Banco Santander-Chile Management Discusses Q3 2010 Results – Earnings Call Transcript

| About: Banco Santander-Chile (BSAC)

Banco Santander-Chile (NYSE:SAN)

Q3 2010 Earnings Conference Call

November 2, 2010 9:00 AM ET


Raimundo Monge – Director, Strategy


Saul Martinez – JP Morgan

Tito Labarta – Deutsche Bank

Jason Mollin – Goldman Sachs


Good day, ladies and gentlemen, and welcome to the Third Quarter Banco Santander Chile Earnings Conference Call. My name is Marcela and I will be your operator for today. (Operator Instructions)

I would now like to turn the conference over to your host for today, Mr. Raimundo Monge, Director of Strategy. Please proceed, sir.

Raimundo Monge

Thank you very much and sorry for being late. We had some technicalities with the webcast. Good morning. First of all, good morning, ladies and gentlemen and welcome to Banco Santander Chile third quarter 2010 results conference call.

My name is Raimundo Monge, Director of Strategic Planning of the Bank and I’m joined today by Robert Moreno, Manager of Investor Relations.

Thank you for attending today’s conference call and in which we will discuss our performance in 3Q ‘10. Afterwards, we will be happy to answer your questions.

In the nine months period ended September 30, 2010, net income attributable to shareholders increased 30.4% compared to the result in the same period of last year. The Bank’s net interest margin reached 5.9% that is 40 basis point higher than in the first nine months of ‘09. The efficiency ratio in the first nine months reached 34%, while the banks ROE reached 30.5% among the highest in Chile’s financial system.

In the third of this year, net income attributable to shareholders totaled CLP125,356 million that is CLP0.67 per share and USD1.42/ADR. These results represent an increase of 14.1% compared to 3Q ‘09 with this result the bank ROE in the quarter reached 29.3% and efficiency levels stood at 33.8%.

By business segment, result was driven mainly by retail activity. In line with our strategic objective, gross income, net of provision and cost in retail banking increased 23.5% Q-on-Q and 42.1% year-on-year.

Net interest income grew 18.9% during Q and 15.1% during year driven by long growth and higher margins with both individuals and small and middle size companies, SME.

Fee income grew 3.7% Q-on-Q and 4.8% Y-on-Y in these segment. This reflects the more recurring nature of our earnings growth and return on equity. The bank capitalization ratios also strength in the quarter. The BASEL ratio reached 14.5%, 40 basis points higher than in last June.

The tier 1 ratio, which is compromises solely by shareholders equity stood at 7.5% among the highest in the Chilean market. Our strong capital base should allow us to support solid levels of asset growth in the future, while high internal capital growth allows us for an attractive dividend payment to shareholders.

The bank’s leading position in the Chilean market, strong profitability, conservative credit risk policies and strong capital ratios has also led to a continuous improvement in our credit risk rating. In October 2010, Fitch increased our foreign currency deposit rating to AA- two notches above Chile’s sovereign ceiling. With this action, these rating agencies has followed the other two that rate our deposit and bonds.

As a consequence, we have been able to access in convenient terms the international bond market in order to maintain solid liquidity levels and to minimize interest rate risk by funding the longer duration portion of the loan book with funding of similar characteristics. In September ‘10, the bank issued among other notes CLP248 billion 10-year bond in the international market. This was the first ever international Chilean Peso issuance abroad by a Chilean corporation.

Result in the quarter also reflected our strategy for the 2010, 2012 period, which has been designed to generate high EPS growth and solid ROEs. Accordingly, the bank activities have been and will be focus in four main strategic objectives to fuel our future growth and profitability.

The first objective is achieving high retail growth and to continue expanding banking penetration levels in Chile. These should help us to maintain our net interest margin and boost our net interest income.

Our second strategic goal is to increase fee income by expanding product use and cross selling. We believe there is still plenty of room for increasing the total client base, where alliance are becoming a key element in achieving greater use of our products specially credit cards.

The third strategic objective is to consolidate the improvement of our credit list management system. This will help us to support a health expansion of our growth in long volumes to riskier higher yielding retail segment.

Our last strategic goal is to continue an active efficiency management. we’re planning to expand our capacity during the next three years and the bank expect to invest close to $380 million in expanding our alternative channels and branch network to fuel growth and improve the systems and processes. Part of this investment will be funded with productivity gains and by lowering both the cost of bringing new clients to alliances and reducing our delivery and transactional cost, relying more on low cost renewed channels such as the internet, phone banking, mobile banking and ATM.

In terms of the goal, high retail growth. In 3Q ‘10, total loans increased 4.5% during Q with growth seen in all products and segment. The recent economic data for Chile show that economic growth has been accelerating with a strong [inaudible] in investment and consumption levels, and employment figures have also been better than expected as well as wage growth.

High yields retail loans increased 4.2% during Q. Loans to individuals increased again 4.2% during Q led by a 6.3% increase in consumer loans. Notable was the 9.9% Q-on-Q and 35.6% year-on-year increase in credit card consumer loans.

The bank’s market share also continues increase in the quarter. The most important rise, the market share has been in consumer and credit card loans, which increase 180 basis points since the beginning of the year.

The bank’s net interest margin reached 5.7% in the quarter. Net interest income increased 8.5% year-on-year. This was mainly due to the 10.3% increase in average loans.

By segment, year-on-year net interest income growth was led by a 15.1% increase from retail banking and a 29.4% increase in net interest income from middle market. Compared to the second quarter of each year, the 2.9% decrease in net interest income was mainly due to the lower inflation rate and higher short-term interest rate which increased funding cost. This was partially offset by the 4.1% Q-on-Q increase in average loans.

Going forward, we expect the Central Bank to continue rising rates as inflation is expected to continue to rise and economic growth remains strong.

In line with our second strategic objective, our client base and cross-selling standards have also been improving. The bank’s checking account base grew at an annualize rate of 8.4% year-to-date. The amount of clients that are cross-sold among our middle to high income clients has increased 17.5% annualized year-to-date and in Santander Banefe, our unit for mass consumer lending, the amount of clients now defined of being cross-sold has increased 22.9% on an annualized basis in the same period. However, only around 20% of our current customer base who fulfill our cross-selling standard with the [inaudible] what we lead is a relevant growth source for the future.

Notable has been the bank’s growth in its credit card business. The number of clients with a credit card is outstanding at an annualized rate of 16.8% year-to-date as the bank increasingly relies on its alliances with key corporate partners as an efficient way to gain access to a larger number of potential clients.

In 3Q ‘10, the bank assignment are co-granting agreement with Preonic [ph], a retailer in Chile with 42 stores and 1.5 million clients. We also renewed our alliance with LAN, Chile’s largest airline. These agreements along with the bank’s other accord with Chile’s largest cellphone company, news breaker, electricity distributor and more than 60% of Chilean universities give us access to more than 7 million potential client. Currently, the bank has 3 million clients.

As of June ‘10, the latest of data available, the bank’s market share in terms of monetary purchases with credit card reached 19.1 including retailer. Year-on-year purchases with Santander cards were up 33.2% in real term.

The rising cross-selling and product usage continue to drive the income, which increase 2% Q-on-Q and 2.6% year-on-year. The buying main fee income such as collection fee cards, checking accounts fee, asset management and brokerage fees will experience – all experience strong sequential growth as the client base continue to grow, cross-selling rises and the negative effects of the earthquake on certain fees has diminished.

In line with our third strategic goal, during the quarter, the bank continues consolidating the improvements in credit risk management and collection procedures. In 2Q ‘10, the bank’s proactively implemented some improvement in its standardized credit scoring model for consumer lending. This is part of our strategic objective to maintain good asset quality as the bank grows at a ready pace in retail banking.

The implementation of this improvement impacted two line items in our income statement, provision expenses and other operating income as explained in detail in the earnings report. The net effect of this improvement in the models was a charge of CLP2,077,000 during the quarter. Incorporating these effects, adjusted provision expense in the quarter increased 1.8% Q-on-Q and was down 28% year-on-year.

As the quality and coverage improved in the quarter, no performing loans decreased 1.9% Q-on-Q. The non-performing loans ratio reached 2.68% as of September 30, 2010, compared to 2.85% at the end of the second quarter. The coverage ratio also increased to 105.1% as of September 30, 2010, compared to 93.3% as of June 2010. The non-performing loans ratio of consumer loans decreased from 2.99% as of June 2010 to 2.87% as of September 30, 2010.

Operating expenses in 3Q ‘10 decreased 3.7% Q-on-Q. Deficiency ratio reached 33.8% in the same period, compared to 35.2% in the previous quarter. The Q-on-Q decrease in cost was mainly due to lower cost from the earthquake and lower personal expenses. Headcount did not vary significantly in the quarter.

The 6.4% Q-on-Q increase in administrative expenses was mainly due to higher cost related to the maintenance and repair of branches and other fixed assets. The year-on-year rise in cost was mainly due to a rise in personal expenses that is directly related to an increase in commercial activity and as a result variable incentives to commercial things have increased especially in retail banking. This should be compensated in future quarters with stronger revenue growth. The year-on-year increase in administrative expenses was mainly due to higher cost due to the earthquake.

In total, in 2010, the total impact of the earthquake on cost including impairment should be around CLP10 billion. Most of these was recognized both in the firsthand second Q of the year.

In summary, 3Q results were positive in line with our strategic objective and the positive evolution of the economy. Our 3Q results were fueled by stronger growth in individual and SME banking, the most profitable segments of our business. These growth in retail activities was also reflected in our results, which were driven by retail banking activities especially consumer lending.

In the quarter, we also improved our balance sheet by increasing our capitalization levels, improving our funding mix to minimize the negative impact of rising rates and from funding cost, and maintaining better asset quality indicators. For these reasons, going forward, we are optimistic about the bank’s growth, outlook and profitability levels.

At this time, we would gladly answer any questions that you might have.



(Operator Instructions) And your first question comes from the line of Saul Martinez with JP Morgan. Please proceed.

Saul Martinez – JP Morgan

Hi, good morning, Raimundo. My question is on your net interest margin and net interest income evolution. You did mention that that is – that growing in retail segment is one of the, the top goals, the number one goal, I guess, of the four you illustrated, and you also gave various moving parts in terms of what drove the NIM including higher funding cost on the one side, but growth and retail lending on the other.

Having said all these, you had – I would have thought your net interest margin, net interest income growth would have been stronger this quarter given that we had deflation in the year ago quarter, inflation this quarter and you had very strong retail lending growth. Can you give us a sense for how you think your net interest margin will evolve going forward considering the various impacts that I mentioned, the higher margin cost associated with higher rates and retail lending growing as well. Should we see stability in the NIM or do you expect to see some contraction going forward.

Secondly, on the fees, you talked a lot about cross-selling your alliances, but your fee growth was only 2% year-on-year. Can you talk a little bit about where you’re seeing pressure and what the expectation for fee growth is going forward, whether you expect to see it pickup there?

Raimundo Monge

Okay. Well, thank you for your questions. Addressing number one, maybe there’s margin in the very short terms specifically in September. We’re affected by an abnormally low inflation rate that we saw that month. That situation is very short-term and should reverse in October, yes and to some extend in November, yes.

We have been – as most analyst, I expect inflation to keep on growing because of a higher economic activity and a normalization acquisition level. We are positioning our balance sheet to benefit from a higher inflation normalizing towards level growth to 3.5, comes in deadline this year and 2011. So, when you have zero inflation that produces a short-term drag during this margin. But this is a very short-term inclination, and this should be mostly counted in October.

In terms of the more medium term concern with this probably worthwhile addressing, we think that our margins have probably picked this cycle and that because of three things will be under pressure and there are some counterbalance in effect.

Number one is that the risk environment is much more sounder than say 12 months ago as we show in our press release, as the quality indicator have been improving. So, naturally the gross margins are under strain because the clients that we’re willing to accept 13 margins now are in a much better position and therefore you don’t charge the margins that are for you to charge say 18 months ago, so that is element number one.

Second, again, in the short-term, the rate had been increasing, the short-term rate and that produces a short-term compression in our margins because the repricing of the liabilities, which are tend to be shorter than the asset produce a short-term compression because you would price them very quickly as oppose to your lows and other assets that take longer to be visible, yes.

So, those are elements are negative for our margins and the counterbalancing elements which sometimes produce fully compensate or partially compensate is the mix as you [inaudible] deposit, we have been growing in higher yield in categories, but still not enough to fully compensate the other two effects, and secondly, the fact that we have around one third, 30% of our funding comes from not interest bearing liability. Mostly, checking account balance, et cetera. So, those balances which used to be invested at 0.7, 0.1%, do they can be invested at 2% and et cetera, supporting our margins.

Going forward, the further we have grown a lot in terms of checking account balances make us believe that we’ll be at the moment of time more than compensating for the reprising effect and the higher in buy in. So, net-net [ph], that’s why margins had to be looked in connection with a permission level, they are not completely isolated. They tend to move in line because when spreads where – when provisions were increasing, we have to increase our spread to compensate for that.

Now, that provision levels, because of the stronger operational environment that we’re seeing are coming down, of course, spreads have to go in line. At the end of the day, what really matters is our risk adjusted net interest margin that is still is in a relative high level by historical standard.

So, net-net [ph], we think that spreads will come down, but relatively on a moderate way going forward. Before the cycle started, our net interest margin was around 4.8%, 4.9%; today, we have 5.7%. But that process won’t be, we think dramatic because the counterbalancing forces will be the nicks and the five-set hour not a yield in balances should be much more profitable with our interest rate. So, it’s simply a reflection that we expect spreads to be relatively stable or slightly going down in the next 24 months. But, of course, the fact that provision levels should be much lower than what we saw in the last 18 months or so, will be more fully compensated.

In terms of fees, there are basically two realities. One is flat fees, which are being under a lot of scrutiny both by authorities and the general public and that’s why we have been conservative in those types of fees. We preferred we have been waiving fees throughout the earthquake, the following quarters. We have been trying to eliminate as much as we can those fees because we have been given more – trying to – when you are growing very healthily on your lending volume, you try not to charge fees that are not very important in terms of your contribution to your profitability and then some of them are a little bit annoying from the standpoint of the client.

So, it’s simply a way how you’re getting the profitability from your clients. Today, given that we are seeing a growth period, we prefer to grow more on the lending side and on the net interest margin side and on the fee side. But if you take a closer look to our fee structure, the usage type of fees has been leading the growth. It’s simply that the picture is a little bit mixed because of flood fees being waived in part because we have been doing it to stimulate our growth on the lending side and secondly, because last year, there was a change in the regulation concerning some fees applicable to checking accounts which we have the higher level of checking accounts in Chile, so we were impacted by that.

And that was kind of an alert that those fees will be going forward under scrutiny, and that’s why we prefer to privilege our usage fees, where we have a strong position especially in credit cards, in asset management, in ATM fees, we had a leading position. So, it’s simply, we have been changing the way we collect revenues from our client in this growth. Part of the cycle, you tend to try to stimulate growth more than collecting flat flees that some of them are not very grave. The clients don’t like them, to pay flat fees especially when you are grow with the mood.

So, net-net [ph], we think that provisions will be as we have seen in the last three quarters; we have been in a sequential basis gaining some momentum. It will be subdued because of this change of the nature of the fees that we’re charging. But no doubt, going into 2011, our growth should be going back to levels close to the upper, the 9 to 10% other inclination for 2011.

Saul Martinez – JP Morgan

Yes. I don’t want to take up too much time, but just one quick follow-up. There was some talk earlier this year about changes in provisions for commercial loan that I think it was for July, got pushed back. What is the status of that and will that, do you think that has any impact on your loan month provisioning line.

Raimundo Monge

Yes. That was a change that was introduced by the superintendent before commercial lending, yes.

Saul Martinez – JP Morgan


Raimundo Monge

The first draft was perceived to be very harsh especially because of our loan – not ours, but for all the system, there was no major deterioration, not relevant deterioration on asset quality on the commercial side. So, the industry well claimed that it was too harsh given the status of the segments and given the fact that we were entering more positive cycles. So, the superintendent set a more light scheme, which will be in placed starting on January the 1st that has – as most of the new regulations, some positive and some negative.

But net-net [ph], are good for the system to be more conservative than not, has been part of explanation why Chilean banks have emerged in a relatively solid position and they shouldn’t be very binding from a profitability standpoint because you will see the positive force coming from an improved operational improvement, to some extent blurred by these more conservative provision levels. But net-net [ph], we think that provisions should be attract to our performance. But this year, they have been fairly positive. Next year, probably neutral or slightly positive.

Saul Martinez – JP Morgan

Okay, great. That’s very helpful. Thanks, Raimundo.


Your next question comes from the line of Tito Labarta with Deutsche Bank. Please proceed.

Tito Labarta – Deutsche Bank

Hi. Good morning, Raimundo. Thanks for the call. So, a couple of questions, following up in terms of the provisioning levels. As you mentioned, it have come down quite a bit. See, I just want to get a sense going forward given that the focus on retail loans. Do you think that could have an impact at all just so from the shift and the loan mix that provisions and such increases. I want to get a sense of what you think the recurring levels of provisions will be going forward, should it stay around what we saw in the third quarter excluding the one-time items or did that either come down further or could it pickup.

And then also just get a sense in terms of the loan growth; these loans have been growing above the system level. What kind of loan growth do you see for next year? And then finally, just one question on the tax rate since it was a bit lower given this mentioned the deferred taxes, just want to get since that’s just a one-time thing or is this going to go back in the fourth quarter to normal levels and they go up to 20% starting next year.

Raimundo Monge

Sorry, could you repeat the last part of it because I understood that you’re concerned about provisions going forward, loan growth forward, but the third part, I didn’t get it.

Tito Labarta – Deutsche Bank

Sorry, just on the tax rate. It’s a bit lower.

Raimundo Monge


Tito Labarta – Deutsche Bank


Raimundo Monge


Tito Labarta – Deutsche Bank


Raimundo Monge

Yes. Well, in terms of the provisions, the IFRS said that at least is for the remaining of this year and to a lot of the extent the first half, then you’d be contributors to all bottom line performance. From then on, they will start picking up mostly because of as you correctly point because of the next effect, you will be growing in high yielding, but of course higher rate per segment.

And the fact that we have been adjusting our score into a more demanding, we have been anticipating the recognition of provisions. We have been slicing and dicing our scoring to incorporate more richly the different kinds of risks that we saw in the downturn of the economy. At some moment, will be reflected in provisions starting to grow again and probably will enter to 2011, yes.

But we still we are like 20 to 30% above the gross provision level, above the whole [ph] times before the downturn started. So, we think there is room there for improvement, but we’re seeing the floor probably in the first half of next year.

In terms of loan growth, we have been growing faster than the market throughout the year and we started in the second half of last year to gain a market share. That process has been achieved in all the segments and with the prices that we expect given our capital consumption and given our profitability target. We think that eventually the competition will start to grow again and we will see pressures and that process will be less difficult.

But the other forces, the recovery of the economy and the growth outlook of the economy, as we anticipate [ph] increasing in this seven to eight months despite the effect of the earthquake and that’s we think that the market should be expanding faster than what we were expecting before. Do they grow for let’s say 18, 19, up to 20% has been hindered by analyst. So, we think that we can maintain our profitability target by compensation lower expected spread with higher volume growth at the market should be expanding faster than we were thinking.

So, in our terms, the only area where we have specific targets for loan growth is in retail, where we think that we can keep on growing market share unless we see practically a crazy price and decisions for our peers, which up to now we haven’t seen, yes.

In terms of corporate, it’s more open because prices – the normalization of spreads abroad and because the Chilean market is very open and this corporations can borrow a lot outside – we had to do it that presence at the corporation as well, and there we see high pressures on margins and therefore, growth is more a consequence of getting other more profitable products than by itself.

If you see [inaudible] money at the current margins, easier and likely to maintain higher ROEs as we are targeting, yes. So, in terms of retail, probably we can maintain and to some extent increase our market share in terms of corporate, it’s an open issue. We only will be growing as long as we see enough profitability at the end of the day.

In terms of taxes, based on the legality, here is the following that taxes are still calculated in taking into account inflation adjustments, yes. That’s why although the tax rate will be higher in the next two years, you shouldn’t expect the full tax to be seen in the financial report that is what you see, simply because in that financial – for tax purposes, you are still adjusting things by inflation as it was the case before IFRS report for Chilean banks. That’s why although rates will increase and the fact that inflation is still picking up will imply that our rate from our current 14 to 15% should increase a couple of points, but it’s very likely you will see taxes up 20% on the financial side because inflation that is still use for calculating tax payment will help to some extent that will also.

So, you will see an increase in the effective rate, but not as high as the 20% that it should be applicable for tax purposes.

Tito Labarta – Deutsche Bank

Okay, thanks. That’s helpful. But we won’t see it in the third quarter was around 10% that was on deferred tax adjustments you had to make. That was just a one-time thing; you won’t see that again in the fourth quarter?

Raimundo Monge

That’s right. That’s why you should be more into 14 to 15% more or less.

Tito Labarta – Deutsche Bank

Okay, great. Thanks, Raimundo.


And your next question comes from the line of Jason Mollin with Goldman Sachs. Please proceed.

Jason Mollin – Goldman Sachs

Hello, everyone. Thank you for hosting the call. My first question is related to the impact of the currency, the strong Chilean peso. It’s appreciated of about 10% since June. If you can give us a sense how this is impacting your clients, the economy in general and then directly and/or indirectly the Bank, and what are your expectations for the currency going forward?

And my second question is a follow-up a bit on what you were suggesting on the credit scoring changes for the consumer segment. If you can describe a little bit what that entailed? Why are we seeing this now? Is it just because of the experience you had in recent quarters or is this incorporating a different sense of risk for the Chilean consumer going forward? We have seen reasonable growth in that segment. Is this acknowledging that let’s say, the penetration of credit is higher and credit scoring needs to be different?

Raimundo Monge

Okay. In terms of currency, I have to be very humble. Nobody knows very well, where the [inaudible] is about, yes. Our economy think that it should be stable and today, the bet is whether the Central Bank will be intervening the market to some extent or not, which is a subsidized [ph] very difficult to predict. But in terms of the impact, in the case of the bank, the directing is very limited because we have at all times, we’re almost close in terms of the extend [ph] rate. In the intra-day, you can generate an open or close position for – but it’s very – it’s not a relevant gap that we have. It’s very expensive to have a high gap in terms of currency mismatch and that’s why banks usually operate very close to being completely close, yes.

In terms of the impact on our clients, there are good and bad news; some marginal exposures are facing the heat of our strong currency and are having difficulties. In terms of up to now, in terms of low profitability because the majority of a big bunch, a big proportion of our exporters are related to commodities to food, to mining, et cetera, where you have had price increases in some cases compensating fully or partially compensation for the strength of the currency.

So, the other thing is that Chile has a very diversified explored mix. So, if your exporting to non-dollar areas – well, the prices are very competitive as well. So, basically for exporting to U.S. denominated songs [ph] you face the [inaudible]. The price of basic commodities, but you know still at a very high level. So, that’s why there are compensations, but some of them are facing difficulty.

In terms of profitability up to now, not in terms of delinquency, at least what we have seen lately. And there are other sectors, retail, services all that rely or need to import which have been benefited in having a very good time, yes. So, where we see that the currency going is very difficult to know because in the short term, currency movements depend more on expectations and interest rate differentials than in terms of fundamentals and that’s why its very difficult to know what to expect.

In terms of the changes into our scoring model, the first is that the conservative buyers that you can see in any bank should be good news in the medium term, yes. We had a lot of discussion internally whether they were visible at the moment to strengthen our scoring or wait until you see more clouds in the rise and because today is a very clear picture in the next two to three years. But we thought that it’s going to take, to be consistent throughout the cycle, yes.

And we have been strengthening – we have – what happened – remember the scoring process, our statistical process that learn from their mistakes to call it some way. So, the more information you have, the longer time series you have with different sorts of data; well, you have to change the parameters and precisely because of that, we were having our scoring with two years of negative affected parameters to call it some way and that’s why those negative quarters are feeded in the system and the system say okay, “My new reflection to call it some way is that you need more provisions and that provision has to be recognize early in the life of the loan.”

And there was the choice to say, “Okay, let’s forget about this for a while because we’re just getting out of the mess.” Or simply say, “Okay, we have to be consistent and it’s a more robust production when you include negative information and positive information,” and that’s why to be consistent, we keep it.

And the other is a more – there was a change at the beginning – that was the first element to be consistent with the scoring requirements, which are statistical process that need to be strengthened when you have more quarters of negative information than before. Simply, it’s a learning tool that the more information you feed to the system, the system is continuously upgrading the requirements of provision.

The second part was more of the following that there was a change in the revelation in line with the IFRS. We had to, the banks didn’t provision for the unused lines of credit that you had. For example, you had a line of credit of a $1,000; you were using $300 according to you. But your profile, you have to set provisions for the $300 you were using, but the remaining $700, you didn’t set any provisions, yes. So, there was a change and you have to set some basic provisions for that unused part of your creative line.

What happen is that at the beginning we set the provisions according to the average, the average of the loan consumer, the credit card consumers depending on the product. And today, we have refined our process because it was a changed that happened at the beginning of the year and we can set provisions one by one which are more accurate and that’s why at the end, we were too conservative and we release part of that provisions that was set in – so, they were two unrelated things, but they can see that in time.

It’s simply, end of a story, to have a sound assets managing base consistent on a cycle of adjusted base.

Jason Mollin – Goldman Sachs

Thank you very much, Raimundo.


(Operator Instructions) At this time, there is no more questions. I would like to turn the call back over to Mr. Raimundo Monger for closing remarks.

Raimundo Monge

Okay. Well, thank you very much for taking the time to participate in today’s call. We look forward to speaking with you again soon. Have a good day.


Ladies and gentlemen that conclude today’s conference. Thank you for your participation. You may now disconnect. Have a great day.

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