Banco Del Bajio Shs Of Bk

Good morning and welcome to Wango del Vallejo's first quarter 2026 results conference call. My name is Sia and I will be your coordinator today. At this time all participants are in a listen-only mode. After the speaker's presentation there will be a question and answer session. Before we begin the call today I would like to remind you that forward-looking statements made during today's conference call Do not account for future economic circumstances, industry conditions, company performance and financial results. These statements are subject to a number of risks and uncertainties. Please note that this video conference is being recorded. Joining us today from Manvajillo are Mr. Carlos de la Cerda, Executive Vice Chairman of the Board of Directors, Mr. Ivan Lomeli, Chief Executive Officer, Mr. Joaquin Dominguez, Chief Financial Officer, and Mr. Rodrigo Marimon, Investor Relations Officer. They will be available to answer your questions during the Q&A session. For opening remarks and introductions, I would now like to turn the call over to Mr. Rodrigo Marimon. Mr. Marimon, you may begin.

Good morning, everyone. Thank you for joining us to discuss Banbajio's results for the first quarter 2026. Today, we will review our quarterly performance, analyze key drivers, and provide updates on our strategic execution. The industry data cited today throughout this presentation is based on CNBP's information as of February 2026, which is the most recent public available data. Before we begin our pod early review, we would like to welcome Mr. Ivan Lomeli, who will assume the position of Chief Executive Officer at Ban Bajio, effective as of 1st of May of 2026. Mr. Lomeli takes this responsibility with distinguished track record of expertise and a deep understanding of our core business. Since May 2022, Ivan delivered exceptional results as our Executive Director of Corporate Banking for the metropolitan area of Mexico City, and earlier this year, he extended his leadership to include the northern and southern regions. Ivan's leadership in corporate segments in key regions was instrumental in building the momentum we are reporting today, ensuring a smooth transition and reinforcing our commitment to our historical business focus, company loans. Under his leadership, we will further bolster our focus on this core target base, ensuring that our pace of growth and franchise expansion remains the central pillars of our corporate strategy. Finally, we would like to express our deepest gratitude to Mr. Edgardo del Rincon for his strong leadership, strategic vision, and unwavering commitment to Ban Bajio. We wish him every success in his future endeavors. Having said this, let's start with the presentation of our quarterly results. As we move to slide three, you will see a quarter defined by a robust long growth acceleration in the first three months of the year and disciplined execution with sound and stable asset quality metrics. These allow us to deliver solid performance despite the ongoing pressure on our revenue generation as a result of interest rate dynamics and the still challenging operating environment. Starting with our growth dynamics, our total loan portfolio expanded 6.9% year-over-year, reaching 286 billion pesos. On a quarterly basis, we saw a robust 2.9% expansion, which positioned us firmly towards the upper end of our 8% to 10% loan growth guidance. This acceleration of growth following four quarters of continued deceleration was primarily driven by our core business, company loans, which increased 7.9% year-over-year. This performance is a reflection of our enhanced focus on company loans and the early success of the evolution of our sales force restructuring implemented in early 2026. In addition, we have been gradually capturing early signals of investment acceleration in key regions and sectors. Furthermore, total deposits grew 8.6% year-over-year, reaching 283 billion pesos, underscoring the continued strength and growth of our franchise. During this first quarter, our risk profile remained a standard feature, The NPL ratio was stable at 1.5%, supported by an ample coverage ratio of 121.7%. Most notably, our cost of risk came in at very sound levels, at 0.56% for the quarter. Our healthy asset quality is further bolstered by 299 million pesos in additional reserves currently held on our balance sheet. This provision buffer, maintained alongside our stable NPL and coverage ratio, provide us with a robust caution to withstand any unexpected impacts in the coming quarters. Regarding profitability, while we anticipated that this first quarter was going to be characterized by the continued pressure of the interest rate cycle, our results remained within our guided range. Our return on average equities stood at 16.7% and our efficiency ratio was 44.1%. Finally, our capitalization ratio as of March 2036 stands at a solid 16%, composed entirely of common equity tier 1 capital. Moving to slide 4, you can see the reacceleration in loan growth discussed earlier. As the charts illustrate, the 6.9% year-over-year and the 2.9% quarter-over-quarter expansion stands as the best start of the year in the past six years, driven by an accelerating pace in our core segments. This is particularly visible in the metropolitan area of Mexico City, as well as in our newly created regional office, Western Mexico, including Guadalajara City, where we are capturing and increasing credit demands from the developing investment trends in the manufacture, services, and general trade sectors. The mentioned growth in company loans, which include both corporate and SME segments, and the continued and deliberate constructions in financial institutions and mortgages, underscores our strategic focus on reallocating capital towards higher margin business lines. The government loans rise in the last 12 months was driven by a specific exposure originated in December with good levels of interest margins, an opportunity aligned with our focus on profitable growth. Turning to slide five, the resilience of our credit profile remains a pillar within our strategy of growth, evidenced by our risk performance that significantly outperforms the industry. Our NPL ratio stood stable at 1.5%, maintaining a wide gap with a system average of 2.2%. The highlight this quarter is our cost of risk, which reached an outstanding 0.56%. This performance validates our outlook from last quarter. The portfolio cleanup completed in the fourth quarter of 2025 positioned us for a healthier expansion in 2026, while our conservative underwriting standards remained unchanged. Turning to the funding side, on slide six, total deposits reached 283 billion pesos, representing a robust 8.6% year-over-year increase. This quarterly rise reflects inflows captured to support the accelerated loan growth reported in the quarter. The 9.7% CAGR in total deposits since 2033 underscores the continuing expansion and deepening of our client franchise. Moving to slide seven, you can see that despite the migration from zero cost to interest-bearing deposits in the first quarter, we successfully delivered a significant reduction in our overall cost of funds. Demand deposits now account for 41% of our total funding mix, and notably, the cost assigned to these balances decreased by 24 basis points during the quarter. As a result, our total funding costs improved to 4.57%, a decrease of 37 basis points quarter over quarter, and a substantial 173 basis points reduction compared to the first quarter of 2035, largely explained by the compression in market rates. Similarly, our cost of funds as a percentage of tier rate dropped to 62.8%. Turning to slide 8, the net interest margin for the first quarter stood at 5.4%. While pressure has mounted as anticipated, we kept our metrics within our targets for the year. This decline is explained by 57 basis points from rate sensitivity and 31 basis points from portfolio mix. And this year-over-year contraction should be viewed in the context that average reference rate is now 270 basis points below the first quarter of 2035 levels. Nevertheless, our insensitivity per 100 basis points of reference rate cut remains disciplined at 19.5 basis points. And the decrease in the quarter was largely driven by the migration of zero-cost deposits to interest-bearing accounts. Moving to slide 9, total revenues reached 5.8 billion pesos for the quarter. While our reported figures show a 9.5% year-over-year decrease, this primarily reflects the anticipated pressure on interest revenues and a significant market-driven valuation adjustment within non-interest income. Our commitment to the continued underlying performance of our core revenues remains unchanged. Our recurring revenue streams continue to show the sound growth rates reported in previous quarters. Net fees and commissions grew 9.1%, with standout performances in bank assurance at 61.1%, appraisals at 30.7%, and cash management fees at 15.3%. Moving to slide 10, our efficiency ratio for the quarter stood at 44.1%, which remains below the system average of 45.6%. Our operating expenses have shown favorable development, reflecting our disciplined approach to cost management, a core strength of our financial performance. Operating expenses grew by a contained 6.7% year-over-year and reported a 4.2% contraction quarter-over-quarter. While revenue remains sensitive to ongoing external pressures, our strict control over our cost base allows us to partially mitigate the impact, and we remain confident in delivering this metric within our guided range of 43% to 45% for the full year. Turning to profitability metrics on slide 11, it is important to highlight that despite the expected quarterly compression, our return on average equity of 16.7% remained firmly within our 2026 guidance of 16.5% to 18%. Finally, on slide 12, we close the first quarter of 2026 with a preliminary capital adequacy ratio of 16%. This level stands significantly above our 14% commitment and well exceeds regulatory requirements. Our robust capital position provides the bank with substantial flexibility to support our growth reacceleration while simultaneously rewarding our shareholders. Lastly, we are pleased to announce that our Annual General Shareholders Meeting held today approved a cash dividend payment equivalent to 50% of our 2025 net income. The total distribution will amount to 4.5 billion pesos, which represents an attractive 7% dividend yield for our shareholders. As has been our practice, the distribution will take place in two equal installments of 25% each, with payments scheduled for May and September 2026. In conclusion, the first quarter of 2026 has successfully demonstrated a robust acceleration of our loan growth, validating the execution of our corporate strategy and our sales force evolution. While revenue will remain under anticipated pressure, our disciplined performance position us within the ranges expected for 2026. and we expect this trend to continue throughout the remainder of the year. With a resilient balance sheet, exceptional asset quality profile, and a new leadership deeply rooted in our corporate DNA, we remain fully confident in our ability to meet our targets for the year and continue delivering long-term value to our shareholders.

We will now conduct a Q&A session. If you would like to ask a question, please press the raise your hand button located at the bottom of the screen. If you are connected by telephone, please dial star 9. We remind you that all lines have been placed on mute. When it is your turn to ask a question, you will be given permission to speak. You will then be able to unmute yourself and ask your question. Our first question comes from the line of Pablo Ordoñez. Please state your company name and ask your question.