East West Banking Corporation (EW) Earnings Call Transcript & Summary

All right. Good afternoon, everyone, and thank you to Cam, Alex, thank you also for being here with me. And good afternoon, and thank you for the PSE for inviting us for the third consecutive year, hopefully, 3 times the time. Next slide, please. Just a quick disclaimer that this presentation and our discussion may contain forward-looking statements that are subject to change. Next slide. Let me reiterate that East West Bank remains to be the best bank proxy for the Philippine consumer story. We've maintained our position as being the most consumer-centric of the universal banks in the country. It's very unique from that perspective. It is a testament to our focus on serving the credit and investment needs of individuals. We are the incumbents. At the same time that we do the credit and investment needs, we are also sustaining this with a competitive and a robust deposit franchise. Our CASA ratio stands at 79%, higher than the industry's average of 71 %. Our CASA grew 13%, which is double the industry's growth of 6%. More importantly, our capital levels remain healthy and are supportive of further growth. We had strong net income growth and improving return on equities. The growth part of our core revenues has been consistent for the last 3 years. Coupled with moderating expenses from operational efficiencies, this translated to an improvement on our cost-to-income ratio now at 53%, a considerable improvement from the 60% when I started presenting this in 2023 for the result in 2022. This continuous improvement allows room for further technology investments for long-term efficiency. We see this going below 50% sustainably, and I hope in a couple of years' time. Our first half net income grew a robust 19% and it ended at PHP 4.1 billion. We registered a return on equity of 11.1%, a stark improvement from the 7.7% at the end of 2022 and we're not stopping here. Furthermore, this is supported by a prudent positioning program appropriate for a consumer-driven portfolio. We likewise focused on maintaining a healthy asset quality. Our provisions for loan losses continue to be appropriate for a predominantly consumer-driven portfolio, while our consumer loan asset quality metrics remain better than industries, and has continued improving over the years. It helps when you're a specialist. Lastly, we continue to have one of the highest net interest margin net of credit costs in the entire industry. Next slide, please. Our net income for the first half, as I mentioned earlier, ended at PHP 4.1 billion, 19% higher than last year's, driven largely by core revenues. That's very important. We're focusing on core revenues and core revenues for us over the period grew by 16%. Trading gains was decent. We achieved PHP 212 million for the first half. However, our trading activities remain supplemental to our revenues, and they actually represent less than 1% of our total. Net revenues grew a robust 17% to PHP 23.8 billion. In contrast, our operating expenses grew at a much more modest pace of 9%. Mainly, this was driven by expenses that are related to growing the balance sheet, things that we really should be spending because it goes together with our growth. So this clearly reflects our widening of the jaws. Our operating leverage as pre-provision operating profit or PPOP stood at PHP 11.1 billion. This is now 25% higher than last year's. This has led, as I mentioned earlier, from a cost-to-income ratio of 53%, which dropped from 57% last year and 60% the previous year. Lastly, provisions for loan losses ended at PHP 6.1 billion as we continue to be prudent and set aside sufficient provisions for potential losses while we grow our core business. And later on, you'll see about how we go about this above-industry consumer NPL coverage ratio. The game is coverage ratio, right? And we have been improving this for the last 3 years, and we continue to improve this. Next slide, please. Our first half interest income stood at PHP 24.1 billion and continues to increase more than our interest expenses, which clocked in at PHP 4.9 billion. This led to larger net interest income of PHP 19.2 billion. This translated to our net interest margin widening further by 20 basis points to 8.3%. I think this is now the highest in the industry, some -- a position that we've held for quite a number of years now. And this is because of rebalanced portfolio yielding higher quality assets and higher business outputs. As funding costs stabilize further and eventually, we expect this to taper down, although with some delays because of the global macroeconomic conditions, any result arising from expected monetary easing, we expect our NIM expansion to further be amplified. We're a negatively GAAP book. Currently, our estimate is we see around 3 to 5 basis point annual improvement in NIM or net interest margin for every 25 basis point cuts in policy rates. But we're not expecting for that to happen. If it happens, it's the cherry on top. What we're trying to do is to do it on the basis of pure performance, and that's what we're doing right now, performance, but if anything comes in because of the macro, well and good. Next slide, please. Let me focus now on our consumer loan portfolio. You've heard many speakers talk about one thing to go into the consumer loan portfolio. This is who we are. We're the largest consumer-centric bank among the universal banks, and this has been the focus of the group for the longest time. Going consumer is not an easy thing. It takes a long maturity process. To date, we have grown this steadily over the past years, and now it's touching close to PHP 300 billion, PHP 298 billion to be exact. Year-on-year, our consumer loans grew by 15%. And that for me is a good number. I've been around the region, and I think 12% to 15% asset book growth is probably optimal over a long period of time. We have largely balanced our consumer loan mix between secured loans of auto, mortgage loans as well as the unsecured portfolio of credit cards and personal loans. Meanwhile, we also have this third category, and you may have heard this earlier, which is called salary loans to government teachers. We're one of the largest in the market. We're the ones that are having PHP 90 billion, in fact, slightly below, PHP 88 billion to be exact, of our book is actually from this segment, which are really payroll deduction directly from government teachers. And this carry relatively lower risk profile. And the combination is very supportive of a high-performance loan mix. Next slide. This high-performing consumer loan portfolio, obviously, is one thing. But on the other side, it needs to be supported by a stable and competitive funding base. The combination of which will make it quite formidable. As I mentioned earlier, our total deposits grew 11% to end at PHP 413 billion. And this is largely driven by competitive CASA, right? It's not the highly expensive funding. This is funding that is generated because of operating account. Our CASA grew 13% to PHP 324 billion, hitting a CASA ratio of 79%. And as I mentioned earlier, we've been consistently outperforming the industry. [indiscernible] aside, our peso CASA to total loans is around 85%. That's very healthy. And we continue to develop ways and initiatives to grow our funding base, enhancing our cash management offerings in order for East West Bank to be our customers' preferred operating account. And we do this by amplifying our presence in key areas where we have competitive advantage. We've expanded our Wealth Management and Priority Banking businesses in cities, particularly outside of Metro Manila. We have one of the widest coverage of Priority Banking centers versus our peers, and we intend to expand this further. “Collaterally, we also have the same approach for our MSME and Corporate Banking business. What we've seen is that our Priority Banking clients are the same people that we have in terms of our MSME and Corporate Banking. What is important is to bank both the companies as well as the individuals behind the companies. Next slide, please. So it's not all balance sheet. Our fees and other income grew by 20% on the back of increased lending and other banking transactions as well as revenue optimization initiatives that are in line with our peers. Fee income alone grew 29%, and we've hit PHP 3.5 billion, and this is driven by deposit-related fees and our lending businesses. On the other hand, our trading income was PHP 212 million. This is a supplementary boost to our core lending businesses, and we do not rely on this and it's currently less than 1% of our revenues, as I mentioned earlier. But as I mentioned, volatility is here. So we're not opposed to taking opportunistic gains if and when they are manifested. Furthermore, we maintain a minimal proportion of securities portfolio relative to our asset. We prefer to focus that on our core businesses client-led. But this is to largely complement our accrual interest income. Moving forward, we aim to supplement our accrual fee income -- accrual and fee income as we expand our lending activities more into trade finance and supply chain financing, particularly for the domestic type of businesses. Next slide, please. Meanwhile, our operating expense growth moderated this time to around 9%, single-digit level, right, year-on-year. And this was really because of the stabilization of our workforce expansion. We had to catch up the first year. And now we've done the technology, the process improvements, and now we're benefiting from that, and we're now moderating our workforce expansion growth rate. Most of our expenses right now are for continuously growing the business to build scale, such as marketing programs, rewards, promotions and other acquisition costs. Similar to our revenues, we are also rationalizing our technology costs. Our CTO and the team have done a wonderful job, particularly in terms of rationalizing software, licenses, subscriptions and really to maximize the benefits of our investments. This is while improving at the same time, our tech infrastructure. And things that came out of this was we've implemented our credit decisioning engine which allows us for faster credit underwriting, straight-through processing. Currently, we're undergoing also a core banking modernization program, which allows us a digital-first API native architecture. We've recently concluded upgrading our treasury, our trust management systems as well, really preparing the bank for the next generation. We have adopted an API-led approach to drive innovation and agility across the bank by developing a resilient ecosystem of interconnected APIs supported by modern data lake and advanced AI capabilities. We aim to create flexible and scalable business models that enable us to swiftly bring new products and services to the market. We believe that we can out fintech the fintechs, right? I mean, this is -- I wasn't very confident about this a few years ago, but I think our stack right now, we could go in and basically compete head-to-head. This integrated approach not only enhances our ability to deliver personalized, seamless experiences to our customers, but also leverages data-driven insights, AI-driven automation to unlock new revenue streams and operational efficiencies. We've been using AI, to be honest, for like almost more than a year now, right? And the results are really, really coming to fore. Ultimately, we are positioning ourselves as a future-ready, digitally-driven bank committed to sustainable growth, innovation and delivering long-term value for our stakeholders. With a cost-to-income ratio, we're always focused on the bottom line and how that moves the needle, improving to 53% from 60.2%. This will allow us more room for further investments in digital-enhancing capabilities and infrastructure, eventually further lowering cost to acquire and cost to serve and more importantly, customer journeys and customer experiences. Speaking of customer experiences, next slide, please. We believe at East West Bank that every Filipino is on a unique financial journey. Each customer segment has its own distinct needs. In fact, there will be hyper personalization at some point. We're getting ready for that. This is from first-time digital bankers to digitally fluent users looking for more convenient and efficient way of banking. We intend at East West Bank to serve them all. This understanding helped us to be named the best digital ecosystem and platform initiative in the Philippines recently by the Asian Banker. We were also awarded the most consumer-centric bank at the ASEAN Fintech Forum. Again, it's good that we are being recognized externally, and it's not just us talking about it ourselves. Our comprehensive digital ecosystem is composed of the following, if you indulge me. Launched only last year and now with over 1.5 million installs and 73% monthly active users or MAU, our main banking app is called EasyWay, is designed for the mass affluent and for our Priority Banking clients. This is a much improved version from our old app, giving users an upgraded experience with improved security, in-app customer service and real-time credit card tracking, among others. We're going to enhance this with further interaction with our consumer suite of products and services going forward. Also, we now have 120 customers -- 120,000 customers active on Komo, which is empowered to apply for salary loans. The one that we talked about, our teachers already apply with us online, real-time, one button. And we do reloans anytime, anywhere, all digitally. Komo offers a fully digital bank account with low-cost transfers, savings with competitive interest rates, simple online payments, and this is positioned for high-volume daily transactional needs. Let me also talk about ESTA, which is our AI-powered and probably the country's only full-service banking chatbot. We now have over 300,000 credit cards and personal loan bookings being done via ESTA and continues to be an agile, nimble workhorse supporting our consumer lending business. Meanwhile, we also have EW Pay, which is the country's first Visa-certified tap-to-pay mobile app for NFC-enabled Android phones with over 30,000 users on the platform now with the recent development that you probably heard about coming from the BSP essentially allowing Apple Pay and Google Pay to operate in the country. And given the tokenization connection created by EW Pay, we are poised to be the first in the Philippines among Visa issuers to participate in Apple and Google Pay should they launch in the market. Our objective is to be like Burger King. If you remember, for those of you that are old enough, Burger King decided that rather than standardizing everything, they would want the customer to determine how they would like to interact with them. And that's basically what we're doing with our digital strategy. And lastly, serving our business clients' needs digitally, we have EasyBiz, which supports the CASA generation as we strive to make East West Bank the main operating account for businesses. Currently, our digital penetration stands at 44% with our platforms having a consolidated 4.6 star rating across Google Pay and App Store, showing consistent customer satisfaction and more importantly, loyalty. For us, digital is not just a channel. It provides a footprint to gain better and deeper understanding of what the customers value, ultimately resulting in better suited, safer products and services and more importantly, journeys for our clients. Next slide, please. Let me talk about provisions. Our provisions for loan losses amounted to PHP 6.1 billion for this period. This is equivalent to a credit cost of around 3.5% And this is brought about by a predominantly consumer portfolio that has grown rapidly in the last 3 years. Let me be very clear in stating that this level of provisioning is appropriate for us right now at this stage of our growth. Our expected credit loss models prescribe higher provisioning early in the life of the loan. And that's really just from conservatism. But this declines the customers' payment behavior is established. It's the same as when you don't know someone, you need to be a bit more defensive until you know the counterparty and then you can obviously be willing to open up a little bit subsequently. And so we continue to be very, very deliberate and very prescribed in our approach. But as the proportion of seasoned portfolio becomes larger than the new loans coming in, in credit costs, what tends to happen is that we normalize over time as provisions are spread over a larger loan base. You might have also seen this in other banks who are aggressively coming into the consumer segment. The good thing is that our segment is already fairly well seasoned from that perspective. And despite this perceived what I call higher-than-normal credit costs, we still registered a net interest margin net of credit costs above our peers, even when compared on the NIM alone. Most importantly, our consumer loan portfolio's asset quality remains healthy and actually have been improving in the past years. If you look at, we started at around 8% something, and now it's down to like 4.7%, which is better from a consumer-to-consumer comparison of the industry's 5.4%. And this is because we've tightened and improved credit underwriting. We've also enhanced our collection initiatives as well as a write-off of loan outstanding accounts. Our efforts, the team's efforts have led to a healthy asset quality, allowing for incremental provisions to accumulate. And this is important, particularly for the consumer side of the business. And this has led to additional buffers for consumer NPL cover or NPL coverage ratio, which now stands for our consumer loan at 71%, which compares very favorably with the industry's 59%. We ensure that we are growing responsibly and maintaining more than adequate buffers for potential losses. What better time to accumulate buffers than when the economy continues to be stable. As they say, the best time to fix the roof is when the sun is shining. Next slide, please. And as such, we continue to sustain our net income trajectory, likely just from a simple run rate, likely to beat last year's for another strong performance. hoping more, much more. Our return on equity continues to improve, trending to surpass industry average as we maintain our focus in executing our strategy. We have not pivoted. We've gone in really deliberate with our strategy. Please note also that the industry average is heavily skewed by the top 3 banks as they contribute more than 50% of the banking industry's total net income. We have enough room to leverage on our existing balance sheet while maintaining above regulatory capital levels. Our profitable trajectory is on track and with a measured approach in terms of growth of business that will optimize our returns and capital accretion while sustaining dividend payouts for our shareholders. Speaking of shareholder returns, next slide, please, 3 years ago, we were introduced in the PSE and would like to thank the PSE for that opportunity. But for those if you had come in around the time like 2022 or the latter part of it towards the beginning of 2023, let's say, a stock price of 6.67, you would have gained around 87% on price appreciation alone. Include our consistent 20% dividend payout for the same period and the total shareholder return or TSR would be more than 100%, actually around 122% based on the stock price as of August 18. In spite of the recent increase in our stock price, I think it still offers a very decent yield of above 5.5%, 5.6%. Furthermore, we aim to maintain a sustainable dividend payout ratio of 20% balancing the expansion of the bank while rewarding our shareholders. With our return on equity trending to surpass industry average, we intend to go beyond this and achieve our natural potential as a consumer-centric, consumer-focused bank, leveraging and benefiting from the dividend -- demographic dividend and the consumption story of the Philippines. If I may direct your attention at the right-hand side of the screen. Let me just highlight that our current levels in terms of stock price provide for an upside for existing and potential investors as our price to book is still way below than what is warranted by our return on equity. This is something that I know a lot of the sophisticated analysts look at. This is something that I personally look at as well. Next slide, please. Just a quick note on awards and recognitions. Over the past 2 years, East West has received over 35 awards, marking an exceptional period of recognition across various domains. We have been acknowledged for our excellence in private banking, wealth management, digital innovation, customer centricity and governance. Global institutions have named us among the best in the industry for retail and private banking. In wealth and asset management, we continue to be recognized for excellence and trusted leadership. Our digital platforms have been recognized for their excellence, winning awards for customer experience and mobile innovation. Beyond our products, our commitment to good governance and people development has been affirmed to such recognitions as the Great Place to Work, Golden Arrow and Best Employer Awards. Together, these awards reinforce our position as a trusted future-ready consumer bank and show that we are building on strong foundations as we continue to pursue sustainable growth. To end, please allow me to conclude by saying our operating leverage is widening as revenues grow and efficiencies improve. We're starting to really benefit from the investments that we've been making over the past few years. Asset quality remains healthy, supported by prudent provisioning and solid buffers. Capital is more than adequate, giving us room for growth, for dividends and for long-term value creation. We are pursuing a disciplined growth path, prioritizing areas that optimize earnings and capital efficiency. Most importantly, we remain steadfast in our goal of becoming one of the country's premier consumer bank, the top consumer bank in the country, the most focused consumer banks among the universal banks, well placed to thrive in a sustained consumption-led economy that is benefiting from the demographic dividends in the Philippines. And with that, I end my presentation, and I look forward to your questions or clarifications. Thank you. Alex, over to you.

Hi. Good afternoon, everyone, and thanks for joining us for this afternoon session on PSE STAR. I'm [Alexa Green] from Security Bank. We would like to invite Jerry back to the window. Jerry, thanks for the presentation. Definitely quite insightful for our investors out there. I guess just to get the ball rolling for Q&A. So does the bank have any plans to increase its dividend payout ratio?

Well, that's something that we can consider for the future. I think that's always a question. Right now, we're actually balancing growth capital to be sustainable and really at the same time also sharing the benefits and the fruits to our loyal and supportive shareholders. And so that one is what we're balancing. At the moment, we are cognizant that our net income has been growing at a CAGR of around 25%, a bit more actually. And our return on equity has been improving and now touching around 11.1%. And with all the projections that we've seen so far, it will continue to grow. And so I think we will need to balance the dividend payout with the with the growth that we need -- with the capital that we need to continue to growing as we've been growing so far. And so I think we will continue with a 20% dividend payout. Even at that level, we're getting a dividend yield of mid-5s, which is very, very decent, coupled with the growth in the appreciation of the underlying, I think the combination from a total shareholder return should still continue to provide very impactful and meaningful upsides.

Yes. Definitely, 5% is quite attractive for investors out there. If we can move over to -- move on to the growth story of the bank, if you can share with us what your asset growth target looks like for the coming year?

Yes. So consumer if there's anything I learned living around the region is that it's not a start-and-stop business, right? What you want is a sustained, high enough, but really robust growth. So from our side, we see a sustainable asset growth rate of around 12% to 15%, right? And we aim to do this by achieving a leverage ratio closer to 7.5x, currently, we're up 7.1%, right? And this strategy is intended to facilitate efficient capital deployment and aligning it with the industry CET1 levels, capital adequacy requirements and so on. So that's kind of how we're thinking about it. So in our 12% to 15% on the asset growth, maybe much higher than that, maybe 20% on the fee side, the combination of which inclusive of productivity gains give you the net income growth that we've been achieving so far for the last 3 years. So hopefully, the objective is to maintain that trajectory.

All right. I guess since you mentioned on capitalization, considering a CET1 ratio at around 12%, does the bank have any plans on raising capital to further grow the business?

This option remains open. I mean, that's something that we look at. But we prefer to fund our asset growth with strong earnings and income retention. This is the reason for our disciplined approach towards asset development as we want to optimize our use of capital given the CET1 constraints that we're actually seeing. But we're not adverse to it. If and when there is a potential opportunity that can allow us to grow much faster than what we have, again, assuming guardrails are in place, we can do that conservatively as well as deliberately, then I think we should be open to that.

All right. I guess moving on to the next question. In terms of your ROE, roughly around 11%. So how does this compare to your internal targets? And what does it signal about your capital efficiency?

I think -- it's -- put it into context, 7.7% was when we started, at least when I started. Now it's now 11.1%. I think the market is now going to around 12%, 15%. That's kind of the project right now. And so I think a lot of that will be really driven by scale economies, but also investments to automate, to create productivity and so on. And so that's what we've been doing over the past 3 years, not just to really -- I can disclose, but we need to make sure that we have the right operating model to continue growing and to improve our ROE over time.

All right. In addition to that, you mentioned deeper personalization and broader product assets via the EasyWay app. So how has customer adoption of the app evolves and what new features can we expect?

Actually, the MAU, the monthly average user retention rate has been around high 70s, which is pretty good, right? And the App Store rating, Google Play and so on has been quite good as well. So the Philippine market is very feedback-driven. If they don't like it, they will tell you, right? So I think that's something that we're really quite proud and happy about. In terms of features, we recently launched our U.S. dollar purchase and sale, and so that's done in quite nicely. I think we have one of the most competitive rates in the market available, and so that's what's gone out. We're moving towards UITF for investments, and that's also going out pretty soon. We're also incorporating our consumer lending capabilities. So you can use it for our credit cards. You can installment online. We're looking at PL, personal loans. We can go in -- looking at it in terms of new applications and so on and so forth. So we want to make sure that we have one of the most vibrant ecosystem going forward. So lots of things to look forward to, and this is something that we're really investing heavily in. But it also requires that the end-to-end is being invested in, right? It's not just on the front end, but it's really to make sure that the entire process is actually really curated appropriately so that [indiscernible].

I see. Quite helpful. I guess if I may ask also in terms of your partnerships like the EastWest Puregold Always Panalo Visa credit card seem to be part of your strategies. So how do these collaborations fit into your like overall growth plan?

That's a very important part of our growth plans. In fact, personally, I think banks will become invisible long term, right? And I think the best banks are the ones that are part of the journey. I mean, you don't get a mortgage, you buy a home, right? You buy a car or your dreams come true, but you don't go and get an auto loan, right? They're just -- pardon to say, they're necessary evils, right? But the reality is that what we want to do is to be making that part of the journey. So banking, we want it to be embedded. And this is one good examples in terms of how we embed ourselves with our partners' ecosystem, making them more accessible, allowing them to sell more, but also for the end consumers to be able to smooth their consumption patterns and so on. And I think that's really, really exciting. That's something that is very important for a country that is experiencing a demographic dividend and a very consumption-led economy. So yes, more to come.

Yes. Exciting times for East West. I guess just to add, beyond banking, East West has been hosting lifestyle events in nationwide forums. So how do these activities strengthen your brand and consumer -- customer relationships?

Yes. I think -- so that's part of our hyper localization strategy. right? We go around different cities, also in Metro Manila, but we're starting to have more focus outside. And it's really about engaging the clients being their main operating account, meaning their go-to bank whenever they need something. And so that's something that we're really focused on. More recently, in our priority banking and high net worth individuals, we've seen a lot of conversations. And so we've led foreign dignitaries and capable, very high-level professors from different universities to come in to talk about intergenerational wealth transfers, so for instance, right? How do you manage your wealth? How do you do estate planning and so on and so forth, successions and so on. So that's something that I think our clients appreciate. So banking need not be -- see, all the things about electronic, digital, they become hygiene factors, right? Everyone needs to have them. And I think we're quite proud of what we've done, but we want to make sure that it's about the total experience, right? We have a very focused physical approach, which is the physical and the digital combined together, augmenting the capabilities of our relationship managers so that they become very effective in meeting and serving the needs of our clients. So that's how we're putting them all together.

All right. And I guess it was mentioned also in the presentation and East West is known to be a client-centric bank. And in fact, it was actually named the most consumer-centric bank and also received Great Place to Work certification. So how do these awards reflect your corporate culture and priorities?

Yes. I think when we're doing transformation, which is what we've effectively been doing. You -- strategy is the easy part, right? So you go in, you do the strategy. It's really just a lot of quantitative stuff. But what is really important is that it becomes a set of values and it becomes a set of a culture that everyone embodies. And I think that goes back to our ethos and our belief that banking is -- at the end of the day, will continue to be a person-to-person relationship, right? It might be augmented with physical and digital and that the whole ecosystem, the whole customer journey needs to be enhanced, but we really need to make sure that we have the right people, the right capabilities and obviously, more importantly, the right culture to serve and continue to serve and support our clients' ever-evolving needs. So that's something that I actually think about because it's not an easy tick the box and you've done it. It's something that evolves and there's a lot of repercussions as you go along if you do something. So it's quite an interesting journey. So it's been -- we shall see. I'm very excited to see the outcome actually.

Definitely sounds interesting. I guess if I can move on to some of our questions from the Q&A box. We have a question here. May I ask what is the expected improvement in East West net interest margin for every 25 bp cut in the BSP policy rate?

Yes. So this is estimate. There is the translational effect. So I just want to make sure that you don't quote me directly. But our estimate at the moment is that for every 25 basis point policy cut, it will reflect in terms of a 3 to 5 basis points in terms of net interest margin annualized impact for the bank. And that's really because of our negatively gapped portfolio.

All right. And in terms of your provisions, it increased despite improvements in the NPL ratio. So should this be viewed as a natural outcome of sustained growth in the credit card business? And what is the bank target NPL coverage ratio?

Yes. So this is a natural consequence of the growth rates that you're seeing, particularly in the unsecured part, credit card and personal loans, as I mentioned earlier. What we normally do is that we have a model which typically takes in higher provisions in the earlier stages. It's like dating. You don't know each other. So therefore, you're a bit defensive in the first few dates and so on until you get to know each other. And once you have the behavioral scores and you've seen the repayment patterns and so on, you get better over time. So I think that's how we've been doing that. But we see this tapering off as we establish the credit behavior of our customers. On the bank's target NPL coverage ratio, we target based on a per loan type. So we look at it on a per loan type, and we target this to be comparable with our peers in regards to NPL coverage. At the moment, overall consumer were very high, actually at 70s. In fact, mid- to high 70s compared to our peers, which are for the consumer portfolio around high 50s, right? But I think that's about right. Being a consumer bank and being a specialist in the area, we've seen these cycles over time. And what we want to be able to do is to be able to go through it both in the good times as well as in the bad. We just want to make sure that we have a sustainable growth profile.

All right. And I guess we have time for one last question. How should we interpret credit cost trends and what guidance can management provide for 2025?

We expect credit cost to be sustained at its current levels as we continue to expand our consumer lending portfolio. This may improve further as we continue to season our existing portfolio while balancing our portfolio loan mix. One of the things that you've noticed earlier was our partnerships with other ecosystems, right? Those give us a level of seasoning because of the information that we are also and the insight that we're able to glean from them because of that approach. And so that coupled together allows us a pathway to continue to grow while being disciplined and maintain our credit cost. I think Cami is here.

Yes, I believe -- yes, that's all the time we have. I would love to discuss more, but thank you very much, Jerry, for the insightful presentation. I turn you over back to Cami. Thank you.

Thank you once again, Mr. Jerry and Lex for that engaging discussion. At this point, we'll pause for a quick 5-minute break. Please stay with us as we continue with more presentations right after.