Grupo Supervielle SA (SUPV) 2017 Q3 法說會逐字稿

Good morning, and welcome to the Grupo Supervielle Third Quarter 2017 Earnings Call. A slide presentation will accompany today's webcast, which is available in the Investors section of Grupo Supervielle's Investor Relations website, www.gruposupervielle.com. (Operator Instructions) As a reminder, today's conference is being recorded. At this time, I would like to turn the call over to Ana Bartesaghi, Treasurer and IRO. Thank you. You may begin.

Thank you. Good morning, everyone, and thank you for joining us today. Speaking during today's call will be Patricio Supervielle, our Chief Executive Officer and Chairman of the Board; and Jorge Ramirez, Vice Chairman of the Board of Directors. Also joining us is Alejandra Naughton, Chief Financial Officer. All will be available for the Q&A session.

Before we proceed, I would like to make the following safe harbor statement. Today's call will contain forward-looking statements and I refer you to the Forward-looking Statements section of our earnings release and recent filings with the SEC. We assume no obligation to update or revise any forward-looking statements to reflect new or changed events or circumstances.

I would now like to turn the call over to our CEO, Patricio Supervielle.

Thank you, Ana. Good morning, everyone and thank you for joining us today.

If you're following the presentation, please turn to Slide 3. We delivered another solid quarter with driving efficiency and profitability gains. On the back of improved economic dynamics across all sectors of the economy, we achieved growth [is absolutely] loan expansion, along with continued growth in deposits, while total NPL ratio posted a slight sequential improvement, with certain increase in cost of risk, inflection consumer financial confidence. It's likely behind the economic recovery, the context of (inaudible) inflation and (inaudible) job recovery. We'll keep a vigilant focus on credit risk and are closely monitoring our loan portfolio in this segment.

Based on our solid performance today, increased CapEx from our recent equity follow-on and our expectations for a positive economic environment ahead, we're revising our guidance for the year upwards, and I will discuss this in more detail shortly.

Please turn to Slide 4.

An important event in the quarter was our follow-on equity offering and this comes just 16 months after we completed our IPO, which is reflective of the success we have shown in growing the business over the past 1.5 years. Investors also recognize this success as the offering was 3x over subscribed. The industry bankers exercised the greenshoe so that in total the proceeds to the company were $342 million. The additional equity has further strengthened our balance sheet, while the proceeds give us more flexibility to enable us to continue to grow, to meet the accelerated demand they have seen in the Argentine financial sector. Another important benefit was from the offering was increase in our trading liquidity, our free float is now 64%, which should enhance liquidity and enable us to further diversify our shareholder base.

Moving on to the macro environment on Slide #5. Economic activity in Argentina continues to expand at a solid pace with positive dynamics across most industry sectors. Construction, up 13% continued to lead growth, driven by public sector expanded infrastructure. Manufacturing and service sectors also posted a pickup activity followed by agriculture and other primary activities. Consumer demand, however, continues to lag behind in, posting soft retail sales in the period. Furthermore, (inaudible) process remain (inaudible) inflation is being more persistent than targeted by the Monetary Authority. (inaudible). Continuing to the Argentine (inaudible) Corporate loans continue to post strong growth, up 14% quarter-on-quarter, showing faster growth in U.S. dollar-denominated loans. Retail loan also performed well, while mortgage loans expanded by a significant 27% reflecting the new economic conditions in the country. (inaudible) deposits resumed growth this quarter, up 5% sequentially, following tough performance last quarter. Year-on-year deposits were up 41%.

Please move to Slide #7. On the back of positive economic dynamics and supported by the funds from our equity offering, we delivered robust loan growth, expanding our loan book up 60% year-on-year as we continue to grow above systems rate -- grade.

Sequentially, loan growth accelerated to (technical difficulty) the prior quarter. Our strategy of developing an integral relationship with corporate customers with the goal of becoming their principal bank continues to drive strong growth in this segment with corporate loans increasing their share of total loans to 45%, up from 47% in the prior quarter and 35% at pre-IPO levels. SMEs and middle markets kept pace, representing a stable 65% share for our corporate loan book. In-line with our differentiated strategy, we have introduced new products into the market this quarter to further increase our customer base, offer a tailor-made value proposition and build long-term relationships. For example, we launched a new product offering dedicated to franchisees, aimed at promoting the adoption of technology, training and professionalism into their businesses.

Please turn to Slide #8. We achieved accelerated loan growth across all segments of our loan growth, posting double-digit growth, factoring our largest corporate loan product and the second-largest overall was a main driver behind the strong growth in corporate loans, which were up 24% sequentially and 79% year-on-year. Retail loans also showed -- started to pick up, up 14% sequentially and 42% year-on-year, personal loans posted solid dynamics while credit cards remained stable in line with industry trends.

Let me highlight the solid performance in mortgage loans we have experienced throughout the year. We are

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coming from very low base, mortgage loans expanded over an impressive 170% sequentially. After many years in which mortgage loans were practically nonexistent in Argentina, we have seen strong growth supported by the declining inflation and expectations of continued improvement in economic dynamics.

With the view of becoming one of the market leaders, we're taking a holistic approach to mortgage underwriting. We have established exclusive agreements with leading brokers as well as online mortgage platforms, including leading [sales] with regional and nationwide reach. We are also forging alliances with leading real estate developers, providing construction loans which provide as a platform for future mortgage clients. We also have a very competitive value proposition and see attractive cross-selling opportunities with home remodeling loans, lease guarantees, insurance and other banking products. As we seek to drive efficiencies across the organization and maximize growth opportunities, we have also reduced mortgage processing times. Today, based on our internal estimates, we run among the top 5 mortgage originators within private sector banks, holding a 10% market share, and we are very excited about the growth opportunities we see in this segment.

Growth in Consumer Finance loans, bounced back this quarter, up 13% mainly driven by a solid performance in personal loans, while credit card loan growth remained weak in the quarter. The gross intermediation margin in this segment doubled year-on-year and was up almost 20% sequentially, pricing the higher cost of risk reflecting the margining -- the marginally higher risk we're seeing in consumer finance loans. I will now hand off the call to Jorge Ramirez, who will review our funding and P&L, and afterwards, I will discuss guidance. Please Jorge, go ahead.

Thank you, Patricio. Good day, everyone.

Moving on to funding on Slide 9, sustained growth in deposits, along with funds from our equity offering supported the significant ARS 8 billion loan origination in the quarter, which represents 1/5 of our loan book. Deposits expanded 55% year-on-year and 10% sequentially, doubling market levels in the quarter. Our loan-to-deposit ratio, however, increased sequentially to 109% from 99% in the prior quarter, mainly reflecting the equity offering proceeds to fund loan growth.

Please turn to Slide 10. Our robust retail franchise continues supporting a highly optimized deposit base. 54% of our total deposits are from individuals. These align with our cash management strategy, boasting 56% of our total deposits bearing either 0 or low interest rates. Headway in this strategy in our corporate segment continues to drive sequential growth in checking account deposits.

Moving on to the P&L on Slide 11, gross financial margin increased 10% sequentially and 50% year-on-year. While at strong levels, total NIM contracted 130 basis points sequentially to 18.5%. The key drivers behind this were a 90 basis point sequential decline in the Argentine peso loan portfolio NIM to 23.4%. This was mainly due to a higher share of corporate loans. This along with an increased share of U.S. dollar-denominated loan impacted the total loan portfolio NIM in the quarter. Also, while the backlog rate increased 120 basis points, cost of funds remained stable. Note that loans did rise on a like basis. Finally,

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gains drove a 210 basis points decline in the average yield on the investment portfolio to 24.2%.

Moving on to Slide 12, net service fees increased 42% year-on-year above inflation. Fees repricing and strong growth in deposit account fees, along with progress on our strategy to drive cross-selling across the company were the main drivers behind net service fee income growth. The net service fee income ratio contracted 130 basis points to 30% in the quarter. This lower ratio is the result.

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Okay. We apologize for the inconvenience. I'll restart on Slide 12.

Net service fees. Net service fees increased 42% year-on-year above inflation. Fees repricing and strong growth in deposit account fees, along with progress on our strategy to drive cross-selling across the company were the main drivers behind net service fee income growth.

The net service fee income ratio contracted 130 basis points to 30% in the quarter. This lower ratio is the result of a relatively higher contribution of net margins to our overall revenues. Income from insurance activities continues to reflect the year-on-year phaseout of our credit-related products, resulting from regulatory changes introduced in September last year. Sequentially, gross written premiums of voluntary insurance products grew 11%, almost compensating the lower credit-related premiums. We continued to broaden our product offering in this business line with the launch this quarter of home,technology and ATM insurance. Year-on-year, premiums were up 55%.

Now moving on to asset quality on Slide 13. While total NPO's declined slightly in the quarter, down 10 basis points to 2.8%, cost of risk increased 20 basis points to 4.4%. This was mainly driven by higher NPLs in the consumer finance segment where consumer confidence is lagging behind economic recovery in the context of persistent inflation and soft job recovery. Because of this, what while seeing a seasonal improvement in the quarter, lagged delinquency remained at a higher relative level. This is consistent with what we're seeing for the rest of the industry in the consumer finance segment. In any event, the higher risk in this segment is fully priced in our gross intermediation margin.

In terms of expenses, on Slide 14, we continue to drive efficiency improvements in the quarter, contributing to higher profitability. The efficiency ratio improved 310 basis points sequentially and 60 basis points year-on-year and reaching 61.9% in the quarter. This compares with pre-IPO levels of 73.8% in first Q '16. Administrative expenses were up 3% quarter-on-quarter, reflecting mainly: The wage increases from the collective agreement implemented at the nonbanking subsidiaries since April. A 2% increase in our headcount in indirect commercial channels, mainly in our sales force, to support growth, along with a 6% increase in nonpersonnel expenses, driven mainly by higher securities services and [management] expenses.

Slide 15 to review profitability. Net income for the quarter rose 43% year-on-year as we continued to make headway in executing our growth strategy. On a sequential basis, net income rose 7% as nonrecurring gains from the sale of 2 noncore assets for a total of ARS 73 million impacted the comparability of results. Excluding these items, net income would have increased 23% quarter-on-quarter.

Return on average equity for the quarter was 27% compared with 31% in the prior quarter with a temporary dilution reflecting the recent equity offering, which resulted in an increase of almost 70% in equity equivalent to ARS 5.6 billion.

In terms of capitalization as shown on Slide 16, after a successful equity follow-on, which are the proceeds of U.S. $342 million to the company, the consolidated performance Tier 1 capital ratio increased to 19.5% at the close of the quarter, from with 11.6% of the close of second quarter '17. As a result, funds of the holding company, which are invested in low-risk mutual funds and central bank notes, and available for further capital injections in subsidiaries, reached ARS 6.5 billion at the end of September. This also allows us to take advantage of tax losses carried forward at the holdco. Note that in September, we made capital injections of ARS 150 million in our consumer finance business. We expect to make further capital injections at Banco Supervielle this quarter and in the first half of 2018, to continue supporting the positive organic growth dynamics we're experiencing in our market.

I will now like to turn the call over to Patricio, to discuss guidance. And then we'll open the floor for questions.

Thank you, Jorge. Moving on to our outlook on Slide 17, we are revising our guidance for the year. Three key factors are driving our upwardly revised guidance.

The first, is additional capital we received from our most recent equity offering that will support further loan growth. Second, more recent data indicate that some macroeconomic assumptions embedded in our original guidance have changed. For example, let me highlight inflation that is expected to end up by 23% instead of the 20% initially considered, with the consequent tightening of monetary policy is moving the BADLAR rate to current levels of 22.6% from the 19% originally expected by year-end 2017.

And third, as I discussed earlier in my presentation, sentiment in the consumer finance segment is still lagging behind overall economic recovery. This segment has remained more cautious in view of inflation not coming down as fast as expected along with a soft job recovery. In this framework, we are experiencing a slight change in the past typical seasonality patterns, which is consistent with what we are seeing for the rest of the industry in the consumer finance segment. So based on the facts as I just discussed, the key guidance point. Our loan growth guidance remains unchanged. Remember, we had increase this in our prior call to a range of 43% to 50% from our original targets of 38% to 45%.

Our cost of guidance -- our cost of risk guidance, now ranges between 3.9% to 4.2% from our previous expectation of 3.2% to 3.6%. Again, this is mainly due to the changed consumer behaviors in our consumer finance segment. And, as I mentioned earlier in the call, this is fully priced in the cross -- in the gross intermediation margins of these loans. We are also tightening our NIM and efficiency guidance ranges. Net NIM is now expected in the 18% to 20% range from our previous 17% to 20% range. Efficiencies anticipated to range between 63% to 66% from our previous target of 63% to 67%. At the same time, we are increasing our net income guidance range to ARS 2.4 billion to ARS 2.6 billion from our previous guidance range of ARS 2.2 billion to ARS 2.4 billion, which calls for an implicit return on average equity of between 25% and 27%.

Finally, our Tier 1 ratio is now expected to range between 18% to 19% of our Tier 1 outlook, prior to the equity follow-on of 10.5% to 11.2%. We are now ready to take questions, please. Operator, please open the line for questions.

(Operator Instructions) Our first question comes from Frederic De Mariz with UBS.

I have a few questions following your presentation. First one on growth, we saw the revised loan growth guidance, with the top of the guidance at 50%. 3Q was very strong, so I'm wondering, what you're seeing -- what you're expecting the fourth quarter, we're already almost in the middle of the quarter. Are you expecting a deceleration or you just want to be a bit conservative on your guidance for loan growth? So that would be the first question on volumes.

And on the growth, if you can mention what sectors would be the most -- presenting the most growth? Second question on asset quality, there was a bit of an increase in the cost of risk. I think you explained very well in your presentation, the impact on consumer finance. My question is more on the coverage ratio. You have a lower ratio than peers. What are you expecting here? Do you plan that ratio to increase? And what would be a good level considering your operation?

And then third, final question on the margins. There is a regulatory change on the directed lending rules for small companies. So we think that, that requirement from the Central Bank is being phased out, is fading over next year. And I just wanted to understand how should we think of it? What's the impact for your margins?

Frederic. Okay, in terms of loan growth, we are not expecting a deceleration in terms of the rate of growth. However, having said that, not necessarily we might be repeating the same percentage growth we had in this quarter. This was a -- as I explained, when I was talking is, the growth that we experienced in the third Q represented 1/5 of our total loan book. So hopefully, if we can continue delivering that kind of growth, or try to. So we're still -- we are sticking to our revised guidance in the previous quarter for the year, probably, we might be ending up in the upper level of the range. Regarding your second question, in terms of coverage, we currently are at 88.9%. Our target for full year, as we have expressed in previous calls is to be around 90% coverage. And we're expecting to reach 100% coverage by 2019 and early 2020 probably. So that's the -- we have a plan in terms of progressively reaching that level and our plan is to continue increasing quarter-by-quarter the level of coverage we have as we progress going forward. Going back to your earlier question, you asked in terms of the sectors, where we see loan growth coming from. Currently, we're mostly seeing growth coming from all the different sectors. Definitely, construction, agri business and energy continue being the most solid sectors driving the economy of recovery, but we're seeing other sectors that are continue showing with recovery like automobiles, like small bike -- motorcycles. And clearly mortgages have been the star in terms percentage wise. The growth for the industry

in the year, still is a very small percentage of the loan portfolio, but it's growing at a very, very high rate, and that's essentially for all -- in all the industry. And your final question was?

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Okay, yes. The Central Bank announced the elimination of these so-called productive lines. This is a positive announcement for the industry as a whole because we no longer will have to lend long term at below market rates, okay? The way we expect these might impact us is, we have a ARS 7.1 billion exposure to these lines, of which, 10% of them are mortgages, and mortgages were at market rate, so there shouldn't be any impact on that end. From the remainder, approximately ARS 3 billion are -- from the remaining ARS 6.4 billion, approximately ARS 3 billion are from factoring, these are short-term lines, which were at average rates, probably around 21%, 22%, so below the LEBAC rates. Those are lines that should reprice fairly quickly because they are between 30 to 90 days average tenor. So we should see some repricing there. And for us, since factoring is a very strong business and has always been one of our specialties, we expect that we might see -- it's still to be seen, but we might see some banks that have entered into this business

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way of protecting themselves from the -- instead of having to lend long term at below market rates, enter the short-term market as a strategy to reuse the impact of these productive lines, on the NIMs, we might see them -- some of them leaving this market arena and margins going back to a much more normal level. The remainder of the portfolio is long term, so it will reprice as the portfolio runs off. So it will take some time, probably, a year, 1.5 year at the most.

That's very helpful. The overall impact, would you be able to quantify it, of this direct lending growth? Would it be a few basis points, 1 percentage, do you have any thoughts on this?

No. Not yet. We're still making our calculations, so probably, we will be able to give you little more visibility on this next quarter.

And our next question comes from Alvin Chew with Trend Capital.

My first question relates to the net interest margin guidance. You have guided net interest margin to be higher for the full year. Now, can I know how you intend to achieve this against the background of higher policy rates? And also increased lending by the other Argentine banks?

I'm not sure I understood your question. Your question is how we foresee from a -- for the fourth Q and going forward the NIM because of the increase in the -- and the other Argentine banks? Was that your question, Alvin?

Yes, correct. Basically you're guiding for higher net interest margins, right? How are you going to achieve -- how are you planning to achieve this against the backdrop of higher policy rates and increased competition for loans?

Okay, yes. It's a fair question. One thing you have to remind is that our business model, we have a larger proportion of personal loans than other banks, and we have a lower proportion of credit cards, okay? Personal loans tend to have higher spreads, and we're able to fix that for longer periods of time than credit cards, which tends to be repriced on a short-term basis. Clearly, the increasing funding cost in the short-term might have a marginally negative effect, but again, we have a higher resilience and very high margin level. So we're very confident in terms of the NIM guidance we're giving. In terms of competitive pressure, we're seeing that, and it's not different from what we saw in the past. It's not that all of a sudden, everybody is waking up, I mean, we've been seeing these kinds of competitive pressures all along for several quarters already. And again, if you look at the other banks, which have even a different mix than the ones that we have, what you will see there is that even in their cases NIMs are also resilient, probably with the exceptions of those banks that have a much larger exposure to U.S. dollar loans, which have much, much, lower NIMs. But again, in general, margin loans for loans in the industry tend to be quite resilient.

Okay. I would like to add something to what said Jorge. Another way that we have to defend our NIMs is on the liabilities side because we are -- a very important strategy for us is trying to become the principal bank of our medium and SME -- medium-size companies and SMEs. Then this is bringing us a very strong growth since we started this strategy in -- at the IPO. It's bringing us a strong growth in checking accounts. So this is another way to defend our NIM also.

Yes. Just 2 additional comments to what Patricio is saying is that elaborating on what he just said is remember that 56% of our deposits are either 0 interest rate or very low interest rates, okay? So that's a very cheap funding base. And on the other hand, the use of the follow-on proceeds helps our NIM, and it helps offset in the short term the increase in the BADLAR rates because those are funds that from -- I mean, in our income statement come on 0 interest rate.

Okay. Yes, okay. Just another question, Patricio. Could you comment quickly on the consumer finance NPLs, which have remained stubbornly high going to the third quarter, which breaks with the historical pattern, right, which basically the consumer finance NPLs tend to trend downwards after the -- with negotiations in March, April. So is this completely linked to inflation? So if you see inflations -- inflation rate coming down in Argentina, will consumer finance NPL [turnover] rates begin to trend downwards? Could you provide us with additional color on this please, Patricio?

Sure. I'll take this question, Patricio, if you don't mind. Alvin, if you look at Page 13 of the presentation, you'll see that we have our consumer finance lagged delinquency both for personal loans and for credit cards. And as you will see there is the pattern is repeating itself. I mean, it's not that it didn't come down in the quarters in terms of lagged delinquency. The problem is that it did so at a higher level, and it did not come down as we originally had expected it, it would come down, okay? And this has to do with, I would say, a couple of things. Number one is inflation has proven to be more resilient than what everybody was expecting. So it took -- it's taking, Alvin, longer to bring it down. That has a direct impact on this segment, essentially because inflation tends to impact worse the lower income levels than what it does the mid-income and the high-income levels, okay? Second thing is the job recovery has been softer, even though the economy is recovering, it's -- I wouldn't call it jobless recovery because we are seeing some industries in which -- they're operating at full job capacity like construction in example, but it's mostly driven by investments by corporates and public sector investments in public works. So it's not a consumption-led recovery. And therefore that also impacts this segment. The third thing I would like to mention is that, remember that 80% of our volume in our consumer finance company is tied to the Walmart business, okay? And Walmart, in line with all the other hypermarkets or large supermarket chains in Argentina, suffered a bit in terms of lower sales compared to 2016 in unit terms. This segment has been replaced by consumers by going to smaller wholesalers, which offer cheaper prices. The industry -- the supermarket industry has reacted to this in the late third Q offering new price offerings and attracting customers back to their supermarkets, to their stores. If you look at -- if you have the press release in front of you, you can take a look at Page 17. On Page 17, we have a table in which we open up the NPL ratio by product and segment. And when you look at the consumer finance segment, what you will see is that we saw marginal improvement in the personal loans NPL ratio from 18.4% to 18.1%, but we saw worsening of the NPL in the credit card loans from 8.9% to 10.1%, and this is related to 2 things. One is that the credit card portfolio remained relatively flat for the company and also reflects what I was just telling you in terms of lower sales at the Walmart supermarket chain. So the blend of all this results in higher cost of risk even though the pattern -- as I was explaining at the beginning of my answer, even though the pattern more or less follows the same trend it did in the previous years, it is on a higher levels -- it is on the higher level of -- than what it was last year. In any event, as we stressed out also throughout the presentation, these higher costs of risk is fully priced in the margins that we charge to this segment. I mean, they doubled year-on-year, and therefore, we're pricing the higher cost of risk. So it's a higher -- it's showing higher cost of risk, but it's a much more profitable business the one that we're having now than the one that we had in the first half or first 3 quarters of last year.

Our next question comes from Carlos Gomez with HSBC.

2 questions from me. Number one, you gave us the guidance for this year about 50% loan growth, perhaps more or at least in higher end. What do you expect for next year, both for inflation and for loan growth? How much do you expect in real terms? Second, your loan-to-deposit ratio is now above 100% because (inaudible) relief. At what level would you feel that it can start to constraint your loan growth? How much higher would you accept to have your loan-to-deposit ratio?

Okay. Regarding your first question is we're still waiting on 2018 numbers. Currently, we're working on the assumption of inflation between 14% to 15%, probably on or above the 15%, but still that's still work in progress. And we're not yet giving growth guidance in loan growth for next year. We plan on doing that when we release our 4Q figures. Regarding your second question -- okay, the loan-to-deposit ratio. I mean, there are 2 things impacting this ratio. These are our 2. Number one is, really very high growth that we experienced in the quarter in terms of loans. Deposits grew up twice the rate that the market did, but it was still half of what our loan book grew, okay? Part of that lower growth also has to do with the second reason, which is we have the proceeds of the follow-on used as liquidity and canceling on some of our wholesale deposits, okay? So that combination explains these higher rates. Going forward, we expect -- I mean, we have a very solid deposit franchise, which has proven to grow at well above market rates so far, and we have a strategy in place in terms of increasing our checking accounts deposits through our strategy of gaining more cash management business from our -- in our corporate segment. That should help us in terms of continued supporting our future growth of loans with deposits. In any event, we believe that loans might continue to grow at a faster pace than what deposits will grow. So our plan for that is to finance that through corporate bonds issuance in the international capital markets. So -- and then we still see lots of appetite for those kind of financings, and you might see some of that coming in the next couple of quarters.

All right. But still going back to my question, 109%, would you be comfortable with 120%, 150%, 170%? Is there a level where (inaudible).

I mean, we don't believe it is going to 150%. Yes, it should be more or less on or around these levels.

The current levels?

Yes.

But again, to be at the current levels you should need to grow your deposits as much as your loans?

Yes, going forward, yes, you're right. I mean, what -- probably, what you will see is in some quarters, some increases in this ratio but then as deposit growth catches up, it should go back to these levels. So (inaudible). This is not an issue that clearly concerns us because again, the other thing you have to consider is that in many other cases is we have a larger proportion of loans compared to the rest of the industry. A very easy way of us bringing this ratio down would be investing in government deposit -- in government securities rather than lending money. We don't believe that that's a good way of building our franchise. So therefore, we could -- continue to see an opportunity for us to establish ourselves and continue gaining market share and continue building the franchise with the private sector which is at the center of our strategy going forward. So again, we have a franchise that is able to double deposit growth in the industry. If the full industry hits a growth wall with deposits, then probably the whole industry will have to minimize the growth in loans, but we do not see that, that is going to be a problem for us. I mean, again, as I said, we're not normally concerned with this ratio.

Our next question comes from Alejandra Aranda with Itaú.

Most of my questions have been answered, but I was wondering if you could comment a little bit on the mix of deposits and how do you see it evolving?

The mix of deposits, you can see that on page -- that's Page 10 in the presentation. We have a very strong retail franchise in deposits. 54% of our deposits are from retail. Approximately, 2/3 of our time deposits, they come from -- also from individuals. So they are -- and those come in at rates which are below BADLAR rates. So it's also very cheap funding source. And as I mentioned, approximately 56% of our deposit base is either low -- either low -- 0 or low interest rates. So in terms of how we expect this going forward, we would expect checking accounts to continue growing its relative importance as we continue to deliver our strategy of growing our cash management business. And if inflation continues to come down, we would expect both savings accounts and retail time deposits to continue growing as disposable income for the individuals continues to climb because of the drop in inflation rate. And at some point in time, the current situation of the LEBAC rate being higher than the interest rate for deposit should reverse, okay? Probably not sure if this is going to be a 2018 event, but going forward, that's the logical thing to expect. And if that's the case, part of the liquidity that currently the Central Bank is absorbing should go to the banks and should start continue to climbing our time deposits.

Okay. So this event you see most likely after 2018?

It seems more a matter of how successful the government ends up proving in being -- bringing down inflation and turning [full] interest rates in the economy to a positive level. Clearly, if at some point in time -- as Carlos was asking earlier, if deposits at some point in time can start being a constraint for future growth of the industry, we might see some pressure of that end as well. In that respect, we feel very confident of the strength of the franchise we have because again, we have a highly optimized deposit base, and we have a very cheap funding source of deposits because of the mix we have. So it shouldn't affect us that much as it might affect other banks, which have a much more wholesale or institutionally based deposit franchise.

We have now reached the end of our Q&A session. I would now like to turn the floor back over to Ana Bartesaghi for closing comments.

Thank you for joining us today, and we appreciate your interest in our company. We look forward to meeting more of you in the coming months and providing financial and business updates next quarter. In the interim, we remain available to answer any questions that you may have. Thank you, and enjoy the rest of your day.

Thank you. Ladies and gentleman, this concludes today's conference. You may disconnect your lines at this time. Thank you all for your participation.