Edited Transcript of UNIFINA.MX earnings conference call or presentation 24-Jul-20 4:00pm GMT

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MIGUEL HIDALGO Jul 28, 2020 (Thomson StreetEvents) — Edited Transcript of Unifin Financiera SAB de CV earnings conference call or presentation Friday, July 24, 2020 at 4:00:00pm GMT Unifin Financiera, S. A. B. de C. V. – Director of IR & Corporate Finance Unifin Financiera, S. A. B. de C. […]

MIGUEL HIDALGO Jul 28, 2020 (Thomson StreetEvents) — Edited Transcript of Unifin Financiera SAB de CV earnings conference call or presentation Friday, July 24, 2020 at 4:00:00pm GMT

Unifin Financiera, S. A. B. de C. V. – Director of IR & Corporate Finance

Unifin Financiera, S. A. B. de C. V. – CEO

Loomis, Sayles & Company L.P. – Credit Research Senior Analyst

Scotiabank Global Banking and Markets, Research Division – MD of LatAm Financial Services

Scotiabank Global Banking and Markets, Research Division – Head of Latin American Strategy, Head of EM Strategy, EM Sovereign Strategist & Director

JPMorgan Chase & Co, Research Division – Head of Latin America Corporate Research

Good morning, and welcome to UNIFIN’s Second Quarter 2020 Conference Call Results Conference. (Operator Instructions)

For opening remarks and introductions, I would like to turn the call over to Mr. David Pernas, Head of Corporate Finance and Investor Relations at UNIFIN. Mr. Pernas, you may begin.

David Pernas Sánchez, Unifin Financiera, S. A. B. de C. V. – Director of IR & Corporate Finance [2]

Good morning to everyone. Given the current unprecedented macroeconomic environment, we’re very much aware of the relevance of this quarter’s results. Because of this, we would like to address how we have strengthened and positioned the company’s business model to face the rest of 2020 and the upcoming years.

As always, we seek to transparently communicate our plans and results, while addressing relevant topics. Therefore, we would like to start the presentation by providing a business overview; then give our COVID-19 update; and finally, share our financial highlights for the quarter. After the presentation, we will follow with our usual Q&A.

If you have not received a copy of the earnings release, please contact the Investor Relations team. You would also find a copy of this document on our website, including a direct link to today’s webcast.

I want to remind you that forward-looking statements may be made during this conference call. These do not necessarily consider changing economic circumstances, industry conditions, the company’s performance or financial results. These forward-looking statements are based on several assumptions and factors that could change, causing actual results to differ materially from current expectations. Therefore, we ask you to refer to our disclaimer located in the earnings release report and the corporate presentation before making any investment decision. Thank you all.

Now I would like to turn over the call to our CEO, Sergio Camacho. Please go ahead.

Sergio José Camacho Carmona, Unifin Financiera, S. A. B. de C. V. – CEO [3]

Thank you, David. Good morning to everyone. And once again, thank you for joining us. In these challenging times, we appreciate your time and interest in UNIFIN.

To understand UNIFIN’s plan to address the current economic crisis and to be able to explain our long-term strategy, we believe it is essential to start the conversation by discussing our key and defining pillars. These pillars are the basis of our values and principles, which constitute the essence of our success story.

UNIFIN is a leading nonbanking financial institution that has risen above its competitors and have taken advantage of an efficient

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sector for the past 27 years. Through these years, UNIFIN’s client-centric business model has proven to be highly adaptable and resilient, and its platform has reached a 16% market share of the total SME loan portfolio.

During the past 4 years, our total loan portfolio showed a compounded annual growth rate of 33.2%. All these characteristics, along with our self-reinforcing ecosystem and diversified product platform allow us to cover the SME sector widely.

Our strategy is to continue penetrating the underserved SME financing markets. SMEs account for 9 out of 10 business in Mexico, 1/2 of the country GDP and 2/3 of the Mexican job market. In the country, only 14% of this market is served, and we are convinced that UNIFIN can make a difference with its product offering. So although the upcoming months will still carry the consequences of the economic downturn caused by the lockdown measures, there are still many opportunities going forward.

UNIFIN targets addressable market of 240,000 SMEs, holds a broad base of unattended prospects representative and attractive expansion potential for the company. To address this potential market, we made relevant adjustments to our commercial approach. We expanded our distribution channels, refocused our advisory team and aligned our strategy to cease the sector opportunities.

We not only conducted commercial adjustments, but we also did our homework to identify the sectors and states that, in our view, are expected to overcome the current crisis faster: healthcare retail, agriculture, media, e-commerce, financial services and wholesale and retail are some (inaudible) sectors where we have spot opportunities to increase our client base and expand our loan portfolio. Additionally, we have a significant presence in states with expected growth potential above Mexico 2020 expected GDP growth. This provide us with a competitive edge to react faster to potential client needs as soon as the economy in these states recover.

It is important to mention that around 25% of our clients have exposure to the new trade agreement with the U.S. and Canada supply chain. These companies are expected to recover faster vis-à-vis the national average in the following years.

In addition to reviewing opportunities from an economic standpoint, we have also realigned our customer-centric strategy by enhancing our product lineup with complementary services to reduce our customer acquisition costs, increase our addressable target market and accelerate financing for the SMEs. We fully comprehend the core value of CapEx financing for an emerging economy. However, to develop our client potential, we have expanded our product offering to move across our capital structure and design a complementary lineup of products that effectively lever on our one-stop shop philosophy, varying between a 5% to 20% probability of closing a new customer from initial content. However, the probability arrives drastically to 60% to 70% as we conduct cross-selling and upselling sales to existing customers. Only with a broader product portfolio, we will be able to increase our clients’ financial capabilities by enhancing the value of our offering and reducing the acquisition costs to reach clients.

Cross and upselling explain why, aside from our core, we have expanded our legacy products to the following financial solutions: working capital access, secured and unsecured loans, business scaling options, structured finance, leasing, full-service leasing, commercial vehicle financing and insurance services. We have also expanded our go-to-market strategy to the lower SME segment with introduction of Uniclick.

Uniclick is our new digital platform that seeks to become an entry point to a significantly broader and more dynamic SME market. Also, it is our product incubator. The platform is a new way to engage customers faster at a substantial lower cost, having achieved an acquisition cost reduction of 8.3x versus UNIFIN overall costs. Uniclick’s unique platform is backed by UNIFIN’s 27 years of experience and a nationwide digital presence with physical branches in 18 different states. Our platform has a state-of-the-art technology, including big data analytics, artificial intelligence capabilities and an in-house platform that serves as the data source from its core financial services. The goal is to offer innovative digital financial solutions to the dynamic SME segment, which has historically been underserved by traditional banks, but much faster at a lower cost. Furthermore, the platform expects to contribute to UNIFIN one-stop shop strategy while leveraging cross-selling opportunities with existing and new clients.

UNIFIN has recently formalized a strategic partnership with Google to create a unique-in-Mexico digital accelerator. This program includes tools for our clients to speed up their digital awareness and transformation. Most small companies in Mexico do not have a website, presenting an opportunity for those who provide (inaudible) services, which, we are creating in alliance with Google. Thanks to Google’s extensive experience and data, we will provide our clients with an estimated of their brand presence according their geographical position, target customers and type of product or service they offer. Our clients will be able to track their online business in detail, allowing them to base their decision-making process on real-time data.

Our key objective is to become the leading platform that offers innovative digital financial solutions and business services to the dynamic SME segment. With this partnership, we intend to propel Uniclick digital platform growth and enable a provision of pinpoint financial solutions for the lower SME mass market.

With that, we would like to move on to our COVID-19 update. We would like to begin by mentioning the initiatives we have adopted to keep our people safe. They are the main assets of UNIFIN. And for that reason, we have prioritized their safety through the pandemic.

The company has provided the tools necessary to allow employees to work from the home effectively. In addition to work tools, we now offer additional benefits, such as online medical consultations, high-quality insurance, psychological assistance and have created a back-to-the-office rollout plan. This plan includes designating areas that will work from home through the foreseeable future.

In relation to our clients, to assess the impact of COVID and the lockdown on our portfolio, we proactively reached out to our entire client base to evaluate their situation. This effort gave us essential decision-driving information that allow us to create a framework to address individual needs and help our clients weather the crisis. This framework includes evaluating individual risk assessment, sector outlook and client performance. Our support plan consists mostly of payment relief, allowing clients to defer payments by 3 to 4 months to help them maintain fiscal liquidity. Through this plan, we provided relief to about 12% of our client portfolio.

On this page, you can see some additional detail regarding our client support plan. 1,200 clients, which represent 15.5% of our total client base as to our number of clients and 12.7% of our total portfolio as a percentage of outstanding balance. We would like to highlight here that despite having around 1,200 customers requesting relief, they are concentrated in the high-growth states of Mexico City, State of Mexico, Queretaro, Guanajuato and Nuevo Leon. Our strong financial position enables us to create this client support plan. And despite these headwinds, we maintain our long-term business view to continue creating value for our clients and shareholders.

Before we start discussing our quarterly results, we would like to highlight that some of this quarter’s most significant achievements. Considering our positive cash flow and following our conservative cash management policy, the company decided to use excess cash proceeds to buy back some of its outstanding market debt in a face value amount of $26.1 million. Consequently, our financial results present a positive gain due to the cancellation of the notes purchased at discount price.

As part of its natural course of business, we confirm the company has successfully rolled over MXN 12 billion in outstanding debt corresponding to revolving facilities from our different commercial and development banking relationships. In addition to maintaining the outstanding balance with our creditors, and according to our strong financial position and exceptional track record, the company has signed 3 new credit facilities: the increase of our NAFIN-Bancomext credit facility for a total amount of MXN 6.2 billion, of which MXN 2.7 billion is incremental capacity; a new credit line with a local commercial bank amounting up to MXN 5 billion; and we successfully refinanced $70 million facility with Barclays. We are also in the process of closing the refinancing of $300 million related to market securitizations that are currently under an amortizing schedule.

Finally, at the Annual Shareholders’ Meeting, we approved a capital increase of up to MXN 2.5 billion. This capital increase will be conducted through the issuance of up to 140 million shares. Current shareholders will have preferential subscription rights to the new shares in proportion to their participation in the company capital stock, thereby avoiding dilution. We expect the transaction to be completed by mid- to late August.

Earlier today, we received the approval from the Banking and Securities Commission to commence their rights offering process. The offering of these new shares will improve UNIFIN’s capital and liquidity ratios and put the company in a stronger position to support its clients in this challenging economic period. As mentioned before, we believe that as Mexico emerge from the COVID pandemic, there will be attractive opportunities in lending to the Mexican SMEs, and we want to be well prepared for when that moment comes.

As a consequence of these reliable managerial decisions and the company’s sound financial position, all of our — all of the credit ratings were reaffirmed during the quarter, including those related to outstanding public and private lease securitizations.

Moving on to our operational highlights. Despite the crisis, year-over-year originations increased the total loan portfolio by 26.7% compared to the first semester of last year, reaching MXN 63.8 billion. Of the total loan portfolio, leasing continues to account for the largest share at MXN 47.7 billion, with factoring at MXN 2.3 billion and auto and other loans at MXN 13.8 billion. The total nonperforming loan ratio was 5.7% in the second quarter compared to 4.3% in the first quarter of this year, affected by the economic slowdown. The loan loss reserve from the quarter increased to MXN 1.9 billion from MXN 962 million in the second quarter of last year.

In line with the current challenging economic conditions and the company’s strategy for the COVID pandemic, these provisions are created according to our loan loss reserve policy attached to the guidelines defined by IFRS. The methodology is based on an expected loss basis.

The factors used to determine expected loss provisions for the leasing portfolio are: historic payment behavior, current environment and reasonable provision for future payments. The recovery value of the leased assets that are 90 days past due was MXN 2.9 billion in second quarter. The estimated breakeven value of these assets was 63%, as shown in the table below. It is important to highlight that UNIFIN’s current loan loss reserve contains sufficient capital to account for potential losses.

Historically, the company has sold these repossessed assets at approximately 80% of their recovery value. The capitalization ratio for the period was 18%, while the financial leverage ratio was 5.5x affected by the volatility of the Mexican peso. Excluding mark-to-market valuations from our capitalization and leverage ratios, capitalization from the quarter was 20.4%, while the leverage ratio stood at 4.9x. This is significant because, given accounting criteria, our financial assets and liabilities denominated in U.S. dollar present variations as rates and the FX move, hence, virtually offsetting our accounting capital position in our capitalization and leverage metrics.

The financial liabilities for the first 6 months of the year were MXN 74.4 billion, an increase of 37.9% compared to the same period last year, mainly attributed to portfolio growth. The weighted average term of the liabilities was 43 months versus 30 months for the total portfolio, thus presenting a healthy gap between maturities and easing potential cash flow pressure. Our debt is most U.S. dollar denominated, having 71% of the total outstanding balance in that currency.

It is important to highlight that all of our U.S. dollar-denominated debt is completely hedged. Additionally, 80% of our debt is at fixed rate, while variable rate debt amounts to 20% of the outstanding balance.

During the quarter, the weighted average funding cost decreased to 9.9% due to quantitive easing policies and strategic financing activities conducted over the last 12 months. Interest costs have been falling on a sequential basis since the second half of 2019 due to lower costs associated with new funding agreements and Mexico easing cycle.

We ended the second quarter with a growth in interest income of 7% versus the same period last year. Insurance costs increased by 2% to MXN 1.7 billion, explained by an increase in financial liabilities related to our operational growth. The financial margin from the quarter increased by 16.6% compared to the second quarter, reaching MXN 1.1 billion. This improvement comes from higher interest income from our different business lines and limiting our interest cost during the quarter. As a result, the financial margin as a percentage of sales was 38.1% in the second quarter of this year. However, the annualized NIM contracted 70 bps to 7.1% in the second quarter versus the second quarter of last year, explained by the deceleration of our business due to current economic condition.

As mentioned earlier, the loan loss reserve portfolio from the second quarter increased by 20x to MXN 628 million, consistent with the current market conditions and the company’s strategy for the COVID pandemic. As a result, the adjusted financial margin closed at MXN 440 million, a decrease of 50% compared to the same quarter of last year.

Administrative expenses, consisting of investments in marketing and promotion, administrative services, legal and professional fees, increased by 5.5% compared to the second quarter of last year, reaching MXN 372 million. This increase is mainly attributable to the company’s substantial efforts related to our business intelligence and Uniclick business branches. However, OpEx, as a percentage of sales, improved by 20 bps in the second quarter to 13.3% from 13.5% in the second quarter of last year.

Moving on to the financial metrics. The return on assets stood at 2.2%, the return on equity was 17.1%, but adjusting for the perpetual bond, the return on equity closed at 29%. The financing results for the quarter reported a net gain of MXN 307 million, mainly explained by 2 factors: on lines related to the repurchase and cancellation of notes in face value amount of $26.1 million and adjustments made to some of our hedging derivatives by taking advantage of the positive mark-to-market valuation due to FX and grade variations throughout the year.

It is important to highlight that despite some opportunistic restrikes in our derivatives portfolio, all of our debt continues to be fully hedged in principle and interest up to maturity. The consolidated net income from — for the quarter fell by 42.3%, closed at MXN 261 million for the quarter compared to MXN 453 million in the second quarter of 2019, primarily attributed to the creation of loan loss reserve as a result of implementing risk-related strategies in response to the current global situation and lower origination volumes across our business lines.

As always, I would like to reiterate our commitment to Mexico and our stakeholders. We will continue focusing on generating long-term value and overcoming this crisis. We are confident that we will emerge as a stronger company. Thank you for listening.

And now I would like to open the Q&A session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Carlos Rivera with Double Line.

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Unidentified Analyst, [2]

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The first one is related to asset quality. I mean, we saw a pretty big increase in the loan loss provisions in the P&L. So given that you follow IFRS, I wanted to have your thoughts about the outlook for this line in the following quarters. You mentioned that this provision covers some of the expected losses also for the future. So what are you expecting for this line? I’m probably also making the question a little bit more precise. Of course, we’re seeing (inaudible) NPLs, but also a portion of your portfolio is receiving some support measures, and it’s not reflected on the NPL. So are these provisions also accounting for that part of the portfolio that is receiving some support but is not reflected on the NPL ratio? And I’ll have a second question on the nonrecurring gains after.

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Sergio José Camacho Carmona, Unifin Financiera, S. A. B. de C. V. – CEO [3]

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Carlos, if we analyze the performance of the portfolio regarding both the payment that we received from our clients, but also the request from support on the COVID plan, what I can tell you is that over the last 2 months, May and June, we saw a complete flattening on the curve on request from support from our clients. So going forward, we do not anticipate a further deterioration on our NPL ratio.

It is really difficult now to provide with an exact outlook on that because nobody knows exactly when this is going to be ending. But based on our recent experience, it’s what I can tell. On the NPLs that are included within the 5.7% and the COVID programs, it’s partially included there.

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David Pernas Sánchez, Unifin Financiera, S. A. B. de C. V. – Director of IR & Corporate Finance [4]

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The allowances, Carlos. As you know, the methodology consists of analyzing and reviewing the entire portfolio of the company on an expected loss basis. Of course, it considers the aging balances of the company. It also includes the severity of the loss and it analyzes, of course, the guarantees and the collateral of the portfolio. So the assessment is done to the entire book. It does have a portion that would account for the restructured portion of the book, but it’s mostly related to the clients that are already reported as an NPL.

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Unidentified Analyst, [5]

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Okay. So if you’re seeing a flattening on the requests for support, and of course, without getting into a very specific number, but then, probably the loan loss provisions, we will not — we should not expect such a big increase in the following quarters? Maybe can we say that the worst — as measures the cost of risk or something like that is behind? I understand that it depends on the outlook for the economy. So if you could also share the GDP assumption or the measure that it’s — these projection based on what is your thinking for the Mexican economy at the moment?

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Sergio José Camacho Carmona, Unifin Financiera, S. A. B. de C. V. – CEO [6]

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I mean, I fully agree with what you said. What we have — I mean, going backwards, late last year, when we started to see the declining in the economic outlook for the country, we saw and we analyzed within the company, which sectors maybe they want to no matter what the public policies of the country were, where the sectors that somehow will have an independent dynamics from the macro. And that’s why we start doing a lot of our originations, so basically focusing and targeting clients that are included within the production line to export to the U.S. thinking of the ratification of the new NAFTA. And as of today, around 25% of that goes into that. So basically, on — 1/4 of our portfolio is going to react immediately. And actually, it’s already — it’s reacting.

On the macro or GDP perspective for the year, we basically go with the public estimations that the IMF and some other analysts are out there. However, we have gone into a second derivative analysis, getting into which states and which industries may be more benefited or less affected, let me put it that way, on the macro situation. And that’s how we are moving all of our commercial efforts. So no matter what the outcome for the GDP growth for Mexico for the year is, we believe that as long as we start seeing some sectors recovering, we are going to perform well.

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Unidentified Analyst, [7]

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Okay. The numbers from GDP overall in Mexico, and I understand the (inaudible) for industries. Are those projections around contraction of 10% to 11%?

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Sergio José Camacho Carmona, Unifin Financiera, S. A. B. de C. V. – CEO [8]

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Yes, 9% to 10%. And that’s basically the premises in which we are working our budgets and our plans.

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Unidentified Analyst, [9]

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Okay. Great. And my second question is related to the nonrecurring things, the gains that you had, and there are a few numbers that are mentioned in the press release, from the purchase of the bonds. One is MXN 307 million, and there’s another MXN 134 million. So if you could clarify which one relates to what? Are those pretax numbers? Is one just related to the difference in prices? And on the hedges, you mentioned in the case, there are some adjustments that were made to those hedges? So does that mean that you close on positions and then you reopen them? Or what was going on the hedging side of your derivatives?

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David Pernas Sánchez, Unifin Financiera, S. A. B. de C. V. – Director of IR & Corporate Finance [10]

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Yes. So basically, what happened, Carlos, was that because of the repurchases of the bonds, so it’s 2 explanations, okay? The first one is because of the repurchases of the bonds. The company took an advantage of the performance of the bond given the overall sentiment, and we decided to buy at a discounted price. As you know, at some point, the — sorry, the bonds were even trading at MXN 0.40 on the dollar. And that, of course, led us to refine our strategy for repurchases. We bought $26.1 million in face value. And of course, because there was a portion of the bonds that was hedged in accordance to that face value, we were allowed to do an entire line for that position because the hedge didn’t make sense anymore. We were overhedged. So that presented again.

In addition to that, because of the significant depreciation of the Mexican peso throughout the year, we had — and because our hedges were done at different rates, the overall mark-to-market of our hedges had a substantial valuation, a substantial gain. So the company decided to restrike those positions, basically by trying to control entirely the amount of interest that we were going to be paying. So there’s no change in the previous rates that we had before to the ones that we have right now because we have benefited from the easing cycle of Mexico’s rates, so which somewhat offset the benefit that we took from the government’s policies or the Central Bank’s policies for that and decided to do some re-couponings on the hedges, and that allowed us to present an additional hedge — sorry, gain from that — from those changes on the hedges. The overall gain was MXN 134 million from the repurchase of the bonds, and then from the on lines or restructuring of the derivatives altogether. The portion that was directly benefiting the results from the repurchase was done or represented $134 million (sic) [MXN 134 million]. The other one is mostly because of the currency effects.

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Unidentified Analyst, [11]

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Okay. Are those figures after tax, the ones that you share or pretax?

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David Pernas Sánchez, Unifin Financiera, S. A. B. de C. V. – Director of IR & Corporate Finance [12]

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They are pretax, both.

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Operator [13]

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Our next question comes from Jason Mollin with Scotiabank.

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Jason Barrett Mollin, Scotiabank Global Banking and Markets, Research Division – MD of LatAm Financial Services [14]

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Can you talk about how you’re helping your clients in terms of providing forbearance, the type of loan rescheduling, the percentage of clients that are participating in these programs and how that’s impacting your business today? And what you think the impact will be when these forbearance initiatives have terminated?

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David Pernas Sánchez, Unifin Financiera, S. A. B. de C. V. – Director of IR & Corporate Finance [15]

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Of course, Jason. The information will be — or is available on our web page, in the presentation of the webcast. And nearly disclosed on the call, but just to be able to remind you all about the numbers. So the total applications — sorry, the total support plan that was granted to the clients was in an amount of 1,206 clients, okay? That’s the total, incorporating all of the product offerings that the company have today. And the outstanding balance — the full outstanding balance of that portfolio for those clients, in particular, amounts for MXN 8 billion in general terms.

The amount of the program, so the 3 to 4 rentals, accounts for around $1.2 billion individually. The restructures are now for those. It’s just the amount of the 3 to 4 rentals.

Also, we defined different strategies and different approach, depending on the product that the client has, and of course, on the overall analysis that we did on an individual basis to each specific client. The relief were basically signed through the months of March, April and May, most of them. I think we received 1 application or a couple of applications through June. And the relief program started for those clients when we signed those agreements, those, say, restructures. And it also depended on how we address the issue individually with the clients.

In the means of when were they going to start repaying us, in most cases, some of that started in July. But in other cases was towards the end of this year, particularly October and November. And in another portion of the clients, because of how severe the conditions were on their individual circumstances, it was sent all the way back or all the end at — all the way at the end of the contract, of the maturity.

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Sergio José Camacho Carmona, Unifin Financiera, S. A. B. de C. V. – CEO [16]

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Let me add, Jason, that, basically, what we did we made an individual risk assessment of client, including the sector outlook and the client performance. All of the support that we provide to the client were for clients that were good payers, and that’s very important. And the other thing to highlight is that basically, in most of the cases, we got some additional guarantees to protect ourselves.

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David Pernas Sánchez, Unifin Financiera, S. A. B. de C. V. – Director of IR & Corporate Finance [17]

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And the application — sorry. No, no, the application — I’m just going to give a quick breakdown for anyone that doesn’t have the presentation available there. But basically, the breakdown per client is 59% focused on leasing clients, 29% on auto lending, 3% on factoring and 10% on Uniclick’s portfolio. And then by product or outstanding balance, it was 87% in leasing, 8% in auto lending, 4% in factoring and 1% in Uniclick.

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Jason Barrett Mollin, Scotiabank Global Banking and Markets, Research Division – MD of LatAm Financial Services [18]

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So you — I mean, if I’m looking — if I’m reading correctly, as of June 2020, you had approximately 5,200 — 5,193 clients in leasing, the vast majority of your clients, right? I guess, I see here 900 in factoring and about 1,200 in auto loans. So the majority of these 1,200 are — and then you gave the balance numbers. I got it. That’s interesting.

And I guess, since it’s just — it’s pretty new, are you getting a sense — do you have a sense of how those clients that have taken this opportunity to restructure? Like how is that going — and in terms of payments? And then how would you compare that to the payments on those that did not participate? Are they going at — they were going before? Or the delinquency is weaker or for that matter better, who knows?

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Sergio José Camacho Carmona, Unifin Financiera, S. A. B. de C. V. – CEO [19]

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We have been very clear, Jason, that from the clients who are in sectors that basically they already opened for business or states that are already opened for business or clients that are, as I said, within the supply chain to the U.S., the back to normality has been very, very quickly. However, there’s also another portion of clients which are in sectors that continues to be closed that are basically still suffering on that. So for the numbers that we are presenting here, we may continue to present some in the third quarter in which we continue to support because of the pandemic basically.

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Operator [20]

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Our next question comes from Joe Kogan with Scotiabank.

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Joseph Kogan, Scotiabank Global Banking and Markets, Research Division – Head of Latin American Strategy, Head of EM Strategy, EM Sovereign Strategist & Director [21]

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I had a couple of questions on recovery rates and on NPLs. First, on the recovery, you have this nice slide with some breakevens. I just want to make sure I understand the slide. So I remember your structure of your loans is to have a low residual, which gives you kind of a larger buffer. So when you say 100% and a historical recovery of 80%, this is 80% of what? And I guess, the kind of — the more important question is, have you actually sold a lot of assets over the past few months? And what has been the process of trying to sell those assets? And what have you been able to get from them? Or is it more recovery on the loan in some other way here?

And then on NPLs, if I understood correctly, you have about 20% of the leasing portfolio that’s more than 30 days due. And in addition, you have 11% that’s restructured. So I should think about it as about 30% of SMEs are having trouble with payments. So I just want to make sure I understood that part. And then kind of going forward, you mentioned the flattening of the curve, and I see 6% in the 31 to 60 bucket and 7.5% to the 61 to 90 bucket. I mean do you expect any of those to become NPLs? I mean am I thinking about it correctly that some of these SMEs had low cash buffers, were able to pay for a couple of months, but if they’re still closed, we’ll see NPLs increasing? Or do you — are you saying they’re going to stay constant at 7% here?

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Sergio José Camacho Carmona, Unifin Financiera, S. A. B. de C. V. – CEO [22]

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Well, first of all, I mean, on the 80% that we provide on the explanation is basically 80% of the commercial value of the asset. So it’s — whatever is the commercial value, we are selling around 80%. That’s a historical trend.

And the breakdown that we provide in our press release and all the information that is provided there, it has a commercial value, but basically considering now how the commercial value that is in the market, which somehow has already been impacted or negatively impacted by the COVID crisis.

As we said, I mean — and of course, we are very focused on the aging balances of our — on our clients. There might be some of them that will go over 90 days and then enter into the NPL methodology and the research and so forth, so on. However, all of our efforts are dedicated towards collecting money from these guys and trying to get them on back on business.

It is really interesting that, for example, even though we provide some programs to some of our clients, some of them were not willing to sign them because they have a different view on how those economies going to evolve and how those economies going to perform. And those — some of those are already included into the 5.7%.

So it’s going to be a dynamic. But my point or what we try to explain here is that the flattening of the curve over the last 2 months somehow show us some stability towards the evolution of our NPL numbers.

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Joseph Kogan, Scotiabank Global Banking and Markets, Research Division – Head of Latin American Strategy, Head of EM Strategy, EM Sovereign Strategist & Director [23]

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Okay. I understand the goal on the NPLs. And as far as the recoveries, I mean, have you actually repossessed, had to repossess any assets during the pandemic? And if so, what has that process been?

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Sergio José Camacho Carmona, Unifin Financiera, S. A. B. de C. V. – CEO [24]

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Maybe around 10 clients, which we have already repossessed because somehow, some of them are going to be out of business. And prior to entering into a legal issue, they decided to give back the assets to us. But it’s a very, very, very small amount in a percentage.

The people that enter into these programs is because they are intending or they’re planning to get back on business. And of course, getting back into our origination process in which the asset is a core of the enterprise that we are providing leasing, it’s — I mean, we are not asking for the asset and they are not offering the assets to all. So basically, it’s at a standstill, let me put it that way.

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Joseph Kogan, Scotiabank Global Banking and Markets, Research Division – Head of Latin American Strategy, Head of EM Strategy, EM Sovereign Strategist & Director [25]

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And were you able to realize a reasonable market value for those assets kind of in line with what you would have expected in a normal period?

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Sergio José Camacho Carmona, Unifin Financiera, S. A. B. de C. V. – CEO [26]

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It is — yes, but in a different way because some of the assets that we have already repossessed have been already allocated to different clients, that they were in the need somehow of similar assets. So — and that’s part of all of our commercial strategy and our business intelligence efforts within the company, which basically, one that we are aware that we’re going to repossess an asset, it already gets into our data warehouses and everything and our commercial guys know that there is going to — there is an asset with a specific condition that is going to get back to UNIFIN, and they start basically marketing that asset. Most of them are existing clients or to new clients or whatever the case is.

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Operator [27]

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Our next question comes from Nicolas Riva with Bank of America.

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Nicolas Alejandro Riva, BofA Merrill Lynch, Research Division – Research Analyst [28]

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Yes. I have 3 questions. The first one on the capital increase that you mentioned then, the idea in terms of timing will be to do it in August, mid to late August. I just wanted to confirm that the commitment from the controlling shareholders is to contribute with key shares, so about 58% of the MXN 2.5 billion. So that will be my first question.

The second question is kind of a follow-up on prior questions on asset quality. So that increase in the NPL ratio, the 140 basis points quarter-on-quarter, if I compare that with other peers in Mexican financials, nonbanks and some banks, for some other periods, we haven’t seen really an increase in NPL ratio in the quarter-on-quarter because of all the debt relief measures and the fact that the restructured loans are still part of the performing loans. In your case, you said that you have done the relief measures for about 13% of your loan portfolio. Is all of that still performing? So the increase in NPLs was due to new NPLs but not due to the restructuring — to restructured loans, if the question is clear.

And then the third question, you mentioned in the press release and this call about buying back some of your U.S. dollar bonds in the second quarter. Given that in July, we saw another decline in bond prices, can you tell us if you also did some of that buying back in the open market in July? Or if you plan to do more of that in the third quarter at all?

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Sergio José Camacho Carmona, Unifin Financiera, S. A. B. de C. V. – CEO [29]

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Sure, Nicolas. Let me start the answer of your questions with a very clear differentiation of UNIFIN vis-à-vis the banks. We own an asset. So we do not have an exposure like a bank may have on a loan because basically, we own the asset and we are leasing the assets. So there’s a natural underlying there. So basically, the nature of our NPL, somehow it’s a little bit different.

Second, all the banks receive somehow programs to support in the regulatory metrics and everything, and maybe that’s why you are seeing a difference. As we are aware, we are not a bank and, therefore, we’re not subject to those regulatory easing within their accounting or the reporting. So basically, that’s the difference, what you might see there.

I mean once again, we own an asset. It’s — we do not need like a fully reserved because we have a real guarantee on each of our leases. Getting to the capital raise, yes, there is the full commitment of our main shareholder and, let’s say, the controlling trust to issue, on a proportional base, their part.

And the third, on the repurchase of some bonds in the third quarter, I mean, yes, those are opportunities that, of course, we analyze on a daily basis, particularly considering that in our view, the reduction on the price, it has been more than justified. So yes, I mean, we are also analyzing that as well.

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Nicolas Alejandro Riva, BofA Merrill Lynch, Research Division – Research Analyst [30]

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Okay. Perfect. And Sergio, one quick follow-up and then just to confirm, the loans that you — the leases that you restructured in the second quarter are still part of your performing loan book.

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Sergio José Camacho Carmona, Unifin Financiera, S. A. B. de C. V. – CEO [31]

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That’s correct.

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David Pernas Sánchez, Unifin Financiera, S. A. B. de C. V. – Director of IR & Corporate Finance [32]

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And Nicolas, just to add one more argument to what Sergio was saying, of course, part of the increase of the NPL accounts for clients that, for whatever reason, this — at some point or could potentially apply for the program but were not granted the program because of several factors. I mean there was clients that on their perspective, they didn’t have a positive outlook and were already basically facing Chapter 11 sort of processes. And of course, it made no sense to approve a program like that to those type of clients or some who were willing for other sort of purposes.

The company was very, very, very cautious on who we decided to grant the program to. And the, let’s say, the increase in the NPLs accounts for, of course, those clients.

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Operator [33]

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Our next question comes from David Lapierre with Loomis Sayles.

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David Lapierre, Loomis, Sayles & Company L.P. – Credit Research Senior Analyst [34]

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Are you able to disclose how much availability you have on some of the — your lines of credit? I see the schedule in the back with the maturity dates. Just wondering if you can share how much is available?

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David Pernas Sánchez, Unifin Financiera, S. A. B. de C. V. – Director of IR & Corporate Finance [35]

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David, yes. Well, first, and thank you for your question. I think an important remark here that was mentioned at some point in the call also, but I would really like to stress out or to highlight that as an important event over the quarter. We did have assets where we did close some facilities with new relationships and with, of course, development banks. So we increased our capacity with Nafinsa/Bancomext. They operate together now in an amount of MXN 2.7 billion of new money, of new money. The total amount of the facilities accounts for MXN 6.2 billion. So that’s an important highlight. So the MXN 2.7 billion is available capacity.

Then we have a MXN 5 billion facility coming from a local commercial bank. This is a new relationship to the company. We don’t have any direct relationship to that particular bank before. And that amounts for MXN 5 billion in new cash.

And last, we did the refinancing of the Barclays deal that has now a maturity sent all the way to the next 12 months. So basically, by August 2021. With that, the company continues to do refinancings on both revolving facilities, which is important to highlight because part of our debt, part of our debt accounts for — in the bank facilities or in the loans, accounts for a natural process of having a revolving structure.

It’s not that we’re changing or we have been changed our conditions from our creditors. This is the way the alliance work. We have, through the year, rolled over around MXN 12 billion of those facilities because some have 90 days, some have 120, some 180. So that creates a lot of rollover of that debt. But the conditions remain the same, and all of our creditors have the same outstanding balance. None of the conditions have been modified for the company, important highlight.

And then, of course, part of the term facilities that the company has, one of which is the Barclays deal, was already refinanced. So the capacity of the company today in just this facility amounts for MXN 7.7 billion, okay, in addition to the cash that has not been in the securitization costs that allows us to retrieve cash by repurchasing some of the rights of the securitization. And that amount will definitely increase now that we are finalizing the revolving structure on those facilities because some of those are already in amortizing period and restrict the cash that is there for the waterfall payment on principal. So that will allow or increase the capacity, the cash flow capacity of the business.

And sorry, just to finalize the argument, the company has today a cash position in the balance, just in cash, not in investment, just in cash, in an amount of MXN 1.5 billion in addition to that. So the cash flow of the company has been very stable. It has worked very well. It was very important for us to give the announcement of these facilities and provide you with the clarity of the access of this new cash.

It’s not that we will be using the cash immediately. It will not necessarily account for additional leverage because we’re — we will use it as originations start increasing and the operational volumes of the company will start rendering some results, hope the availability is there. So it gives us a lot of maneuvering capabilities.

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David Lapierre, Loomis, Sayles & Company L.P. – Credit Research Senior Analyst [36]

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Great. David, that’s very helpful. Congratulations on all the work on the credit facilities this quarter.

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David Pernas Sánchez, Unifin Financiera, S. A. B. de C. V. – Director of IR & Corporate Finance [37]

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Thanks. Thanks.

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Operator [38]

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Our next question comes from Alejandro Isaza with SURA.

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Alejandro Isaza Zapata, [39]

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Yes. I’m sorry, I had to reconnect to the call, so maybe I didn’t hear part of your last answers. My first question is regarding collections. How deep has been the reduction you’ve seen in collections? And what can we expect for the rest of the year?

And second, in terms of nonperforming loans. Do you expect them to continue worsening above that 5.7% we saw in the second quarter? Or should the peak be around that number?

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Sergio José Camacho Carmona, Unifin Financiera, S. A. B. de C. V. – CEO [40]

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Yes. Thank you, Alejandro, for your questions. Based on the current situation that we’re standing at, I would say that the 5.7% may be one — a peak number on our NPLs. The amount of collection from our goal of collection of them all has been stable between 80% to 85% of the goal of collections for each month. So it’s consistent with the support and everything that we have been providing to some customers.

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Alejandro Isaza Zapata, [41]

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So that reduction has been in the conservative. I mean it’s not been that deep as the scenarios you — we were talking about in the first quarter?

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Sergio José Camacho Carmona, Unifin Financiera, S. A. B. de C. V. – CEO [42]

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Yes. Yes. If you recall, on the first quarter conference call, we made a stress test that take up to 50% of our collections. And that’s the way that we start planning our — the year. Fortunately, that number has remained, as I said, between 80% to 85%. So it has been a very good management on collection on our side and, of course, somehow provides an implicit support of our credit scorecards and our credit analysis with the client, and we feel very proud about that.

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David Pernas Sánchez, Unifin Financiera, S. A. B. de C. V. – Director of IR & Corporate Finance [43]

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And to add a little on that, I think a very clear chart, where you can look at that amount or how we, in a way, of course, it consists of many other variables and many other things. But just for the sake of providing you with some additional context, if you analyze the maturity profile of our debt vis-à-vis the portfolio, basically, we are covered in a substantial amount because of the cash collections that we receive over the course of the next 12 months and in the next even 24 with a positive gap, vis-à-vis whatever amount of debt needs to be served, doubling the amounts and so on.

So we have a lot of timing of maneuvering, considering how the collections are being approved to date, vis-à-vis the repayment of debt or vis-à-vis the servicing of debt and other creditors. And so that’s a very important thing that the company has established over the course of the past 3, 4 even years. This is an important argument with, of course, rating agencies. I mean I think it does highlight the capacity of the company.

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Operator [44]

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Our next question comes from Rodrigo Sanhueza with PineBridge Investments.

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Rodrigo Sanhueza Vega, [45]

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I have a follow-up on the last 2 questions actually. In this part where you told us that 46% of your portfolio is maturing in the next 12 months, are you including your nonperforming loans? Or are you excluding, for example, your over 90 days nonperforming loans in this chart? Also, as you mentioned, you’re already including the 12% of rollovers in this chart. If you can confirm me, that would be great. I have a second question after.

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David Pernas Sánchez, Unifin Financiera, S. A. B. de C. V. – Director of IR & Corporate Finance [46]

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Yes. So as to the first question it’s, of course, net or after the restructures that we have to do in our book. So it does consider the modifications on the COVID relief programs and the aging balance.

As to the revolving structures, yes, it’s also after the rollovers of debt. As I said before, around MXN 8 billion of outstanding debt of the company has a weighted average maturity of 120 days. So you will still see an important amount of those maturities coming due over the course of the next 6 to 12 months, of course. But that debt in nature, again, will be rolled over. It’s not a maturity specifically. And the differential would be just term loans or securitizations that are under amortizing period, which, by the way, have their own specific cash flow because of the collections on the portfolio, among others. So the gap is an important one.

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Sergio José Camacho Carmona, Unifin Financiera, S. A. B. de C. V. – CEO [47]

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It’s also very important, Roberto, that we have kept, I will say, a monthly conversation with basically all of our commercial banks and banking relationships in which we have the implicit commitment to basically roll over everything that is next up to the next 12 months. So we feel very, very comfortable there no matter what everything we’re getting in addition on additional funding.

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Rodrigo Sanhueza Vega, [48]

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Okay. Perfect. And maybe a quick follow-up on the latter also. Are you expecting to increase your legal fee cash expenses, administrative expenses? What is your budget on your cash needs in order for you to function for the year?

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Sergio José Camacho Carmona, Unifin Financiera, S. A. B. de C. V. – CEO [49]

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We’re very, very, very cautious, and it’s one of my main priorities, to keep an eye and to have a very good track on the OpEx as a percentage of sales. However, yes, as you mentioned, the legal fees have gone up during this pandemic because we need to prepare for the guys that are not going to be willing in either to pay us or to get back the assets. And that’s part of the ongoing business that we have had over the last 27 years.

I do not expect, and our plan does not call, for a significant increase in the OpEx. If we analyze over the last 12 months, basically, the increase on the OpEx has been more on our digital platform and on, let’s say, on investing in our business for being faster and improve our product offering to all of our clients.

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Rodrigo Sanhueza Vega, [50]

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Okay. Perfect. And my second question was regarding your leasing portfolio. You usually disclose your number of clients, and I noticed that your originations for this quarter was really like lower than MXN 3 billion. So I was wondering why your total clients increased from roughly 4,000 to 5,000 on a quarterly basis.

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David Pernas Sánchez, Unifin Financiera, S. A. B. de C. V. – Director of IR & Corporate Finance [51]

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Rodrigo, sorry, the line broke, and I wasn’t able to hear you properly. Can you repeat your question, please?

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Rodrigo Sanhueza Vega, [52]

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Yes. Well, so in the Page 11 of your press release, you usually disclose your number of clients, right? So I was wondering why your leasing number of clients increased that much on a quarterly basis.

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David Pernas Sánchez, Unifin Financiera, S. A. B. de C. V. – Director of IR & Corporate Finance [53]

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Give me one second, please. I’m looking at the numbers.

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Rodrigo Sanhueza Vega, [54]

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Yes. This — I’m asking because it doesn’t really — I don’t understand because your originations for this quarter was low or relatively low.

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David Pernas Sánchez, Unifin Financiera, S. A. B. de C. V. – Director of IR & Corporate Finance [55]

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I mean partially, I would think it, of course, it’s offset by the commercial approach these days on a larger exposure and broader base of clients with a lower average ticket. But please let me follow-up with that number because — and I’ll address that question for you, please. I think that’s the actual answer and the correct one, but I’ll review, and get back to you.

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Operator [56]

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Our next question comes from Adrian Garcia with Invesco.

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Adrian Garcia, [57]

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My question is relating in terms of the amounts that you still have to roll over for the rest of the year. I understand a lot of your liabilities are revolving type. But what remains to be done for the rest of the year? That’s one.

And the second one is on the securitization that you have outstanding. Correct me if I’m wrong, but my understanding is that these instruments, you have to maintain a certain number of coverage in those instruments. And if they fall below that, you have to add assets to that. I’m curious, what has been that performance? And if you had to add more portfolio to maintain those coverage ratios.

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David Pernas Sánchez, Unifin Financiera, S. A. B. de C. V. – Director of IR & Corporate Finance [58]

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Adrian, thank you for your question. The first — I would address the first one. So the amount of debt that remains to be, let’s say, rolled over at this point for the rest of the year amounts for $70 million, okay? That accounts for 2 facilities: a Deutsche Bank facility; and partly, the first amortization of the Bladex-Nomura syndicated deals that we have available. That amounts for $220 million, but it’s partially being amortized over the course of the next year. So the amount, the net amount is $70 million.

However, we are discussing both with Deutsche and both with Bladex and Nomura the likelihood of doing a new agreement that will allow us to — similar to what happened to our plea, extend the maturity of that. I think the conversations are positive. In most cases, of course, what we were discussing was, let’s see how things are evolving and so on, typically to happen under this current situation.

But I think that transparency and everything everyone feels in a very strong position about the company today. The capabilities, the additional flexibility or financial capacity that the company is disclosing in this call also would provide a much ease or much ease towards the situation of the company. But notwithstanding that, and as previously said over the rest of — over the first 6 months of the year, it’s important to consider that those amortizations are already embedded in the, let’s say, in the stress analysis of the company. So we can make those amortizations regardless of whether we actually do the rollovers or not, okay? So those are accounted already in that context.

And in addition, we’re also working with the $200 million facility of securitization that was discussed. That will also provide additional cash flow to be above on that front and be able to address given this situation.

The expectations of the company are that we will do a rollover of those 2 facilities in the total amount. So I don’t know if that answers your first question. And if you could please remind me of your second one, I would appreciate it.

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Adrian Garcia, [59]

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Yes. Sorry, on this one or this question before going to the next one, what was the — you mentioned there’s a securitization that is due. How much is that for this MXN 300 million? I think that’s that.

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David Pernas Sánchez, Unifin Financiera, S. A. B. de C. V. – Director of IR & Corporate Finance [60]

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$300 million.

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Adrian Garcia, [61]

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Okay. That’s it. Okay. Perfect. Now the second question is around the local securitizations that, if I’m not I’m mistaken, you have to maintain a certain coverage — asset coverage ratio. And if that falls under a certain coverage, you have to add more assets to the portfolio to maintain that coverage. I’m curious, how has that been performing? And if you had to add portfolio to those instruments.

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David Pernas Sánchez, Unifin Financiera, S. A. B. de C. V. – Director of IR & Corporate Finance [62]

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Yes. Since it’s a full amortization schedule, what happens is that the waterfall collections because we’re not able to retrieve the excess cash anymore from that, so you have an expected amount of cash collections that will be used all to service debt. So what happens is that under amortizing, under the typical amortizing schedule of any security, of any of our securitization, with the cash collections and the proceeds, what happens is that there were collateralization increases during this period because you’re amortizing more debt than what the actual portfolio is there.

So that’s why the collateralization or the loan to values of these securitizations grow larger in the amortizing period. What that amount — or that means that it’s also much more inefficient for the company to have those structures there because the collateral grows. So that’s specifically the reason why we’re trying to do the rollover because we will then be a lot more efficient in the means of using the collateral of those securitizations.

It’s not growing because we’re putting additional collateral to the structure, it grows because the collateral of the structure itself outgrows the outstanding amount of debt. So that’s an important question.

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Adrian Garcia, [63]

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Yes, I understand that. But my question is suppose that the NPL levels rise in those instruments, so by an increase in the NPLs in those structures, I would reduce the overcollateralization. And my question is if those are falling below the threshold that you have to maintain and, as such, do you have to contribute more assets to maintain that OC? Does that make sense?

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David Pernas Sánchez, Unifin Financiera, S. A. B. de C. V. – Director of IR & Corporate Finance [64]

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No. So another argument to that would be that all of the rating agencies specifically that analyze the securitizations have reaffirmed the ratings, specifically because if overcollateralized, it cuts the scenario of potential losses of the trust. So there’s no need to — I mean, there wouldn’t be an event of default because with the overcollateralization, it’s already sold for the amount of NPLs that could potentially reflect on the trust.

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Operator [65]

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Our final question comes from Natalia Corfield with JPMorgan.

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Natalia Corfield De Melo Monteiro, JPMorgan Chase & Co, Research Division – Head of Latin America Corporate Research [66]

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Follow-up questions here. The first one is related to your funding, all that you described. This MXN 2.7 billion extra money that you got from NAFIN, just to clarify, this is a credit line like the other that you had before, that you have to be rolling over on an ongoing basis. This is not like a more longer-term credit line. So that’s one question.

The second one is also in terms of funding for the second quarter of the year, are we done with credit lines from development banks? Or do you think you can get more from them or that’s it? And if you have anything else apart from the securitizations that you already mentioned, that this would be great if you could share. And I have a question on collections as well, but I can ask that after you answer this first question on funding.

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Sergio José Camacho Carmona, Unifin Financiera, S. A. B. de C. V. – CEO [67]

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Yes. On our relationship with the development banks, particularly Nafinsa and Bancomext, as you’re aware, having our relationship since I would say, close to 10 years, and we have partnered very well with them. We announced on the first quarter call that we were negotiating with them incremental lines and incremental facilities. These are — the number that we provide today is a result of those negotiations that basically start prior to the COVID. So it’s based on the excellent relationship that we have with these institutions. The way that these new loans are going to be structured are, I will say, to medium- to long-term facilities.

Now that can be used as a revolving or it can be used on the best interest of UNIFIN. Of that number, and this is something that we do not include today, we still have that it’s a preapproved facility with Banobras of MXN 2.2 billion that is going through their different processes internally on Banobras, and that we expect to have that basically signed in 60 days. And that will be also incremental money. So basically, I’m trying to make my point very clear that we have a very good relationship with the development banks in Mexico.

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David Pernas Sánchez, Unifin Financiera, S. A. B. de C. V. – Director of IR & Corporate Finance [68]

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As to the capacity or the profile of the line, specifically, yes, it’s within similar conditions, it’s just incremental capacity. There is no change on those structures. It’s a short-term revolving facility also. But the line itself or the agreement has no maturity. The line is available for us. And that will obviously comes from the same mechanism as we have or before. And…

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Sergio José Camacho Carmona, Unifin Financiera, S. A. B. de C. V. – CEO [69]

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It’s also important here to mention that we are also working with the development bank for using some guarantees that they can provide to our portfolio. And that, of course, is not — is something that we’re not including in these numbers that we are working also in that front.

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Natalia Corfield De Melo Monteiro, JPMorgan Chase & Co, Research Division – Head of Latin America Corporate Research [70]

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Okay. That’s very helpful. And then my last question would be on collections. You said that collections were around 80% to 85% of the original amount expected. I am actually trying to calculate the number of collections of the quarter, but I am not 100% sure I’m doing the right way because I’m getting something around MXN 5 billion, which seems low to me. So — and basically, I can say what I’m doing. I’m taking your loan portfolio as of first quarter of this year. I am adding the originations of the quarter and then I subtract from the final number of your loan portfolio as of 2Q ’20. So I get a very — I get like MXN 5 billion. So I don’t know if that’s the right way to do.

The other way would be also the portfolio as of 4Q ’19 and the origination minus the portfolio as of 2Q ’20. So — or if you have the number and you could provide the number, then it would facilitate everything.

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David Pernas Sánchez, Unifin Financiera, S. A. B. de C. V. – Director of IR & Corporate Finance [71]

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We’ll follow-up because I don’t have the analysis on the — what amortizes vis-à-vis the collections. I think — I mean, I’ll provide you with that number so that you can share also with investors, following up either today or next week. But no, I don’t get to the same number. I think we have to clarify a little bit more that amount.

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Operator [72]

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Our next question comes from Rafael Buerba with Santander.

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Rafael Buerba Gomez, [73]

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The outstanding balance of the clients that you’ve given support or restructuring is MXN 8 billion. And you mentioned you’re getting some additional guarantees from these clients. So I wanted to have an idea of the size of those guarantees. And if that has been a condition in order to provide some support to get additional guarantees.

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Sergio José Camacho Carmona, Unifin Financiera, S. A. B. de C. V. – CEO [74]

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Yes. I mean depending on the sector and once again, I mean, we go through a very in-depth analysis on case by case. So in the sectors or the clients that we felt that they were more exposed to either the pandemic or the macro, we decide to ask for additional guarantees. Basically and the overall on 40% of our clients that participate in this COVID support program, 40% of them we were requested to provide with additional guarantees.

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Rafael Buerba Gomez, [75]

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Okay. And the size of those guarantees, are we able to know that?

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Sergio José Camacho Carmona, Unifin Financiera, S. A. B. de C. V. – CEO [76]

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I don’t have that number here, but I will get back to you on that.

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Operator [77]

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There are no further questions at this time. I’d like to turn the floor back over to management for any closing remarks you may have.

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Sergio José Camacho Carmona, Unifin Financiera, S. A. B. de C. V. – CEO [78]

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Well, thank you. Thank you very much for being with us today. As we said through the call, we remain confident on our business model. We remain confident on the performance of most of our clients because we have a very strong conviction on Mexico. So we will keep you posted on everything new that is going on within the company.

But one of the things that we want to point out here is that we have very good perspectives based on our digital platform and everything that we have done with Google and so forth, so on, on that front, but also because even though the size of the situation in Mexico or the deterioration of the macro conditions have been very, very, very high, we have been able to somehow control or have a very strong and well-prepared damage control. So we are very, very confident that we will remain as strong as ever and that the outlook on the medium and long term for the company is very, very positive.

So once again, thank you, thank you very much for being with us today. And David and his team is going to be available if you want a follow-up question. Thank you.

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Operator [79]

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Ladies and gentlemen, this concludes today’s webcast. You may now disconnect your lines at this time. Thank you for your participation, and have a great day.

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