Credicorp Ltd.

This is a recording of the Critic Corp's first quarter 2021 conference call on Friday, May 7th, 2021 at 9.30 a.m. Central Time. Ladies and gentlemen, good morning, everyone. I would like to welcome all of you to Credit Corp Limited First Quarter 2021 Conference Call. We now have all of our speakers in conference. Please be aware that each of your lines is in a listen-only mode. At the conclusion of today's presentation, we will open the floor for questions. At that time, instructions will be given as to the procedure to follow if you would like to ask a question. With us today is Mr. Walter Bailey, Chief Executive Officer, Mr. Alvaro Correa, Deputy Chief Executive Officer, Mr. Gianfranco Ferrari, Deputy Chief Executive Officer. Mr. Reynaldo Llosa, Chief Risk Officer. Mr. Cesar Rios, Chief Financial Officer. And Ms. Milagros Siguenas, Investor Relations Officer. And now, it is my pleasure to turn the conference over to Credit Corp's Chief Financial Officer, Mr. Cesar Rios. Mr. Rios, you may begin, sir. Thank you.

Good morning and welcome to Credit Corp's conference call on our earnings results for the first quarter of 2021. I hope you and your families are healthy. As you know, the current sanitary situation in Peru, as well as the political landscape, are key factors of uncertainty. The sanitary situation in Peru and metropolitan Lima has not improved in recent months, as is reflected in data on excess mortality. Peru's vaccination rollout, which began in February, has progressed at a slower pace than the other countries in the region. Nonetheless, the government has announced there will be an acceleration in the immunization process in the coming months. In this challenging context, we continue to put the well-being of Credit Corp's employees first as we focus on ensuring operating continuity and offering financial solutions to clients and employees alike. Our ultimate goal is to serve society as we continue to create value. On the political scene, candidates Pedro Castillo and Keiko Fujimori will face off in the second round of presidential elections on June 6th. The latest polls show candidate Pedro Castillo in the lead. Mr. Castillo, from the political party Peru Libre, has proposed a number of measures. According to the party's government plan, it intends to shift away from the current market-oriented economic model one that prioritizes a so-called popular economy with markets. Under this model, the state will play a much more active role in businesses. Peru Libre's plan also includes holding a constitution assembly to write a new constitution and nationalizing so-called strategic sectors. Mrs. Polimori, in contrast, favors maintaining an economic model that supports national and foreign investments and advocates a restricted and secondary role for the state in the economy. Mrs. Fujimori also believes that the current constitution should remain in effect. It is still early to predict the outcome of this election. Polls can shift considerably in the Peruvian context, which is marked by high levels of voter indecision. In any scenario, the new executive branch will need to generate consensus to be able to implement changes. The recent elected Congress is highly fragmented and composed of 10 political parties. Other relevant elements of credit courts operating context in Colombia, the executive branch recently withdrew the bill for tax reform that is submitted to Congress, which represents the 15th of its kind... 1991, a new bill will be formulated. In Chile, elections will be held on May 15 and 16, primarily to determine the members of the constitutional assembly. Next slide, please. Regarding Peruvian economic activity, recovery continued in the first quarter of 2021 despite localized lockdowns. Our estimates suggest that GDP grew around 4% year-over-year in the first quarter of 2021. This is the first positive register in five quarters. In seasonally adjusted terms, GDP in the first quarter of 2021 stands very close to the pre-pandemic levels. Electricity demand also continued to recover in the first quarter of 2021 and surpassed, albeit slightly, pre-pandemic levels. Due to political uncertainty, sovereign Peru's interest rate has increased, primarily for medium and long-term maturities. The Peruvian sol has also depreciated to hit a record low. The global economy continues to improve, but interest rates and FX levels remain volatile. Commodity prices continue to be robust, and the price of copper, which is relevant for Peru, reached a peak of $4.43, almost a 10-year peak. We expect Peru's GDP to rebound to 9% in 2021, underpinned by high copper prices, as well as expensive monetary and fiscal policies. Next slide, please. I will comment on the evolution of the financial system and the regulatory environment. According to data from the Central Bank, loan growth in March stood at 94.1% year-over-year at a constant exchange rate, driven by the influx of reactiva loans. If we exclude the effect of reactiva loans, total loans declined 7% year-over-year. Regarding economic policy and the regulatory environment, I would like to highlight the following. First, the Congress approved a new private pension fund withdrawal under this plan, but current contributors and non-contributors will be able to withdraw up to 1,700 solids. It is important to note that the Ministry of Finance has announced it will propose taking the law to the Constitutional Court. Regarding new regulations, Congress also approved the withdrawal of 100% of CTS accounts until December 2021. As of February, CTS deposits total 21.8 billion soles system-wide. Moreover, the government approved rescheduling of reactive loans for a total of 19.5 billion soles along with the five loans for 2.1 billion soles. But until July 15, the rescheduling process includes a new grace period of up to 12 months. Lastly, the executive branch has announced it will bring the law on interest rate caps and fee restrictions before the Constitutional Court. Several private institutions have presented legal actions that may also be taken before the Constitutional Court. Key restrictions have already been implemented, while recent guidelines from the central bank has set an interest rate cap of 83.4% for small consumer and microbusiness loans from May to October 2021. We will continue to closely monitor these developments to evaluate their impact on Credit Corp's operations. Next slide, please. Now, I will comment on Credit Corp's performance in the first quarter of 2021. Credit Corp's net income totaled 661 million soles this quarter, which represents an increase of 215.8% year over year and reflects the fact that in 2020, we set aside significant provisions to mitigate the impact of the pandemic. Despite an adverse environment due to COVID-19, we continue to recover and cause 10.6% this quarter. The upward trend in earnings in recent quarters has been driven mainly by a decrease in provisions and reflects the terrible evolution of assets quality and uptick in fee income. This was offset by a decrease in the net interest margin and an increase in the life insurance gains. Regarding our quarter-over-quarter evolution, I would like to highlight the loan portfolio remained flat in terms of quarter-end balances, as growth posted in consumer loans, mortgages, and debacle was offset by contractions in corporate banking and credit cards. Net interest income grew 2.6%. This result includes $88 million in expenses related to a liability management operation at PCT standalone, which will generate savings going forward in a context of lower-cost funding. With these results, NIM remained flat at 3.73%. Provision expenses fell due to the ongoing improvement in client payment behavior. which led to a cost of risk of 1.63% and a structural cost of risk of 1.92% this quarter. Within non-financial income, fee income contracted 4.9%, which was mainly attributable to a decrease in transactions due to seasonality and localized lockdowns. The net gain on securities also posted a decrease as fixed income securities from ASB proprietary portfolio registered a drop in value in a context of higher interest rates. Insurers' underwriting results were severely impacted by a considerable increase in COVID-19-related claims and incurred but not reported provisions in the live business. Expenses remain under control. finally our balance sheet remains strong with ample equity and adequate capital ratios next slide please in terms of the performance of our life of business each of our subsidiaries is in a different stage of the recovery in terms of subsidiaries i would like to highlight bcp standalone drop recovery with an earnest contribution of 725 million soles, which represented an 18.4% return on equity. The Bank of Recovery's sluggish with an earnest contribution of 14 million soles and a 2.7% return on equity. Pacifico's business was the most impacted by the pandemic, this quarter, and registered 96 million soles in losses. Investment banking and wealth management, in turn, reported an earnest contribution of 37 million solid, which was close to pre-pandemic levels. I will now explain the key dynamics in each of our lines of business this quarter, which led to mixed results. After that, we will review in detail our consolidated performance line by line. Next slide. Going into universal banking, this line of business drives the recovery this quarter. After registering the most difficult quarter in its history in the second quarter of 2020, BCPS standalone remained on track to earnest recovery, costing an earnest contribution to Credit Corp. of $725 million solid and a return on equity of 18.4% this quarter. Net interest income decreased 10.4% year-over-year, which was driven by a decrease in market interest rate, a contraction in the structural loans, and the presence of government loans. These impacts were partially offset by growth in low-cost deposit actions to take advantage of lower rates through liability management strategies and the increase of the investment portfolio. Provision expenses decreased 65.5% year-over-year after the majority of grace periods expired and clients registered improvements in payment behavior. In this context, cost of risk was 1.37% and structural cost of risk was 1.62%. E-income increased 6.2% year-over-year given that the first quarter last year was impacted by three exceptions. On a quarter-over-quarter basis, however, fee income fell somewhat due to a decrease in transactional activity among localized lockdowns and the initial impact of government-mandated fee restrictions. Net gains on securities increased 73 million year-over-year after posting losses in the first quarter of 2020 due to a general decline in capital markets in the context of the first wave of COVID-19. On a quarter-over-quarter basis, results were mainly driven by sovereign bond sales in the banking book portfolio. Finally, operating expenses remain under control. This reflects a normalization in the levels of variable compensation and the impact of other cost controls. Regarding Bolivia, the business resumed positive earnings contribution, given that the last quarter of 2020 was impacted by new governance regulations on reprogrammed loans. Next slide, please. In microfinance, MiBanco's recovery is taking long. After resuming growth in earnings during the second half of last year, the bank registered 14 million soles in earnings contributions this quarter. MiBanco's clients who own primary microbusinesses felt the impact of lockdown measures more than larger PME clients at BCP. MiBanco's progress in implementing a hybrid business model has helped partially offset this effect. As a result, origination decelerated and the loan portfolio grew 0.5% quarter over quarter. There were new needs for credit facilities as grace periods expired and delinquency increased. Net interest income contracted year over year This reflected the advent of lower interest rate and the fact that through 2020, we targeted lower risk clients. So an increase in the average ticket and register are decreasing yields. It also includes the net effect of interest reversals of previously non-reprogramming loans and amortization or impairment on zero interest rate loans made last year. Recently, the average ticket trend is moving in the opposite direction as the average ticket decreases and origination yields increase. These trends, coupled with a decrease in the cost of funds, led net interest income to grow 4.4% quarter over quarter. Provision expenses increased 17.6% quarter over quarter. which was driven primarily by a deterioration in portfolio quality and by alignment with bureau information and as competitor's delinquency increased. Non-financial income contracted 52% quarter over quarter, given that last quarter we recognized extraordinary fee for credit life insurance commissions relating to the reprogramming loans for the full year 2020. At the operating expense level, MiBanco's results reflect the positive impact of the gradual implementation of the hybrid distribution model. In Colombia, MiBanco posted positive results for the first time since the acquisition of Banco Partir in 2019. Loan origination is already at pre-pandemic levels and commercial productivity has been improving. Additionally, overdue loans improve from 5% to 4.5% quarter-by-quarter. Next slide, please. Regarding insurance and pensions. A typical life business generated a stable earnings in the first half of 2020, but began to reflect the weight of pandemic in the third quarter of last year. In the first quarter of 2021, a second wave of COVID-19 ripped through the country, severely impacting the live business. Consequently, Pacifico posted a negative earnings contribution of 95.5 million soles this quarter, driven by 260 million soles of claims and ID&R reserved for COVID-19. Year over year and quarter over quarter, the evolution of earnings was driven by an increase in life claims and IV&R provisions, which was partially offset by a decrease in claims in the property and casualty business due to mobility restrictions and an increase in net income from the medical service business due to higher demand. Regarding the pension business, Prima's assets under management expanded year-over-year, reflecting the recovery of capital markets offset by the fund withdrawals of $7.2 billion in 2020 and $2.5 billion in 2021 due to government-mandated facilities. On a quarter-over-quarter basis, assets under management contracted 3.2%. contracted 5.5% year-over-year due to a decrease in affiliate contribution, but show an improvement quarter-over-quarter due to growth in average salaries and in the number of active contributors. Next slide, please. Regarding our investment banking and wealth management businesses, assets under management and income grew year-over-year, given that the steepest decline in the capital market was seen in the first quarter of 2020. On a quarter over quarter basis, I would like to highlight Total assets under management increased 3.3%, mainly driven by net new money in the asset management business. The effect of new subscriptions was partially offset by devolution of asset values, which were affected by an increase in interest rates. Regarding recurring income contribution, the contraction was driven by a downturn in capital markets and corporate finance. In capital markets, fixed income securities from the proprietary portfolios registered a drop in value in a context of higher interest rate. In corporate finance, income was affected by seasonality, costing lower levels of corporate transaction executions. These results were partially offset by growth in income in wealth management, which was primarily associated with higher gains from brokerage investment products and family offices. Asset management income growth driven by traditional and alternative funds as well by the distribution of third-party products and growth in the treasury income, which was affected by devaluation of loan health proprietary investments. Next slide, please. Now, I will discuss credit courts consolidated performance. On the asset side, credit courts interest earning assets grew 26.9% year-over-year, driven by government program loans and investments. The structural portfolio dropped after wholesale clients had less need for liquidity, which led to an increase in cancellation of short-term loans. On a quarter-over-quarter basis, I would like to highlight interest-earning assets decreased 2.9% driven by the investment portfolio at BCPS and alone. This quarter, we increased positions in the short-term investment portfolio and managed exposure in the medium-term banking book in a context of rising interest rates. Our loan portfolio contracted 0.3% quarter-over-quarter in average daily balances, which was mainly due to a drop in the wholesale banking structure of the portfolio and to a lesser extent to prepayments in some reactive loans. This was partially offset by the expansion posted in retail banking and at Nibanco in Bolivia. The 1.3% quarter-over-quarter expansion in retail banking loan portfolio was driven by mortgage, consumer, and SME clear segments. This evolution was partially offset by a contraction in SME business, which was high levels of liquidity, and in credit cards, which registered low balances due to a drop in big-ticket purchases and higher constraints in the risk appetite for consumer segments. MiBanco's loan portfolio expanded to 1.9% loan origination in this segment, decelerated in February due to mobility restrictions, but growth resumed in March. Next slide, please. Regarding funding structure, total deposits grew 24.3% year-over-year. Expansion was driven by an increase in demand and projection of liquidity through government program facilities and higher saving rates among individuals. The aforementioned coupled with lower interest rate and active liability management led to an improvement in the funding cost. Regarding funding management this quarter, I would like to highlight Total funding increased driven by growth, low cost deposits in a context of high market liquidity. TPS standalone executed a new liability management track sanction. It exchanged two callable subordinated bonds, a bond, a 2026 bond at 6.875% and a 2027 bond at 6.125% for a new subordinated bond of $500 million at 3.25% that matures in 2031. This transaction, which will allow us to capture savings going forward, triggered related charges in financial expenses for $88 million in March 2021. Structural funding costs dropped to 1.35% this quarter if we include funding relative to government programs and charges related to liability management operation, the total funding cost situates at 1.43% this quarter. Next slide, please. Evolution of both payment behavior and portfolio quality improved in retail banking, but the situation at Bibanco was less favorable. clients in this segment have been more impacted by the second wave of COVID-19. At BCPS standalone, retail clients sustained a strong payment performance. On-time payments on loans was 95% in March as higher volumes of reprogrammed loans expired. Non-reprogrammed up-to-date loans increased this quarter to represent 76% of the structural loans and the high uncertainty portfolio, which is comprised of recurrent loans and are within grace periods and those that are reduced to 5% compared to 9% last quarter. At Mibanco, on time payments on loans, due remained at 93% in a context marked by an increasing expiration of grace periods quarter over quarter. Analyzing the structural portfolio figures, we note, first, non-reprogrammed up-to-date loans posted are not worth it growth this quarter to represent 57% of the structural loans compared to 49% at the end of 2020. Second, The overdue portfolio increased this quarter from 6% to 9% of structural loans as client facilities expired and clients were impacted by lockdowns. Finally, the high uncertainty portfolio was reduced to 19% of structural loans compared to 24% last quarter. In this portfolio, 10% of structural loans were still within grace period, which will be expired mainly by June 2021. Regarding portfolio quality ratios, the majority of credit cards' structural NPR ratios increased this quarter. The retail banking portfolio, the BCPS analog, improved its structural NPR ratio this quarter to a decrease in overdue loans in the consumer or credit card segments, reflecting its positive payment behavior. and increasing write-offs and low growth also fueled a drop in the ratio. Deterioration in NPL for wholesale banking was attributable to specific clients in the middle market segment. In Nibanco, the NPL ratio deteriorated this quarter due to higher delinquencies after a large tranche of grace periods expired and client payments began to reflect the effect of the lockdown in February. As a result, credit cards structure NPL increased to 6.05%. Finally, the MPL coverage ratio decreased to 142.9% this quarter, reflecting also 767 million soles for write-offs. Next slide, please. Now I will explain cost of risk dynamics. Provision expenses continue to follow a notable downward trend, which was attributable to an improvement in client payment behavior and uptick in transactional activity at BCPS standalone, mainly in retail banking segments. At Mibanco, provisions increased this quarter due to two factors. Announce win in delinquency after grace periods expire and external alignment given that our competitor's delinquency levels rose. As a result, Credit Corp's structured allowance for loan losses over the total structured loan ratio fell this quarter to 8.5%. Regarding the evolution of structural cost of risk quarter over quarter, BCPS standalone ratio registered a significant contraction of 95 basis points and situated at 1.62%, while MiBank cost ratio increased 73 basis points to situate at 5.45%. As a result, Credit Corp's structural cost of risk contracted 72 basis points and situated at 1.92%. Finally, Credit Corp's total cost of risk contracted 50 basis points quarter over quarter, posting a level of 1.63%. Next slide, please. At Credit Corp, NIM remained flat this quarter at 3.73%. interest income was offset by growth in average interest earning assets. NIM includes a negative impact of seven basis points from charges related to the liability management transaction at BCPS standalone. Structurally, NIM dropped 12 basis points this quarter affected by a less favorable mix in interest earning assets and lower origination rates at BCPS standalone. Finally, risk-adjusted NIM increased 34 basis points this quarter in line with lower provisions. A BCPA standalone mean contracted 37 basis points quarter over quarter following the same dynamic Mi Ban Con In increased 17 basis points quarter over quarter given that the structural loan dynamics continue to recover despite the lockdown imposed by the government and interest rates on new loans increase in line with a drop in the average loan ticket. Next slide, please. Non-financial income expanded 24.7% year over year driven by inflation. 9.3% growth in fee income given that the first quarter of last year was impacted by fee exceptions and growth in the net gain of securities given that the first quarter of last year reported losses in line with the steepest decline in value in the capital markets due to the onset of the pandemic. On a quarter-over-quarter basis, non-financial income contracted 10.2%. which was driven by a decrease in net income securities, significant gains were booked in the last quarter of 2020. This drop was driven by losses registered in fixed income securities from HSBs, proprietary portfolios, due to a drop in value in a context of higher interest rates. These losses were offset by gains on sales of sovereign bonds and BCP stand-alone banking book portfolios. A decrease in fee income and VCP after extraordinary fees were registered in the fourth quarter of 2020 for reprogrammed loans during the full year 2020. Next slide, please. The insurance underwriting result was severely impacted this quarter and posted a loss of 65.2 million soles. The main driver of this result was the life insurance business. On a year-over-year basis, the increase in the loss ratio in the life business while driven by excess mortality related to COVID-19. This was partially offset by growth in net premiums from Cisco 5 after higher fees were obtained through the new option for ASP mortality risk coverage and price adjustments were made in the credit life business. In the case of property casualty, the loss ratio improved after the claim level dropped across businesses due to mobility restrictions. The material quarter-over-quarter increase in IV and R provisions for COVID-19 is due to two factors. Mortality was driven by the retired population in the first wave and by members of the economically active population in the second wave. Credit exposure in the second group was consequently higher. Provisioning in the context of the pandemic has been challenging and initially involved our best estimates. Even though there is a lag between the moment in which cases occur and when they are reported, our learning curve has increased significantly since the beginning of the crisis, and such as we have adopted our IV and R models to reflect the potential impact of increased mortality. The statistics show that mortality rates are beginning to decrease, and IV and R should follow that trend. Next slide, please. Credit courts operating expenses remain under control. The year-over-year deterioration in credit court efficiency ratio, which situated at 44%, was driven by a decreasing income due to lockdowns and charges for BCP standalone liability management transactions. Excluding these charges, credit courts adjusted efficiency ratio was 43.06%, which represents a year-over-year improvement of 32 basis points. Expense controls at this EPA standalone was reflected primarily in a reduction in variable remuneration expenses. MiBank Control has made significant progress in implementing its hybrid distribution model, which is more cost efficient. Next slide, please. In terms of our liquidity, The regulator monitors the 30-day liquidity coverage ratio, and BCPA standalone and MiBank have maintained levels well above the regulatory minimum, both in soles and in dollars. However, the management decision, we use a more stringent indicator, relying on liquidity coverage ratio of 15, 30, and 60 days, whose standards are aligned with Basel III. In this context, we have maintained our high-quality liquid assets at high levels. Regarding capital, each of our subsidiaries maintain adequate capital levels, which ensures their solvency. A slight reduction in Core Equity Tier 1 at BCP standalone is related with the reduction of unrealized gains, which in turn is related with increasing long-term interest rate in solids. MiBancos Core Equity Tier 1 decreased this quarter given that in local accounting, the effect of capital increase of 400 million soles reported last year was canceled out by the effect of constituting a similar amount of voluntary provisions last quarter. This offset was registered in the first quarter of 2021. Next slide, please. We have advanced on our digital journey and our accelerating digital initiative about the business and credit card levels. At BCPA standalone, digital science has fueled growth. This trend has accelerated over the last year and will continue to be key going forward. Digitalization has grown at Pacifico, where almost 64% of its clients are now able to self-serve for different types of transactions. At Nibanco, the hybrid model has boosted the productivity of loan officers and improved efficiency. At Credit Corp. level, we are in the process of building an ecosystem that focuses on the needs of SME clients. We aim to provide these businesses with a consistent and integrated offer to a platform with unique user experience standards and high connectivity. This will enable us to process data at transactions efficiently. Our goal is to innovate, to provide clients with solutions to develop and grow, increase customer loyalty, and generate new sources of income. Next slide, please. In March, Credit Corp published its first sustainability report at the holding level with details of its 2020-2025 sustainability program. As part of the exercise, the company developed a new purpose, vision, and values which now guide the implementation of its strategy and decision-making. Additionally, Credit Corp has defined three pillars oriented to sustain long-term value creation and alignment with the United Nations Sustainable Development Goals create a more sustainable and inclusive economy, improve the financial health of citizens, and finally empower our people to thrive. We invite our investor community to navigate through our sustainability report, where you will be able to find details of our ESG business strategy, our analysis of risks and opportunities, our governance structure, and our commitment to the future. Finally, as always, we are glad to receive any feedback you may have on our sustainability approach, as we believe it will contribute to advance further in this journey. Next slide, please. Regarding our 2021 guidance, as of today, we maintain our expectation for GDP growth between 8 and 10 percent for this year. Loan portfolio dynamics has been weak And as such, we expect loan growth to be in the lower ends of guidance. Net interest margin was sluggish in the first quarter of 2021. The recovery of this indicator throughout the year will depend on the structural loan dynamics. On the other hand, cost of risk has improved faster than expected, and if current conditions hold, we expect this trend to continue. The efficiency ratio posted in the first quarter of 2021 is under control. Our ability to maintain the efficiency ratio within guidance will depend on income dynamics. All in all, we maintain our return on average equity guidance. There are other factors that may impact our results this year that I would like to mention. First, Regarding the new law that sets interest rate caps and restricts some fees, while we estimate that this will have a limited impact on Credit Corp P&L, however, we are concerned about the negative impact of these measures on financial inclusion in Peru. Second, regarding life insurance claims and ID&R provisions going forward, we have fine-tuned our model to better estimate potential losses. If the mortality curve starts to ease, In Peru, we expect these IP&R provisions to reach their maximum level in the second quarter this year. Finally, as we communicate to the market previously, we have postponed our decision of dividend payments until our certainties on the local scenes are dispelled. With these comments, I would like to give the floor to Walter Bailey, who would like to add some remarks before starting the Q&A session.

Thank you, Cesar. Good morning to all of you. I will try to summarize the two results of this first quarter conference call. I think I'll comment before opening up to the Q&A portion of the call. PCP delivered a strong performance and 18.4% analyzed with different languages. We are still not seeing growth in the loan portfolio. and loan growth will probably be sluggish throughout the year. Its strong results were largely driven by lower costs of risk. Nipanko's path to recovery was negatively impacted by the lockdown measures which curtailed loan origination. The situation is stabilized, and I am confident that Nipanko can still deliver high single-digit return on equity this year. Pacific Coast results were severely impacted by the second wave of COVID-related deaths. This was exacerbated by changes in the methodology utilized to more accurately calculate incurred but not reported claims. We should see the tail end of this second wave in the second quarter. The impact should nevertheless be less severe in that the statistics indicate that the second wave is already declining. and the revised methodology has allowed us to anticipate I, B, and R claims. A third wave cannot be ruled out before the event, but the severity should be less that the vaccination process is already underway with approximately 5% of the population already vaccinated. But the relevant risk factors today are not related to the performance of any of the reports units. now centered around legislation and politics. As Cesar mentioned, Congress recently passed and enacted legislation around eco-freight, which benefits no one. This legislation has limited impact on DCP, who is traditionally more focused on asking consumers. This legislation is more relevant to Banco, who would have to redirect its non-origination sales force to other sectors. This could even be marginally more profitable, since entry-level microfinance loans are not the most profitable, but are core to our purpose and mission of financial inclusion. This piece of legislation, which is being challenged in our constituency, will have a very negative impact on financial inclusion. Other legislation worth mentioning is an additional distribution of funds for the private pension system. we represent approximately 11.4 billion soles, or 34% of assets under management. But of course, the largest risk factor is around the upcoming second round of presidential elections. The outcome is still unclear. With important segments of the population still undecided, they could see the results their way. We will have a clear picture as the election date comes closer. It is very worrisome that one of the candidates has made public statements regarding his party's intention to shut down or eliminate institutions such as the Criminal Constitucional or La Defensoría del Pueblo, which are pillars of our democratic system. Furthermore, the Peru Libre Programme mentions the state taking over oil, gas, mining and other sectors of the productive side. Such initiatives have been tested in Peru in the past and in neighboring countries with very negative results on production levels, employment, investment, and overall economic well-being. Members of Congress have already been elected, and we will have a very fragmented Congress. And whoever becomes president will have a hard time enacting new legislation. To the extent that the new administration governs within the boundaries of democracy, the checks and balances of our system should work. Having said that, this political and economic volatility is extremely negative and comes at a moment when Peru is struggling to recover from the worst economic and health crisis in its history. The world's population is very much impacted by the health and economic crisis, and hopefully we will be able to continue down the path of the past decades that have proven successful in reducing poverty and improving the quality of life in the world. With this, I finish my comments, and we open up to a Q&A session.