Banco Santander-Chile (BSAC) Q1 2019 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the First Quarter 2019 Banco Santander-Chile Earnings Conference Call. [Operator Instructions]. Now it's my pleasure to turn the call to our Chief Financial Officer, Emiliano Muratore.

Good afternoon, everyone. Welcome to Banco Santander-Chile's First Quarter 2019 Results Webcast and Conference Call. This is Emiliano Muratore, CFO. And I'm joined today by Robert Moreno, Manager of Investor Relations; and our Chief Economist, Claudio Soto. Thank you for attending today's conference call. As you will see in the rest of the presentation, the first quarter was challenging from an inflation and rate environment with inflation rapidly slowing down and Central Bank still rising short-term rates. Given the structure of our balance sheet, this is negative for our margins and ROE in the short-term. The bank proactively confronted that this situation, significantly outperforming our competitors in this environment. Additionally, we believe that in the coming quarters, inflation should normalize, rate should stabilize and the economy should continue to grow at an attractive pace. Moreover, we have announced an attractive investment plan focused on expanding our digital transformation and improving access of our -- of the unbanked population to banking services. Claudio will now give us more insight into the quarter and the positive news we see as we look ahead.

Thank you, Emiliano. Please turn to Slide 4, where we show the main economic indicators. As expected, the economy grew 4% in 2018 with an important rebound of nonmining sectors during the fourth quarter. However, economic indicators in the first month of the year have been weaker than expected with some sector-specific negative effect in mining related to climate event in the north of the country. Also, we're seeing a slowdown in export and consumption, reflecting the impact of the global deceleration and a labor market that has been lagging behind the cycle. For the rest of the year, economic expansion will depend on the global activity and the evolution of large investment projects, mostly in mining infrastructure and forestry sectors. We expect investment to grow 5.4% above the 4.7% seen in 2018. The speed-up of investment will boost the labor market and kick start consumption. On the other hand, export will expand at a modest pace at 2%, reflecting the slowdown in global demand and the limited capacity of mining expansion in the short run. Moving on to Slide 5. Overall, the slowest start of the year has led us to reduce our growth perspective from 3.5% to 3%. This forecast implies a gradual increase in year-on-year growth. We estimate the first quarter had the lowest growth of the year at around 1.8%. Then we expect it will increase to 2.5% in the second quarter, reaching 4.4% in the third quarter. The last quarter of the year will end up growing at 3.3% because of base effects. Inflation has also been lower than expected, reflecting the still open output gaps and muted pass-through from the exchange rate depreciation of last year and the lagging impact of the fall of energy prices until December. We expect inflation to pick up in the coming quarters with a quarterly average of U.S. variation of about 0.8% in order to reach the 2.3% annual variation we estimate for the end of the year. This is still below the 3% target of the monetary authority. In this context, the Central Bank of Chile has changed the forward guidance, stating that the monetary policy will remain at 3% for the next 2 quarters with a possible hike at the end of the year, this after the hike of January, the second one in several quarters. In our scenario, we assume the next hike will take place in 2020. After that, the policy rate will move up slowly to reach its neutral level at around 4%, just in 2021.

Thank you, Claudio. We will now move on to the bank's strategy and advances throughout the quarter. The bank continues with 3 objectives for healthy growth and a higher profitability, as you can see on Slide 7. Moving on to Slide 8. We would like to present our recent investment plans announced by the President of the Board in our recent shareholders meeting. The bank has announced a 3-year investment plan totaling $380 million for 2019-2021 assigned for digital transformation, investment in cyber security and to increase access of unbanked clients to financial services through digital and transactional products. In the second quarter of 2019, the bank will launch a new prepaid card, Superdigital, which aims to give the unbanked population greater access to the digital economy, enabling them to make online purchases. It's important to point out that Superdigital is a product originally developed by Santander Brasil and demonstrates Grupo Santander's growing leadership in developing digital services in the region. We estimate that 4 million persons in the Chilean workforce have no or limited access to credit cards or digital services such as Spotify, Netflix, Uber, et cetera. Superdigital will enable the bank to widen the client base in this market through a 100% digital prepaid credit card and over time will enable us to further penetrate this market. For SMEs, the bank is planning to enter into the acquiring business in 2020 with the aim of significantly modernizing and expanding the access of SMEs to POS terminals. We calculate that 70% of small commerces in Chile do not have a POS, and we expect to attend this market with modern POS technology, which in the long run will also permit us to increase our business with unbanked SMEs. For our middle income clients, we are venturing into a new auto financing business, which we will go into detail shortly. This together with our Life program should allow us to increase the growth rate of loans in the middle income segments. For our high income individuals, we are now focusing on how to further improve our services to these clients towards select banking hubs. The focus is on investment and wealth management, supported by a multidisciplinary team, much more specialized in these products, be it mutual fund or alternative investments. All of these segments will continue to be supported by our Work Café branches, which are more profitable and efficient than our traditional branches. In 2019, we will transform and open 23 more Work Cafés totaling around 60% by year-end. Please move to Slide 9. In March, we announced our intention to buy the 49% stake of SKBergé in Santander Consumer Finance Chile, a company dedicated to the auto financing market. Santander group, our parent company, owns the other 51%. The price of the investment will be CLP 59 billion. The final outcome of the operation will depend on the conclusion of the contractual agreements and the time it takes to achieve the necessary regulatory authorizations. On Slide 10, we have provided some key financial indicators of this business. At the end of 2018, Santander Consumer obtained a net profit of CLP 11 billion and ranked second in the new car financing industry. This business has a net interest margin over 11% with NIM net of risk, including dealer fees above 8%, strengthened by an improved asset quality with a NPL ratio of 2.7% and coverage at 135.7%. At the end of 2018, the total loan book of Santander Consumer Chile was CLP 388 billion and was growing 28%. This business has an ROE of 20%. We see this as an exciting opportunity to enter the fast-growing auto loan business in Chile. Moving to Slide 11. We will now go into the quarter itself, beginning with deposit growth. In the first quarter, the bank's funding strategy was centered on minimizing the impact of the lower inflation and higher short-term interest rates. The bank's total deposits increased 6.5% year-over-year and decreased 1.6% quarter-on-quarter. In the first quarter of 2019, the Central Bank raised the short-term interest rate by 25 basis points to 3% despite a low inflationary environment. Therefore, the bank focused on controlling the cost of funds allowing the time deposit base to decrease. To compensate this decrease, the bank successfully obtained funds through other instruments such as bonds. Bonds increased 9.5% year-over-year and 5.2% quarter-on-quarter as the mortgage portfolio also grew strongly. As almost all of the bank's mortgages are fixed real rate loans with an average duration of 7 years, the bank's finances these mortgages with long-term bonds. The spread of our locally issued bonds over the Central Bank rates reached historically low levels in the period. As we will see later on, margin were compressed by lower inflation. However, this was somewhat mitigated by our management of our cost of funds. On Slide 12, we have included a graph showing the effect of the Central Bank interest rate hike on our nominal time deposits. As you can see, thanks to our strategic planning, we have continued to achieve the controlled cost of funding and below that of our main competitors at a time when the Central Bank has increased short-term rates. This management has been very important in compensating the otherwise weaker margins. On Slide 13, we also show that the funding strategy was accompanied by strong liquidity levels. The LCR of banks are now being published. And as can be observed in this slide, we are well above the 60% limit set by the Chilean regulators and above the average of our competitors with an LCR ratio of 125.8%. Our NSFR was also solid at 108.8% at the end of the quarter. On Slide 14, we can see our loan book grew 8% year-over-year and 1.1% quarter-on-quarter, driven by retail banking and the middle market and offset by a fall in low-yielding corporate loans. Loans to individuals have been growing in our target segments. The growth of consumer loans of 7.4% year-over-year and 0.9% quarter-on-quarter was mainly driven by loans to high income earners, which grew 1.7% quarter-on-quarter. Mortgage loans continue to grow healthily and increased 1.8% quarter-on-quarter and 11.5% year-over-year. Middle market loans grew 2.5% quarter-over-quarter despite the slower-than-expected economic activity. This segment has continued to grow healthily, mainly driven by investments. Loans to SMEs decreased 0.8% as the bank continues to maintain a considerate stance regarding loan growth in this segment by focusing our lending to larger, less risky SMEs while increasing transactional services for all of our SME clients that generates nonlending revenues. Loans in SCIB, our corporate bank, decreased 5.4% in the quarter leading to a year-over-year decrease of 15.7%. However, SCIB's overall contribution to income increased by 17.6% in the quarter with a strong rise in noninterest revenue while optimizing capital usage in line with our strategy in this segment. We expect an acceleration of loan growth in coming quarters and continue to forecast overall loan growth of 8% to 10% during the year, mainly driven by retail loans. Moving on to Slide 15. Given the macroeconomic as described by Claudio earlier on, there was a compression on margins. As you can see in the graph, our margins are sensitive to the variation of the UF, the inflation-linked currency used in Chile. The bank has 2 major sensitivities in its balance sheet. We are asset insensitive to inflation since the bank has more assets than liabilities linked to inflation, and we are liability sensitive to short-term rates since the bank's deposits are mainly denominated in nominal peso and have a shorter duration than interest-earning assets. The duration of the UF was 0% in the quarter compared to 0.8% in 4Q '18, and the Central Bank increased the monetary policy rate by 25 basis points. These 2 factors were the main reasons that the bank's NIM contracted in the quarter. In order to minimize this impact, the bank reduced the net inflation gap by 18% quarter-on-quarter. As we expect inflation to pick up in the coming quarters, we can also expect our NIMs to improve. On Slide 16, we can see that asset quality continued the positive evolution that we had seen in previous quarters. The NPL ratio improved to 2% with impairment ratio at 5.9% and coverage ratio rising to 131%. In particular, we saw improvements in the consumer mortgage loans. These tendencies are a reflection of our commitment to growing our loan book in a healthy manner, focusing on the overall profitability of our client base. As we can see on Slide 17, the positive evolution of asset quality has led to a solid cost of credit, which reached 1% in 1 quarter '19, in line with guidance, and partially mitigating the lower NIM in the quarter. As a reminder, in the second quarter of this year, we are expecting to recognize the onetime provision charge for the change in the provisioning models for group commercial loans. We had initially estimated a charge of CLP 55 billion. However, our estimate has now been updated and lowered to CLP 40 billion. Going into the second objective of our strategy of increasing client loyalty on Slide 18. This translated to greater income from our fees and other financial services. If you look at Slide 19, you can see the results of our initiatives as experienced by the client. In order to measure our progress, the bank carries out various studies, including digital surveys, involving a significant sample of our clients. In 2018, we can probably say that we reached our goal of ranking #2 compared to our relevant peers regarding overall client satisfaction. We're also able to surpass our peers in all other key metrics such as product quality, service quality and image. Furthermore, we managed to reduce the amount of complaints received by the financial consumer advisory board, or Sernac Financiero, by 12%. This reduction has been continuous over the last 3 years. In Slide 20, we can see how this improvement in quality of service has been driven by digital transformation both on the front and back end. Today, we have more than 1 million digital clients out of a total of 1.5 million active users, and 85% of our current account holders are digital. We have created better digital solutions from then with excellent results. At the beginning of 2018, we launched our app 2.0 with a better look and feel and stronger capabilities. As a result, in 2018, our monthly active users of our app increased 27%. In consumer lending, our 1-2-3 Click product has continued to be an attractive way for clients to digitally obtain personal loans. Loans obtained through this platform are growing 75%. Life, our program for the middle income individual, which is also based on a digital platform, experienced a 21% increase in consumer loans this quarter. All of these numbers are a reflection of the better digital products and services we have been launching as well as the hard work we have done behind the scenes. During the past year, we have invested heavily in improving back office and streamlining it to better offer -- to better increase -- to better improve the overall service. In terms of operations, we've greatly enhanced the response time for requests for new products, cutting it by more than half by improving digital processes. A clear example is the time it now takes for a client to have their credit cards ready for use. Before, the way a client would receive a card was to wait for the courier to deliver it and then activate it at an ATM. The client then would have to wait 24 hours for the card to be activated and be ready to use. Today, we have card printers in almost all of our branches where a client taking out a new product or even clients that have misplaced the card can go and within 15 minutes or less to have the new credit card with them. The cards are automatically activated and can be used immediately. This is how the average time in credit card activation was reduced by 2/3 last year. Another area of focus has been reducing obsolete systems and processes and today we have managed to reach an obsolescence level of our systems of just 5%. Something that also freed up the team's time and effort to focus on creating and implementing was the large reduction in daily incidents within our digital processes. This was also an important step to impose the digitalization of the bank and move forward at a faster pace. On Slide 21, we can see the effects these initiatives have had on our client loyalty in our target segments. Client loyalty continue to rise in retail banking with loyal individual customers in the high end growing on average almost 11% since 2015. Over this period, total clients have grown almost 7%. On Slide 22, you can see that another area of strong growth in the quarter was noninterest income, which includes fees and financial transactions. As you can see from the graph, there is a positive evolution in the past quarters with growth in the first quarter reaching 6.1% quarter-over-quarter and 10.9% year-over-year. This was achieved by a combination of a strong recovery of fee income after a weak second half of 2018 and strong client treasury results. At the same time, nonclient treasury income had a strong quarter. In 1Q '19, local medium and long rates descended driving mark-to-market gains. This also helped to partially offset the lower NIMs in the quarter. On Slide 23, we show how we also continue to restructure our physical distribution network. The number of points of sales remained stable while we continue to transform branches into Work Cafés, reaching a total of 43 by the end of the quarter. The total headcount also decreased slightly in the period. Regarding costs, on Slide 24, we can see that operating expenses increased 5.4%. This was due to the investments we are making to improve our productivity and efficiency as part of our investment plan for 2019-2021. In January, the bank also implemented IFRS 16. The bank rents around 75% of its branches and buildings. Instead of recognizing an expense for rental of these properties, the bank recognizes the associated amortization and depreciation. The impact of this change was CLP 7.3 billion lower administrative expenses and CLP 7.8 billion higher depreciation costs, with a net effect of CLP 500 million higher costs in the quarter. Our third objective on Slide 25 focuses on optimizing profitability and capital. Slide 26 shows we were able to generate 20 basis point of capital despite a lower ROE with the core capital of 10.8% and a BIS ratio of 13.6% at the end of the quarter. On April 23, we held the Annual Shareholders Meeting where a payout of 60% of 2018 earnings was agreed, representing a dividend yield of 3.7% and giving the bank room to grow the loan book as well as implementation of the mentioned investment initiatives. We still have no more additional news regarding the risk ratings with the implementation of Basel III. We should have more information after the merger of the SBIF and CMF is completed in June. Slide 27 shows the evolution of our ROE from 2015 to date compared to our main competitors. As you can see, the macro environment in the first quarter was challenging for all the banks. However, our strategy in terms of UF gap, funding costs and noninterest income permitted us to significantly outperform our main competitor. Now that the worst has passed, we expect a better outlook for the rest of the year as we summarize on Slide 29. GDP expectations were lower, but mainly due to the weaker first quarter. The rest of the year should show accelerating GDP growth. Loan growth should therefore also pick up, leading to an 8% to 10% growth for the year. NIM should also bounce back as inflation rises and short-term rates stabilize. Noninterest income should continue to grow, led by greater client loyalty and digitalization. Asset quality remains healthy with a cost of credit of 1%. Cost growth should stabilize and the tax rate should come down in the next quarters. In all, the recurring ROE for the whole of 2018 should be around 18%, but higher in the next three quarters, and our long-term ROE outlook remains stable at 19%. At this time, we will gladly answer any questions you have.

[Operator Instructions]. And our first question comes from the line of Ernesto Gabilondo with Bank of America Merrill Lynch.

So my first question is to know your expectations for the year. In spite the economy is growing at a solid pace and inflation is rebounding, do you think it should be enough for not changing your net income guidance for the year? After this quarter, where do you see the net income grow? Do you think it would be more in the mid or high single digits? And then my second question is on the digital transformation. So we have seen you have done a very good job in maintaining expenses under control even with this quarter being a little bit higher. But as you mentioned, it should be more at around 4% for the year. But how much additional room do you see to improve the expense line with the digital transformation? You show in your presentation very interesting numbers in front and back office businesses from the digital transformation. But on the revenue side, do you have cross-selling targets with the digital transformation? And can you share with us how much of your revenues are coming from these digital initiatives?

Ernesto, thank you for your question. Regarding your first question for the year outlook, as Robert mentioned, now after -- we are very, let's say, confident and optimistic about the last, like, 3 quarters of the year. I mean, despite that the first quarter was challenging for us due to basically, let's say, monetary scenario, inflation plus interest rates going up. So leaving that behind for the rest of the year, we keep our outlook, but factoring in the first quarter, that is what make us like adjust the full year ROE from the 19% area we were talking some months ago that the now we are talking about 18% area for the year. I mean the last 3 quarters will be above 18%, I mean, and around 19% as we were expecting, but the first quarter is the one dragging the full year ROE and in terms of net income that take us to a more flattish or low single digits net income scenario that is consistent with the 19% -- with the 18% ROE.

And regarding the digital transformation, well, there's a lot going on as you mentioned in the front and back end. And on top of that, there's the new investment initiatives, Superdigital and also our entrance into the acquiring business. So I would say right now, we're like in the middle of doing quite a few investments. So I think cost, as you said, we're still a very efficient bank. Costs were growing around 5% in the first quarter. But overall, for the full year, we think costs should grow roughly around 4% or so. And our target in the end for 2020, 2021 is cost growth closer to inflation. So with that, you should have if the income goes up some improvements in the efficiency ratio. Now I would say one cost that obviously is important that is rising is, obviously, cybersecurity. So that is also driving up a little bit cost. This year we're going to invest between CLP 20 million, CLP 25 million in cybersecurity. Digitalization is a fantastic process, but obviously, it does have the other side, which is the cybersecurity part. In terms of the income growth and digitalization, I would say today, remember we're following a digital strategy. So we still think the physical network is important but the branches need to be more and more digital and -- like the Work Café and some of the investment hubs we're doing. And the digital part, obviously, it should grow over time with our entrance into acquiring business. We think there's going to be huge room for a lot of SMEs to begin to have more POSs. This will -- and also at the same time, with Superdigital allow more people to be able to pay with the card. So we expect this to greatly increase the use of cards in Chile and at the same time to decrease the use of cash and checks, et cetera. Today, at the moment, I would say around in the retail banking, lending to individuals, 20%, 25% is done digital and the rest is still highly dependent on the branch network, which is also why we are -- and the phone banking. Phone banking remember is around 15% to 20% of all of our sales as well. So that's why the digital process is giving digital products but also doing the digital back office so that everything is done much more quicker and efficient.

And our next question is from Sebastián Gallego with CrediCorp Capital. Sebastián Gallego: I have two questions. Can you please talk about the guidance that you provided on cost of credit? That 1% for 2019, whether or not that includes the CLP 40 billion that you expect as one-off? And the second question is related to the Work Cafés and the select private banking branches. Can you elaborate a bit more what you're trying to achieve with the 2.0 Work Café and the select private banking? What's that main changes that you expect to provide and how would you think that customers will react to those changes?

Sebastián, thank you for your question. Regarding your first comment, I mean, the 1% as a risk doesn't include the CLP 40 billion one-off we expect to have because of the SMEs provision in euro relation. So on top of that 1%, you should consider how much...

13 basis points.

13 basis points of more cost of risk because of that. Robert?

Okay, so basically what we're doing now is piloting this new style of branches. So the idea here is to make it simple, the branches, our normal branches, most people know have a lot of -- have human tellers. They have back office. They have vaults, a lot of paper work. So the idea here is to -- and the Work Café, the original Work Café was a big step in this direction. It's to create points of sale as we call them that are more focused on generating business and not so much on transactions. So basically the Work Café 2.0, which I think there's 2 or 3 pilots being tested are branches with very little back office, no human tellers and with a very sophisticated CRM that has machine learning, artificial intelligence. So basically, the branches and the people who work at the branch are almost all front office, and they're dedicated to generating new business and new ideas for the clients in a nice atmosphere with an atmosphere that's very similar to the current Work Cafés. And the investment hubs, we have Santander-select branches, which are nice branches but they have the traditional select, have the look and feel of a branch, okay, and they still have human tellers, they still have a back office, but they're nice branches with -- a nice traditional branch, you could say. The select hubs are much more focused on investment and wealth management, okay? So once again, the people who work there are concentrated more in a centralized area. They receive customers when they come in, in a very nice atmosphere and once again, the idea here is to focus, focus more investment management and to focus on business and not so much on transactions. And the transactional part, obviously, with the digital banking, with our web, with our app, we expect a lot of that part -- the transactional part to be done digitally, okay? So that's a bit the idea we're testing and piloting. How will clients react? Well, the first Work Café, the reaction was very, very positive. These branches are full of people. They're generating good business. They're efficient. And now we have to see how the public and our clients react to these new formats.

[Operator Instructions]. And our next question is from Jorg Friedemann with Citibank.

I have two questions. One is a follow-up on the provisions for group basis. Just wondering, what drove your revision for the lower number compared to what you had before. And if you think that these should come on top of what the market should be doing as well. Just asking that because I think given your salvation in the [indiscernible] I know, probably a bit aggressive in the initial forecast that they had, and I know some of the market participants were expecting higher expenses for the system that then SBIF had previously forecasted. So how this CLP 40 billion compares to the initial forecast for this SBIF? Is this more or less the market share of your SME loans or is this a bit lower than that? This is the first question. And the second question, you mentioned that you expect a bit further participation of trading income in noninterest income. Just wondering however, how you see income by itself evolving throughout the year? We know that it was negatively affected over the past two quarters given the termination of the agreement in the ATM front. So do you think it is possible given the significant increase in client activity -- in loyal clients to already post like mid-single digits growth in fee income stand-alone?

Jorg, thank you for your questions. Regarding the adjustment on the guidance for the new provision and the impact, basically, what we did was to do some data quality improvement because the new relation puts a lot of emphasis on collaterals. So I think that for us and for many other banks usually, the humbling of the collateral information it's maybe not always as good as we would like. So now that we needed to be completely sure of what kind of collateral and the amount we had for each of the exposure we went to look for the papers and basically now we are, let's say, with a better assessment of the collateral we have for the exposure. And that made the impact go down because when we did our initial estimate, we didn't have all the, let's say, the collateral information we needed or we were making some estimates. So now the CLP 40 billion is our best estimate. And regarding how that compares with the system, well, basically, we don't know. We don't have any, let's say, specific indication that we shouldn't be in line with our share of the business. So I think it's fair to kind of extrapolate our CLP 40 billion to the system by the share we have in our -- in that business but it was just a matter of, let's say, looking deeper into the papers and the databases and now having a better assessment of the collaterals we actually have.

Okay, and regarding the other question, so our noninterest income, as you saw, is rebounding a bit. Obviously, there's a treasury component. Remember, our treasury is mainly clients. So this is treasury gain -- income we generate with our clients. And that actually last year, that started out very weak and then it slowly began to recover and has continued to do well. On the other hand, fee income last year started out very well and then it slowed down. And then the good news is in the first quarter we started to see a rebound from the low levels of the second half of last year, but we still haven't recovered the level of the first quarter of last year. So I think fees are slowly rebounding with the cross-selling, with our digital initiatives. I would say there is room for fees to continue to rise. There's always one question mark. It's kind of like the investment banking side, which has kind of more lumpy so depends, little more deal driven. But at least on the retail banking side, we're seeing that the growth of mortgage is leading to good growth of insurance. Insurance brokerage is growing, asset management is doing relatively well. And what is doing relatively well is the usage of our credit cards, okay? Another thing, ATM fees were falling but we're starting to -- we're not going to overly expand our ATM network now, but we are starting to open some ATMs in much better locations, much safer, so those fees should no longer be falling. So by year-end, we should see probably a mid-single, low mid-digit growth of fees, okay?

[Operator Instructions]. And our next question is from Yuri Fernandes with JPMorgan.

I have a follow-up on your digital transformation and your CapEx plan, the CLP 380 million plan. I know you have like the guidance for efficiency ratio of 40% but that all includes the operating expense excluding impairments and amortizations. My question here, can you provide some color on how should we see like the total operating expenses including impairments and including amortization in the coming quarters because I think it should accelerate, right, given this plan and it would be really nice for us to have an idea on how the pace of this investment plan will kick in the results?

Okay, so remember our plan is always like a 3-year plan. So last year when we were talking, the plan basically was CLP 350 million between 2018 and 2020 and now we're going from 2019 to 2021, and we've increased it to CLP 380 million, okay? And remember, this plan has a lot of digital component and a lot of it is geared around the optimization not only in the front end but the back end. So there are some cost savings involved as well. And these investments in technology tend to generate kind of these cost savings part relatively quickly. So this said, even including impairments and amortizations, we expect cost growth this year to be around 4%, maybe between 4% and 5%, and next year, roughly around inflation, okay? So what you're going to see is probably a very stable headcount. So personnel expenses should be under control and a little more growth on the admin side, okay? Net-net though we should see a cost growth this year 4% to 5% and next year and the following year around inflation.

And I'm not showing any further questions in the queue. I would like to turn the call back to Emiliano Muratore for any final remarks.

So thank you all very much for taking the time to participate in today's call. We look forward to speaking with you again soon.

And with that, ladies and gentlemen, we thank you for participating in today's conference. This concludes the program. You may all disconnect. Have a wonderful day.