Financiera Independencia SAB de CV SOFOM ENR

BMV:FINDEP

Earnings Call Transcript

[Operator]

Good morning, everyone, and welcome to Financiera Independencia 2025 First Quarter Results Conference Call. My name is Anna, and I will be your operator for today's call. [Operator Instructions].

FINDEP released its earnings report on Friday, April 25, after the market closed. If you did not receive the report, please contact FINDEP's IR department directly, and they will e-mail it to you.

As a reminder, this video conference is being recorded. Joining us today from Financiera Independencia is Mr. Eduardo Messmacher, Chief Executive Officer; and Mr. Jose Maria Cid, Chief Financial Officer. I would now like to turn the call over to Mr. Jose Maria Cid. Mr. Cid, you may begin.

[Jose Maria Cid Michavila, executive]

Good morning. Thank you for joining FINDEP's First Quarter Results 2025 Conference Call. We published these results last Friday, which are available on our Investor Relations website, findep.mx. I would like to remind you that the information shared during this conference call may include forward-looking statements and as such, are subject to assumptions, uncertainties, risks and other factors that could cause actual results to differ materially from those described including risks that may be beyond the company's control.

Now I will turn the call over to Eduardo Messmacher.

[Eduardo Bernhart Messmacher Henríquez, executive]

Thank you, Jose Maria. Good morning, everyone. We delivered solid results in the first quarter. demonstrating continued strength across our businesses and continue to focus on our investment in technology and our proactive management of liquidity to fuel our growth. I will share performance highlights from our first quarter '25 operation.

Reported net profit for the quarter reached MXN 174 million, another quarter of strong, consistent results. The top line remained strong with interest income up 7% from prior year and operating expenses to the average portfolio at 32% in the quarter. The average portfolio increased 10% versus the prior year and 2% under constant FX. Liquidity is abnormally high, with cash at MXN 2.4 billion driven by two important actions completed to further strengthen liquidity and support growth.

On March 7, the company announced Apoyo Financiero. Its U.S.-based subsidiary issued $84.3 million Class 8 notes with a coupon rate of 7.72% due on April 25, 2034, in a private placement ABS transaction. On March 21, the company announced its decision to carry out a 52.7% redemption in cash of its unsecured debt instruments called step-up senior notes. With an interest rate of 10% and maturing on March 1, 2028, an aggregate principal amount of $39 million was redeemed on April 4, 2025. Yesterday, at our Annual Ordinary Shareholders meeting, the payment of a cash dividend of MXN 1.25 billion was approved to be paid in a single installment on May 12, 2025, corresponding to accumulated results through fiscal year 2024.

Our equity-to-asset ratio was 50% at quarter end, 1 percentage point below the first quarter last year. Our Mexico portfolio grew approximately 2% year-on-year our U.S. portfolio decreased marginally by 1% year-on-year in dollar terms. In the first quarter '25, loan origination was MXN 1.1 billion, roughly the same level as last year, but a decrease of 6% under constant FX. Compared to the prior quarter, Total loan originations decreased 8% with originations in Mexico, increasing slightly, and those in the U.S. decreasing 15% in dollar terms. The change in each of the portfolio's origination activities in the quarter continues to reflect our responsiveness to prevailing market and macroeconomic conditions.

The consolidated NPL ratio measured as Stage 3 loan portfolio over the total portfolio was 5.7% in the first quarter '25, improving 20 basis points for the prior quarter and flat to the prior year. FINDEP's write-offs amounted to MXN 408 million in the quarter, increasing 4% from the prior quarter and 11% from the prior year. Compared to the average portfolio, trailing 12 months write-offs were 19%, improving from 20% in the prior year. NPLs plus trailing 12-month write-offs of the total loan portfolio, including trailing 12 months write-offs, was 20% compared with 22% in the prior year.

Now I would like to share some performance highlights from each of our businesses during the quarter. Independencia represents 33% of the total portfolio and its portfolio declined 1% year-on-year with net interest income increasing 5%. Apoyo Economico Familiar represents 27% of the total portfolio and experienced growth of 6% year-on-year, with net interest income growing 4% versus the prior year. Apoyo Financiero represents 40% of the total portfolio, increasing 23% year-on-year in pesos, marginally decreasing in dollar terms.

Net interest income was flat versus the prior year. Our focus on building upon the company's core strength continues as we kick off the year with solid quarterly performance, remaining committed to executing our strategy.

I'll now hand over the discussion to Jose Maria who will provide additional details of our results.

[Jose Maria Cid Michavila, executive]

Thank you, Eduardo. In first quarter, '25, interest income was MXN 1.3 billion, an increase of 7% year-over-year with a 9% increase in the loan portfolio or 1% under constant FX. Interest expense of MXN 151 million increased 2% year-over-year, reflecting the continued and proactive management of debt and maturities. Net interest income of MXN 1.1 billion increased 8% year-over-year.

The provision for loan losses for PLL was MXN 327 million in first quarter '25, 10% lower compared to the prior quarter, but 13% higher versus the prior year. PLL to average loans was 16%, declining 170 basis points from the prior quarter and increasing 50 basis points from the prior year. Noninterest expenses were MXN 664 million in first quarter '25, increase of 4% from the prior quarter and 3% from the prior year. Representing 32% as a percentage of average portfolio compared with 30% in the prior quarter and 34% in the prior year, continue to reflect disciplined management of the expense base.

Interest-bearing liabilities increased 35% year-over-year and 19% under constant FX, reflective of the liquidity management actions taken in the quarter. Compared to the prior quarter, interest-bearing liabilities have increased 28% or 29% under constant FX. The company maintains a strong financial position with cash and cash equivalents at MXN 2.4 billion or 19% of total assets and the solvency ratio equity to total assets of 50% compared to 54% in the prior quarter and 51% in the prior year. Net debt measured as interest-bearing liabilities minus cash and cash equivalents of MXN 2.7 billion at the end of the quarter was down MXN 282 million or 9% from the prior year a 23% decline under a constant FX rate, reflecting prudent portfolio and debt management.

On a sequential basis, net debt decreased MXN 198 million. Our operating cash flow during the first quarter '25 was MXN 623 million. The company's coverage ratio was 226%, measured as allowances for loan losses over Stage 3 loans compared with 221% in the prior quarter and 233% in the prior year. The company's return on equity ratio for the quarter was 11%, decreasing 240 basis points from the prior year, and the return on assets ratio was 5.7%, decreasing 110 basis points from the prior year. When considering tangible equity for the quarter, it decreased to 13.1% versus 16.5% in the prior year. Overall, the company again delivered strong and consistent results for the first quarter of 2025.

Operator, we'd like to open the call for questions at this time.

[Operator]

[Operator Instructions]. Our first question comes from the line of Nicolas Riva.

[Nicolas Riva, analyst]

Jose Maria and Eduardo, thanks for the chance to ask questions. It's Nicolas Riva from Bank of America. I have a few questions.

The first one on the recent issue on the $4 million that you issued out of the U.S. subsidiary that was secured, if you can discuss details on the collateral that you had to offer on that issuance? That's my first question.

My second question, if you can give us any updates regarding your plans to keep a presence in the in the international unsecured market, given that right now, the outstanding on the '28 is very small, I think from memory, just roughly $30 million unchanged.

And then third, I know that in the last call, you had provided -- you had basically said that you wanted to resume dividend payments that you hadn't paid dividends in over 10 years. And I think in the beginning of this call, you did provide a number on the dividend you plan to play out of your 2024 net profits, if you can repeat that number, the dividend you plan to play this year.

[Jose Maria Cid Michavila, executive]

The first one for the U.S. issuance that we made basically, basically, it's an ABS. And it's basically a backdrop of the portfolio that we have in the U.S. That's basically the main thing. Is a secured issuance, right? It's a secure decision for the portfolio.

I think the second one, we do want to keep on issuing the national markets, and that's why we announced the short-term notes like a month ago or so. So we will keep on doing some things in international markets. So that's something that we really want to do.

And on the dividend, the amount basically was announced with MXN 1.2 billion, MXN 1.25 billion to be exact. And this is going to be paid on May 12.

[Eduardo Bernhart Messmacher Henríquez, executive]

And as a clarification, it's not the results of 2024. It comes from accumulated results of '24 and before. It is a fraction of accumulated results that were kept as capital retained earnings.

[Nicolas Riva, analyst]

Just one follow-up regarding the U.S. issuance. So Jose Maria, you said it's parked by loans from the U.S. business. Can you say roughly what would be the ratio of how much collateral you had to put relative to the issuance of the $84 million?

[Jose Maria Cid Michavila, executive]

Yes, it's about -- it's exactly 1.28 .

[Nicolas Riva, analyst]

1.28. Thanks very much.

[Eduardo Bernhart Messmacher Henríquez, executive]

On your question on international markets, I mean, our intention is to continue being present in international markets. Of course, markets have been crazy lately. But absolutely, our intention is to continue being present in international markets.

[Operator]

[Operator Instructions] We have not received any further questions at this point. So that concludes our question-and-answer session. Thank you. I would now like to hand the call back over to Mr. Cid for some closing remarks.

[Jose Maria Cid Michavila, executive]

Thank you very much for your time and interest in Financiera Independencia. As you know, when I came the information available on our website at findep.mx, if you have any further questions. Have a great day.