level of the bank. Yes. The level of exporters of the bank is about 10% of our customer's base.

And you're needing to see a need to recalibrate risk appetite towards the export sector or not?

I don't think so. I mean, we are closely monitoring the activity of our customers, and we are in very close communication with them to see how they are going to react to any tariff. Of course, the activity, for example, is steel and aluminum. We are having very good communication with those customers to see how they are changing their strategy to face the tariffs that they are having today. So we are planning to continue with that, very close communication with them.

And we're going to close off with one last question. It's going to be a follow-up from Ernesto Gabilondo at Bank of America.

Just last question, a follow-up on the special dividend. I believe in the past you mentioned that you will pay or you could potentially pay everything when it exits the common equity Tier 1 ratio. I believe it was around 14.3% in this quarter. So making some numbers, you have an excess capital of roughly MXN 0.8 billion. That implies a 1.6% dividend yield. Am I right with the math? Is that what at some point you could be expecting?

As I mentioned before, the decision whether we'll pay an additional dividend will be taken after the third quarter results, so we can have more clarity and a better view of the economy and the loan growth rate in the economy. If we don't see a loan growth, an important loan growth, we could consider paying an extra dividend that would take our capitalization rate close to 14%, not below, but close to 14% and that could be a figure close to what you mentioned.

I would now like to hand the call back over to Angelica Munoz for some closing remarks.

Thank you very much for connecting. Please let us know us know if you have any further questions. We look forward to seeing you next quarter when we report the third quarter 2025.

That concludes today's call. You may now disconnect.