Fideicomiso Irrevocable F/2061 FHipo (FHIPO14) Earnings Call Transcript & Summary

Good morning. My name is Joe, and I will be your conference operator. [Operator Instructions] This is FHipo's Fourth Quarter 2021 Conference Call. [Operator Instructions] FHipo released its earnings report on Friday, February 25 after market close. If you did not receive the report, please contact FHipo's IR department directly, and they will e-mail it to you. Please note that this call is for investors and analysts only. Questions from the media will not be taken nor should the call be reported on. Any forward-looking statements made during this conference call are based on information that is currently available. Please refer to the disclaimer in the earnings release for guidance on this matter. We are joined by Daniel Braatz, Chief Executive Officer; Jesús Gómez, Chief Operating Officer; and Ignacio Gutiérrez, Chief Financial Officer. I would now like to turn the call over to Daniel Braatz. Daniel, please go ahead.

Good morning, everyone, and thank you for joining us today. I'm pleased to announce FHipo's fourth quarter 2021 results. I would like to start by addressing FHipo's performance and achievements during the quarter. We're very pleased with the solid financial and operational results we achieved during the full year of 2021. Net income in '21 was MXN 763 million, a 19% increase compared to the normalized net income of MXN 641 million reported in 2020. The accumulated estimated distribution per CBFI for 2021 is MXN 1.83 per share, one of the largest distribution paid in the past 3 years. Turning to the quarterly results in Slide 1. I would like to highlight the following achievements. First, during the first quarter -- the fourth quarter, we issued our third and fourth peso-denominated RMBS transactions in the Mexican market with ticker symbols people FHIPOCB 21/2 and people FHIPOCB 21/3 for MXN 3 billion and MXN 750 million, respectively. Both issuances received a AAA credit rating nationally. Second, also during the quarter, we focused on maintaining people's financial health and a strong balance sheet. That is why we made some changes to our funding structures to optimize our cost of debt and maximize investors profitability. We fully paid 2 warehousing facilities contracted with Nafin and IDB and fully amortized the 2 long-term covered bonds with ticker symbols, FHIPO16 and FHIPO17 for a total amount of MXN 3 billion and MXN 900 million, respectively. For the full year, I'd like to point out the following achievements. As mentioned earlier, in the graph in the bottom left, you can see that our estimated distribution for 2021 subject to the current distribution policy was MXN 1.83 per share for the year, one of the highest distributions in the past 3 periods, reaffirming our commitment to continue delivering attractive results to our investors. And in the graph in the right corner, you can see the positive trend in the company's ROE. Even in the face of an adverse environment related to the COVID-19 pandemic, we are proud to report an increase in return on equity of 1.2 percentage points versus 2020 and 1.9 percentage points versus 2019. We will continue working to maintain the software trend going forward. So for the next slides regarding our portfolio composition, I'll hand the call over to our COO, Jesús Gómez. Jesús please go ahead.

Thank you, Daniel. Good morning, everyone. Thank you for joining us today. I would like to continue with Slide 6 to discuss the breakdown of our mortgage portfolio for the fourth quarter of 2021. At the end of the fourth quarter, FHipo's consolidated portfolio amounted to MXN 27 billion, comprising 93,000 loans, which represents a decline of 4.4% and 6.2%, respectively, compared to the fourth quarter of 2020. This was mainly due to the natural amortization of our portfolio. Our loans come from our partnerships with several origination programs such as Infonavit Total, Infonavit Más Crédito, Fovissste and YAVE. Both the average loan-to-value payment income ratios remained stable compared to the fourth quarter of 2020 at 77.9% and 24.3%, respectively. As of the fourth quarter of 2021, 94.7% of our portfolio remains current, leaving the consolidated NPL ratio at 5.3%, which is explained by the natural seasoning of our portfolio. Our portfolio remains diversified across different programs with the following breakdown: MXN 9.5 billion belong to Infonavit Total, MXN 14.4 billion to Infonavit Más Crédito, MXN 2.5 billion to Fovissste, MXN 688 million to YAVE, which is our current or main origination program. Moving on to Slide 7, we can see how FHipo's portfolio continues to be geographically diversified across all 32 Mexican states. Regarding our partnerships and origination programs, our portfolio is diversified in the following ways: First, Infonavit Más Crédito, the program represents slightly more than half of our portfolio at 53.4%; second, Infonavit Total pesos represents 19%; third, Infonavit Total VSM, with minimum wage index loans represents 16% of the consolidated portfolio; fourth, Fovissste portfolio represents 9% of the total portfolio; and finally, YAVE, which increased by 70% compared to the fourth quarter of 2020, represents 2.5% of the total portfolio. As always, we will continue to monitor the performance of our portfolio, particularly in the context of the current global situation. And now I will hand over the call to our CFO, Ignacio Gutiérrez, to discuss FHipo's financials.

Thank you, Jesús. And again, good morning, everyone. I will continue the presentation by going through our diversified sources of funding on Slide 10. Our funding structure is well diversified, including securitizations, short-term unsecured bonds and warehousing facilities. As of the end of the fourth quarter of 2021, our consolidated debt-to-equity ratio was 2x, and our on-balance debt-to-equity ratio was 0.7x, almost half when compared to the 1.4x in the fourth quarter of 2020. This decrease is mainly explained by the amortization of certain warehousing facilities and the scheduled total amortization of long-term covered bonds with the resources obtained from the securitizations issued during 2021 for a total amount of MXN 6.2 billion. Looking at Slide 12, I'll go through the asset quality of our portfolio, our NPLs and our allowance for loan losses. We maintain a conservative allowance for loan losses with our expected loss coverage standing at 1.49x and our NPL coverage ratio at 0.75x, both in consolidated terms. Our NPL ratio remained at a health level, standing at 5.3% of FHipo's consolidated portfolio, and our portfolio quality remained stable even during these challenging times and continues to perform strongly. This was certainly helped by the diversification across several origination programs, income levels and geographies. Moving on to Slide 15, I will go through the financial results of the quarter. On the bottom line, net income for the quarter was MXN 109.2 million, a decrease of 10.3% compared to the MXN 121.8 million reported in the fourth quarter of 2020. This decrease is mainly due to the indexation of the VSM-denominated portfolio, which took place at 4.99%, reflected mainly within the valuation of receivable benefits in securitization transactions. Considering the outstanding CBFIs as of the date of the report, resulted in a net income per CBFI or earnings per share for the quarter of MXN 0.282 and in a net income per CBFI subject to distribution of MXN 0.268. In more detail, the total interest income from mortgage loans amounted to MXN 319 million a 40.6% decrease compared to the MXN 537 million reported in the same quarter of 2020. This decrease was mainly due to the effect of the 3 portfolio securitizations carried out during 2021. Since the interest from the securitized portfolio is now considered as part of the valuation of receivable benefits in securitization transactions. As in previous quarters, this is mainly an accounting effect due to the securitizations. Interest expenses for the quarter were MXN 167.9 million compared to the MXN 314 million in the fourth quarter of 2020, a 46.7% decrease mainly related to the effect of the portfolio ionization issue during the 2021 due to the fact as that with the proceedings of such insurances, we amortized on balanced long-term covered bonds and warehousing facilities. The allowance for loan losses for the quarter were MXN 52.1 million, a 43.4% lower compared to the MXN 92.1 million reported for the fourth quarter of 2020. The valuation of receivable benefits from securitization transactions was MXN 66.2 million, a decrease when compared to previous quarter, explained mainly by the indexation of our VSM-denominated portfolio, as mentioned earlier. The administrative expenses for the quarter, which included Infonavit's administration and collection services were MXN 73.9 million and they're in line with the expense budget approved for 2021. Moving on to Slide 16. We closed the fourth quarter with a financial margin of 50.1%. The total expense over gross income ratio stood at 18.4% and on an annual basis, the return on equity was 7.7%. With this, we conclude the financial results, and I will now turn the call back to our CEO, Daniel Braatz, for closing remarks and the Q&A session.

Thank you, Ignacio. I would like to close by saying that we are very optimistic about 2022. We believe it will be a year with greater opportunities for people and convinced that we have the financial and operational strength to take advantage of these opportunities and continue innovating within our business model and loan portfolio. I would now like to hand the call back to the operator to start the Q&A session, please.

[Operator Instructions] Our first question comes from the Q&A chat feature from Martin Lara. I have several questions. One, what can we expect in terms of portfolio acquisitions? Two, where do you see the consolidated portfolio growth this year? And three, where do you see the NPL at the end of the year?

Thank you, Martin. In terms of expected portfolio acquisitions, we plan to keep origination through certain partnerships that we have established during the last years, particularly with YAVE, priorly known smart lending will keep continuing acquiring part of those portfolios. And we are also reviewing right now with Fovissste and Infonavit, 2 programs that potentially will originate new mortgages for this year and other certain type of loans. In terms of the consolidated portfolio growth for this year, at least, we plan to keep the same size of our balance sheet. If possible, grow it a little bit more. But to be conservative, the idea is to keep our own size, not be that aggressive until we see the world's macroeconomic environment and political environment being reduced significantly. And finally, where do we see the NPL by the end of the year? As you can see, the NPL has been performing according to our projections. Right now, we believe that the ratio that we're holding is quite good considering the seasoning of the current portfolio. So we expect normal tendency going forward. So there is nothing to report that we'll be off projections for this ratio.

We will pause once more for any further questions. We have not received any further questions at this point. So that concludes our question-and-answer session. Thank you. I would now like to hand the call back over to Daniel Braatz for some closing remarks.

Thank you all for joining us today. Please don't hesitate to reach out to us if you have any more questions or concerns. We appreciate your interest in FHipo and look forward to speaking with you soon. Thank you very much.

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