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

Good morning. My name is Juan Pablo and I will be your conference operator. [Operator Instructions]. This is FHipo's Second Quarter 2022 Conference Call. [Operator Instructions] FHipo released its earnings report on Thursday, July 28, 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; Jesus Gomez, Chief Operating Officer; and Ignacio Gutierrez, Chief Financial Officer. I would now like to turn the call over to Daniel Braatz. Daniel, please go ahead.

Thank you, and good morning to everyone. Let's start by discussing our main results and what we have achieved in there this quarter. So as you can see on this slide, we continue to deliver strong results, benefiting from our strategy of exploring opportunities as they arise and only taking those that maximize portfolio profitability. Our net income in the second quarter of 2022 was MXN 289 million. That is a 10.4% increase compared to the second quarter of '21. We are starting to see the benefits of optimizing our funding structures in 2020 and 2021 with low rates. The net income per CBFI or per share of our company on the second quarter was MXN 0.752 which demonstrates the strength of the business model. I would like to highlight the following achievements: Our accumulated ROE for the first half of 2022 closed at 10%. That is 240 basis points higher than the figure reported in the first half of 2020 and 100 basis points when compared to 2021, demonstrating the company's resilience along with its commitment to its shareholders. Also, this upward trend proves the company's ability to overcome challenging macroeconomic environments. In the second quarter of this year, we almost doubled the originations with Yave reaching MXN 981 million, a 94% growth compared to the second quarter of last year. In a span of 5 years, Yave's origination has managed to grow from MXN 40 million to MXN 981 million. Also, our portfolio's maturity contributes to higher margins that we expect to achieve going forward. Miranda Global Research began coverage of FHipo CBFIs, allowing investors to follow our results, and I think that shows a positive perspective from the market towards our company. As you can see on the graph on the on your screen, in the last 12 months, our financial margin has been steadily increasing closing in the second Q at 58.2%. This reflects our commitment to providing higher returns to our investors despite the volatility and the macroeconomic environment that we are in. So I will stop here for the next slides regarding our portfolio composition, and I'll hand the call to our COO, Jesus Gomez.

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 second quarter of 2022. At the end of the second quarter, FHipo's consolidated portfolio totaled MXN 25.8 billion and was comprised of 88,000 loans, a decline of 5.5% and 7.6%, respectively, when compared to the second quarter of 2021. This is explained among several factors by the amortization of our portfolio. Our loans come from our partnerships with several origination programs such as Infonavit Total, Infonavit Mas Credito, Fovissste and Yave. The average loan-to-value ratio decreased from 77.8% in the second quarter of '21 to 71.1% in the second quarter of '22. The [indiscernible] to income ratio also decreased from 24.3% to 23.9% for the second quarter of '22. As of the second quarter, 95% of our portfolio remained current, given the consolidated NPL ratio at 5%, which is explained mainly by the seasoning of our portfolio. This indicator remains in line to what was expected at this moment. Our [ 4 ] portfolio remains diversified across different programs with the following breakdown: MXN 8.7 billion belong to Infonavit Total, MXN 13.6 billion to Infonavit Mas Credito, MXN 2.5 billion to Fovissste and close to MXN 1 billion 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 [indiscernible] as follows: Infonavit Mas Credito represents slightly more than half of our portfolio at 52.5%. And Infonavit Total Pesos represents 18.3%, with Infonavit Total VSM, the minimum wage index loans represents 15.6%. The Fovissste portfolio represents 9.8% of the total portfolio. And finally, the Yave portfolio, which increased by 95% compared to the second quarter of 2021, now represents 3.8% of the total portfolio. As always, we continue to monitor the performance of the portfolio, particularly in a challenging economic context. I will now hand the call over to our CFO, Ignacio Gutierrez, to discuss Fhipo financials.

Thank you, Jesus, and good morning, everyone. I will continue the presentation by going through our diversified sources of funding on Slide 10. Our funding structure continues to be well diversified including securitizations, short-term unsecured bonds and revolving warehousing facilities. As of the end of the second quarter of 2022, our consolidated debt-to-equity ratio stood at 1.9x, and our on-balance debt-to-equity ratio stood at 0.7x, 0.3x lower when compared to the onetime reported for the second quarter of 2021. The decrease is mainly explained by the full prepayment of certain unbalanced financing structures with resources obtained from the securitizations issued during the second half of 2021. If we look to Slide 12, in here, we'll go through the asset quality of our portfolio, our NPLs and our allowance for loan losses. Our NPL ratio remain at a healthy level, standing at 5% of FHipo's consolidated portfolio and at 4.24% when considering portfolio balance origination. We maintain a conservative allowance for loan losses with our expected loss coverage standing at 1.47x, and our NPL coverage ratio at 0.76x both in consolidated terms. Moving on to Slide 15, in here, we will go through a summary of the financial results for the quarter. The net income for the quarter was MXN 289 million, a 10.4% increase when compared to the MXN 262 million reported during the second quarter of 2021. Considering the outstanding CBFIs as of the date of this report, this resulted in a net income per CBFI or earnings per share for the quarter of MXN 0.752 and in a net income per CBFI subject to distribution of MXN 0.714. Total interest income from mortgage loans amounted to MXN 344 million, a 27% decrease compared to the MXN 473 million reported in the same quarter of 2021. This decrease was mainly due to the portfolio securitizations issued during the second half of 2021 as the interest from the securitized portfolio are now recognized as part of the valuation receivable benefits and securitization transactions. The interest expenses for the quarter were MXN 153 million, a 40% decrease when compared to the MXN 258 million reported during the second quarter of 2021. This decrease is mainly related to the amortization of certain financings carried out during the second half, as mentioned before, through the issuance of the securitizations as part of our leverage strategy and optimization of our funding structures. With this, the financial margin for the quarter was MXN 214 million, representing an increase of 12% when compared to the MXN 190 million reported in the previous quarter. The allowance for loan losses for the quarter was MXN 157 million based on our portfolio status. The valuation of receivable benefits from securitization transactions, representing the income generated on our on balance -- on our off-balance utilizations was MXN 89 million, and the administrative expenses for the quarter, which include Infonavit's administration and collection servicing fees were MXN 170 million. Moving on to Slide 16. In here, we closed -- as you can see, we closed the first half of 2022 with a financial margin of 58.3%. The accumulated return on equity was 10% and the consolidated nonperforming loan indicator considering the portfolio balance origination stood at 4.24%. With this, we conclude the summary of 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 happy with our results during this year so far. We will continue with a conservative portfolio growth and origination strategy, being selective about market opportunities and focusing on those that improve our portfolio profitability and in turn, generate higher returns for our shareholders. This strategy has already proven to be successful, and we expect to continue delivering good results while maintaining this conservative strategy. I would now like to hand the call back over to the operator to start the Q&A session.

[Operator Instructions] We would like to take this moment to thank you for joining FHipo's Second Quarter 2022 Results Conference Call. Our speakers today are Daniel Braatz, Chief Executive Officer; Jesus Gomez, Chief Operating Officer; and Ignacio Gutierrez, Chief Financial Officer. We would all be happy to answer any questions you might have about FHipo's second quarter 2022 results. Our first question comes from the telephone line ending in 8563.

Can you hear me?

Yes. we can hear you.

This is Martin Lara from Miranda Global Research. Congratulations for these results. I have 2 questions. The first one is do you expect additional positive provisions during the rest of the year? And the second one is where do you see Yave's origination during the next few quarters?

Thank you for the questions. In regards to the first one, it will depend a lot on how our reviews and strategy going forward will be executed. As you know, we are in constant optimization of our portfolio and trying to achieve the best margin and results for the investors. So we expect our process to continue and depending on the performance of the portfolio, the allowance for loan losses will be applied. In the second question, we expect the trend of origination from Yave to keep constant. So the increase of originations that we have seen in the previous year, that is something that we expect to have for the next 12 to 24 months as well.

[Operator Instructions] 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.

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