Financiera Independencia SAB de CV SOFOM ENR

BMV:FINDEP

Earnings Call Transcript 2021-Q3

[Operator]

Good morning, everyone, and welcome to Financiera Independencia's 2021 Third Quarter Results Conference Call. My name is Joe, and I will be your coordinator for today. [Operator Instructions] As a reminder, this video conference is being recorded.

For opening remarks and introductions, I would now like to turn the call over to Mr. Ivan Barona, Investor Relations Officer at Financiera Independencia. Mr. Barona, you may begin.

[Ivan Gonzalez, executive]

Good morning. Thank you for joining FINDEP's 2021 Third Quarter Results Conference Call. With me today are Mr. Eduardo Messmacher, our Chief Executive Officer; and Enrique Brockmann, our Chief Financial Officer. We published our results press release yesterday, which is available in our Investor Relations webpage at findep.mx. Let me remind you that the conference that we will share 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 would like to turn the call over to Eduardo Messmacher.

[Eduardo Bernhart Messmacher Henríquez, executive]

Thank you, Ivan. Good morning, everyone. A whole year has come by in the steepest moment from one of our most challenging economic downturns in the global economy. And both our core long-term vision and strong strategy execution have proven to serve and set us in the right direction. With specialized knowledge, responsible decisions and corporate discipline, these goals were achieved, reporting the strongest profits for a non-growing period in the last 10 years.

3 quarters in a row with best outcomes possible in the current complex context, it's quite an achievement. Let me begin by sharing the highlights of the company's performance, and extraordinary results during the first 9 months of 2021, while Enrique will go through the details of the financials that show our spending growth with a strengthened business model.

The company kept up the OpEx base that started in the fourth quarter 2020. Financiera Independencia's loan portfolio keeps on with proud asset quality, while improving efficiencies translating to strong profitability.

Regarding our balance sheet. It remains down with high capitalization, cash in hand, reduced leverage and credit line availability to support growth. Net income was MXN 121.4 million, posting the third consecutive quarter of record profitability, standing at the best in the last 10 years. Return on equity of 11% and return on tangible equity of 15% versus negative 2.5% and negative 3.4% during the third quarter 2020, respectively.

The total loan portfolio closed the quarter with a balance of MXN 7.5 billion, a 10% expansion with respect to the previous quarter. If you take out the effect of the sale of Finsol Mexico's loan portfolio and Fisofo. The portfolio posted a 19% year-on-year expansion, and as we adjust for FX difference in third quarter 2020, growth was 22.3%.

In the third quarter '21, loan origination accelerated in our subsidiaries, standing 35% above its pre-COVID level of January to March of 2020, reaching MXN 2.1 billion. This resulted in growth of the performing loan portfolio of MXN 681 million or 10.4% quarter-on-quarter. The consolidated NPL ratio in the third quarter of '21 was 3.8%, 20 basis points below the 4% observed in the last quarter and 330 basis points below the 7.2% reported 12 months ago. This NPL ratio reflects increased participation in the U.S. market, along with improved asset quality, which more than offset any impact from the recent payroll business divestiture.

The NPL ratio for the unsecured individual loans business in Mexico, Independencia, was 5.6% in the third quarter '21. A 30 basis point increase with respect to the 5.3% was observed in the second quarter '21. The NPL ratio in our California-based company was 1.2% in the third quarter of '21, a 60 basis point decrease with respect to the 1.8% reported in the second quarter of '21.

And finally, the NPL ratio in Finsol Brazil was 3.9% in third quarter '21, a 20 basis point decrease against 4.1% reported in the second quarter '21.

As for guidance, the amount is MXN 230 million, standing 2% above those witnessed in the second quarter '21 and 43% lower than the third quarter of 2020 figures on a comparable basis. At the close of the third quarter '21, we maintained a high coverage ratio of 214%, above the 185% recorded the third quarter '20.

In accordance with our main strategic priorities, in the quarter, we maintained liabilities below historical levels and a strong financial position. Year-on-year, we reduced 11% our long-term debt and 37% of bank loans. We maintained a solvency ratio of 42.1% in the third quarter of '21 versus 38.2% observed 12 months earlier and in line with the 43.4% of the second quarter.

We ended the third quarter '21 with cash and cash equivalents of MXN 685 million, 5.4% lower than the MXN 724 million observed in the third quarter 2020. This figure is 3% below the second quarter '21, on the back of higher origination and portfolio growth. As such, net debt declined 18% year-on-year from MXN 5.8 billion back in the second quarter of 2020 to MXN 4.7 billion in the third quarter '21.

Our net result in the first 9 months of '21, which is the best in more than 10 years, validates our strategy of focusing on our core strengths, in how secure individual loans and a very predictive and risk collection management and digital transformation.

Now let me share some highlights or features for our subsidiaries during the third quarter. In the Financiera quarter with a loan portfolio of roughly MXN 2.4 billion and a client base of over 189,000 people. In the Financiera portfolio represents 32% of the total portfolio. The performing loans grew MXN 150 million or 7% in the quarter. Apoyo Economico Familiar closed the third quarter with a loan portfolio of MXN 1.8 billion and a client base of over 103,000 people. It’s loan portfolio represents 24.4% of the company's total. The performing loans grew MXN 45 million or 2.8% in the quarter.

Apoyo Financiero, our California-based company, closed the quarter with a loan portfolio of MXN 2.9 billion and a client base of over 28,000 people. And its loan portfolio represents 39.5% of the company's total. The performing loans grew MXN 481 million or 19.5% in the quarter. During the quarter, [indiscernible] loan origination paid 66% relative to pre-COVID levels of the first quarter of 2020.

Finsol Brazil closed third quarter '21 with a loan portfolio of MXN 327 million and a client base of over 27,000 people. Finsol Brazil's loan portfolio represents 4.4% of our company's total. As a reminder, the company continues its digital transformation process during '21, and we have obtained important achievements, including third quarter '21 originations considering same operations have grown 23% versus pre-pandemic levels of fourth quarter '19, with 21% fewer employees, considering also same operations.

In particular, originations AFI have grown 31% versus pre-pandemic levels with 19% fewer employees. In Mexico, 80% of new clients were from digitally enabled channels. In AFI, 80% of collections are done outside of our brand.

Moving on with our strategy of focusing on our core businesses. On October 1, we reached an agreement with Omni for the sale of our operations in Brazil. For the time being, the transaction is still subject to the approval of the regulatory authorities.

I will turn the call over to Enrique, so he can provide details of our third quarter financials. Go ahead, Enrique.

[Enrique Brockmann del Valle, executive]

Thank you, Eduardo. Please note that the results in the quarter do not include the indices that we exited in fourth quarter '20 and first quarter '21. So our comparables versus prior year are effects. In some length, I will provide a comparison of our performance, considering only the remaining subsidiaries in our operation.

In the third quarter '21, interest income was MXN 1.1 billion. It decreased 6% year-on-year as a consequence of the reduced loan portfolio, including the sale of Finsol Mexico's portfolio and Finsol. Excluding Finsol and Fisofo, interest income was 14% higher year-on-year, versus second quarter '21, interest income grew 9% on the back of larger credit originations.

Interest expense was MXN 126 million, a 3% contraction relative to the second quarter '21 and a 25% decrease versus the third quarter '20. Net interest income was MXN 969 million, an 11% advance versus the second quarter '21 and 3% lower than third quarter '20. The provision for loan losses was MXN 233 million in third quarter '21, 41% higher when compared to second quarter '21 and 39% below third quarter '20. This figure comes in line with our expectations and reflects credit origination momentum.

It is important to highlight that in the second quarter of '20, we created prudential reserves of MXN 442 million as a key priority of our strategy to face the pandemic. Write-offs were MXN 220 million in the third quarter, 43% lower year-on-year and 2% above those of the second quarter '21. The coverage ratio of non-performing loans stands at 214%, in line with the previous quarter. Net interest income after provision for loan losses was MXN 736 million in the third quarter, a 21% increase with respect to the third quarter '20, mainly on the back of considerably lower loan loss reserves in the quarter.

Net operating revenue was MXN 862 million in the third quarter '21, a 23% increase versus the third quarter '20. Noninterest expense was MXN 691 million, posting a year-on-year decrease of 7%, driven by the sale of Finsol and Fisofo, and also by reaping benefits of our continued focus on efficiency. Costs increased MXN 20 million versus the second quarter, driven by an acceleration in origination. The cost in the quarter also includes transaction costs related to the sale agreement of Finsol Brazil. Without the above explained, we posted a net profit of MXN 121 million in the quarter. Once again, our strongest quarter for the third quarter in a row in the best -- in the last 10 years.

The corporate strategy took our company to a strong financial position with a liquidity buffer that represents 6% of the total assets and a high solvency ratio. During the quarter, our strategy proposed to keep a sound balance sheet, our liabilities at the third quarter '21 reached MXN 6.2 billion, standing 15% below third quarter '20 levels. Our net debt measured as liabilities minus cash and cash equivalents reached MXN 4.7 billion at the end of the quarter. On a sequential basis, it grew MXN 450 million compared to a MXN 706 million expansion in our loan portfolio, sinking some cash generation.

The solvency ratio is 42%, 4 percentage points greater than in the third quarter '20. The solvency ratio, excluding intangible items, is 35%, which is 3.7 percentage points greater than in the third quarter '20. Overall, the company's financial health is good and in a stronger position to be both growing and facing the pandemic.

In order to keep strengthening our market leadership and [indiscernible], on October 1, 2021, the company signed an agreement with OMNI S.A. - CREDITO, FINANCIAMENTO E INVESTIMENTO, for the sale of INDEPENDENCIA PARTICIPACOES S.A., who owns the company that carries out FINDEP's operation in Brazil. The sale agreement was closed at a ratio of 1.3x value of the company's equity at the end of June 2021. The effects of the aforementioned transaction are subject, among other issues, to regulatory approvals in Brazil by the Central Bank. The closing of this operation will be opportunely informed to the investing public. This transaction means the exit of FINDEP from its operations in Brazil.

The goodwill related to Finsol Brazil is worth about MXN 180 million, and we expect to cancel this goodwill in the fourth quarter '21 with a negative effect of around MXN 130 million. This is a non-cash item without any impact on our liquidity.

Now, I would like to open the call to questions. Operator, please do so.

[Operator]

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

[Nicolas Riva, analyst]

It's Nicola Riva from Bank of America. I have 2 questions. The first one on your bank credit lines, you say in the earnings report that you have MXN 4 billion in the credit lines. As I note to the financial statement, if I add all the credit lines, I'm counting MXN 5 billion in the credit lines, if you can clarify whether you have MXN 4 billion or MXN 5 billion in the credit line? And how much of that is committed versus uncommitted, please? And then, the second question on the 2024 bond. Given that you represent over 2/3 of your total debt, if you can talk about the plan to refinance that maturity?

[Enrique Brockmann del Valle, executive]

Yes. Just to confirm, all the -- all our lines are uncommitted. And as we said, we are evaluating several alternatives to refinance our -- mainly our long-term bond. And we're looking at alternatives of portfolio stabilization both in U.S. and in Mexico. And we are also looking at other liability management structures. We will likely do something in the first half of next year regarding this, but at the moment, as we've said, we have good space in our credit lines and we will continue using them for -- to fund our growth. But for next year, we will definitely need to look at the refinancing.

[Nicolas Riva, analyst]

2 follow-ups there. Then, so you said everything is uncommitted. But the total amount of the financial credit is MXN 4 billion or MXN 5 billion. I know you have drawn so far, MXN 1.7 billion.

[Enrique Brockmann del Valle, executive]

It's MXN 4 billion, sorry.

[Nicolas Riva, analyst]

Okay. And then, regarding the bond then you're saying you would be looking to refinance that first half of next year. Did you say then the base case would be to refinance that in the international debt market?

[Enrique Brockmann del Valle, executive]

No. What I mean, Nick, is that we are looking at doing other financing options next year. One of which could be a refinancing of the bond, we're not yet -- we have not yet decided whether we will refinance next year or not. But we're looking at many alternatives that we will likely begin to execute next year.

[Eduardo Bernhart Messmacher Henríquez, executive]

Just to emphasize, we're not looking at refinancing the bond on the first half of next year. No. We're looking at other alternatives we can correctly plan the refinancing of the bonds as we still have a couple of years more of space.

[Operator]

Our next question comes from Carlos de Legarreta.

[Carlos de Legarreta Diaz, analyst]

This is Carlos from GBM. Just -- I would like to understand if there are any further asset divestments or adjustments to a loan portfolio that we should consider? Or do you feel comfortable with the current assets that you have? And secondly, if you could talk a little bit about your expectations for next year, that will be great.

[Eduardo Bernhart Messmacher Henríquez, executive]

So as we mentioned, we are in an agreement to divest our Brazil operation. That is still subject to regulatory approval. And as you know, regulatory approval can take a few months. Once we divest Brazil, we end up with a portfolio of businesses that are quite congruent, in terms of all being focused on secured personal lending. We will continue growing on this type of businesses. We will and we are actively exploring segments that can expand our unsecured business with some larger loans to more, let's say, to larger businesses, expanding our micro business strategy.

We are also considering online lending, but everything revolves around unsecured personal lending and expansion that we can get from unsecured personal lending. Regarding next year and the years to follow, we will continue with our prudence and continuous growth of the portfolio. We really cannot make any guidance in terms of the growth of the portfolio for next year. It will depend on the situation of the market and how the rest of the COVID and the economic recovery plays out. And we will be vigilant at balancing growth and risk to the best way possible, especially in light of all of the opportunity that we have in the U.S. to continue growing that portfolio.

[Enrique Brockmann del Valle, executive]

Just to clarify, we will continue our focus in smaller trades -- in smaller loans. That's what we do best and we'll continue with that too.

[Carlos de Legarreta Diaz, analyst]

Those comments are very helpful. But thinking about the figure target ROE, of course, long-term, not for next year. Thinking about a mid-single digit, which is basically the average of the pre-pandemic years, the 5-year average, I think, is 6.2%. Is that a reference that this could be useful? Or given that the -- mixing the assets has changed, that is no longer something we should look at as a reference?

[Enrique Brockmann del Valle, executive]

So we believe that we can achieve something in the middle 10s, in the middle teens. So if you see our return on equity, on tangible equity is already around 15%. And we believe that is a place where we can continue delivering results. Delivering 15% ROE with the operation of the -- in the U.S. is more challenging. In Mexico, we believe we can achieve it. But let's say, the average should be in the 12% to 15% range. And again, this is measured in tangible equity, which will -- the goodwill would be slightly reduced after the sale of Brazil.

[Operator]

Our next question comes from the telephone line ending in 7-6-0-9.

[Unknown]

This is Nik Dimitrov of Morgan Stanley Investment Management. I have a few very short questions. So the whole point is loan growth is back, right? And you're focusing on unsecured personal lending. Prior to COVID-19, the story was that you're migrating away from the informal sector, going into the formal sector in the U.S. as well. Now, post-COVID, a simpler feedback. Where will be the focus in terms of formal versus informal? Are we going to see those 2 segments go at the same time? Or are you going to prioritize one versus the other, and why?

[Eduardo Bernhart Messmacher Henríquez, executive]

So let me answer the question in the following way. There is -- in the Mexican economy, there is a lot of opportunity, let's say, in what would be fiscally considered an informal, let's say, individual. That is an individual that may not be fully registered in paying tax -- for paying tax. Within that segment, there are various categories. The one that we strive to serve is the micro business segment. We focus on small lending, and we believe that micro businesses represent roughly 50% of employment in Mexico and therefore, a big opportunity.

Now, within the informal sector, remember that there's a big spectrum, and the other end of spectrum may be very small, self-employed individuals. And those individuals usually carry a larger risk. And those are the ones that we tend to not focus on, but rather focus on these micro businesses that may be informal, but are a bit more short-term than what we used to serve in the past. The current originations are something around 50-50 between people receiving a salary and people earning their living out of micro businesses in Mexico. More so, we now have that in Fisa. But we believe that is a good mix, and it represents a very large target market and one that the banks have usually a lot of difficulty in serving. And therefore, we can serve quite efficiently. In the U.S., most of our business is salaried employees. Therefore, obviously, safely, let's say, considered formal. We plan to stick to this type of segments, not going to the big, big formal sector. But let's say, managing the opportunity that exists in informal micro business.

[Unknown]

Okay. Understood. And with regard to the U.S. business, so it's almost 40% of your book. And I was wondering -- I mean, this is obviously dollar-denominated, right? And in case of a devaluation of the Mexican pesos, that could be pressure on capitalization. What portion of your capital is in the U.S. versus Mexico? In other words, what portion of the capital is in dollars versus Mexican pesos?

[Eduardo Bernhart Messmacher Henríquez, executive]

Maybe, Enrique, you want to address that exactly? Let me just mention that the company has its own capital denominated in dollars. And please also remember that our biggest liabilities come from the international bond and, therefore, are in dollars. Therefore, we have a big margin between assets and liabilities, consolidated with the past figures.

[Enrique Brockmann del Valle, executive]

Asset capital invested in pesos is around MXN 750 million, while the company's capital at the end of the third quarter is MXN 4,496 million. So that will be the proportion of the capital that we have in asset.

[Eduardo Bernhart Messmacher Henríquez, executive]

Now, I would also consider tangible equity on there, the proportion is higher because all of the equity that assets have is tangible equity.

[Unknown]

But most of the capital is still in Mexico, right? Overwhelming, it is still Mexican sectors normally?

[Enrique Brockmann del Valle, executive]

Yes.

[Unknown]

Yes. Okay. Okay. With regards to the rating agencies, you had 3 good consecutive quarters. At the same time, you're simplifying the organization, which sometimes the rating agencies look at and it's less diversification, right? And they like the diversification. You currently have a negative outlook by both Fitch and S&P. I was wondering whether you've had any discussions with them recently about the outlook, assuming the fact that you had 3 good quarters? And -- but at the same time, diversification is declining. So any update on that front?

[Eduardo Bernhart Messmacher Henríquez, executive]

Yes. I mean, we regularly stop talk with our agencies. The -- we believe most of their overview is related to this segment, not so much to us. They like our performance. They are being cautious in the center but they're making sure that what we are doing is sustainable. But their view is more -- we think it's more related to the -- to our industry, more than the company.

[Unknown]

Okay. Got it. And just one last question on -- I noticed that your collection's declined in the U.S. business. And you explained that by the fact that the book is growing, which we expect. But you also mentioned that you were deferring borrowers to repay. Can you let us know what exactly that means?

[Eduardo Bernhart Messmacher Henríquez, executive]

Well, we -- so what we have done is we have migrated most of the collections out of the branch and into other channels such as PayNearMe, which enables all of, say, the 7-Elevens to receive payments for our credits. We are also moving towards collections through ACH, through, let's say, automatic debit. So what we have seen is more something in the behavior of the customers rather than in something that we try to incentivize. What we see is that the behavior of our customers, when they have more convenient channels and channels that they actually don't have to, let's say, drive for certain amount of miles to reach, as it was a case when they had to pay in our branch, they tend to have less prepayment than what we used to observe, which is actually good for us because that help us grow the portfolio faster. Less prepayment, less curtailment. And that, we believe, is something good for our portfolio.

We are not incentivizing the customers to prepay less. We are just giving them better and more convenient options and their behavior is such that they prepay less. And therefore, the tenure of the loans, let's say, the actual tenure, the effective tenure actually is longer than what we serve.

[Unknown]

Got it. And sorry, just one last thing. It crossed my mind. So you guys have benefited from a few tailwinds, right? Coming out of COVID-19, you're going through the recovery process and your best to growing the loan book, divesting businesses and so on and so on. So -- and that's been reflected in your numbers. But I was wondering, do you think that the positive momentum from the recovery is a thing of the past? What I'm trying to figure out here -- and I know that you said that you believe that ROE will probably reach at one point, mid-double digits, mid-teens. But with the book growing, your cost of risk is kind of starting to turn up and obviously, that's related to the growth of the book and stuff like that. But do you believe that the best is behind us in terms of all these positive things? And as the book starts to season, we're going to see a lot more normalization, a little bit of the old, same debt come back. Have we reached the best in terms of that recovery process?

[Eduardo Bernhart Messmacher Henríquez, executive]

So what we see -- let me divide the answer in 2, in the U.S. and Mexico. In the U.S., we still see plenty of market, let's say, potential to grow with this quality of portfolio. In Mexico, it will depend on the evolution of the economy. And as you know, Mexico as a country, it's not having a comeback from [indiscernible] as many other countries. So the answer in Mexico will depend on the performance of the economy. But we believe that we have so much potential in the U.S. We're still growing and we're exploring other geographies and actively pursuing getting licenses for those locations.

And we believe there is so much potential in the U.S. that we can continue growing our book either in Mexico or in the U.S. or both, depending on the economic situation. I believe that the best in the U.S. is yet to come. The economy is getting a very positive momentum, very positive dynamics. And if at all, the limit right now in the U.S. is the lack of people wanting to work or people who can work and not -- from someone that needs help. So we're going to see many great things in the U.S. Mexico is still a bit of a question mark on how it will behave next year. And my answer will depend on how it finally behaves.

[Enrique Brockmann del Valle, executive]

I would complement a little bit, Eduardo, on efficiencies. That's something that we will continue to drive in the company, independent on how the environment looks. We have a big opportunity in increasing our efficiency, and we're focusing on doing that. And we see there's ample room ahead, both in -- I mean especially in Mexico inviting that.

[Eduardo Bernhart Messmacher Henríquez, executive]

And the part of you read very well, is that the more new clients we attract, the higher the division. As you know, this is a business that is based on a longer relationship with a client that allows us to positively select the clients that we want to keep. And yes, the risk will go up as we start -- as we continue originating new business. Now, the game there is about the balance between credit losses and efficiency, and we will continue striving for much smaller efficiency and reducing whatever possible the waste to counteract the increase in risk costs.

[Unknown]

Right. And because I discussed out with you previously. And I'm glad that you're working on that front because that's been one of the biggest challenges for you. Currently, your cost income ratio is 63%, it's come down a little bit. Based on your efforts, do you think that there would be more -- some improvement there as well in terms of where do you think you can get it down to?

[Enrique Brockmann del Valle, executive]

Just let me add a comment there. Yes, we're working on becoming more efficient. But one of the things that affects our efficiency ratios is the volume originations that we have. So if we continue having a high-volume of originations, those efficiency numbers will probably not improve. And they may improve if we reduce originations. So on that regard, what we are following very closely is our origination cost. So we're making sure that we -- that it is efficient, and it continues to improve as we go forward, especially in new clients. So that's where the -- that's the largest origination cost, and they're more expensive than originating again with your current clients. So we're working that metric in order to make sure that we drive efficiency.

[Operator]

Our next question comes from [ Maria Cruz ].

[Unknown Analyst]

I have 2 questions. So you have been talking about the continued expanding of your operation in the U.S. So I wonder what share of the book do you expect to represent in a -- I mean, now it represents by 20%. Do you expect to represent even more? And the other question is, if you can please provide the level of origination and collection in Mexican pesos, please?

[Eduardo Bernhart Messmacher Henríquez, executive]

So for the first part of the question, we really don't have a target of the composition of the portfolio between Mexico and the U.S. It really depends on the opportunity of the market. As we see the market today and as we see the opportunities in the U.S. and Mexico, the share of the portfolio will continue growing. And we really do not have any set target other than capturing the opportunities that are present in the market. As for the second part, Enrique, if you could provide some detail, please, go ahead.

[Enrique Brockmann del Valle, executive]

Yes. The amount of originations that we had in the quarter are around MXN 1.9 billion. And the collections, as we disclosed in our report, they vary a little bit from subsidiary to subsidiary. If we take those percentages and compare them with the average loan portfolio, we get collections in the quarter to a ramp of around MXN 2.1 billion. So more or less, those are the numbers.

[Unknown Analyst]

Okay. Another question, could you please disclose maybe cost of risk by region? Is that possible?

[Eduardo Bernhart Messmacher Henríquez, executive]

In U.S. versus Mexico?

[Unknown Analyst]

Yes. Yes, for an idea.

[Eduardo Bernhart Messmacher Henríquez, executive]

Yes. So we do disclose the non-performing loans, if you want to state it. Go ahead, please, Enrique.

[Enrique Brockmann del Valle, executive]

Yes. NPL -- give me one second. NPLs in the U.S. are at 1.2%. In Mexico, we have around 5.6% of the NPLS.

[Unknown Analyst]

Okay. Yes, I think I can confirm it myself. Okay. And do you plan to remain in the same level going forward?

[Enrique Brockmann del Valle, executive]

We -- as Eduardo said, as we continue to grow our portfolio, our cost of risk may increase. So if we continue growing, we may see an increase in the level of risk and NPLs. But as Eduardo stated, we will follow closely our efficiency to make sure that we have the correct balance between those 2, so that we maintain profitability.

[Operator]

Our next question is a follow-up from the telephone line ending in 7-0-6-9.

[Unknown]

This is Nik again. Just something crossed my mind. After the demise of offer credit, investors in general, feel very skittish about non-loan banks in general and a lot of our questions recurring principal used or recurring practices used by the Mexican non-banks. One of your indirect peers, Middle Eastern, part of their story has been that, well look at us, we are regulated like the banks. And what that means is that they basically follow the accounting standards utilized by the banks. Obviously, there's no regulation when it comes down to the amount of capital and liquidity that I have to keep. But nonetheless, investors get an extra level of comfort just because of the accounting practices that they use. Have you ever considered doing something similar? And if you do, that will be a huge [indiscernible].

[Eduardo Bernhart Messmacher Henríquez, executive]

Thank you for the comment, and we'll take it into consideration. So essentially, for us, we have been a long-standing name known in the industry. And we believe that our accounting principles are sound. We will consider the comment that you make. And especially, it could be convenient if we decide to start issuing debt in Mexico. It's actually a requirement that we issue certain types of debt in Mexico. So thank you for the comment, and we will definitely consider it.

[Unknown]

Fantastic. Thank you, yes. That would be amazing.

[Enrique Brockmann del Valle, executive]

Yes. And aside comment from Eduardo's, I mean, we have increased our capitalization importantly. We think that our strength of capital is very high. So we hear your question, but we would like to just remind you that no, we're very conservative on our capitalization there.

[Unknown]

I agree. No, I agree. And we're going to probably see normalization in your capital ratios as growth comes back, right? I mean we all see -- at least just from a calculations this morning, your potential equity, your tangible assets or no matter how you look at capital, it's slightly down quarter-over-quarter, which is normal, right? Because growth is intact. And I would expect that those metrics to continue deteriorating as you grow. But again, going back to applying accounting principles that are supervised would be -- give you a superb level of credibility when it comes down to your numbers.

[Operator]

[Operator Instructions] So that concludes our question-and-answer session. Thank you. I would now like to hand the call back over to Ivan Barona for some closing remarks.

[Ivan Gonzalez, executive]

Thank you very much for your time and interest in this information that proves the strength and market leadership of Financiera Independencia. If you have any further questions, please don't hesitate to contact. My contact information in our webpage findep.mx. Have a good day.

[Operator]

That concludes today's call. You may now disconnect.