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

Good morning. My name is Zanella, and I will be your conference operator. [Operator Instructions] This is FHipo's First quarter 2022 Conference Call. [Operator Instructions] FHipo released its earnings report on Friday, April 29 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 meeting will not be taken nor should the call be reported on. Any forward-looking statements made during this 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 first quarter 2022 results. I would like to start by addressing FHipo's performance and achievements during this quarter. As you can see, we continue to deliver strong results, even in the face of challenging macroeconomic conditions. Net income in the first quarter was MXN 191 million. That is a 10% increase compared to the net income of MXN 174 million reported in the first quarter of last year, mainly as a result of the optimization of our financial structure and the performance of our portfolio. Net income per CBFI for the first quarter of 2022 was $0.49. We will continue to pursue a conservative strategy, preserving our current portfolio and selectively seeking opportunities to grow going forward. We will keep also focusing on generating higher returns for our shareholders as we move on during this year. Turning to quarterly results on Slide 1. I would like to highlight the following achievements that we accomplished. Our return on equity closed at 8%, that is 80 basis points higher when compared to the first quarter of 2021 and almost back to pre-pandemic levels. This demonstrates once again that the resilience of our business model as well as the company's efforts to provide higher returns for the investors are continuing to be achieved. I'm proud also to announce that during the quarter, HR ratings ugrade FHipo's credit rating. We are right now at a AA+ level coming from AA, and also the same credit rating agency upgraded the Dual Program's rating going from HR1 to HR+1. These credit ratings reaffirm FHipo's solid credit position as a company and the ability to refinance and the confidence that the market and financial institutions have shown in our business model. During the quarter, we also closed a new revolving warehousing facility for up to MXN 2 billion with Grupo Financiero Banorte with a spread of 135 basis points and a legal maturity as up to 2055. Finally, our estimated distribution [indiscernible] subject to the current distribution policy resulted of $0.47 for the quarter that is the highest figure for our first quarter in the past 3 years. For the next slides regarding our portfolio composition, I will hand the call over to our COO, Jesús Gómez.

Thank you, Daniel. Good morning, everyone, and thank you for joining us today. I would like to continue with the Slide 6 to discuss the breakdown of our mortgage portfolio for the first quarter of 2022. At the end of the quarter, FHipo's consolidated portfolio stood at MXN 26.7 billion and comprised 91,000 loans, representing a decline of 4.6% and [ 6.9% ] respectively, compared to the first quarter of 2021. 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-to-income ratios remained stable compared to the first quarter of 2021 at 77.9% and 24.3%, respectively. As of the first quarter of 2022, 94.2% of our portfolio remains current, leaving a consolidated NPL ratio at 5.8%, which is explained by the natural seasoning of our portfolio. Our portfolio remains diversified across the different programs with the following breakdown: MXN 9.3 billion [indiscernible] Infonavit Total; MXN 14.1 billion to Infonavit Más Crédito; MXN 2.6 billion belong to Fovissste and MXN 791 million to YAVE, which is currently our 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 divided in the following ways. First, Infonavit Más Crédito program represents slightly more than half of our portfolio at 52.6%. Second, Infonavit Total Pesos program represents 18.8%. Third, the Infonavit Total VSM or minimum wage index loans represents 16% of the consolidated portfolio. Fourth, the Fovissste portfolio represents 9.6% of the total portfolio. And finally, the YAVE portfolio, which increased 78% compared to the first quarter of 2021 represents 3% of the total portfolio. As always, we will continue to monitor the performance of our portfolio, particularly in the current economic context. I will now hand the call over to our CFO, Ignacio Gutiérrez, to discuss FHipo's financials.

Thank you, Jesús. And again, good morning, everyone. I would like to continue the presentation by going through our diversified sources of funding on Slide 10. Our funding structure is well diversified, including securitizations, short-term bonds and warehousing facilities. As of the end of the first quarter 2022, our consolidated debt-to-equity ratio was 1.9x, and our on-balance debt-to-equity ratio down 0.7x, almost half when compared to the 1.3x of the first quarter of 2021. This decrease is mainly explained by the strategies carried out during the last 12 months, including the issuance of several securitizations. If we move to Slide 12, I'll now go through the asset quality of our portfolio, our NPLs and our allowance for loan losses. As you can see, we're maintaining a conservative allowance for loan losses with our expected loss coverage standing at 1.46x and our NPL coverage ratio at 0.73x both in consolidated terms. Our NPL ratio stood at 5.8% of FHipo's consolidated portfolio and at 4.96% while considering portfolio balance of Origination. Moving into Slide 15. And here, I will go through the financial results for the quarter. The net income for the quarter resulted in MXN 191.9 million, an increase of 10.1% compared to the MXN 174 million reported during the first quarter of 2021. This increase is related to the amortization of our financing structures and to a lower requirement of allowance for loan losses on the mortgage portfolio, mainly due to its performance in terms of asset quality during the quarter. Considering the outstanding CBFIs as of the date of each report, these results in a net income per CBFI or earnings per share for the quarter of $0.495 and in a net income for CBFI subject to distribution of $0.47. If we go into some detail in some accounts, the total interest income from mortgage loans amounted to MXN 312 million, a 38.3% decrease compared to the MXN 507 million reported in the same quarter of the last 12 months. The decrease is mainly due to the securitizations carried out during 2021. Since as you know, the interest accrued from the securitized portfolio was previously reported as interest income and now is reported within the valuation of securities recievables. Interest expenses for the quarter were MXN 137 million when compared to MXN 264 million in the first quarter of 2021, a 48.2% decrease mainly related to the amortization of certain financings carried out during 2021. These amortizations were done mostly with the proceeds from the portfolio securitizations issued from 2021. The on-balance allowance for loan losses for the quarter was MXN 14 million, 78.5% lower compared to MXN 65 million reported in the first quarter of 2021. The valuation of receivable benefits from securitization transactions was MXN 90 million, an increase when compared to the previous quarter, mainly due to the new securitizations. And finally, the administrative expenses for the quarter, which included [indiscernible] and Fovissste servicing fees were MXN 75.1 million. If we move to Slide 16, as you can see, we closed the quarter with a healthy financial margin of 58.2%. The total expense over gross income ratio stood at 17.9% and the annualized return on equity for the quarter, as Daniel mentioned, was 8.1%. With this, we conclude the financial results, and I will now hand the call back to our CEO, Daniel Braatz for closing remarks before the Q&A session.

Thank you, Ignacio. I would like to end by saying that we are very proud of the first quarter '22 results [indiscernible] strong performance, our solid financing strategy has allowed us to keep delivering solid results. We expect these strong results to continue for the rest of 2022. And as always, we will continue to selectively seek for opportunities to increase our portfolio and only take those, which will provide us with the highest returns. I would now like to hand the call back over to operator and start the Q&A session. Thank you.

[Operator Instructions] Our first question comes from the line of [ Martin Lara ].

I have 2 questions. The first one is, where do you see the growth at YAVE during the rest of the year? And the second one is where do you see the NIM, the net interest margin during the rest of 2022.

Thank you, Martin. In regards of the growth of YAVE, what we have been discussing with the originator and the guidance that they have provided to us is that they expect to originate during this year approximately between $50 million to $100 million worth of mortgages, out of which we will be selecting the ones that fit our eligibility criteria. So that will be the range that you should use as our guidance between $50 million to $100 million. And in regards of the NIM, we expect the net interest margin to keep constant at the same levels that we reported on this quarter.

Our speakers today are Daniel Braatz, Chief Executive Officer; Jesús Gómez, Chief Operating Officer; and Ignacio Gutiérrez, Chief Financial Officer. They would all be happy to answer any further questions you may have about FHipo's first quarter 2020 results. All right. At this time, we have not received any further questions. 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, everyone, and thank you for joining us today. Please don't hesitate to reach out to us if you have any more questions or any follow-ups. We appreciate your interest in people and look forward to speaking to you soon. Thanks.

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