Bank of the Philippine Islands (BPI) Earnings Call Transcript & Summary

Okay. Good afternoon, everyone, and welcome to our Earnings Call to discuss BPI's Results for the Third Quarter and the First 9 Months of 2024. I am Chinky Lukban, your moderator for this afternoon. We are conducting this briefing in a hybrid manner with our speakers and panelists here in our headquarters at the Tower 2 of Ayala Triangle Gardens in Makati, while the rest of our participants are dialing in remotely. Just a reminder to everyone to enhance -- who are online to enhance your viewing experience, may we request you to select your view settings under side-by-side so that the slides will be much clearer. So this afternoon, I'm pleased to introduce our speakers and panelists this afternoon. They are: our President, TG Limcaoco; our Chief Finance Officer, Eric Luchangco, and they will be joined in the panel in the Q&A by Ms. Ginbee Go, our Head of Consumer Banking; Mr. Marcial, our Head of our Private Wealth Business; Jenny Lacerna, Head of our Mass Retail Products business; and John-C Syquia, who will be joining us remotely, our Head of Institutional Banking. We are also joined by the rest of the BPI senior leadership team in this call. This afternoon's agenda will begin with opening remarks from our President, TG Limcaoco; followed by our CFO, Eric Luchangco, who will walk you through the financial highlights for the first 9 months of the year, as well as some updates on our digital and sustainability initiatives. The floor will then be open to questions from the audience. Now, let me turn you over to TG for his opening remarks.

Thank you very much, Chinky, and a warm welcome to everyone dialing in today for our quarterly and 9 months earnings. BPI resulted, as Eric will tell you, the very strong results for the first 9 months with net income up 24.3%, EPS rising 16.5% that difference as a result of the 6% dilution of the Robinsons Bank shares that were issued upon the merger. We also had strong third quarter numbers where our net income versus quarter 2 was up 13.3%. We had record levels for both net interest and -- sorry, for net interest and fee income with good trading profits as a result of the easing stance that the BSP has taken, all of this, we're prepared to give more color from my colleagues here today. We saw deposit growth of 14.5%. We saw loan growth of 18.9%. I believe this to be better than the market even after removing the effects of the Robinsons Bank merger. Our share of the non-institutional loan book -- our share of non-institutional loans in our loan book continues to grow. That's now at 27.4% as all of you will recall, that's something that we've been moving towards a 30% level. This is the reason for the continued expansion of our NIMs in the quarter, as well as the slightly higher NPL level that we had versus last year. Our NPL uptick in quarter 3 was driven by upticks in both our corporate NPL book and our mortgage book, which we are also prepared to share some color on. So let me end here and turn this over to Eric. And thanks, again, everyone, for joining us today. But before I turn it over to Eric, I'd also like to introduce one of our panelists today is Jenny Lacerna. Jenny replaces and succeeds Jojo Ocampo, who retired at the end of September as Head of our Mass Retail business, responsible for the cards, the personal loans, as well as the microfinance business. So Eric, thank you.

Thank you, TG, and good afternoon, and thanks to everybody joining us for this, our third quarter earnings call. We're pleased to report that the bank delivered another quarter with a strong set of results and the highlights are as follows. For the first 9 months, the bank generated a record income of PHP 48 billion, up 24.3% from the prior year, largely driven by revenue growth. The bank also generated a record quarter income of PHP 17.4 billion, up 13.8% quarter-on-quarter. Return on equity further improved to 15.9% and return on assets to 2.07%, the highest levels in a decade. The balance sheet continued to expand in the third quarter with loans up 18.9% year-on-year and 2.5% quarter-on-quarter, while deposits were up 14.5% year-on-year and 1.4% quarter-on-quarter. Liquidity ratios remained robust with LCR at 195% and the NSFR at 144%, while the capital position further strengthened from the strong income generation with the CET1 ratio at 14.8% and CAR at 15.5%. Asset quality remains solid, notwithstanding a slight uptick in the NPL ratio to 2.3%. NPL cover remains comfortable at 111.2%. Finally, for the first 9 months, the bank generated an earnings per share of PHP 9.10, up 16.5%. We remain on track to return excess capital to investors. Taking a deeper look into the first 9 months performance. We delivered a net income of PHP 47.99 billion, up 24.3% year-on-year, driven by revenues, which offset the increase in operating expenses and provisions. This includes net interest income of PHP 93.85 billion, up 22.2% attributed to strong loan growth and higher NIMs. Trading income of PHP 2.98 billion, up 175.3% as we took some profits following the decline in interest rates. Fee income of PHP 26.38 billion, up 28% on sustained strong volume growth in our biggest businesses. Total revenues hit a record PHP 125.76 billion, up 24.7%, while operating expenses at PHP 59.36 billion were up 22.1%, driven primarily by growth in manpower, technology and business volumes. Pre-provision operating profit of PHP 66.4 billion was up 27.1% on a sustained positive jaw. Provisions of PHP 4.8 billion, up 60%, brought net income to PHP 48 billion, up 24.3%. Looking at the sequential quarters, net income of PHP 17.42 billion is up 13.8%. The revenue-led performance remained intact with the quarter's revenue at PHP 44.58 billion, up 7% from the prior quarter, driven by record quarter net interest income of PHP 32.59 billion, up 3.8% quarter-on-quarter, record quarter fee income of PHP 9.39 billion, up 4.5% quarter-on-quarter and trading income of PHP 2.23 billion, up 19x versus last quarter. OpEx of PHP 21.08 billion was up 4.1%, resulting in a pre-provisioning operating profit of PHP 23.5 billion, up 9.8%. Provisions of PHP 1.8 billion, up 20%, bringing the current running credit cost to 31 basis points. All told, the bank generated a record quarterly income of PHP 17.42 billion, up 13.8%. Earnings per share for the first 9 months was, as mentioned, PHP 9.10, a 16.5% increase from last year despite the additional shares issued through the Robinsons Bank merger effective January of this year. Higher earnings further improved profitability, driving ROE to 15.88% and ROA to 2.07%, the highest level since 2013. Total resources for the bank stood at PHP 3.18 trillion, up 2.2% quarter-on-quarter and 17.2% year-on-year. Gross loans stood at PHP 2.13 trillion, while deposits were at PHP 2.49 trillion, up 18.9% and 14.5% year-on-year, respectively. Excluding the amount of loans and deposits added to the book on day 1 of the RBC merger, loan growth would have still been at 12.4% and deposits 7.7%, still higher than recent industry trends and reflecting sustained organic growth. Our deposit base remains stable with retail clients contributing 70% on total deposits and 71% of CASA. As shared in our previous meetings, we continue to manage deposit growth and improve our loan-to-deposit ratio, which are supportive of our NIM. We continue to see positive trends on the loan book, which stood at PHP 2.13 trillion, up 18.9% year-on-year and 2.5% quarter-on-quarter. The strong performance of the loan portfolio is broken down on the table to the right. Institutional loans posted a 2-year CAGR of 11%, while non-institutional posted a 17.9% CAGR with consistently strong growth across all segments. The table below shows the steady shift in the -- of the loan mix to consumer loans, business banking and microfinance, which collectively account for 27.4% of the mix as of third quarter 2024 from 21.1% in 2021. Continuing the trend in the previous quarters, all loan segments posted solid year-on-year growth, led by business bank for the SME portfolio, up 103.6%, personal loans up 103.3% and microfinance up 65.2%. These were followed by auto loans, up 36.3%, credit cards up 33.1% and mortgage up at 31.8%. Institutional loans, despite a gain of 12.8%, posted the slowest growth among the segments. Collectively, the high-yield segment grew 39% year-on-year, outpacing growth in the institutional loan book, further shifting the loan mix in favor of non-institutional loans, which now account for 27.4% of total loans, which is up 394 basis points from last year. This same trend applied to sequential quarter growth as well. Institutional was up 1.5%, business bank up 18.2%, microfinance up 10.4%, personal loans up 9.4%, credit cards 5.8%, auto loans 5.4%, and mortgage up 2.9%. Loan releases for the past 12 months have been consistently higher than last year, with September loan releases amounting to PHP 5.1 billion, up 28% year-on-year. Institutional banking loan growth improved from the previous quarter -- institutional banking loan growth at 1.5% improved from the previous quarter and the outlook into the fourth quarter of 2024 moving into 2025 is positive, buoyed by expectations of further rate cuts from the BSP and an improving macro outlook. Moving on to the liability side. Deposits stood at PHP 2.48 trillion, up 14.5% year-on-year, ahead of the industry trend. Consistent with the industry, the CASA ratio declined on the sequential quarter. However, we continue to strengthen our deposit franchise with our mass market customer segment showing consistently strong deposit growth in the past 8 months and the highest CASA ratio among our market segments. Deposits from our mass market are up 210% from last year and 10% on the sequential quarter. Our deposit mix is still -- is largely retail, which accounts for 70% of total deposits or 75% if you include the business banking deposits there. Given the elevated TD rates through the first 9 months of the year, we have pivoted to tapping other sources of funding, including bond issuances. This funding vehicle offers significantly lower effective yields than top rate time deposits. As of September, the bank's total borrowings stood at PHP 131 billion, unchanged from the beginning of the year as bond issuances and additional borrowings from RBC offset the bond maturities. Compared to 2022, borrowings are up 69% and the bulk are in peso and pay a fixed interest rate. We have kept the average tenor relatively short at less than 2 years to maintain flexibility for refinancing as rates move downward in the near future. Our recent bond issuance, the 1.5-year PHP 33.7 billion BPI Sustainable, Environment and Equitable Development bonds or BPIC bonds, which pay 6.2% interest was nearly 6x oversubscribed, reflecting the bank's flexibility to tap other funding sources as needed. The bond, which forms part of our PHP 100 billion borrowing -- PHP 100 billion bond program was the bank's first foray in the sustainable bond format under BSP Circular 1185, which provides incentives for banks to extend loans for green and sustainable projects. Continuing the trend of the previous quarters, NIM increased in the sequential quarter by 3 basis points to 4.35% and by 20 basis points from last year, driven by a higher loan-to-deposit ratio and the continued shift in our loan mix to non-institutional loans, which more than offset the impact of a slightly lower CASA ratio. The recent announcement by BSP to cut the RRR by 250 basis points effective the 25th of this month is positive for NIM and further RRR cuts being suggested by the BSP would push NIM and ROE structurally higher. Moving on to asset quality. The NPL ratio increased 10 basis points to 2.3% on the sequential quarter, driven mostly by the institutional segment and to a lesser extent, by movements in the consumer segment. If we exclude the NPLs that have turned current but still classified as NPL during the 6-month seasoning period as prescribed by the BSP's regulations, the bank's NPL ratio would actually be at 2.06%. Despite the uptick to 2.3%, overall asset quality remains benign and below industry averages. Credit cost has remained below normalized levels for nearly 2 years now, allowing NPL cover to slide, but still sufficient at 111.2%. In addition to reserves, the NPL portfolio also has a collateral cover of 200%. The increase in the NPL ratio for the quarter is mainly attributable to 2 key items: one, an account in our institutional segment, which turned NPL after 3 months being past due. We have been in discussions with the company on a restructuring and believe that we are close to working something out. We expect the account to become current in the succeeding months. But as required by regulations, the loan will remain classified NPL for 6 months after turning -- after payments are resumed due to the 6-month seasoning period. The second is due to a technical increase in NPL delinquency of the -- in the mortgage segment, stemming from a contract-to-sell arrangement where the developer's delivery of the project was delayed, prompting clients to hold on payments. This is a temporary setback as we are confident the developer has the resources and is committed to deliver the project. As turnover of the project occurs, these accounts will be released from the delinquency count. On the other hand, the credit card NPL ratio, which peaked at 5.24% in June has since declined to 4.5% in September, aided by write-offs. NPL cover for credit cards remains sufficient at 1.5x. The upticks in NPL ratio of personal, microfinance and business banking are in line with our strategy and are not unexpected. Moving on to our fee income. We delivered a record quarter fee income of PHP 9.39 billion, up 26.6% year-on-year and 4.5% quarter-on-quarter. Year-to-date growth was led by our biggest businesses. Credit cards up 28.7% year-on-year on record billings, which were up 22%, aided by a 15% increase in active customers. Wealth management, up 17.6% on record AUM of PHP 1.54 trillion, up 25% year-on-year on sustained net inflows and higher securities valuation, and on increased trust fees for select investment funds effective February of this year. Insurance, up 73.4% year-on-year, driven by equity income from investments in BPI MS and BPI AIA and higher branch commissions on new insurance products. Branch service charges, up 33% due to a steady increase in the number of transactions. ATM and digital channels, up 22.2% on a 57% increase in total fees from API partners, as well as a 72% growth in interbank fund transfers. Transaction banking, up 20% year-on-year, driven by higher cash management fees from Robinsons Bank's merchant acquiring business, as well as an increase in trade and supply chain fees. These increases were partly offset by the decline in investment banking due primarily to 2 large project finance deals that were closed last year. Year-to-date, investment bank closed 18 deals versus 16 in the prior year. Operating expenses stood at PHP 21.1 billion, up 22.4% year-on-year, driven by manpower cost, which was up 24.4% due to structural salary adjustments, higher headcount from the merger, as well as CBA negotiations. This also included expenses on HR initiatives that resulted in lower attrition, better employee engagement, enhanced employee development and a positive cultural change. Premises cost of 23.3% was primarily due to additional branches and office space from the RBC merger. Technology expense up 23.3% was primarily due to additional branches -- sorry, technology expense was up 17.2% on continued investment in digitalization and increased number of transactions. Other expenses, which includes marketing expenses attributable to campaigns, particularly in our credit card business and rewards expense, which was expanded beyond credit card usage to include loans, deposits, investments and payments was up 23.4% year-on-year. Despite the increase in operating expenses, the year-to-date cost-to-income ratio stood at 47.2%, 100 basis points lower than the same period last year to a faster increase in revenue. We added nearly 3 million clients this year, bringing total client count to 14.52 million, while we continue to rationalize the number of BPI branches moving forward. We are still looking to build a presence in underserved areas, while looking to expand BanKo and LSB's branch footprint and focus on scaling up customer acquisition and transactions in our agency banking's 6,369 partner stores. We remain well capitalized. Our CET1 capital was at PHP 373 billion, up PHP 55.9 billion from last year on net income accretion and additional shares issued through the merger. Capital ratios remain robust, notwithstanding the increase in risk-weighted assets from strong loans expansion and increase in capital distribution. CET1 stood at 14.83% and CAR at 15.54%. Though lower year-on-year, the ratios remained well above regulatory and internal thresholds and sufficient to support continued loan expansion. Let me now provide a brief update on our client engagement platforms. On VYBE, we have over 1.38 million sign-ups, 18% of which are new to bank, including those onboarded without the need of an ID. Sign-ups have been increasing gradually with 33,000 new clients in August from only 4,000 in January. In addition, to receive and send money to other banks, scan QRPh, bills payment and cardless withdrawal, clients can now buy load for telco and transportation. BPI app launched cardless withdrawal, which allows clients to withdraw cash from BPI VYBE and Euronet ATMs with no card needed. Growth has been steady with 7.5 million enrolled clients and 4.9 million active users, up 19% and 9% year-on-year, respectively. New features are still being developed for BPI Trade app and the UI/UX improvements are in the works as well. We now have 423,000 registered users in the BanKo app, translating to 22% year-on-year. The app saw 177,000 financial transactions corresponding to PHP 799 million or 94% and 1.8x increase versus last year. On BizKo, we recently introduced salary-on-demand to BizKo users to be offered to their employees. We now have 24,000 enrolled clients, up 67% year-on-year. On BizLink, we have a 41% penetration rate on an expanding client base and the number of transactions on the platform is up 45% year-on-year. Lastly, on BPI Wealth, the app for high net worth individuals for their investments, there's 13,000 enrolled since its launch in April with 1,800 active users. The inclusion of CASA accounts in BPI Wealth Online will be available soon. We continue to expand our retail client base now at 14.4 million, adding 2.9 million customers year-to-date. 62% of them were onboarded via digital platforms and agency banking. Our efforts to convert clients to become digital customers is progressing nicely, which -- the latest count of which is at 5.6 million or 39% of our total retail clients. In terms of engagement, digital customers had about 4.6x more transactions than non-digital customers in September, driven by the increase in transactions made via digital platforms, which resulted to 1.62x more revenue per capita compared to nondigital clients. On August 5 in Cebu, the bank officially launched the cash-in, cash-out banking service, which allows BPI account holders to deposit and withdraw cash at select Prince stores and Prince Hypermarket (sic) [ Prince Hypermart ] partner stores. This followed by -- this was followed by Rodamel Drugstores in Tuguegarao, bringing to 36 the number of partner stores with branch-like functionality. We will continue to expand this further as we move forward. The map shows these 36 partner stores in yellow and red pins, which are mostly located in areas where BPI branches shown in red dots are not present. On the left, we show a typical setup of BPI identified by BPI dito or BPI is here signages in partner stores and the interaction of BPI clients with partner store employees. We process an average of 100 transactions per day with an aggregate amount of PHP 600,000. Notwithstanding the low count at this early stage, this initiative marks a significant leap for BPI towards financial inclusion by reaching more underserved areas, both to acquire and to service bankable Filipinos. Turning to teachers loans offered through Legazpi Savings Bank, or LSB, which is a subsidiary we acquired through the merger with RBC. Having secured BSP approval to market teachers loans through BPI and BanKo branches in June, the teachers loan portfolio of LSB saw its highest monthly loan release of about PHP 1 billion in September, up nearly 100% from last year. This brings third quarter loan releases to PHP 2.18 billion, up 43% year-on-year and outstanding loans to PHP 7.8 billion, up 50% year-on-year. We're excited about the contribution of teachers loans to our portfolio given its reliable, superior yields and low NPL profile. Today, we have -- we only have a 2% market share of teachers loans, but we are confident that we can become one of the dominant players in this segment, supported by our digital onboarding platform, BPI's large branch network and a simplified process. BPI continues to further boost its sustainability efforts across both the banking and operations side. BPI issued the PHP 33.7 billion SEED bonds, the proceeds of which were allocated to projects with clear environmental and social benefits. BPI Capital also acted as the joint lead arranger and sole selling agent of the transaction. We added 2 new project types to BPI's flagship sustainable development finance program, namely pollution control, sustainable water projects -- and sustainable water projects. BPI continues to offer free technical evaluation for -- from IFC trained and accredited consultants as part of its SDF program. We released salary-on-demand, which allows employees to access their earned wages instantly, providing financial support when they need it most. BPI Capital also had several ESG theme deals this quarter, including ALI's sustainability-linked bond with key performance indicators related to carbon emissions reduction. Maynilad's blue bond, the proceeds of which support sustainable water and wastewater management. EDC's green bond, the proceeds of which are used for geothermal, wind, solar, hydropower, bioenergy and energy storage projects. BPI also funded PHP 4 billion of the PHP 8 billion term loan facility of Alternergy Tanay Wind Corp., with BPI Capital also acting as one of the mandated lead arrangers. Proceeds of the loan will be used for the construction and development of a wind farm in Tanay, Rizal. Finally, BPI continued to make its day-to-day operations more environmentally sustainable this year, adding 7 new IFC EDGE-certified bank branches, bringing the total number to 18. In 2024, BPI has garnered a total of 15 ESG-focused awards year-to-date with various reputable award-giving bodies such as Finance Asia, Global Finance and The Asset, surpassing its record high of 14 ESG-focused awards received in 2023. In summary, on profitability, we saw improved profitability with record quarter income led by revenue. On the balance sheet, loan growth remains strong across all segments, led by non-institutional segments. The bank's liquidity and capital positions remains above regulatory thresholds. On asset quality, despite upticks in NPL, strong asset quality is maintained with sufficient cover. And lastly, we delivered high EPS on an improved ROE and are on track to deliver further improved dividends next year. We are pleased with another quarter of strong operating results. We are optimistic about the bank's ability to sustain its performance in light of the normalization of interest rates and an improving macro outlook. And we will continue to execute our strategic initiatives with discipline. We now open the floor to questions.

Thank you, Eric. Before we open the floor to questions, may we ask our senior leaders to come in front. We will just set up the chairs in a -- for a few minutes. So we'll have Ginbee, Head of our Consumer Banking; Tere, Head of our Private Wealth business; and Jenny, the Head of our Mass Retail Products business. So for those online, just give us a couple of minutes. [Operator Instructions] Anyone on the floor for questions? Yes.

Congratulations on the results and the presentation. I'm [ Jamie ] from BPI Wealth. So I just wanted to drill down on the asset quality. Can you discuss the top drivers of NPL and your thoughts on NPL formation and NPL ratio moving forward?

Yes. So there were really, as I mentioned during the presentation, 2 key drivers to the growth in NPL, right? There was the one account from institutional, which it's actually been a problem account for a while. They fell into PDO status 3 months ago, a little over 3 months ago. And then because we've been working with them in order to try and resolve their situation, work out a plan on which they could repay the loan. We're coming close to what we believe is a workable solution, but we weren't able to complete that before the account went into NPL. And therefore, it is now in NPL status. We do believe that we'll be able to come to a solution on this and that, therefore, over time, it will move back into current status. That will, of course, take at least 6 months after they start paying because of BSP regulations. But again, we're fairly confident that we'll be able to work out a payment plan for them. And then, again, the second key driver there was on the mortgages, where we saw basically one large developer with a large project that basically, they're not completed on time. And therefore, it's very understandable that that the buyers have withheld payment because the turnovers aren't happening. But again, as I mentioned, we do believe that the project is going to be completed. We know the company has the resources to do so, and we know they're committed to developing -- to finishing the development on the project. And therefore, these turnovers are going to happen, and therefore, the end users are going to pay for it. So those are the 2 key drivers. And then meanwhile, if you look at some of the other accounts -- some of the other segments, we're actually seeing some strength in those segments. We saw some recoveries in credit cards. And I think although month-on-month business banking was down a little, if you look at it on a year-on-year basis, they're actually higher. And so, especially with the interest rate environment looking like it's going to become easier, we do believe that the delinquencies will be maintained under control.

Thank you, Eric. We have a question from one of our participants at Zoom. Aakash of UBS. Aakash, are you there? Can you unmute the line?

Okay, I can do it. Aakash from UBS. The first question -- I can hear an echo. I don't know if that the case, you...

Go ahead, Aakash.

The first one is in terms of [ pickup in net yield that you saw, what was the select ] institutional account and the multiple changes? So there was 43 basis points of NPL formation this quarter. Could you give us [indiscernible]?

So, Aakash, the institutional account that Eric talks about was about a PHP 2 billion account. That's something that we're working on. It was PDO before the third quarter. It went into NPL in the third quarter. It's fully secured by a good property. So we're fairly confident about that. And we are in discussion with them and with a potential white knight to take over. And then on the real estate CTS issues, that's what PHP 2.5 billion. So those 2 alone is PHP 4.5 billion out of a loan book of 1.6. So I can't do the math, but it's roughly there.

Okay, great. On the institutional account, are you able to share what is the level of coverage that you have? And what sort of nature of the business is this?

So provisioning is 49% and then collateral or collateral cover.

Sorry, 49% in collateral cover?

No, no, 49% is already -- the account is already 49% provided for with specific provisions. About 51% collateral cover.

Okay. Got it. And the line of business, if you can share that?

Industrial, [ I agree ], right?

Okay. There was also some elevated write-offs this quarter, NPL write-offs. Could you talk about that?

Yes. I think it's more of a timing issue. Some of the write-offs that -- so we didn't have that much write-offs in second quarter, and those were delayed into the third quarter, but we did the third quarter on schedule. So I think that was a big part of the reason for the elevated write-offs in the third quarter relative to second quarter.

Okay. Understood. And then...

And that was mainly in our cards division -- segment.

Okay. The other area which has been a big concern for investors is in the unsecured lending, which I think you gave a lot of color last quarter. Is that still true that you've started to tighten the model and you won't see that sort of [indiscernible]?

Yes. So in the last quarter report, there was really a high report of an NPL. But for the quarter, we have already tightened the tap to be able to control the -- and these are actually really test programs that we did that resulted to higher NPL. So we've closed those programs, and we know where it's coming from. So third quarter moving forward, those will not be booked anymore. So it will improve.

Okay. Great. The last question I have is, just a more high-level one. TG, Eric, what are the chances do you [indiscernible] go down to 0 at some point?

At some point, Aakash, like before 2029, fairly certain. Zero by next year, not sure. I think the market believes there might be another 200 basis point cut next year. But the governor has clearly -- I mean, the governor has indicated that he would like it to be 0 by the end of his term.

And so, I think the reason I ask is, very few countries around the world [indiscernible] developed markets where we see a level of 0%. Most of the [ emerging markets ] they have higher levels. But do you really thing BSP [ thinking ] that they can bring it down to 0 [ if it thinks ]?

Yes. I think, Aakash, in my discussions with the governor, we talk about what exactly does a reserve requirement achieve in terms of bank safety when they can really control it with monetary policy. From a monetary policy point of view, I think the feeling of the current governor is that, there are better tools that reserve ratio requirement is a structural impediment. I think I might be putting words into his mouth, but this is when I discuss with him the concept of a reserve requirement, clearly, he feels that there are better tools for monetary policy.

We now have a question from Selvie Jusman.

Can you hear me?

Yes, we can hear you.

I think there's a little bit of a echo. So I have two questions. The first one is on the trade. I mean, [indiscernible] how are you seeing the pricing power in terms of like when [indiscernible] and competition and the likelihood of you [indiscernible]? So that's the first question. And then second question is on the capital return. Eric also mentioned at the beginning remarks that [indiscernible] capital. Could you elaborate on that?

Selvie, I think when you take a look at what the effect of a BSP policy rate cut is, obviously, there will be 2 effects. I think the immediate effect we will see clearly in the deposit levels. And when you combine the 50 basis point cut together with the 250 basis point cut in reserve requirements, you'll clearly see deposit rates come down, which we are seeing today. And so, that bodes very well for our NIMs. Certainly, on the asset side, when you take a look at a loan book that -- or when you take at loans that are to the corporate side, then there's a lot of competition there because the Philippine banking market clearly favors lending to top corporates for the credit exposure. That one, I think, will be challenged. I think corporates will continue to be able to demand rates that are close to policy. And that's the reason why we continue to focus to shift our book towards what we call the non-institutional book, focused more on small business loans, focused on the consumer which are less sensitive to the policy rates. Let me turn it over to Eric on his promise to return capital.

Yes, sure, Selvie. Thank you. And so, with regard to capital return, I mean, as we've previously indicated, dividends -- our dividend policy is that, we're going to pay between 35% to 50% of the previous year's net income in terms of dividends. And over the last couple of years, we've been paying it out at a 40% rate. As it stands right now, based on our projections, including where loan growth is going to be, we believe that we -- there's no real reason at this time to change the payout ratio. So I think our current view is that, we'll probably keep the current payout ratio. And given the fact that earnings per share is up 16.5%, therefore, it would point towards keeping that payout ratio, it would point towards higher dividends next year. And then that's the increased capital return that I was referring to.

Got it. Sorry, can I just have one more question? Just in terms of the write-off rate of credit card, what is the write-off rate for your credit card?

For the month of September, I believe it's about 3%. On the quarter, it's about 2.97%, 3%.

All right. Thank you, Selvie. We'll take a couple of questions from the Q&A chat box. We have 2 questions related to NPL. The first one is, are you able to share the net income contribution of Robinsons Bank? And how big also is the NPL level and NPL ratio attributable to Robinsons?

Yes, sorry. Yes. So actually, to be honest, I mean, we gave information in relation to Robinsons Bank in the initial -- especially in terms of the balance sheet, how much it's contributed. But the reality is that, moving forward, it's more and more a gray area, right? Whether was this really contributed by Robinsons Bank versus BPI, given that the operations and the people have really come together, right? So we're not really tracking that and then therefore, we're not tracking it on that basis, and therefore, we're also not disclosing it on that basis. That's in relation to the Robinsons Bank kind of breakdown, right? There was another question. On the NPLs. Yes. So same thing. I mean, basically, the book is now one book. And so, therefore, I think it's not really relevant whether the new NPL formation is coming from the Robinsons -- the ex Robinsons Bank book or the BPI book, it's just BPI NPLs at this point.

The reason we do that is because when you take a look at the businesses, for example, the top corporate credits, we've merged all the accounts and given it to respective account managers. So it's hard to say that this account, which used to be both, let's say, an account that was both on the BPI and Robinsons Bank level, if they draw another loan, is that a Robinsons Bank contribution or a BPI contribution. Likewise, for the branches, I understand the Robinsons branches are having very high cross-sell rates. Is that a Robinsons Bank contribution because they're selling a BPI product. So it's counterproductive already to say this is Robinsons Bank and this is BPI. So we don't do that. And at the start of the year, we figured Robinsons Bank was about 6% across the board of everything about BPI, and that's the way we take a look at it. But today, we take a look at the business as one. Even on the NPL, it's kind of unfair to say that the contribution of NPL is Robinsons Bank because every loan we're booking today is part of what we call the BPI book. And so, the loans are being paid down on the Robinsons book. And therefore, technically, the NPL will be rising there only because the denominator is shrinking and the numerator is not changing because we're not growing the denominator anymore because we're moving into the BPI book. So we don't do that anymore.

Okay. Thank you, TG and Eric. On NPLs, NPL coverage has been trending downwards. Should we expect higher credit cost in the next few quarters? What is the level of NPL coverage that BPI is comfortable at?

So first, on the first question of the trend for credit cost, I think it's reasonable for you to expect that credit costs should start to trend upwards in the coming years. We've viewed a kind of running through the cycle credit cost of something of the -- along the lines of 40 to 45 basis points as where a normalized level should be. And therefore, the current level, 23 basis points last year, 30 basis points, approximately 30 basis points this year was really a below trend. And therefore, we should come back up to a normalized credit cost over the next couple of years, right? And so, that's with regard to the credit cost. And then the second -- sorry, was...

What is the level of NPL coverage we're comfortable at?

Yes. On the level of NPL coverage, theoretically, from -- in our viewpoint, you need as much -- you need 100% NPL cover is sufficient, 100% NPL cover of where you expect loans to be, right? And so, then it becomes a matter of where you expect loans to be. And in our view, something along those lines, 100%, 110% NPL cover looks like it should be sufficient for us, especially in the face of what we believe is an improving macroeconomic environment.

Okay. Thank you, Eric. We have a follow-up question on reserve requirement from Joseph Sinay. He says, congratulations on the strong results. If the reserve requirement is cut, then there will be a lot of liquidity coming to the market. How is BPI thinking about potential changes to competitive intensity?

I think the first thing we have to realize is that, the reserve requirement cut is very beneficial to the bank. And the way we would play that is, I think Dino says the first thing we would do is immediately throw it back to the BSP, right? And if you think about NIMs, take the level of the policy rate of the BSP at 6%, 2.5 basis point cut where peso deposits are roughly 85% of our deposits. So 6% times 2.5 times 85% gives you a lift of about 12 basis points on NIMs. Then as you try to work it through your system, the next easiest thing to do is lose the time deposits, which are costlier and use the funding that's made available by the reserve requirement cut. So if you have -- if you're able to lose the time deposits that are very expensive, slightly higher than the BSP rate, then you're actually ahead. Even if it's lower than the BSP rate because of the friction cost of a deposit, doc stamps and deposit insurance, which add about 175 to 200 basis points to the deposit level, you actually gain more by losing the deposit. And then finally, obviously, the third play you would do is then lend it out on the mortgage book -- sorry, on the consumer book where rates are significantly higher than the BSP policy rate. So those are the 3 ways you would play it. Certainly very positive for the banks. But, obviously, throws -- each bank then has to figure out the way they want to play this extra liquidity that they're getting.

And then maybe if I can just add also, in this environment, we're also expecting stronger loan growth, and that will also suck up some of the additional liquidity.

Okay. Related to that, could you please provide us the latest NIM sensitivity? You mentioned NIM could compress by 8 basis points for each 25 basis point cut. Is this still valid given the recent RRR cut?

Yes. So actually, I think that 8 basis point move per 25 basis point cut was given relatively early on in the process of rates going up. And that continues to be the mathematical computation. In reality, what we've seen is that, as rates were on the way up, but also as rates were on the way down during the pandemic, we saw that many of the consumer loans did not move on a one-for-one basis in line with the policy rate movements. And therefore, what we saw in practice on the way up was that, the actual NIM increase that you could attribute to policy rate increases because we had to strip out the effect of the increasing mix of non-institutional loans. And so, if we strip out that effect, then we would end up with a movement of about 4 basis points per 25 basis points. And I think that's more likely to be closer to the sensitivity that we're going to see moving forward.

Thank you, Eric. We have a question on teachers loans. How large are your teachers' loans and as a percentage of gross loans? What is the structure of these teachers loans? Are you able to deduct teachers salary when they default?

So teachers loans is about 2% of penetration to the total outstanding balance. And what's the second question?

What's the structure? Are you able to deduct teacher salary when they default?

Yes. As a partner of DepEd, it's actually -- the process is actually an auto deduction of the teacher salary loans before they paid out to the teachers at month end.

Thank you, Jenny. And there's a follow-up question on the mortgage NPL. The uptick on the mortgage NPLs. So why was the developers' delivery of the projects delayed? What type of property is this?

I think the delay in the property in the development has really been since the pandemic. There is already a lack of manpower at that time. They cannot come in full 100% of the time. So there was -- because of that delay over the pandemic, of course, the construction completion would also get delayed. But we are quite -- very, very confident that the developer will be able to complete since they already are back 100% of the time. It will just require maybe a year's delay to complete it, and it will eventually get paid. So it's really technical pass-through. It's not that the buyers are delinquent. It's just that the turnover is delayed, and therefore, buyers will naturally not immediately pay the big amount, the balloon payment.

I think the concern might be -- is it possible that this developer might not [indiscernible]?

Not at all. It's a big developer. So it's -- again, completion risk is not a concern here. Overall, the -- if you look at the NPL rate of mortgage of 5.01%, the impact of the delayed turnover on the total NPL is really 100 bps. So the real NPL level is 4%, much, much lower than industry NPL. So even if you compare the 5% of mortgage at 5%, your NPL industry is 200 bps higher. So a big gap. Definitely, we can still take on more risk on the end buyer financing.

[indiscernible].

Yes, no, your honor. No, no. Always able to deliver. It's not a question of whether they will be able to complete or not. It really is just a delay.

Ginbee, what type of property is this?

It's a condominium.

All right. Thanks, Ginbee. We'll go through to Danielo Picache, who's online. Okay. We'll get back to Danielo. We'll go to Angela's question. What's the nature of institutional loans being availed by clients? What industries are they from? I believe John-C is online and is able to answer. John-C, are you online?

Yes. Can you hear me?

Yes, we can hear you.

So there's been an echo for those who are on Zoom. So [indiscernible].

For those who are on Zoom, may we ask you to close your speaker since it causes an echo. I think that's what our technical team is...

Okay. Anyway. So I used my Airpods, but still --. So, Chinky, the question was what type of industries, right?

Yes. What industries are the availments coming from?

Okay. So it's a good mix of industries. The corporate bank portfolio is still driven by a lot of big invest in different industries, whether building -- continue to build capacity for future requirements. So I think Eric has mentioned that he [ fumbled at the word ] Alternergy, we continue to see a lot of activity in the renewable energy space. The energy will be an area of focus going forward. There are developments in the LNG space, which we are staying very close to. And the activity on both expansion and in some cases [indiscernible]. On the consumer space, I think the story that Eric and TG were laying out for the bank, reflects really the fact that the bank is expanding its customer base. And it means where the corporates operate, there will obviously expansion in their ability to reach more customers. So while we have already good bank and the corporate sector has really [ helped ] further down the spectrum of client base. We expect [ those ] continue to expand and get the benefit of demographic [ profile or economy ]. So while [ on an organic ] basis, with lower growth in some areas, [ new active fund ], therefore, there would still be a new [indiscernible] capital requirement. But as TG mentioned, for the [indiscernible] there will be stronger competition among banks for [indiscernible]. But we'll see a mix where consumer is being served and in the real estate sector, [indiscernible] clearly, that should pickup maybe in a year or 2. But in some areas we continue to see very robust growth sectors like tourism and other residential activities. I hope that [ helps ]. The echo is terrible.

Okay. Thanks, John-C. We have -- Danielo wrote his question on the chat box. His question is, any update on your credit risk prediction score initiative? Curious to know how your NPLs would look like if we exclude the impact of such as how you explain the adjustments in the second quarter of 2024.

Okay. So for the tests that we did in 2024 second quarter, we still have a little bit of portfolio on the personal loan side because those loans tend to run long. So -- but we've closed the test already. And as mentioned, there was a write-off also that happened in the quarter, which has improved the portfolio. So we've closed that tests and other PL tests are being done, and we're dynamic in being able to actually do test and also close them as we need to learn what really can actually work in expanding the portfolio. So there's really a lot of test and learn that we're doing for both credit cards and PL. And the more we learn, the more -- I mean, the more we are able to actually manage the portfolio in revenue and in risks. We expect the NPLs to actually still go down further because we're like what I said, drawing down the portfolio and the through-the-door bookings that we have for both cards and PL is actually better than what it was in the first half of the year.

Yes. For the secured portfolio, that's auto housing and motorcycle. As I mentioned earlier, we're super much -- we're much lower than industry. So definitely, that's something that is an opportunity for us, gives us room to test to do champion/challenger scenarios. And we continue to penetrate and do lending programs that specifically target our depositor base, which means that we have a very high-quality loan book and customer base for our accounts. Not to mention, these are secured. So with the development of [ OneScore ] for BPI, which covers, not only the secured, but also the unsecured portfolio, our ability to look at it holistically will also bode well for us when it comes to risk management, credit risk management. So, overall, we believe that we can maintain our NPL ratios simply because we will continue to grow the loan books from a denominator basis. We will continue to grow the loan books even as the absolute number of NPL amount would grow. That means we will continue to be more inclusive, go down market, but also manage it from the point of view of total amounts involved.

Thank you, Ginbee. One more question from Danielo. Given the lumpy debt maturities in 2025 and 2026, can you share your refi plans? And is it safe to assume that you will be less reliant on wholesale funds in the ensuing years given expectation of rate cuts and RRR cuts?

Yes. Thank you for the question. Good evening, everyone. 2025 and '26 debt maturities. Right now, we still favor wholesale funding, especially for peso bonds because of the incentive brought given by the BSP for such issuances. If there is no advantage to issuing these bonds going forward, then we are likely to abandon it and go back to time deposits. But for now, as TG said, for reserves to be cut such that there will be no or the incentives of the BSP is going to disappear, I think that will take a long time. In my estimation for '25 -- 2025 and 2026, we will probably continue to rely on these wholesale funding instruments.

Thank you, Dino. That was Dino Gasmen, our Treasurer. We have a question on our private wealth business. I guess, Tere, you can take this. Where are investable funds going and what products, investment outlets now that interest rates are coming down and the peso on the weaker side? Can you provide some color on what drove the AUM higher? How was the client -- how has the client preference moved after the rate cut?

Thanks for the question. So first, where are funds going? We're seeing some net flows at the moment still in long-term fixed income instruments. That has been the trend for the past quarter, particularly there have been new issuances on the corporate side, and we saw investors starting to add positions in medium- to long-term fixed income investments. It's early days for the equity portfolios, but because of decline in interest rates and what we call risk on sentiment, we are seeing some slow net flows into equity portfolios, as well as medium- to long-term bond funds, which has been our key recommendation because of our outlook for declining interest rates. It's early days for retail. We typically see retail flows into riskier assets towards the mid to end of a rally in terms of a market cycle. So that's for the first question. Second, how has AUM performed?

How has the client preference moved after the rate cut?

So that, so after the rate cut. AUM is, what's driving?

Yes, inflows or securities valuation. Which product?

Yes. For the first 9 months of the year, we saw very strong growth in AUM. We are tracking 20% growth in AUM, and that's across segregated portfolios, as well as investment funds. Segregated portfolios is growing at a stronger pace, about 24%, 25%, while investment funds are growing at about 16%, 17%, but still strong compared to what we saw in the previous year. In the first 9 months of the year, we saw AUM -- the growth in AUM of 20%, about 65% of that growth is coming from net flows and around 35% of that growth is coming from market revaluation. If we look at ourselves versus the industry, we have a more diversified set of investments. The portfolios are more diversified. So you would see that in periods of rising equity and fixed income valuations, our AUM is more sensitive. So because of favorable market conditions, we are reaping the benefits of higher AUM valuation coming from market change.

After that, there's a follow-up question. On private wealth, how do you position private wealth versus competition?

Well, what we have done with private wealth since we rebranded about 1.5 years ago was to position it as going beyond banking. So that's when we launched what we call the BPI Private Wealth Signature Experience, where we focus, not only on elevating our services in terms of banking needs, but also we elevated our services across the other pillars of what the wealthy families need, which is around investments, around planning, estate planning, legacy planning and also providing curated lifestyle experiences. So it's a holistic approach to going beyond banking, and that's how we differentiate ourselves versus competition.

Okay. Thank you, Tere. We have a couple of questions from Melissa Kuang. Given your focus on retail loans, will you try to do a test run again into another separate new segment of retail? Or what will your focus for growing retail loans be?

Melissa, I think the only way to continue to expand is to continue to run different test programs and try to look for different areas where new credits can be given. So we will continue to run test programs, as Ginbee and Jenny said, we will continue to run test programs to look for different markets to try to acquire new customers to expand the credit. And one of the targets we have is, we have a clear idea of where we want the NPL ratios for different products to land. And at this point, for example, the credit card -- the current NPL ratio for credit cards, while Jenny says it's going down is below the target that we have set internally where we want it to be, which gives us room in the business to continue to run test programs in an expanded way. So I think we're very committed to grow our consumer book, and that growth will be driven by new credits and new acquisitions and new customers in that side and really driven by test programs and marketing to our current customer mix.

Okay. Thank you, TG. The second question from Melissa. On growth, earlier, you point to more robust credit growth. How sustainable do you see underlying credit growth into next year? Do you think we can see further acceleration in momentum? Can you share your loan pipeline for the year ahead?

I'm very confident that loan growth next year, particularly on the institutional side will be stronger than what it will be this year, driven primarily by what we see as rising confidence on the corporate side to make the investments that they've drawn down this year. What we've seen actually is that, we've had an increase in the number of lines that have been applied for the approvals we've given. And now what we're waiting for is people, the corporates to draw. I think on the consumer side, we continue to be fairly bullish about that. We believe confidence remains there, particularly on the segments that we're targeting, and that's why we continue to grow our efforts on our main lines, which is credit cards, mortgage and auto. Obviously, we've got some new lines, courtesy of Robinsons Bank, our teachers loans is a new product that used to be sold only through a limited number of branches. Today, we are marketing our teachers loans throughout the whole BPI network. Motorcycle loans is a new product that we've had. We've only started it. It's already up 12% this year from last year, and that was a product that we didn't have that was solely with Robinsons Bank last year, it's a product we're learning.

Okay. Thanks, TG. Aakash, you have a follow-up question.

I've just lowered my hand.

Okay. Danielo, you have any other questions? You still have your hand raised. Okay, none. We have a question from Cristina Ulang. How many bank branches are expected to be added or closed this year? And what's the expected year-end branch network count and that of 2025?

We're looking at consolidating this November 13 Robinsons Bank branches. So that would bring us to around 850, 855 thereabouts. But next year, we're looking at consolidating additional branches, but also opening new ones. So we're looking at 25 new branches in new areas where we are not yet saturated, but we're also closing about 70 branches coming from the Robinsons Bank consolidation. So again, our -- we continue to look at our branch optimization. We have a model that determines where we are more saturated, and therefore, we need to close down our branches, but also in areas where we don't have enough presence, and we need to serve them more or better by opening branches. Of course, these are all done with a view that there are alternative channels that are available for us to service and acquire customers. One of which, as mentioned earlier by Eric, is agency banking and the second is also digital. Currently, our digital channels in tandem with agency banking is already accounting for more than 50% of new-to-bank acquisition. So, we look at it holistically. The objective is really to go after new-to-bank customers and serve our existing customers better through the digital space.

Okay. Thanks, Ginbee. Any questions here on the floor? Yes, go ahead.

DA here from JPMorgan. Just a few follow-up questions. First on asset quality. So if you look at your NPL formation, I think it's around PHP 9 billion in the quarter. I think you explained around PHP 4.5 billion earlier. So I just want to understand where the rest is coming from? And is that what you expect as more normal?

Sorry, sorry, can you just repeat those numbers?

So NPL formation in our estimate is close to PHP 9 billion for the quarter. You explained PHP 4.5 billion, so you don't want to understand where the rest, PHP 4.5 billion is coming from.

Yes, I mean -- so I'm just checking some of my notes here. But in general, we are going to -- I mean, NPL formation is -- new NPL formation is not unusual for the bank, right? We expect new NPL formation to start to come down over time, especially as rates start to come down. But as also mentioned, there really is going to be a seasoning period, right? So even as accounts start to turn current, it takes 6 months for that to then reflect on the books as becoming current. I mean, in terms of the disclosures, right? So there really is a seasoning period. And I think one of the things that I mentioned was where NPLs would be if -- without the seasoning period, which I believe was 2.06%. Yes. So, on a net basis, our NPL level is PHP 3.2 billion up, right?

Okay. Understood. Yes. But then there were write-offs. So you add that back, so the formation is higher. But anyway, I guess, moving on to similar question along the same lines. On the credit cost side, I understand you guys are planning for specific NPL levels. So I just want to understand on consumer, non-institutional, do you program for a level of credit costs as well?

So both on the -- I guess, on the consumer level, especially when you have a tendency to look at things on a portfolio basis, then it's really more -- we really have a tendency to look at it on target levels, target NPL levels per consumer book, right? And that and as well on the business banking, microfinance side, where you really have a tendency to look at it as a portfolio, right? On the institutional side, that one, we look at less on a portfolio basis and more on an individual basis. And therefore, it's less targeted as, oh, we're looking for a 1% NPL level on institutional. It's really, we look into on a per account basis, is this an account that we believe we should be lending to?

The answer is yes, you are correct. For the consumer book, it's very formulaic, what we provision is very formulaic. What goes into NPLs is based on schedule and what we provision is just based on [indiscernible].

Okay. And, I guess, where I'm coming from is, you guys used to do like 30 to 40 basis points as normalized before pre-pandemic -- I mean, pre-pandemic. Now, you're guiding 40 basis points, 45 basis points, which is about the same range. So, I guess, the question is, as you shift more to consumer, do these test programs, should we expect credit costs to be a bit higher?

So in the immediate -- so 40 to 45 basis points is where we believe it's going to be over the next -- like into 2025, maybe into 2026, right? Obviously, if we were to continue to shift, which we believe we're going to do, right, as we continue to shift more and more towards consumer, we would also expect credit costs to start to pick up. But over the next year to 2 years, we think 40 to 45 basis points is the appropriate level, right?

Understood. And last one is on payments. So there's use of payments potentially going to 0. Any comments on that? Do you think that's likely? And potential impact to you guys?

Politically. I understand where the BSP is coming from. I understand what they're trying to do. I think 0 person-to-person fees is good for the consumer. Obviously, as a bank, we have revenues that arise from that. And those revenues, if the circular were to be in effect April 1, we would lose those revenues. I do understand also that in discussions that have gone back even prior to the governor, the current governor, discussions with Governor Felipe Medalla was that -- the idea was that a reserve cut would compensate for that. They have done the reserve cut and now they have proposed a P2P waiver of all fees. Obviously, there is some pushback from some banks. There are some comments on the circular. Certain players in the payment space are against it for obvious reasons. But as a bank, as BPI, we understand where they're coming from. We understand the benefit we get from a reserve cut, and we understand the benefits that would redound to the consumer going forward. So we're very quiet about the objections. But also, DA, to be honest, when you have free P2P payments, it opens a lot of potential for a bank to work in the payment space where the payment space might be -- any bank in the world that in any industry where the payment space is dominated by a single player, free payments have opened up that market to the banks and the banks have become major players because of that.

Thank you, TG. Any other questions on the floor before I go to the Q&A box? None. We have one final question. Will there be a face-to-face stockholders' meeting in 2025?

We're evaluating that. I think it's something that we need to think about and coordinate with the rest of the Ayala Group. But we will get back to you on that.

Okay. Thank you, TG. One final call? None. Okay. So thank you, everyone, for joining us this afternoon. Thank you for your questions. Before we end the call, may we ask TG for some of his final thoughts.

Again, thanks to everyone for coming here today and joining us. Thanks to my colleagues for answering the questions. There's one thing I just wanted to make clear, a question from Danielo about wholesale funding. I think the misconception that wholesale funding comes from institutional. Our funding that comes from our bond issues is primarily geared towards the retail network. We have a very strong distribution network. And when you look at our -- the customer base that holds our bonds, that's very retail, basically our existing customers. The reason we like it, as Dino said, is that, it's actually cheaper for us because of the lower reserve requirements that we have to hold. And secondly, one of the things that we are looking at, as Dino did in the last bond issue where he just did 1.5 years tenor, we're trying to look and shorten those bonds that paper even more to attract more and more of our traditional TD clients and into bonds because actually it's the same funding, more efficient for us and actually, they'll actually get a better rate on the bonds because there's less friction cost. So just to disabuse the notion that wholesale funding means it's funding from institutions. A lot of -- most of our bonds are sold to the retail side. With that, I just want to thank everyone for coming here today. Let me reiterate that I think the bank is in a good place that the performance as evidenced by our 9 months is very strong. We continue to execute along the things we said we would execute on. We see our performance continuing to take market share on consumer products and deposits and loans. We're very bullish about loan growth next year. We're comfortable with our NPL levels. It's something that we expect because of our shift to non-institutional loans. And as I said, we do have a target for each of the products, and we will work towards those targets because of the belief that the margins that we get from these consumer loans justifies these kinds of NPL levels. So with that, thanks very much and see you at the next briefing. Thank you.

Thank you, TG and the team. Ladies and gentlemen, this concludes today's earnings call. Thank you for your participation. To those joining us online, you may now disconnect. And to those who are here on-site, please join us for some refreshments outside. Thank you.