Gentera SAB de CV

BMV:GENTERA

Earnings Call Transcript 2022-Q1

[Operator]

Good morning, and welcome to the First Quarter 2022 Gentera's 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. 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 Majos, Gentera's Chief Executive Officer; Mr. Patricio Diez De Bonilla, Banco Compartamos' Chief Executive Officer; and Mr. Mario Langarica, Gentera's Chief Financial Officer. Enrique Majos and Mario Langarica will present the results for Gentera for the first quarter period as per the report that was issued yesterday. And Patricio Diez De Bonilla, along with Enrique and Mario, will actively participate in the Q&A session of this conference call.

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 located in our earnings release. 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.

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

[Enrique Majós Ramírez, executive]

Thank you, and good morning to everyone. As always, your presence and interest in our call is encouraging for us.

2022 has started with really solid results, not only in terms of our business numbers, but also in terms of our presence in the market and the value that our product offer provides to our customers. At the same time, we are having substantial progress on our digital transformation initiatives. And as we explained before, several initiatives are on their way to be implemented around the present year.

So the highlights for today are basically 2: the first one, we will have a quick overview of Gentera and its subsidiaries' results for the first quarter; and second, we will have an update on Gentera's digital transformation journey.

Once again, let me start by expressing my gratitude to all the management team, staff members and members of the Board, of course. Any progress made up to now and the accomplishments you will see along the year are the results of the hard work and commitment of our staff, management team and Board of Directors.

If we previously defined that 2021 was the year of the recovery from the pandemic crisis, 2022 will be defined as the year of deploying our digital capacity in order to get ready for the solid growth and opportunities that we expect for the following years. And we believe that the fact that we have been delivering solid and consistent results for several quarters now is the best indicator of our potential growth in the years to come.

So let me start by talking about the first quarter results. Gentera's loan portfolio reached the largest figure historically. We ended the quarter with MXN 49 billion, representing a solid 23% growth compared with the first quarter 2021. In terms of client base, which is one of the most relevant indicators to show potential future growth, we grew around 180,000 credit clients in a year-to-year basis. This is a strong growth if we consider that during the last year, we let go more than 100,000 customers in Guatemala. Our cost of risk continues in very good shape. As you could see, loan portfolio NPLs ended the quarter at 2.5%, which is even better from the NPLs reported in previous quarters. And cost of risk stood at 9.7%, which is below our original expectations.

One more time, we are delivering strong results. Gentera's net income in the first quarter was MXN 1,005 million. The net income reached in this quarter is among the 5 best net income generated in a single quarter in our 31 years of history, which makes us feel very proud about this year and enthusiastic about the opportunities ahead. And very important, our net income comes clearly from the healthy operations of our core business.

And overall, we continued with very solid numbers in terms of capitalization and liquidity. Mario Langarica will provide more details about each of our subsidiaries. And as always, we will be happy to answer any specific questions about our business operations at our Q&A session.

As you can see fundamentals of our business operations are solid, maybe better than ever. So we are in the best position to put our attention on the digital transformation journey we have decided to follow as the pillar of our business strategy to build Gentera's future.

So let me jump now to the update on Gentera's digital transformation journey. As we have said before, our digital transformation strategy is aimed to accomplish 2 very important and specific goals: the first one, to provide increasing convenience to our customers; and the second one, to make Gentera a more efficient and profitable company. As part of our transformation journey, we have been moving forward in the first stage of our technology enablers in Mexico and Peru, which are the foundation in which we will be deploying our business initiatives.

Let me update you about the most important digital transformation initiatives. At Compartamos Banco in Mexico, we are testing the end-to-end credit process of the digital platform whose purpose is to capture efficiencies of the individual and group lending process that will help the productivity of our sales force and will improve the experience of our customers. As part of our testing process, we already implemented the platform in 2 branches. Feedback from loan officers and customers has been very good, and they are already experiencing the benefits of the platform.

And let me give you a few examples. You know that clients usually receive confirmation of their capacity of receiving a loan after 5 days, and that was the traditional process. With a new digital platform, today, they receive the preapproved confirmation of their credit application the same day they requested it.

Another fact is paperwork. With the new process, the onboarding process for new customers is 100% digital. This makes the experience easier for clients and staff members. And the major impact is in the renewal process, which now is 100% paperless and automated. And for our loan officers, the first indicators show that they can optimize their daily process by at least 30%.

At Yastás, we are in the process of upgrading our digital payment core system. This is also a very important initiative for our transformation journey. The new system will provide us flexibility in connecting other banks to Yastás' payment network. In addition, it will create a more friendly experience to our correspondent agents, and they will be able to offer a more robust platform of financial and nonfinancial services to the end customer.

Now in Peru at Financiera Compartamos. Last month, we released our new core banking system. And as of today, we have had only some minor incidents. This is a very important accomplishment since the new core system has better capacity to add new functionality and technology to our operation. Also in Peru, we are implementing a digital platform for the individual lending process. Through this platform, we will capture benefits in terms of productivity and cost efficiency, and we expect to have hard data to prove the effectiveness of this new process by the second half of the year.

Finally, synergies between ConCrédito and Compartamos are promising, and we have started to see its potential. As of today, 12,000 Compartamos clients have also become [ Empresarias ] ConCrédito. They now represent close to 20% of the [ Empresarias ] ConCrédito half. And we have here a double positive effect: the first one, we are expanding ConCrédito's credit distribution capacity through new distribution channels; and second, by giving our Compartamos clients the opportunity to become Empresarias ConCrédito, we are providing them a source of new income.

So as we explained in our previous call, our road map for 2022 is about deploying our digital capacity in order to get ready to start capturing the value of the new processes and tools by the second half of the year, of course, through the following years. We are convinced that our digital transformation strategy has great potential and will be the engine for our future growth.

Now regarding Gentera's Annual Shareholders' Meeting celebrated on April 13, I can tell you that the ordinary dividend payment equivalent to 20% of Gentera's net income was approved. This dividend will be distributed among the outstanding shares at the date of payment, which will be no later than May 13.

And let me now pass the call to Mario Langarica, who will provide the financial and business highlights. And afterwards, we will have our Q&A session with Mario, Patricio and myself. So thank you, Mario, and go ahead.

[Mario Langarica Ávila, executive]

Thank you, Enrique, and good day to everyone. As always, we appreciate your interest in Gentera. As in previous conference calls, I will focus my remarks on the following context: one, our portfolio growth and the performance of our margins; second, asset quality, including cost of risk, allowances, NPLs now defined as stage 3 portfolio and coverage ratios; three, operational expenses; four, our strong and improving net income generation and profitability; five, our liquidity and capital position; and six, some final remarks.

Before starting, and as mentioned in our past conference call, from first Q '22 and onwards, our financial statements and the analysis prepared will be presented under new Mexican financial accounting standards aligned to IFRS-9 methodology. The main changes -- impacts are explained within the press release that we published yesterday, and I will mention some of the most important during my remarks. Financial statement and its metrics for previous quarters 4Q '21 and first Q '21 were not reexpressed under this new financial and reporting standard, given the fact that we didn't see major impacts in general.

Now let me start. One, our portfolio has kept growing, and our margins have kept improving. As mentioned by Enrique, Gentera's loan portfolio reached a new historic level of MXN 49 billion in first Q '22, representing a 23.6% growth compared to first Q '21 and 6.7% above 4Q '21. This initial performance make us believe that we could finalize the year in the high end of the portfolio growth range guided for the year around 15%.

Banco Compartamos finalized the quarter with a loan portfolio amounting to MXN 28.9 billion, a remarkable 32.3% growth compared to first Q '21 and maintaining very strong asset quality. In Compartamos Financiera in Peru, where -- we have continued to witness very positive signs of recovery. Loan portfolio amounted to MXN 17.2 billion, representing a 15.7% increase compared to first Q '21 and 4.4% compared to 4Q '21. And in ConCrédito, we closed the quarter with MXN 3.1 billion on portfolio, representing a 35% growth compared to first Q '21.

Regarding margins at Gentera level. We have observed improved performance in the different margin components. A, interest income grew 27% compared to first Q '21, mainly driven by the portfolio growth of Banco Compartamos and Peru. B, interest expenses stood at MXN 623 million, representing an 18% growth compared to first Q. It is very important to remember that expenses associated to credit origination and leasing agreements have been now reclassified from first Q '22 onwards in the interest expense line according to the new financial reporting standards and IFRS. In first Q '22, these expenses represented MXN 88 million or around 14% of the total MXN 623 million reported.

Even considering these changes, the growth in net interest income was 28% higher than first Q '21, representing a 39.5% NIM compared to 32.1% in first Q '21. And compared to 4Q '21, net interest income grew 5%, and NIM showed an additional improvement over the last quarter's 39.3% figure.

C, provision for loan losses amounted to MXN 1.156 billion in first Q '22, a higher level compared to the MXN 720 million in provisions registered in first Q '21 and very similar to the level of provisions required in 4Q '21 of MXN 1.1 billion. The annual increase is mainly explained due to the strong loan portfolio growth and the comparable -- and the low comparable base of provisions in first Q '21; and two, ConCrédito's strong growth in its portfolio and a change in its provisions methodology, which now considers credits as personal loans instead of revolving credits.

Net interest income after provisions amounted to MXN 4.77 billion compared to MXN 3.9 billion in first Q '21, representing a 22% growth. That resulted in a NIM after provisions of 31.8% compared to 27.1% in first Q '21 and 31.7% in 4Q '21. It is important to say that even considering the reclassification impacts in the interest expense line described above, the NIM after provisions reached in first Q '22 was the best level that we have seen since the pandemic started.

Regarding risk levels. Cost of risk in first Q '22 stood at 9.7%, better than the 10.5% range guided for the year. Allowances amounted to MXN 3.5 billion on a consolidated level. As of today, we still maintain around MXN 200 million in additional reserves in Compartamos Peru.

NPLs, now stage 3 loan portfolio, stood at 2.5%, which is an improvement compared to the 2.82% in 4Q '21 and a solid improvement compared to the 3.74% in first Q '21. Worth highlighting is that the bank continues showing a strong asset quality performance, and Peru is also showing very positive results. Our coverage ratio in first Q '22 amounted to 281%, superior to the 267% in the previous quarter.

Three, operational expenses. Operational expenses for the quarter stood at MXN 3.662 billion, representing a 1.9% annual growth compared to first Q '21. Once again, it's important to note that the deferred expenses linked to credit origination and leasing agreements are now reflected in the interest expense line, as described above. And at the bank level, IPAB fees and expenses that were previously reflected in operational expenses are now considered in the other expense line, and that amounts to MXN 22 million.

Considering all these changes for '22, we expect to grow operational expenses around 5% to 6% compared to 2021, as explained in the last call. So we should expect higher expense levels in the following quarters compared to first Q, mainly related to the acceleration of our investments in the transformational initiatives that we have been telling you about in the last call and particularly with the points that Enrique described above.

Four, net income continued growing, maintaining a positive recurring trend. Gentera's first Q '22 net income amounted to MXN 1.005 billion, a very strong result, representing 2.7x growth compared to the MXN 378 million reached in first Q '21. Gentera's controlling participation amounted to MXN 977 million, representing an EPS of MXN 0.62. As you can see, with this strong result that we're posting, Gentera is back to normal dynamics and with very strong opportunities lying ahead.

Even as we have an excellent quarter, we're still prudent about the following quarters' expectations after the current macroeconomic environment. Therefore, at this point, we are not changing our guidance for the year. And as mentioned before, we also expect to increase the investments of our transformational initiatives, which will represent additional expenses in the following quarters, as explained before.

Gentera's ROE for the first Q '22 stood at 16% and ROA at 5.6%, showing consecutive growth compared to 4Q '21 and a strong improvement compared to first Q '21. It's important to highlight that Banco Compartamos, our largest subsidiary, reached strong levels of ROE of 28.4% and ROE of 8.7%, even considering the very strong capitalization levels that we have and also mentioning that Peru is accelerating its contribution faster than expected. So our expectation for Gentera is to finalize the year with an ROE moving around 15% and an ROA around 5%.

Five, we maintain our strong liquidity, funding and capital position. Gentera has concluded 4Q '21 with -- sorry, first Q '22 with a very healthy liquidity position amounting to MXN 30 billion. And the liquidity levels at each subsidiary are very solid and sufficient to fund the growth and are strong to face the opportunities that this year will bring. As we have mentioned in different conference calls, we have very strong access to different incremental funding sources for the holding company and our subsidiaries. We have very strong relationships with plenty of funding options, and we're constantly improving and adapting our debt maturity profile. Gentera's strong capital to assets ratio amounted to 34.5%. Banco Compartamos concluded the quarter with a 37% ICAP, Compartamos Financiera with a solvency level of around 18% and ConCrédito with a capital to assets ratio of 51%.

To finalize my remarks, I want to emphasize that we're very pleased about the results we've presented and excited about this year, as this is the year of transformation, growth and new opportunities. We're very enthusiastic with the prospects for the future, and we're moving in the right direction to reach in the medium term, as we have said in the past, an ROE above 20%.

Thank you very much for your attention, and that's all for our presentation. And we would like to move forward for the Q&A session.

[Operator]

[Operator Instructions] Your first question is coming from Ernesto Gabilondo from Bank of America.

[Ernesto María Gabilondo Márquez, analyst]

Carlos, Enrique, Patricio and Mario, congratulations on your strong first quarter results despite the heightened cycle. And my first question is related to that. What would be your expectations for rates for this next year? And what are you doing to mitigate the impact? Can you transfer the impact to the client or maybe take some development bank lines or use part of your excess cash? So what will be the strategy behind it?

And then for my second question, it's on loan growth. As you know, we have been seeing higher inflation, higher rates. So just wondering if it could have an impact in your loan growth portfolio. Or do you think that the Gentera's business could be kind of more contracyclical?

And my last question is on, when do you start to see reaching the 20% sustainable ROE? And considering that you delivered a common equity Tier 1 of 37%, could this make us think of higher dividend payout ratio next year, which could also be supportive for the ROE expansion?

[Mario Langarica Ávila, executive]

Thank you very much, Ernesto. I will answer the first and the third, and then Patricio and Enrique will probably give you the answer to the second.

Yes. Well, very good point, and I didn't say that in my speech. But we have readjusted our original expectations for rates for the year-end. And now we are expecting a 5.5% reference rate for Peru and an 8% reference rate for Mexico. And that's also why we also said that we are prudent in the expectations for next quarter because the interest rates will grow.

Now what we're doing? As you can see, our balance sheet management team is -- has been doing a lot of things to continue improving our asset and liability profile. And we are switching between interest, fixed and variable rates. We are reducing our liquidity, and we are also expanding additional funding sources. We are not expecting to increase prices to our clients. But we think that managing through the cost of risk through the adequate management of expenses, we still can bring an improvement to the net income even after the -- these increases in the reference rates. Patricio or Enrique?

[Patricio De Bonilla Garcia Vallejo, executive]

I'll jump to the second question, Ernesto. In terms of portfolio, you need to bear in mind that Mexico and Peru, they still are very large underserved markets where credit demand is robust. Therefore, in economic downturns, as the one we're living in, the reality is that more micro entrepreneurs require financing for their activities.

As such, we don't expect to see lower volumes. As you will remember, the guidance for the year is to grow the portfolio between 13% and 15%. This first quarter of the year shows that we are in a very good momentum to get there. And going forward, even with a high inflation environment, the reality is that where basic goods start to pick up in prices, the demand for financing also increases because they buy inventories on the credit that we collect. And as such, we don't expect a contraction of the portfolio because of inflation.

So having said that, we are still aiming the guidance for the portfolio this year, and we still see very good opportunities for the coming years.

[Mario Langarica Ávila, executive]

Thank you, Patricio. And for ROE, as you have seen this quarter, we had an excellent 16% ROE, and that basically comes from the very good ROE of the bank and the improvement of the results in Peru. We hope that for the second half of 2023, we could be above the 20% hurdle that we have talked about. And since this year, still Peru has to pick up and next year will probably be a consolidation year for Peru. Once we have Peru with similar levels of ROE compared to 18% and 19%, then we will be able to reach the 20% hurdle.

[Ernesto María Gabilondo Márquez, analyst]

Perfect. And this ROE of 20%, is this considering a higher dividend payout ratio?

[Mario Langarica Ávila, executive]

Very good point. As we mentioned in our last call, part of the payout ratio, where it is around 20%, has to do more with the acquisition of ConCrédito. But once the acquisition -- the final part of the acquisition is accomplished in August, then we will surely be able to increase the payout of Gentera, obviously, if the results are as expected for next year. So even though without reaching the 20% ROE, we would expect to raise the payout if things happen as expected.

[Operator]

Your next question is coming from Jason Mollin of Scotiabank.

[Jason Mollin, analyst]

My question is about growth and the growth expectations that you were just mentioning as part of the prior guidance. I guess, let's talk about 15% loan growth there. What is driving that? Will it be increasing number of clients in Mexico and Peru? Will it be increasing the average ticket? Do you see the average ticket going higher with this kind of inflation that we had in both Mexico and Peru? And what do you think are the drivers to have better-than-expected growth or weaker-than-expected growth, if you're suggesting that perhaps there's some lack of cyclicality in the business despite the slowdown in the economic growth outlooks for your main markets?

[Patricio De Bonilla Garcia Vallejo, executive]

Thank you, Jason. This is Patricio. These drivers for growth, of course, have to do with customer acquisition. We are still growing in customers. But more importantly, we are retaining better existing customers. As you will recall, existing customers can repeat higher loans. So the ticket size increases as you retain good customers. So new customers and higher volumes of existing customers will drive the group lending portfolio in Mexico.

As you can see also, the individual piece of the Mexican business is doing well. We expect to continue the growth momentum on the individual lending side in Mexico. That's another avenue for growth. And the cross-sell opportunities for both group lending and individual are growing fast. As you saw, we grew -- the cross-sell product grew by 97% in Mexico. So those 3 factors will drive growth for the Banco Compartamos business.

On the Peruvian front, we are growing back again, the individual fees, as we are holding better the asset quality, as you saw. And we are seeking back again growth on the group lending side. So new customers on the group lending side and retaining better individual are the growing factors or items for the Peruvian business. And you need to bear in mind also that ConCrédito, it's playing also a very strong growth momentum. As you recall, we are growing over 30% in this business. We are entering new markets in Mexico, and ConCrédito will also help Gentera to continue the growth momentum going forward.

So I talked about the 3 financial subsidiaries for Gentera. I know those 3 drivers will drive growth not only in this 2022 but going forward.

[Jason Mollin, analyst]

And what are the risks to the upside or the downside in these -- for these drivers?

[Patricio De Bonilla Garcia Vallejo, executive]

The reality is that the competitive landscape today, it's not very strong. The reality is that we are seeing that competitors in Mexico and in Peru are still facing operational and financial difficulty due to the pandemic. Therefore, there's a large market that needs to be served.

But we need to be careful, Jason. As you remember, we are maintaining good asset quality. We would rather grow with quality than fast, as you have seen through the years. But the downside risks, of course, are economic downturns. We're seeing that the growth not only in Mexico, also in Peru, it's slowing, and that's something to be considered. And that also could put pressure on the asset quality. Those 2 would be the downside risks for what I just mentioned.

On the upside, if we are digitally enabled through -- for the end of the year, and we are able to restructure our digitally enabled customers, we think that there's a lot of growth momentum using digital tools for the subsidiaries of Gentera.

[Operator]

Your next question is from Yuri Fernandes of JPMorgan.

[Yuri Fernandes, analyst]

I have a first one regarding your guidance. I guess you kept it unchanged, the MXN 2.05 to MXN 2.15, EPS per share, right? Don't you see this as too conservative? You already had like MXN 0.62 this quarter. And if you want to analyze this, we are talking about MXN 2.4 to MXN 2.50 EPS, right? I understand that G&A will move up because of your investments on digital front. It has been very good this quarter, maybe not sustainable.

But your effective tax rate was also very high this quarter. And I guess, margins should keep healthy. ConCrédito was weak this quarter because of higher provision. My question is, why not revise the guidance up? Like do you see, I don't know, any kind of headwinds that I'm not seeing here in these comments? Like what is your take here on your EPS guidance for the year?

And I had a second question regarding with pricing and margins. Gentera is a holding, right, like a consolidated entity, which should have more than 15% NIMs. I know there is accounting changes here. The mix has changed as well. But don't you -- what is the group margin in the long term? Do you think like your margins will remain around 40%, the current level? Or do you see NIM after margin expansion going forward?

[Enrique Majós Ramírez, executive]

Thank you, Yuri, and I think that you have a very valid debate on the guidance. So let me first give you the short answer. And maybe the short answer is that we believe it is too early to tell. We are in the first quarter. But yes, things could change. And if we need to make an adjustment, we will do it, and we will communicate it to you as soon as we decide it.

But let me give you a little bit more of the rationale under this. And I think that, yes, the good news is that we believe we have been very consistent now. And after several quarters, we have been showing solid recovery. So -- and Peru is a little bit behind, but it is also showing a solid recovery. And as Mario explained, we also know that we have some investments related to our digital transformation process or initiatives that are still to come. So we know for a fact that we have some expenses that are going to be there for the following quarters.

And on the other side, economic activity seems to be speeding down not only in Mexico but also in Peru. So we believe we need to finish observing how is it going to impact us. And maybe for the second quarter of the year, we will be able to make a better analysis or assessment of this. And if we decided to change the guidance, we will tell you as soon as possible.

[Mario Langarica Ávila, executive]

And well, regarding NIMs, yes, as you know, we have changed the structure of the composition in the last year, mostly to the relevance -- increasing relevance of Peru. But as you have seen, our earnings have been increasing. We would expect the NIMs to maintain the good momentum for the following quarters. And what is very important is that this improving margin through, one, the growing in the loan portfolio; second, the control of the interest expenses; third, maintaining asset quality, should allow us to continue this improvement. But very important is what all of these transformational initiatives that Enrique has described and we have been talking about in the past should bring going forward in terms of productivity and efficiency.

So yes, we will keep obviously taking a look at the marginally. But overall, it's very important not to forget that where we have a big opportunity is in the efficiency of the company with the digitalization that we will bring in the next years.

[Yuri Fernandes, analyst]

And also quickly, I was just pointing margin because sometimes we hear from investors that because you are a liability to bank, right, higher rate seems to be negative, people, they are, I would say, a little more conservative when looking to the NIM. And I do believe that maybe you have more potential for margin expansion, more power with the rates, right? So this is why I'm asking about margins. I'm basically trying to see the strength going forward despite of a tougher environment for rates in Mexico.

[Operator]

Your next question is coming from Brian Flores of ASA Investments.

[Brian Flores, analyst]

I have a couple of questions and then maybe a follow-up on Yuri's question. My first question is on ConCrédito, particularly on the asset quality, because we have seen sequential improvements both with a very high level of charge-offs compared to the growth also. So just wanted to ask, how do you think there is a sustainable level of charge-offs versus gross loans just to have an idea going forward?

And also, just willing to understand, my second question is on OpEx. Mario, you commented that, of course, there will be some investments going forward. And this is, I think, very understandable. Just wanted to understand, how long do you think we could see these investments? And how much do you think it will represent on a marginal basis compared to the original guidance going forward? And after that, I'll make a quick follow-up on Yuri's question.

[Enrique Majós Ramírez, executive]

Okay. Thank you, Brian. Let me start with ConCrédito, and I will take the opportunity to give you a little bit more information about how ConCrédito's business is growing. So as Patricio explained in maybe the first question he answered, the ConCrédito strategy is very -- we are really happy and we have great expectations about this because it's basically based on 3 things. The first one is the geographic expansion that the business is having here in Mexico. The second one is this referral program that I talked about in my initial remarks, which are these Compartamos clients becoming Empresarias ConCrédito. So that's also an expansion of the distribution channel to put credit in the market. And the third one is the initiatives related to CrediTienda.

And also with this, we see that in ConCrédito, we have those opportunities that we have seen since we started and we planned and executed the investments on this business, which is they have a very good digital platform for Empresarias and staff to manage their loans and processes. So they are a kind of a fintech business. And now, as I told you last quarter, they have become branchless in terms of their operations in the field. So there's a lot of things that we like about this business. Portfolio is around MXN 3 billion now.

And talking about now your question related with the quality of the portfolio, I can tell you that -- and Mario can give you a little bit more information about this. But I think that the problem was -- at this point, the problem is in the write-offs. What we are looking is that NPLs, which is these short-term nonperforming loans, is very good. It's even below 2%. So the problem, I think now it's in the past. It was last year.

So the write-offs, and Mario will give you more information about the write-offs, but the write-offs was a problem because last year, as you remember, what we did is that we started a very aggressive expansion with new Empresarias who didn't have the traditional experience of managing this kind of businesses. We put correction measures on this, and we turned this strategy more into this referral program. We had a very, very good quality of portfolio. We are looking at very good results, not only in terms of the loan portfolio growth, but also in the quality of that portfolio. So I guess, looking forward, I think that we are now with more solid steps in ConCrédito's growth. Mario, I don't know if you also have something.

[Mario Langarica Ávila, executive]

No. I mean, you have explained it very well. What I would tell you is that, one, the write-off level of ConCrédito for the quarter was almost double the first quarter of '21, and that was because of what Enrique just explained. The cost of risk for the quarter was 34%, but we should aim to bring that level back to below 20% as soon as possible. So we hope that for next year, we should be below 20%, as it has been historically below that. Last year, it was 5 -- 15.8%. And in 2020, it was 17.7%. So we should aim to bring it back down. So it's a temporary situation.

And again, what is important is to see the cost of risk for Gentera as a whole. And that's -- we are at 9.7% compared to the guidance that we gave of 10.5%. So yes -- and we also mentioned that in the past that we -- that the good levels of asset quality should allow us to test and pilot new products and new ideas in order to reach additional growth. But obviously, we will control that particular case and bring down the cost of risk at ConCrédito as soon as possible.

The other one, the OpEx. Well, yes, I mean, we gave a guidance of around 12% to 13% for total expenses. Total expenses are defined as what expenses were in the previous methodology of the [Foreign Language]. And what we said is that, more or less, an increase of 5% was related to the normal growth of expenses. And the delta, plus/minus 7%, was related to all the expenses that were related to the transformational initiatives this year.

So basically, what we should expect is that once we do this, most of the investments of this initiative this year, we may have a little bit also next year. But since most of it will happen this year, those investments are already considered in the guidance that we gave. So you shouldn't expect additional expenses to what we guided. What we said is that we will have more expenses in the following quarters than in this quarter because every -- and that's normal. Every year, the first quarter, traditionally, we spend less than the following ones. But in this particular year, these investments will be in the following quarters. But all of the -- some of those expenses should not be above to what we guided in the beginning of the year.

[Brian Flores, analyst]

That is very clear. And if I may, just a quick follow-up on Yuri's question on the guidance. Just like taking a higher-level picture here, isn't, by nature, Gentera's a bit countercyclical in nature? Meaning that for the CNBV segment, generally, credit is a bit more demanded when the economy is a bit more tight? Just wanted to see your view on that.

[Mario Langarica Ávila, executive]

What we say is it's not necessarily that we're countercyclical. What is very true is that the demand in our segment is huge, and it's not satisfied. So independently of how the economy is in general, there is a big demand from our clients in the segments that we cover. And that's why even though the economy goes better or worse, we need to serve that demand. And that's where we see the growing opportunity.

[Enrique Majós Ramírez, executive]

Yes. And again, I think that the answer or the rationale comes in 2 main ideas that I explained before, which is we have some investment expenses coming up because of our digital transformation initiatives in the following months. And the second one that has to do with the economy is that we are looking that we are actually having a speed down of the economic activity in Mexico and in Peru. And we have to look how is this going to affect our -- or impact to our customers because the slowdown in the economy is also something that affects the business of our customers.

So let's see how this goes. And as I told you, I think it is too early to tell. And I'm sure we are going to talk about this in the next quarter report.

[Operator]

Your next question is coming from Jorge Henderson of Santander.

[Jorge Henderson Cubillas, analyst]

Congratulations for the results. My question is on competition. You mentioned you intend to look upwards from the socioeconomic level to the C level, looking for higher income customers. My question is that, should this certainly imply that you have to compete more heavily with fintechs and other places where you previously were not usually competitors?

[Mario Langarica Ávila, executive]

Yes. Sorry, Jorge, maybe I didn't hear your question clearly.

[Patricio De Bonilla Garcia Vallejo, executive]

Let me try to jump into it. In terms of competition, Jorge, and I understand that you -- the different types of competitor that we face, and this is true for Mexico and also Peru. Of course, we compete with the traditional banks in certain sectors, in certain products, the higher-end customers of Compartamos. We might have credit from other -- from traditional banks through credit cards or whatever. We also compete with niche banks but focus mostly on the consumer lending side, and the bulk of our competitors today are microfinance institutions that are in microfinance networks, both in Peru and Mexico.

The fintechs, of course, they are entering into the landscape. Some are very well funded and trying to reach scale. We have mapped all the competitors, again, not only in Mexico but in Peru in these categories. And as of today, what I can tell you is that where we compete the most is with microfinance institutions. And as I said during my remarks, these competitors got hit hard during the pandemic, both operationally and financially.

Therefore, we see an opportunity to tap into those customers. But again, going forward and moving to the digital world as we are heading as well, the reality is that not only the existing competitors but new offerings such as the fintechs are the ones that we expect to fight head-to-head in the years to come. I don't know, Jorge, if this answers your question. It was not very clear.

[Jorge Henderson Cubillas, analyst]

Yes. I mean, I also have a couple of questions that I wanted to ask. And I know you think that -- I mean, I know you already answered that your main competitors are microfinance institutions. But I just wanted to know, you have sighted some fintech companies that are getting more into your area [indiscernible]?

[Mario Langarica Ávila, executive]

Yes. Okay. Thank you, Patricio. So let me try to give you another view of what already Patricio has explained that I agree totally with him. And I think that to compete in our market, not only in the way we traditionally have competed, but how can we compete for the customer and to be the more convenient offer to -- for our customers in the future, I think that we need to put our efforts and our capabilities in 2 things.

The first one is I think that technology and digital tools are going to make a very huge difference for the customer experience and for the efficiency of the financial institutions. And that's why it is so important for us to be very aggressive but very effective with the digital transformation strategy that we are following. So -- and definitely, I think that there are coming up many fintechs and different kind of companies that are moving -- that understand this and are moving to a more digital experience in terms of financial services. So that's very important. We obviously are very focused on looking how these capabilities and how these fintechs are deploying and developing new products and new ways to deliver the product to the customers, and I think that we are working on this.

The second thing that is very important and not always we talk about this when we talk about competition but specifically about fintechs is that our core business is about managing risk. It's about collection. It's about our capacity to really be good in collecting the loans that we disburse. So -- and I think that, that's a challenge for many of -- I think that's a challenge in which we have a competitive advantage because we have a lot of experience there. And I think that's something that other institutions, including fintechs, have a lot to do and to build around their business to really become a very solid and growth potential businesses.

[Operator]

Your next question is coming from Carlos Gomez of HSBC.

[Carlos Gomez-Lopez, analyst]

Again, congratulations for a very good result. I wanted to ask you about your acquisition of a stake in ConCrédito, and You acquired 6%. And when we look at the notes in the financial statements, we see a price of MXN 233 million. Could you confirm that is a price that you paid? And is that similar to the price that we should expect when you complete the acquisition of the other 17% you still have to buy by August?

[Mario Langarica Ávila, executive]

Yes. No, it was around MXN 600 million. And we -- as we mentioned in the last conference call, Carlos, in August, when we acquire the remaining part to reach the 75% that we said, we will provide you with all the details of the different moments of the acquisition so you have the full picture at that point.

[Carlos Gomez-Lopez, analyst]

Okay. So -- but for this acquisition, therefore, the number you have in the notes, your financial statement, is only a part of the price. Did I understand that?

[Mario Langarica Ávila, executive]

Yes. Yes.

[Operator]

Your next question is coming from [ Jose Cuenca ] of Citigroup.

[Unknown Analyst]

Just 2 follow-ups with regards to what has been commented on operating expenses. Yes, you were mentioning that you expect most of these investments to the digital initiatives to take place in 2022. So my question here is, when do you think it would be a good time to assess the benefits of these efficiency gains, of these productivity gains? Not sure if 2023 would be like a good year to see how these investments have turned out.

And my second question is with regards to net fees. Just wondering, not sure if the level of net fees we saw during the first quarter, you think it's representative of what you could see in the coming quarters? Just if you could have a little bit of color on that side.

[Mario Langarica Ávila, executive]

Yes. Thank you very much. Well, regarding operating expenses, yes, we have projections, obviously, for each of these initiatives with a very clear P&L and with specific goals that each initiative needs to reach. And yes, as you said, part of the benefits, we will see them in '23 and also going forward. It's too early to give you the details of that because we have said that some of the investments, we still have not done it yet. But we think that they will have a very fast impact as they are deployed, and we can map each presence in the country.

So probably in the last quarters of the year, and when we tell you what are our expectations for next year, we can provide you more detail and some KPIs of the productivity and the improvements of each initiative, similar to what Enrique was telling you in his speech of moving from processes taking 5 days to taking hours or minutes and things like that. So a very good question. We expect to see the benefits in '23, '24 going forward. And we can -- we will provide you more detail when the time comes on those.

Regarding net fees, well, yes, as you know, fees are related to the activity. So the main driver for fees collected are the size -- the growth of clients, the growth of the portfolio. And those are related mostly to the insurance fees and is related to the credit activity. But also, we pay more fees if the portfolio grow and if the activity grow. But we should expect net fees moving positive and going forward in the next quarters.

[Operator]

[Operator Instructions] Okay. There are no more questions in the queue. The question-and-answer session is now concluded. I will hand over the call to the management of the company for final remarks.

[Enrique Majós Ramírez, executive]

Well, thank you. Thank you all for attending this call and for your continued interest in Gentera. We are, as you can tell, very enthusiastic about what we are facing and what we expect for the future. As you can see, 2022 will be a year of growth of our business at the same time that we'll be working on the strategic digital initiatives to start capturing value from them as soon as possible. So it will be a very exciting year. And of course, we will keep you posted. And thank you again. Have a nice day.

[Operator]

Thank you all for participating in today's conference call. You may now disconnect.