Credicorp Ltd (BAP) 2006 Q1 法說會逐字稿

Good day, everyone. Welcome to the Creditcorp conference call. As a reminder, today's call if being recorded.

At this time I would like to turn the conference over to Maria Barona. Please go ahead.

Thank you and good morning, everyone. This is Maria Barona with i-advize. Thank you for joining the management of Creditcorp today to discuss their results for the first quarter of 2006 on this, the 12th of May of 2006.

Any comment they make today may include forward-looking statements which are subject to various conditions. These are outlined in the disclaimer in the press release that was distributed yesterday. If you did not get a copy or you require assistance during today's call, please call us in New York at 212-406-3690.

It is now my pleasure to introduce our speakers. Joining us from Lima, Peru are Mr. Walter Bayly, Creditcorp's chief financial officer, and Ms. Aida Cleffmann, investor relations officer, as well as other members of Creditcorp's team.

With that, I'll turn the call over to Mr. Bayly, who will begin the presentation. Please go ahead, sir.

Thank you, Maria. Good morning and welcome to Creditcorp's first quarter financial earnings conference call.

We are pleased to be able to report first quarter results that continue showing growth and improved earnings despite the uncertainties generated by the electoral process we are currently experiencing in Peru. We are again very satisfied with this result, which fulfill our expectations.

The first quarter has further confirmed the improvement of Creditcorp earnings generation capacity. It made clear the potential for continued growth. Our 2006 earnings results are at an all-time high and we continue to feel confident that this result are sustainable in time. We will this time spare you the numbers on the Peruvian economy in the financial [inaudible], which are available to you in our press release, and we'll focus on Creditcorp's number and those of its main operating subsidiaries. Next page, please.

Creditcorp's total [inaudible - highly accented language] during first quarter '06 confirmed the trends shown in the previous quarters, reaching a net income of 51.2 million, which is 15.4% higher than the fourth quarter '05 and 17.4% higher year over year. This improvement is reflected on the return on equity, which move from 15% in the previous quarter to 17.4 in the first quarter '06. Following the trend set forth in the previous quarters, Creditcorp's results were clearly led by banking operations, mainly Banco de Credito, including Bolivia. BCB consolidated contributed with a total of 57.6, which represents a 25.2% growth quarter over quarter and 31.8% growth year over year. Also, it consolidated operation in Bolivia had a stable performance during the first quarter '06 with a contribution to BCB's earnings numbers that reached 3.1 million, very similar to the 3.8 million reached in the fourth quarter '05 and almost four times the net income achieved in the first quarter '05.

Atlantic Security Holding is also a consistent contributor to Creditcorp, complementing the financial services offered by our corporation. With its offshore private banking activities and proprietary and asset management business, its conservative investment strategy makes it a low risk operation with a steady contribution, which reached this first quarter the 4.9 million mark, excluding dividends on Creditcorp shares position, reflecting a 40% growth quarter over quarter and 44% year over year.

Pacifico Peruano Suiza, Creditcorp's insurance business, is in the process of stabilizing its income by improving its risk management and insurance underwriting capabilities. This process will require some time. Nevertheless. PPS's results show net income of 3.8 million, giving evidence of a 13.8 growth year over year. PPS's contribution to Creditcorp reached 2.7 million for the first quarter '06, after deducting minority interest [inaudible].

The losses reported in Creditcorp and Grupo Credito include the startup operation of Prima, our private pension fund operation. Prima has shown significant portfolio growth, having captured more than 5% market share. The executive contribution to Creditcorp is lower than expected for this first quarter at 2.7 million loss. This negative contribution is, however, partially offset at Grupo Credito by other income generating by investments registered at this entity which reduced the negative contribution to 0.5 million. At Creditcorp holding level, where 9.3 million in taxes and dividends paid for '05 and provision for '06 were registered in the first quarter, accounted for most of the 13.5 million charge shown on Creditcorp. The remainder is accounted for by the loss in a foreign exchange hedging position taken to cover Creditcorp's local currency dividend received from BCP and PPS and paid early May 2006 from potentially high exchange rate volatile. Given this contributions breakdown, we would like to give you some more detail on the main earning contributor. Next page, please.

Starting with BCP, BCP's net income for the first quarter '06 continued its growth trend and reached 59.9 million, a 25.3% growth quarter over quarter and 31.9% year over year. The continuing generalized expansion of BCP's business is reflected in all of its numbers, showing good growth in net interest income of 2.5% quarter over quarter and 15.1% year over year. Non-interest income, which includes commissions for banking services, foreign exchange, sale of securities and other income, reached 68.5 million for the first quarter '06, very similar to the amount reached in the previous fourth quarter of '05.

[Loan] fee income in particularly dropped slightly by 1.3% quarter over quarter. This does not reflect any downward trend, as the general trend is a very positive one as reflected by the 13% fee income growth year over year. The quarter over quarter drop is mainly explained by one, seasonality in commercial activity. The last months of the year are typically of much stronger retail activity due to the holiday season and the first quarter is affected by the shorter month of February. One-time costs, commissions for some insurance, cross-selling at BCP related to personal loans and mortgages booked at the end of the year affected the comparison with the first quarter. And strategy related to fee reductions, two new savings accounts were introduced this first quarter '06 with reduced maintenance fees as a strategy to achieve stronger penetration [inaudible] of the population. Thus core earnings, which at BCP include net interest income, fee income and foreign exchange, grew 1.9 quarter over quarter and 17% year over year.

Total asset expansion of 3.7% year over year and 21.9% year over year is driven mainly by the expansion of bank deposits, including the cash and banks [inaudible], as well as an increase in net loan portfolio, which grew 2.9% quarter over quarter and 15.7% year over year. The liquid financial condition of the banking system led to a change in asset mix, which was proportionately higher growth and low yielding investment, such as deposits at the [Central Bank], which grew 51% quarter over quarter and 93% year over year where the high yielding, low portfolio reached -- grew only by 2.8% quarter over quarter and 15.5% year over year.

Though operating results were very good, BCP's net earnings include a relevant effect generated by the [inaudible] and dollar exchange rate volatility shown during the last quarter of 2005 and the first quarter of this year, leading to currency translation adjustment in the [inaudible] quarter. Thus, a devaluation of the local currency in the fourth quarter led to a negative currency [inaudible] translation result of minus [inaudible]. Later, the exchange rate corrected during the first quarter, resulting in a positive translation result, a gain of 4.7 million. Altogether, this effect accounts for close to a $10 million difference between the net income results of the two consecutive quarters. This overall significant improvement in BCP's earnings generation, coupled with continued cost controls, led to a further improvement of BCP's efficiency ratio, which drops to 48.3% for the first quarter compared to 51.7 obtained in the fourth quarter '05.

The following charts will help us explain this development a bit further. Next page, please. In terms of loan growth, this has been mainly achieved in the retail and SME segment, which is at an all-time -- which at the same time are the more profitable ones. Based on monthly average balances, the retail and SME segment has led the growth in the total loan portfolio of BCP, 24% for the retail and SME segment, 13% for the middle market and 5% for the corporate segment, all of them compared on a year over year basis.

Within the retail and SME segment, all the different products grew at comparable rates, ranging between 29.9% credit cards, 36.4% personal loans and 34.8% consumer loan and 20% mortgages. Altogether, net loan growth achieved 2.9 quarter over quarter and 15.7 year over year, which is satisfactory in light of the high liquidity in the market and growth of the Peruvian capital markets. This development sets forth the [re-composition] being experienced of BCP's loan portfolio where the trend towards the retail and SME segment can be clearly observed, as a percentage of the total loan accounts now for 36%. Next page, please.

On the BCP income side, net interest income remains strong, growing 2.5% quarter over quarter and 15.1% year over year, while fee income expanded 13% year over year but experienced a slight decrease of 1.3% quarter over quarter, as was mentioned before. The distribution and growth of net interest income and not interest income by business segment on a year over year basis is clearly reflected in the left-hand side chart. Again, the importance and potential of the retail and SME market is easily perceived, not only growth is mainly driven by this segment, also profitability given the largest net interest margin that can be achieved in this segment.

However, despite the positive evolution of interest income in absolute terms, net interest margin drops to 5.06 this first quarter versus 5.62 in the first quarter and 5.45 reaching the fourth quarter '05. The main reason for this reduction was a change in BCP's asset mix where lower yielding assets grew strongly by 21% quarter over quarter and 93.3 year over year, while higher yielding assets, such as the loan portfolio, grew only at 2.8 quarter over quarter and 15.5% year over year. The dynamic development towards retail and SME segment has contributed to widen our earnings generation capacity. Next page, please.

Loan portfolio quality has also continued improving in this first quarter, leading to a [inaudible] loan to total loan ratio, including the [inaudible] portfolio, of 1.91, below the 2.1 level of the Peruvian banking system. In addition, the coverage ratio reached 203.8, or slightly below the 207.7 obtained in the preceding quarter, but higher than the 163.6 achieved in the fourth quarter '05. We feel very satisfied with this portfolio quality indicators given the good loan growth rate achieved during the last quarter, which confirm a very healthy and steady growth of BCP's business [inaudible].

After the recovery in loan quality and more stable behavior of the financial market, the provisioning level is reaching its more traditional levels of previous years, which have historically been around 15% of net interest income. Thus, provisions expense in this first quarter increased to 15.5 of net interest income compared to 14.1 for the fourth quarter '05 and 5% for the first quarter '05. This growing provision is evident since the fourth quarter '05 for some seasonality in loan volumes placed at the end of the year and as a result of the stronger growth of BCP's loan portfolio in the retail and SME segment.

Recoveries of write-offs are still significant and benefit overall results. Therefore, net provision levels are still low, reaching 4.8 million for this first quarter, even lower than the fourth quarter '05 net provisioning of 5.3 million, despite having high growth provisioning expense. In brief, a very healthy growth with low provisioning requirements and strong [inaudible] loan ratios. Next page, please.

With respect to the expense side, we also feel very satisfied reporting an important reduction of BCP's salaries and employee benefits from 44 million in fourth quarter '05 to 41.1 in first quarter '06 and administrative expenses from 33.5 in fourth quarter to 32.6 million in first quarter '06. This [inaudible] important growth in income have led to significant improvement of BCP's efficiency ratio, which drops to 48.5 for the first quarter '06 from 54.7 reached in the same period last year. This improvement in the overall performance of BCP's business is better reflected in the profitability ratio. Return on average asset reached 2.5 while return on average equity increased to a very healthy 27.6%. Next page, please.

Given the [inaudible] of Bolivia in the Latin American scenario due to recent political developments in this country, it becomes important to show you a few figures of our Bolivia bank. BCB has had a very good first quarter and we are very pleased with its results. Net earnings reached 3.1 million, slightly under the last quarter income of 3.8 million but significantly better than the 0.8 million earned in the first quarter '05. Despite a recent [deceleration] of loan quality in the Bolivian financial system, we have managed to further reduce our problem loans, reaching today a [inaudible] loan ratio of 5.6 versus 5.8 in the fourth quarter '05, which compares very favorably to the 12.2 of the Bolivian financial system. Our coverage ratio is also far better than the system, reaching 133% versus 77% of the system. This number have put BCB in a very good position to capitalize on its image today as the most solid bank in the system.

Furthermore, our Bolivian operation has capitalized on our Peruvian experience and is poised to benefit from its management capabilities and experience to grow its business based exclusively on its own capital and organic position. This positive development led to an improvement in return on equity to 16.7 versus 8.4 last year. Nevertheless, the political line adopted by the government of president Evo Morales has generated some slowdown in the business activity and thus the loan quality of the financial system deteriorates, as shown by the loan quality ratios mentioned before. Furthermore, the measures adopted by the government of Bolivia regarding the [nationalization] of hydrocarbon represent increased risk for all related parties. BCB has identified its exposure to this sector, which as of May 2nd was close to 13.5 million loans to entities directly and indirectly related. Of this, 7.6 million represent loans to companies directly involved in the hydrocarbons activity and create concern to us as to the uncertainty toward the future business development rather than an eminent loan recovery risk. We feel confident, however, of BCB's good position to weather out this political turmoil.

We will now move on to the next page to commence our Atlantic Security's performance. Atlantic Security Holding is a very stable contributor to Creditcorp's results. Atlantic Holding reported a contribution for this first quarter of 4.9 million, only 3.8% higher than the 3.4 million contribution reached in the first quarter '05. Income growth is explained mainly by important gains from the sale of securities, which grew from 1.5 million in the first quarter '05 to 4.6 million first quarter '06.

Net interest income grew 3% quarter over quarter and year over year following a 34% expansion in assets. This small growth vis a vis the important expansion in assets is explained by a shift in the composition of its interest earning assets to a lower yielding, less risky asset which, coupled with a very flat yield curve, leaves less room for margins. Asset expansion was concentrated towards the end of the quarter, thus related additional interest income is marginal for the full period.

The increase in fee income is a result of the focus in the asset management business as part of Atlantic's strategy. Fees and commissions grew by 7.1% and 15.4% year over year and quarter over quarter. Specifically, asset management related fees grew 13.3% on a quarter over quarter and year over year comparison. Altogether, improved results furthered business expansion.

The first quarter results for PPS reflect some recovery after a year with significant casualties that affected the company. Net consolidated earnings for the first quarter '06 reached 3.84 million, reflecting a quarter over quarter growth of 9%, though an improvement of 14% year over year. However, PPS's contribution to Creditcorp reached 2.94 million, three times the contribution of the first quarter and 21.9% higher than the one obtained in the first quarter of '05. This recovery is mainly a result of the turnaround situation in the health segment, which has started to operate positively, and in the property casualty business as well as continuing good results in the life insurance business.

Property casualty. Premiums growth for this segment reached 12.5%. Bottom line results of PPS are also significantly better this first quarter, having reverted as a result from the first quarter of minus 3.34 million to practically zero this first quarter.

Health. Total premiums collected dropped by 5.4 year over year since a major government entity failed to renew its insurance policy in March 2005. On a quarter over quarter comparison, total premiums dropped 4%, but cost of services rendered dropped -- drops more, reaching a 8.4% reduction. This is the result of a significant improvement in a net earned loss ratio over the year, dropping from 85% in the first quarter '05 to 74.5 in this first quarter '06 following major cost controls imposed on service providers. This led to a significant improvement in bottom line results for this segment for the first quarter '06, which turned positive after constant losses throughout 2005, reaching a net earnings of 1.43% -- 1.43 million.

Life. During the first quarter of the current year, total premiums grew 22% year over year. However, higher earnings resulting from this growth are partially offset by a need to have higher reserves. Thus, net earnings are only similar to earnings reported in the first quarter, reaching 2.35 million and certainly lower than the extraordinarily high 9.2 million reported in the fourth quarter '05, which benefited from important financial income reported that quarter and even more significant accounting corrections related to commissions booked before accrued and therefore reversed. Though the combined ratio and net loss ratio showed improvement quarter over quarter, they do not yet recover the better levels from a year ago. Results are, however, encouraging. Next page, please.

On our new private pension fund venture, Prima AFP, similar results can be reported. Despite tough competition in the pension fund business spurred by Prima's appearance in the market with very aggressive low commissions, Prima has been able to maintain this first quarter a very good growth rate in terms of [inaudible] portfolio and number of affiliated customers. Portfolio funds under management grew from 255 million in December to 532 million in March 2006, which represent a growth in market share from 2.5 to 5% respective.

Income generated this first quarter is above expectations, having reached 2.3 million, which puts Prima's market share of income above the 4% mark. This, coupled with cost controls which led to a slight personnel reduction [stabilizing] our sales force up to an aggressive initial period, have allowed for lower losses than expected, reaching minus 2.7 million. Altogether, it is also noteworthy that this market continues growing at very good rates, reaching 8.4% growth quarter over quarter, with a total of 10.2 billion funds under management at the end of the first quarter '06. This denotes the large potential offered by still young business in a growing economy. Next page, please.

On the overall and summing up these results, we feel very pleased, especially given the growth results with an uncertain political environment. BCP started the year with solid loan growth and excellent bottom line results. Dynamics in the most profitable business, the retail and SME segment, continues, and thus the shift of its portfolio towards higher margins, high growth business. This business expansion was achieved while loan quality continued improving and maintained its actual very comfortable levels without any significant increase in cost, thus our ratios show significant improvement. Atlantic Security Holdings continues expanding its business and represent a stable, low risk income generator. PPS has started a recovery path with improved results, as shown by the positive bottom line results in all three business segments and our newly created pension fund company, Prima, is on track with projections.

Altogether, Creditcorp has benefited from the strong economic performance in the country and is very well positioned to continue doing so. The market numbers you see in the chart reflect this performance, which you must all have been following very close.

Thank you very much and we can now go on with the question and answer period.

Thank you very much. [Operator Instructions]

Our first question today will come from [Jason Moline] with Bear Stearns.

Hello, everyone. My question is regarding the impact of exchange rate movements on Creditcorp's results. In your presentation you mentioned the impact of translation gains or losses in this quarter and prior quarters, but can you talk about Creditcorp's overall foreign currency and [inaudible] exposure? For instance, what portion of assets and funding are denominated in foreign currency and specifically what is BAP's net foreign currency exposure at the end of the first quarter? What has been the evolution of that and probably even more important is what do you expect to do in the future if you're actively managing this exposure?

Absolutely. Good question. We can talk quite a while about it, but I'll try to give you a glimpse, a picture of where we are. First of all this quarter we had unusually exposure -- large exposure because the local subsidiaries, the bank and the insurance company declared dividends paid -- to be paid to the holding company. Those dividends are paid in local currency, thus we had an unusually high exposure to local currency, which we hedged with forward transactions which proved an expensive hedge, if you will, because the currency revalued since the moment we closed the hedge.

But leaving that particular issue on the side, which was related just to the dividend flow that happens once a year, we do active manage our foreign currency -- or exposure to the different currencies, mostly at a bank which clearly represents about 87% of the total assets of Creditcorp. At the bank we currently have both a long dollar position and a long [inaudible] position, both of about similar amounts roughly of about 200 to $300 million each. We actively manage those depending on our expectations whether the local currency will revalue or be valued going forward. We have a very active asset liability management, an [inaudible] committee which meets once a month, and we have overall limits on what we can do and those are actively managed.

There are impact on taxes as well because if a local currency, if we have -- if you think in dollars and you have at the bank a long dollar position and that long dollar makes money in local currency, you are subject to local income taxes. So we have to not only take in considering the currency, but the tax impact of those positions. But in short, yes, we do manage those very actively and we review those in our [inaudible] committee.

In terms of the equity of the bank, we also manage what position of debt equity is covered by foreign currency. Currency we currently were at 65%. In the past that number used to be almost 100%, but we feel that the local currency has again a lot of strength and going forward, leaving on the side political movement, the [inaudible] of the economy tell us that we should have and we have reduced the coverage of the equity at Banco de Credito from 100%, almost 100% to 65%.

Does that answer the question?

Yes, that gives us an interesting sense. And what has been kind of the range of this exposure in dollars and [inaudible] that you say is currently about 2 to $300 million? Does that go to zero and then go up to a billion or how does that work?

No. No, no. Actually the dollar position, I think if I recall correctly, the largest we had was about 600 million and we have lowered that. And our local currency position used to be zero and we have increased that. So those are the ranges. I don't think we'll ever have our dollar position at zero. And we have had our local currency position at zero, but we don't think that that will go forward because the local currency seems to be having a good prospective going forward.

So that -- your view is that the local currency should remain at similar levels or could continue the recent strength that we saw in the first quarter or even following the first quarter?

That would be a result of the prices of commodities. If you tell me where commodities will be, I'll tell you where the local currency will be.

Fair enough. Thank you very much for your comments.

Our next question will come from [Juan Balinuevo] with [inaudible].

Hello. Still talking about currency exchanges, I would like to know whether this positive impact you received from the -- from the local currency losing its value during the month of March negatively impact you during the month of April or the direction of the value of the local currency moved to the opposite side? And whether the increase of this income due to an improvement of your net income from loans is something that is a one-time thing or do you also, as you said, expect this to continue throughout the year and maybe throughout 2007 as well?

When we have a local currency revaluation, as we have had this quarter, that generates additional income for Creditcorp. Don't forget that we carry our numbers in dollars, so our dollar loan position has zero effect whereas the local currency assets have revalued in terms of dollars. So the revaluation of the local currency when you have a long local currency position is beneficial for Creditcorp.

Now, could you ask your question again? I think I got lost -- I lost you somewhere along the way.

Yes, I believe you have gained -- Banco de Credito gained significantly on exchange rates during the month of March because the Peruvian [sol] lost value because of the political turmoil. But on April the situation was exactly the opposite, I mean the Peruvian sol regained a lot of its value after the elections. Is that going to impact negatively on the next quarter earnings report of BCP?

I think the position is that you are probably looking at the local currency Banco de Credito numbers that we publish domestically. Don't forget that we have decided that our -- the currency with which we think and operate is dollars, so Banco de Credito has to prepare several [inaudible], if you will. One is the local currency numbers according to Peruvian accounting standards, which are published in the Peruvian newspapers, but those are the numbers which we manage Banco de Credito. We manage Banco de Credito as part of Creditcorp; our corporation [inaudible] trades in dollars and according to international financial standards. So yes, what you're right is saying if you think in the local currency book, but we tend to think in the dollars because our stock trades in dollars, thus we worry about the U.S. dollar, international financial standards and reporting standards.

Okay...

...is right, but we don't manage the bank that way.

I'm sorry, we can -- I'll invite you to lunch and we can talk this over. This is a very Peruvian issue.

Anything further from our questioner?

We'll take our next question from [Juan Ardida] with JP Morgan.

Hello?

Yes, I'm here.

Good morning. I have a couple of questions. First is going back to the currency issue, am I right in assuming that you also made better gains from foreign currency brokerage this quarter or the gains are all related to just your long position in pesos?

No, we have had -- when we report our core earnings, you can see in the press releases there we don't include the gains or losses in the positions. We include the trading. Since Peru is a very [dollarized] economy, people transact and do a lot of foreign exchange transactions retail in our branches. The bulk of our foreign exchange fees come from that. It's from the retail buying and selling of local currency versus the dollars in the retail and that is -- we view that as part of our core earnings.

Okay.

We are having an increased volume and the margins have been very good and our numbers, if I recall correctly, have increased by almost -- here I have them. Gains of foreign exchange transactions first quarter '06 were 10 million and the last quarter -- the same period a year ago were 6 million, so almost a 50% increase year over year. So yes, and those are risk free foreign exchange transactions.

Thank you. My next question is regarding the financial margin at Creditcorp. We saw -- or net interest income, we saw decline quarter over quarter whereas at the bank loan there was an increase. What explains the difference between the two, what -- is that another subsidiary that impacted the net interest income?

No, that was a result of the forward transaction I mentioned before. You see Creditcorp was about to receive about $170 million paid in local currency of dividends from the bank and the insurance company. So when those dividends were declared by the operating companies and they were going to be paid in local currency, the holding company did a forward transaction. Unfortunately, the currency moved against us and that generated a $7 million loss, I believe, and that consolidates within the financial margin.

Understood, okay. And finally, my last question has to do with [inaudible] Prima, the results were better than expected. When do you -- do you expect it to go into the black into profit next quarter, as soon as next quarter or when do you expect that to -- ?

No, our budget is that for the month of December, for that particular month, we will have breakeven, so next year we should have numbers in the positive.

Okay, thank you very much.

You're welcome.

Next we'll hear from [Jorge Luis] with [Centura].

Good morning. This is Jorge Luis [Rodriguez] from Centura. My question is regarding the Banco de Credito, the Bolivia outlook and I don't know if you have further insight on where the future of the bank can go from here given the current political risk and there could be any chances of higher exposure to risk in Bolivia regarding total loans? Thank you.

Sure, no problem. I just spent personally a couple of days in Bolivia and I came extremely reassured by the potential that our bank has in terms of capturing organic growth, a larger percentage of the market share. If you look at the Bolivian banking environment, there were basically two foreign banks that were operated that clearly had a credit quality or volume of [past due research], quality of the portfolios, slightly -- ours way ahead and the others ahead of our local competitors.

Our competition was [Banco Santa Cruz] which was owned by Banco [inaudible]. That bank has been recently sold and we have been successful in [inaudible] most of the multinational to bring some of their business to us being the fact that we are the only foreign bank there which has a much larger parent company and capital base than our local competitor. So we are being perceived as the safe bank and that is increasing our capacity to attract deposits and business volume. We have a market share that allows us, as compared to Banco Credito in Peru, a dynamic where we can gain new customers and achieve greater volumes. We have a very solid management team and we think we have good chances.

Now, if you put that in an economically volatile political environment, one has to be cautious in terms of increased risk. The banking association recently met with the leaders of the country and we were reassured that the country is going to have a solid fiscal and macroeconomic management, but those political initiatives that the government has taken undoubtedly will slow down investment. So yes, we are growing slowly and selectively and watching very closely how events evolve, but I feel very confident that the teams and the structures and the capital base that we have in place allow us to weather the times that will come.

Okay. Thank you very much.

We have a follow-up question from Juan Ardida with JP Morgan.

Yes, I have a follow-up regarding my prior question. Just to see if I understood correctly, the taxes that you pay on that dividend go through other income whereas the hedging went through the income statement, right?

Right. The hedging -- when you consolidate...

Through the interest margin.

Yes, the hedging goes directly into the margin, the tax goes into the other income, you are correct.

Okay, thank you.

At this time we have no questions in the queue. [Operator Instructions]

We have no questions in the queue at this time. I will now turn the conference back over to Walter Bayly for any closing or additional remarks.

Well, thank you very much for joining us in this first quarter conference call. As mentioned before, we are very enthusiastic about the times that are coming. I hope the changes in the material which we have done will allow you to facilitate to understand better our numbers. As usual, we are ready to assist any of the investors or analysts with further questions and comments. And again, thank you very much for joining us. Goodbye.

And that does conclude our conference call. Thank you for joining us today.