Gentera SAB de CV

BMV:GENTERA

Earnings Call Transcript 2019-Q1

[Operator]

Good morning, and welcome to the First Quarter 2019 Gentera Conference Call.

Now I would like to turn the call over to Mr. Enrique Barrera, Investor Relations Officer of the company. Sir, you may begin.

[Enrique Barrera, executive]

Thank you. Good morning, and thank you all for joining us and for your continued interest in Gentera. I'm Enrique Barrera, the company's Investor Relations Officer.

I'm very pleased to introduce our management team. With us today are: Mr. Enrique Majós, Gentera's Chief Executive Officer; Mr. Patricio Diez De Bonilla, Banco Compartamos' Chief Executive Officer; and Mr. Mario Langarica, Gentera's Chief Financial Officer.

They will review the results of Gentera for the first quarter period as per the report that was issued yesterday. If you did not receive a copy of the release or if you have any questions, please do not hesitate to contact our Investor Relations Department in Mexico City. If you are a member of the media, we ask you to contact us directly.

Please note that during this presentation, Gentera may make forward-looking statements. These do not account for future economic circumstances, industry conditions, company performance or financial results. Additional information on forward-looking statements can be found in the disclaimer in our earnings release.

I would now like to turn the call over to Mr. Enrique Majós for his presentation. Enrique, please go ahead.

[Enrique Majós Ramírez, executive]

Hi. Good morning, everyone.

We are always happy to have you in our Gentera's results report session. And today, I would like to start by pointing out some of the most relevant business results of Gentera. And then I will take a space to share with you a general description of our strategy for 2019 and 2020. And finally, I will update you about how is Gentera adding value and creating synergies with the financial inclusion initiatives that the Mexican government is implementing. Afterwards, Patricio will get into more specific information regarding Compartamos Banco, and then Mario will give you detailed financial information of the group. Finally, as always, we will have our traditional Q&A session.

So let me start by talking a little bit about our business results. In Gentera, we are happy to share that our first quarter results are in line with the business plan we communicated early this year. Our net income for the first quarter was MXN 838 million. Gentera concluded the quarter with a loan portfolio of MXN 35.5 billion, representing an annual growth of 12.5% and an increase of 15.4% in net income compared with the first quarter 2018. With 3.4 million clients, in Gentera, we continue growing our client base. In a yearly basis, Gentera grew 8.4%, and during the last quarter we grew 1.2%, which is in line with the growth trends that we expect along the first quarter of every year knowing that the second semester growth is always faster than the first one.

During the quarter, we acquired 30,000 new clients, and our customer retention rate remains above 80%. This is a clear indicator that the customer perceives value in our offer as we are providing them the best solution for their credit needs. We clearly see a market opportunity ahead for the 3 countries in which we operate.

During the first quarter of the present year, Gentera's total loan portfolio slightly decreased 0.5% since the loan amount per customer was 1.5% below the previous quarter. This can be considered a normal trend at the beginning of every year. However, we remain close to our customers to understand any impact that the macroeconomic context might have in their businesses. It is important to mention that at this point we do not see a relevant variation in the consumption dynamic of our customers' businesses if we compare it with the second semester of last year.

Another good news is that NPLs are in good shape overall and in every market and product that we have. Our overall NPLs is around 3% which is within the 3% to 5% limit that we have always defined as healthy. During the first quarter, our efficiency ratio was 73.6%, slightly below our 75% guidance. Mario will explain this with more detail. But basically, it has to do with some marketing expenses that we didn't execute during the first quarter and that will be reflected during the following months. In any case, we maintain our guidance of maximum 8% of increase in expenses during the whole year as well as our commitment of increasing income above expenses for the rest of the year.

As Patricio will explain shortly, Banco Compartamos in Mexico started the year with promising results. And talking about Peru, Financiera Compartamos continues with solid and outstanding results. Net income in soles, Peru's local currency, increased 37% compared with the fourth quarter 2018 and 50% compared with the first quarter 2019.

It is important to mention that Fitch Rating Agency affirmed Banco Compartamos' ratings in Mexico, and in Peru we improved our rating from B+ to A-.

Talking about the rest of Gentera's business units, YASTAS, our banking correspondent network, grew the number of affiliates and reached 3,500 points of transaction, which represents an 18.5% growth on a yearly basis. At the same time, ATERNA reached 5.3 million active life insurance policies, which represents a 5% growth in a yearly basis. And INTERMEX processed more than MXN 5.8 billion in remittances payments, which is 6% more than 1 year ago.

Now as I said, I will take a space to share with you a general description of our strategy for 2019 and 2020. We have defined 2 fundamentals in our strategy for at least the following 2 years.

First, we will work to maintain a solid performance in our business as usual and our business indicators and results. We will keep Compartamos as the best option for the client. Our management teams in Mexico, Guatemala and Peru have specific action plans and commercial strategies to accomplish our goals for this year. The second fundamental in our strategy is that we will continue working in the evolution and improvement of our business model.

As a basic concept, we believe that any improvement to our actual business model has to provide 2 basic things. The first one, a better customer experience; and the second one, efficiencies in the way we operate, always using new digital technologies as one of the most powerful enablers we have nowadays. That is the definition of true evolution for us in Gentera.

And we will address this journey from 2 perspectives. First, a midterm perspective which goes from 1 to 3 years. And here, we will review and improve our end-to-end processes, including back office and front office. So we are working very hard with our teams to start mapping all these processes. The second perspective is a long-term perspective in which we will keep exploring, designing, building and testing new business models and fintech solutions through our innovation lab, FIINLAB.

Now in another matter, I would like to update you about the collaboration that Gentera is making with our new government in Mexico in order to create synergies with the financial inclusion initiatives they have. Among some other meetings and workshops in which Gentera has participated, let me point out the following ones. Since the new Mexican administration took office, we have been part of the working groups of the program, Jóvenes Construyendo el Futuro, as members of the Mexican Bank Association (sic) [ Banks of Mexico Association ], ABM.

We are open to receive 1,000 young people this year and incorporate them into our operations in financial education programs for our customers.

Next month, we will formalize this joint effort through an agreement letter. We are also having close conversations with our regulators. And in every case, different synergies have been identified such as the use of the YASTAS transactional network, joint initiative for financial inclusion and financial education, and of course, our participation in the digital payment transactions initiative of Banco de Mexico that is named CoDi.

And by the way, I know that some of you have expressed your concerns about the government program [ Tandas para Desarrollo ] since they could be perceived as a competitor for Compartamos and other microfinance institutions. In our last call, I missed the opportunity to clarify our point of view about this program, so let me talk a little bit more about it now.

Historically, these sort of government programs have always been positive since they have activated the consumption activity in the local community. And we believe that this is the case of [ Tandas para Desarrollo ] since it will reinforce the consumption dynamic all over the country. On the other hand, [ Tandas para Desarrollo ] will distribute a total of MXN 6 billion in 1 year. To provide some perspective, this amount represents 4% of the total amount that the microfinance industry disburses to Mexico every year. And Compartamos itself disburses MXN 90 billion in a year, which means 15x the scale of this program.

So let me wrap up by saying that this program is oriented to activate the consumption activities in the local communities of our customers, and based on our previous experience we firmly believe this will be positive by all means.

Now let me finish by informing you that our Shareholders' Assembly approved an ordinary dividend payment equivalent to MXN 593 million. This is something that we already anticipated in our last call, and it was confirmed in our last Annual Shareholders' Meeting that took place in April 12.

So thank you for your interest in Gentera overview remarks. And let me now turn the call to Patricio Diez de Bonilla, the CEO of Banco Compartamos, so he can share with you some interesting information about our operations and plans in Mexico.

Please, Patricio, go ahead. Patricio?

[Technical Difficulty]

Okay. Patricio still is on another line, and it seems we are having problems to connect with him. But Mario Langarica will provide and will deliver the message that Patricio has prepared for you.

[Mario Langarica Ávila, executive]

Thank you very much.

As we have mentioned in previous conference calls the recovery plan was expected to show positive trends in the second semester of 2019 and with more of this in the midterm in the following quarters. As you can see in the results that we presented yesterday after the decisions made more than 1 year ago, now we're witnessing better dynamics in different operation on financial metrics. For sure, there are still challenges to solve, but the results achieved in the 3 first months of the year are proving a better performance in the bank.

During this quarter, we grew again the number of customers served, finalizing the quarter with over 2.5 million. This is our third consecutive quarter of customer growth despite the fact that the first quarter is typically soft in terms of credit demand and customer attraction. This growth continues to be a very relevant figure for us because it reflects that as signaled in the previous conference call, the customers are coming back to the bank due to better service and simplified products and processes.

Customer retention rate continues in very solid levels, and now, we're moving around 85%. Credito Mujer, maintaining its double-digit growth compared versus first quarter '18. These are very relevant indicators in our efforts to strengthen this product methodology.

Total loan portfolio grew 4% [indiscernible] portfolio at the end of March '18. The demand for credit was aligned with our expectations considering that, as I already mentioned, typically the first quarter of every year credit demand is softer compared to the rest of the year. In addition, this year, the Easter holiday demand was on April and not in March as in previous years. The results obtained in this quarter is a reflection of maintaining the operation and a better value proposition for our customers, supported by the commercial decisions made in 2018 which continued gaining traction this quarter.

For the rest of the year, we will continue improving our products and services with a strong focus on the origination and monitoring processes to keep asset quality under control. In addition, we will follow up with different strategies and commercial initiatives aiming to, first, give additional benefits to approach current customers; and second, implement strategies to re-attract customers that we have lost in previous years.

Another highlight for this quarter was asset quality, which is still at 3.07%, well below the 4.58% that Banco Compartamos had at the end of 1Q '18. As such, provisions have improved consistently in the last quarter. This ratio is a result of, one, redesigning our products and services; two, credit orientation processes by the sales force; and three, disciplined monitoring processes. We will continue these efforts to make sure that every loan we give is a good business opportunity for our clients.

With regards to write-offs, it's important to highlight the current performance of Credito Mujer. Considering that in 1Q '19, Banco Compartamos wrote off MXN 138 million, which is 36% smaller compared with the MXN 260 million in write-offs in 1Q '18 and NPLs in this product is now at 1.87% which is better than the 2.45% level reached at the end of 1Q '18.

Finally, employee turnover also showed very positive trends. Finalizing this quarter again is 26%, which along with the previous report at the end of December 2018, is the best ratio ever seen in 28 years of history of the company. This [indiscernible] reflected a positive work environment for our more than 6,000 employees in Mexico.

In addition, due to the lower turnover of employees, as we have said in the past, we can be more effective on the service side with customers and we have more experienced personnel in front of them and should reflect solid customer retention.

All in all, considering all the progress achieved in the past months, now we have a more motivated team, working hard every day improving their service and product offering provided to our clients with a clear purpose in helping them to achieve their dreams. We are sure by maintaining an inspired team, we will reach our goals of servicing much more customers in the coming quarters and years.

Now I will go continue reviewing Gentera's financials for the quarter.

[Enrique Majós Ramírez, executive]

Thank you, Mario.

I believe -- Patricio, are you in the line now? No, not yet. Okay. We're trying to connect him. And now Mario, if you please provide us the detailed information -- financial information for Gentera. Thank you.

[Mario Langarica Ávila, executive]

Of course. Thank you, Enrique. And good day to everyone. I didn't say good day to everyone before.

1Q '19 interest income stood at MXN 5.47 billion, representing a 9.2% increase compared to 1Q '18. This is the second consecutive quarter with positive growth after 4 consecutive quarters of final contractions, and it is larger than the 6% presented in 1Q '18. This result was mainly driven by a larger loan portfolio and a larger contribution of Compartamos Financiera in Gentera's consolidated interest income.

Interest expenses grew 40% compared to 1Q '18. This increase is mainly explained by the 6.4% increase Banco Compartamos total loan portfolio; the [ MXN 3,000 million ] raised in extra liquidity in Banco Compartamos in November 2018; 100 basis points increase in the reference interest rate in Mexico since December 2017; and a 32% increase in Compartamos Financiera portfolio.

Net interest income showed a 6.7% increase compared to 1Q '18, whereas net interest margin stood at 45.3%, representing a contraction compared to the 51.1% achieved in 1Q '18.

This contraction comes from: one, Banco Compartamos from [indiscernible]; and two, a smaller contribution of the Mexican subsidiary in Gentera's consolidated credit portfolio, which represented 63.9% at the end of the 1Q '19 versus 69.1% in 1Q '18.

It's important to note that if Gentera had not had the additional liquidity described before, the increase for provisions for 1Q '19 should have stood around 48.7%, 3.4% [indiscernible] above the level report.

As we already mentioned, asset quality has been stable, which has resulted in reductions in the level of provisions, which for this quarter decreased 2.4% compared to 1Q '18.

Net interest margin after provisions stood at 39.5%, which is below the 43.8% ratio obtained in 1Q '18. However, as previously explained in [indiscernible] for provisions, this ratio was affected by this extra liquidity we have had since November '18. If Banco Compartamos hadn't had this extra liquidity, NIM after provisions in 1Q '19 should have stood around 42.4%.

The cost of [indiscernible] for the quarter stood at 7.2%, but again, we expect the levels for the full year to be around 8% and 8.5%.

Fee income during the quarter increased 10.8% to MXN 348 million compared to 1Q '18. This increase is mainly explained by, one, fee generated by the sale of [indiscernible] Banco Compartamos which grew 6.8% on year-to-year comparison; and two, a larger contribution in the fees generated at Compartamos Financiera Peru which in the 1Q grew 36% compared to 1Q '18.

Fee expenses increased 21.5%, mainly due to the flexibility we are giving back to our clients in Banco Compartamos to use third-party infrastructure to [indiscernible] their credit improvement and payments at their convenience and also due to the growth in the number of clients and those transactions in Peru.

Net commissions show a 6.3% growth compared to the previous range at the end of 1Q '18.

Operating expenses grew 4.7% compared to 1Q '18. And we [indiscernible] our year-end objective to be around 8%. The increase on a year-over-year basis was mainly driven by marketing campaigns, commercial initiatives to attract and reward customer performance, other strategic initiatives and technology, and some expenses associated to infrastructure.

The efficiency ratio for the quarter stood at 72.6% (sic) [ 73.6% ] compared to 75.1% as Enrique previously explained. But it's important to note that in this quarter the growth in expenses was lower than [indiscernible] objective since we have not launched yet new commercial initiatives that will imply incremental marketing expenses as described previously by Enrique. So our guidance for the year for expenses is to stay around 8%.

Gentera closed the first quarter of the year with a consolidated net income of MXN 838 million, representing a 15.4% growth compared to 1Q '18 and 18.4% growth compared to the previous quarter.

In 1Q '19, return on equity stood at 18.1%, and return on assets at 6.4%, above the 17.1% and below the 6.8%, respectively, in 1Q '18.

The levels of profitability presented in this quarter were solid. However, show less operational expenses and the ones expected for the full year due to our new initiatives calendar that will start to be reflected in second quarter '19. Thank you all.

This is all for our presentation. Operator, so we can now move to the Q&A session.

[Operator]

[Operator Instructions] Our first question will come from Alonso Garcia, Credit Suisse.

[Alonso Garcia, analyst]

My question is regarding the margins. How do you expect NIMs to behave as it progresses considering on one hand that you will lower your yields on the Mexico portfolio, but at the same time you will have decreasing excess liquidity and also an improving mix as Mexico loan growth picks up?

[Mario Langarica Ávila, executive]

Yes. As we discussed in the first conference of the year, we expect that NIM will be around 43% and NIM after provisions around 36%. That includes the extra liquidity that we have set, the guidance on the prices, improvements that we will make and the balance composition of Peru and Mexico.

[Operator]

[Operator Instructions] Our next question will come from Yuri Fernandes, JPMorgan.

[Yuri Fernandes, analyst]

I have a question on the Mexican portion of the loan growth. It was growing, I guess, in February around 8%, 9%, and it decelerated in March. So my question is how do you see it evolving because I guess your guidance for Mexico is higher than that. It's [ above ] 15%. So how to improve his growth? It's only related to the Mexican base. As you start accelerating the Mexican base, the loan growth in Mexico would accelerate. So that's basically the first one. And my second question is regarding the employees. Like if you look to the employees in Mexico, they have been declining. So my question here is related to you -- basically your optimization expenses and reducing the headcount. Or are you still suffering with competition basically going to the loan officers, then taking some of your loan officers to serve in other firms?

[Patricio De Bonilla Garcia Vallejo, executive]

Thank you. This is Patricio. Can you hear me now?

[Yuri Fernandes, analyst]

Yes, I can.

[Enrique Majós Ramírez, executive]

Yes, Patricio. Thank you.

[Patricio De Bonilla Garcia Vallejo, executive]

Perfect. Sorry about that. My line was cut off. In terms of the volume in Mexico, as you know, the first quarter of every year it's typically the softer one due to lower economic activity present in -- during the quarter. It's also due to the renewals of the

[Audio Gap]

that -- I mean the loans we gave away in October and November got expired in February and March. So our customers typically adapt their loan balances depending on the economic cycle, and you need to bear in mind that also the Easter holiday for Mexico was in April. So all those things together made that the loan portfolio to grow as fast as you saw during the fourth quarter of 2019 (sic) [ 2018 ]. We -- I mean the demand for April and the coming months remains strong. So we expect to grow double-digit for the year. So nothing that worries us still in the market today. Actually, we see a good opportunity to maintain growth momentum.

[Yuri Fernandes, analyst]

Just one follow-up here, Patricio. Do -- like the Easter holiday is good for you? Because this year actually it was in April and last year it was end of March. And the seasonality, we're basically comparing year-over-year, so should not be a seasonality here.

[Patricio De Bonilla Garcia Vallejo, executive]

Right. Yes. I mean last year, Easter holiday -- Easter is a very big holiday in Mexico. The demand for credit during this period is high. And the reality is that last year it was in late March. So it was exactly by the end of the quarter. This year, it was mid-April. So there is a lot of lowering volume because of also the weaker economic activity during -- mostly present in the first quarter as I -- so nothing really that worries us. Also, the improvements in the products and the commercial strategies for the year are up now since April. So we start -- I mean we expect to see pick up in volume for the coming quarters. But what's more important to us today is the reality that it is the third quarter in which we consistently grow on the customer base. So again, it's more of a seasonal piece rather than something that could allow us to get out of the guidance for the year.

[Yuri Fernandes, analyst]

No. Super clear, Patricio.

[Patricio De Bonilla Garcia Vallejo, executive]

Okay. And your second question, Yuri, was, sorry?

[Yuri Fernandes, analyst]

Was regarding the headcount. Like we are seeing some decrease in the headcount in Mexico. And my question is if this is related to the thing that you want to do? Like you are basically reducing the headcount or is your competition being tougher with your [ replace ]?

[Patricio De Bonilla Garcia Vallejo, executive]

No. No, no, no. I mean, all the efforts that we put in front of the sales force have to be with productivity, so that's one piece. And secondly, we also -- last year at the end of 2018 we shut down some branches. So there are more of a productivity [indiscernible] rather than something related to other thing. So for the year we think that we have now the adequate sales force and we'll be -- continue to focus on getting more productivity from our sales reps with the use of technology or other improvements in our business processes.

[Operator]

[Operator Instructions] Our next question will come from Ernesto Gabilondo, Bank of America Merrill Lynch.

[Ernesto María Gabilondo Márquez, analyst]

My first question is a follow-up just to understand the next trends in the next quarters. So you are not changing your net income guidance. I just want to verify if it will remain the same because from my understanding, you will accelerate the loan portfolio, so I think that will imply higher provision charges. And on the other hand, you will have higher noninterest expenses as you will be reactivating the marketing campaigns. So again, just want to verify with you. we should think that net income growth for this quarter will be the same on next quarters or it will be lower because of these 2 elements?

Then my second question is on your plans on the digital transformation. I was lucky to visit your operation in Puebla and I see your virtual meeting. So it surprised me that this project has been a pilot project for about 2 years. So just want to know when do you expect you will be able to replicate the virtual meeting to other states? Also, I noticed that at the beginning when clients move to our virtual meeting, NPLs tend to rise. So I don't know if there is a learning curve that has to be implemented, and I don't know if that was the reason why you are still not replicating this virtual meeting to other states.

And finally, my last question is related to the digital transformation also. We are seeing a lot of participants willing to develop the digital payments in the low-income segments. We are seeing names such as Walmart, Amazon, Mercado Libre [ Fintex ] and some large-cap banks. So how are you preparing to offer the same service and demands? Are you concerned that the banks will be offering at some points microfinance products to the low-income segment of the population? For example, we're seeing BBVA Bancomer is ahead of the industry in terms of technology and is already implementing CoDi and connecting smartphones in the low-income segment. So being Gentera, the leader in the microfinance segments, any comment on the digital transformations will be much appreciated.

[Mario Langarica Ávila, executive]

Okay. Perfect. So I will start with the financials and then I'll pass to Enrique for a -- to describe more the digital strategy that we have. So yes, as you said very appropriately, we are maintaining the guidance for the year and exactly as you described. Number one, we expect a higher growth in the loan portfolio. This growth will come mainly with the new commercial initiatives that we're launching that Patricio described and that started coming to the market in April. So we will start to see some of those trends in second quarter 2019. And the other one, obviously, has to do exactly with the explanation given before of seasonality and a stronger growth in the second semester. So yes, we expect that our -- the portfolio will grow in 17% and 19% of guidance. Then on cost of risk, as you described, because of the dynamics of the first quarter, provision was a little lower than what we expect for the next month with the growth of the portfolio and also the NPLs were in the lower levels of the range that we give between 3% and 3.5%. So we keep our cost of risk guidance of between 8% and 8.5% for the year. And operational expenses again as you described and as described by Patricio and Enrique previously, this will come with an increase, mostly driven by the new commercial campaigns and the new commercial approach that we will start seeing since April and the second quarter. So all of that keeps us in our guidance for net income and that's what we should expect to see in the coming quarters.

[Enrique Majós Ramírez, executive]

Yes, Ernesto, thank you for your question, and thank you for putting your attention on the efforts that we are making on the digital world. We are really very excited about what is happening and I think that there are going to -- these kind of solutions will bring you a lot of opportunities in the future. The pilot that we have for [indiscernible] in Puebla is a work in progress, it's a pilot actually and we believe and we are aware that we have a lot of challenges and fixes to do there. But what we have heard from our customers and our loan officers there is -- also is that they are not willing to go back to the traditional process. And that means that overall the new process and the new digital solution is something that they value and they are willing to adopt. Yet, I wouldn't say that we have relevant differences in NPLs with the groups that are in that processes and the ones are being managed by the traditional process. Actually, it depends on many other things. So I can tell you after almost 1 year -- almost 2 years of working with those groups there that the NPLs and the quality of [ the porta ] portfolio is very similar from what we have in the traditional one. Maybe the major challenge there is how can we connect that solution that is oriented to manage the group, to the whole process of selling and disbursing and paying the loan, and that's what we are working on now. I was saying that one of our main lines of work for the strategy of the following 2 years is that we are reviewing our front- and back-office processes and this is part of the work we are doing now. So, but yes, as I said I think that we have challenges there. But overall, we are going to have a lot of benefit from what we are doing in terms of efforts in the digital world. And I believe that Patricio has also some things to share with us because he [ sold also ] this kind of thing.

[Patricio De Bonilla Garcia Vallejo, executive]

Yes. And in terms of new entrants, Ernesto, and you mentioned CoDi that as you know everyone is working hard to get it done by September this year. It's -- I'm talking about CoDi, it's a key piece now for -- to build an ecosystem and strengthen the payment systems in Mexico. That will be very good for financial institution to reduce the transactional costs and also reduce in Mexico the heavy use of cash, that it's still something that in Mexico we need to work out. So with these new initiatives or improvement financial system, of course there will be new entrants, newcomers and in Mexico it's a marketing which has a [indiscernible] there, but platform -- I mean, the payments and the information will be, as Enrique said, will be used to better designing products, new services. And that's something that we need to work out in the coming years . But I do agree with Enrique that exciting opportunities are very close by. And for example, in the case of Peru, all the digital and cashless operation for Credito Mujer, it's already present in the operations in the Peruvian market. So it's something that again reduces the transactional cost. It's beneficial for the end user and it's something that we need to work out in order to make this a competitive advantage of Banco Compartamos going forward.

[Operator]

[Operator Instructions] Our next question will come from Claudia Benavente, Santander.

[Claudia Benavente, analyst]

I was wondering if you could give us a little bit of color on how the digital processes are working in the group with [indiscernible]. What have you learned there? Is there something that you feel you can work with as well in Mexico? Any learning processes, and how those advantages translated into a better, I don't know, [indiscernible] income ratio, et cetera?

[Patricio De Bonilla Garcia Vallejo, executive]

Thank you, Claudia. And essentially, in my previous remarks, when you see in Mexico that we are growing customers while decreased in, for example, headcount, it's basically because we've been working on streamline processes, not only on the origination side, but most importantly on the back-office side as well. So, for example, another regulatory improvement that needs to get done this year is the use of biometrics and that could be something very good in order to better identify your customers to make the credit origination process much faster and allow our sales reps to serve a much higher number of customers than they do today. So the reality is that [indiscernible] against could be worked out -- front-office and the pitch for the opportunity here is to try to increase productivity and expand the infrastructure that we have already created.

[Claudia Benavente, analyst]

But my question was more related to Peru. I was wondering what you have learned there? What can be replicated in Mexico, and what advantages have you seen there like in the Peruvian operations per se?

[Patricio De Bonilla Garcia Vallejo, executive]

Yes, sure Claudia...

[Enrique Majós Ramírez, executive]

Go ahead, Patricio and then I can comment on that.

[Patricio De Bonilla Garcia Vallejo, executive]

Yes. In terms of what -- I mean, what we've seen is that the acceptance of this new technology in Peru has been very important so as, for example, the use of the BIM cards in groups. They basically are working cashless. So the time and effort that the group meetings took in order to count cash and also the security concerns that our customers had by using this cash-based methodology has now reduced to 0 in most cases. So the reality that you see in this kind of methodology, which is mostly via electronic transfers, the reality is that we could be more efficient and this is something that again it's now working well in Peru and it's something that for sure we can bring that back to Mexico.

[Enrique Majós Ramírez, executive]

Yes. And Claudia, let me point out maybe 2 main learnings that I believe we have had in our experience, not only in Peru, but also in Mexico. And the first one is that we believe that it is going to be very important to maintain the balance between human touch and digital connection. And we have to see the digital technology as a very powerful enabler of a way or a tool to provide customers better experience, and at the same time as a company be more efficient. But that we have been always very close and we are very intensive touch with our -- human touch with our customers. And we believe that, that's something that the customer still values. So that balance I think is something that we have to still continue learning to get the right balance there. And the second learning I have from both experiences, Mexico and Peru, is that it is very useful to have an open or common platform for digital transactions as the one we have there in Peru, which is BIM. And it is very -- it looks like something that can be empowered by the [ cog ] initiative here in Banco de Mexico. So the support of the government, the Central Bank, the bank associations in many countries, it's very important to reach this common platform in which all of the financial providers can jump in and connect our customers with the financial world and transaction. So I think that we're in the right track on that and that's why we feel very excited of what this can bring in terms of opportunity.

[Claudia Benavente, analyst]

One more question there, do you have, for example, any metrics that you can share for Peru? For example, if there are transactions that are made digitally, how much relative to the overall? And have you seen that you need to hire less loan officers relative to what you need to hire proportionally in Mexico? Any color that you can give there?

[Mario Langarica Ávila, executive]

Yes, hi Claudia, it's Mario. We are currently serving around 3,700 groups in Peru and around [ 15,000 ] clients in Peru. And in Peru, we have a biweekly methodology. So yes, we're trying some of these initiatives already there with very successful results. And as part of that, as Enrique and as Patricio explained, will be implemented to Mexico and [ redeploy ] the plan in the country.

[Claudia Benavente, analyst]

[ 15,000 ] clients are being served digitally? Just double checking.

[Mario Langarica Ávila, executive]

Yes, in Peru with [indiscernible].

[Claudia Benavente, analyst]

And any relationship of requiring of less loan officers relative to Mexico because of the digital processes that are more advanced there?

[Mario Langarica Ávila, executive]

It's more a matter of productivity than less loan officers. What we want is to have these technologies increase the productivity of our workforce. But we have some initial signs there, there is positive ones in the pilot that we have in Puebla. On average a loan officer reaches every week around 250 to 300 clients. And with this tool that we have there, the [indiscernible] platform, there are some loan officers that are reaching up to 400 to 500 customers. So as Mario said, it's a combination of productivity and having more time to make more sales [ packed ] and sales kind of work to get more customers.

[Operator]

Our next question will come from Manuel Gonzalez, Signum Research.

[Manuel González, analyst]

Congratulations on the good results. I just had a quick question regarding fees and tariffs. I was wondering if you could give us some color about the trends in the year that you are seeing in that segment?

[Mario Langarica Ávila, executive]

Sorry, I missed the first part of your question, Manuel. Sorry, can you repeat?

[Manuel González, analyst]

Yes. Sure. My question is regarding fees and tariffs. I was wondering if you could give us a little color on the trends that you're seeing for the year.

[Mario Langarica Ávila, executive]

I'm sorry, but I didn't understand the topic of your question. The fees? Are the fees? Okay.

[Manuel González, analyst]

Yes, fees and tariffs, yes.

[Mario Langarica Ávila, executive]

Yes. okay. Okay. Yes, as we mentioned, we got [ that ] an increase in fees of 10.8% in the fees that we charge and that comes basically with a -- both in the portfolio and also that with the [ growing ] clients. As you know, we have a combination around 65% to 70% of our fees are related to our insurance product. So there is a positive correlation between the growth of clients and the growth in insurance fees. And also as our portfolio grows, also our commissions for late payments also grow. So that brought an increase of 10.8%. On the other side, on the fee space, the increase was 21.5%, but in the net comparison to last year, the net commissions grew. The increase in total in this space also has to do as we explained before: One, from the flexibility that we give to our clients to -- for their enrollment and for the collection and also for the growth in Peru that is also making that number grow. So that's basically the fee explanation.

[Patricio De Bonilla Garcia Vallejo, executive]

And just to complement a little bit. In terms of fee income, we've been very active also trying to deploy new insurance products. So in Mexico not only we sell now the life insurance product which has been the core of the proposition for more than 15 years. Now we have health care insurance product -- cash, hospital cash, it's also a product that we sell to customers. And since April, we are now selling some sort of security insurance that we deploy -- I mean we are starting to deploy this, this April and we expect the product to pick up during the year as part of the value proposition that we want to put in front of our customers. So again, on the insurance side, we are very excited with the new products that we have. And if they are successful, of course the fee income is something that will outpace as it has been the customer base.

[Operator]

[Operator Instructions] With no questions in the queue, the question-and-answer session has concluded. I will now hand the call over to the management of the company for any final remarks.

[Enrique Majós Ramírez, executive]

Thank you. Well, as we have pointed out in previous conference calls, we firmly see a big market opportunity ahead and we feel comfortable by saying that we have a solid operation after the adjustments we have made in the last year and the ones that we are about to implement this year. So having said that, thank you for your attention, and have a nice day, all.

[Operator]

Thank you very much. Ladies and gentlemen, thank you for joining us for today's conference. You may now disconnect your lines. And have a great rest of the week.