Gentera SAB de CV

BMV:GENTERA

Earnings Call Transcript 2018-Q2

[Operator]

Good morning, and welcome to the Second Quarter 2018 Gentera Conference Call. I would now like to turn the conference over to Enrique Barrera, the Investor Relations Officer of the company. Sir, please go ahead.

[Enrique Barrera, executive]

Thank you. Good day to everyone. Thank you all for joining us and for your continued interest in Gentera. I'm Enrique Barrera Flores, 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 second 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 located 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]

Thank you. Good morning to everyone. We are glad to have you here for our second quarter 2018 report. As you certainly know, Gentera's vision is to eradicate financial exclusion and transform lives through the benefits of having access to financial services. From previous reports, I am sure you are also aware of our strategy for this year. As we have mentioned, our goal for 2018 is to rebuild the relevance that we have always had with our customers through our products and services. Also, we are working to have a better segmentation of our customers base that will provide us the ability to take special care of our better and more loyal customers. This way, we are not only capturing new customers, but we are also improving our customer retention rate. As we have stated before, first semester has allowed us to stop the loss of customers and for the second semester of the year, we will recover our growing trends again.

Also, we keep on working on innovation and new business propositions based on technology, and we expect to deploy some of these initiatives in 2019. Let me share broadly some global Gentera's business results. Our total Gentera portfolio grew 2.6% compared with the results in the second quarter 2017. It is very relevant to highlight that one of the priorities we had assigned last year was to improve the quality of our portfolio in our 3 markets: Mexico, Peru and Guatemala. And the benefit has already been seen on an important reduction in our cost of reserves. This way, NPLs improved significantly from 3.9% to 2.9% in a year-on-year basis. Gentera's net income was above expectation with a 3.3% growth compared with the second quarter 2017.

It is very important to mention that this growth is partially due to a better asset quality and less cost of provisions, and we have also a couple of nonrecurrent benefits that Mario will explain in a few minutes. Gentera concluded the second quarter of the year with results aligned to our plan for the first semester. These results will help us to start a second semester with more solid foundations to start growing again.

And before turning the call to Patricio, let me give you some general information about each of our business unit.

Specifically, in the case of Mexico, Patricio will provide a detailed landscape and explanation. However, just let me highlight 3 relevant points. First, the quality of our portfolio has improved substantially, and as a direct consequence, cost of provisions has been much lower than expected. Second, even if we have had a slight decrease in the number of clients during the year, we have to consider that a large number of write-offs were applied during the first 2 quarters of the year. Second semester write-offs are much smaller, and we have an aggressive marketing strategy. So trends for the rest of the year look clearly positive. Third, even considering write-offs, in July, Crédito Mujer started growing again for the first time in the last 20 months.

Let me now switch to Peru. Peru already represents for Gentera 32% in portfolio and 14% in net income. In Peru, portfolio is growing at 37% growth rate in a year-on-year base, and we have now more than 0.5 million active clients. We keep on growing our market share, especially through the group lending product, Crédito Súper Mujer. And we are now the third larger microfinance institution in Peru in terms of number of clients. In addition, the quality of our portfolio in Peru is very good and still improving. NPLs decreased from 3.2% to 2.8% in a year-on-year basis. For 2019, the microfinance industry in Peru expects to grow around 10%, and our estimated -- estimation for Financiera Compartamos is to grow above the industry rate.

In Guatemala, as of this quarter, we have 95,000 active customers. In a year-on-year base, we grew 9% in clients and growth in portfolio was 13.5%. Also, the quality of portfolio has improved from 3 -- 4.3% in the second quarter 2017 to 3.5% at the end of last quarter. YASTAS recorded 1.8 million financial transactions during the quarter, representing a slight 2% increase compared to the number of financial transactions recorded in the second quarter 2017. At the end of last quarter, YASTAS had a network of more than 2,900 affiliates. ATERNA ended the quarter with 5 million active life insurance policies through its operations in Mexico, Peru and Guatemala. And with more than 2,800 points of payments, INTERMEX processed 18% more in remittances payments compared with the figure reached in the second quarter 2017.

We are also happy to announce that ConCrédito transaction was successfully closed last month. This was a MXN 2.5 billion transaction, including a MXN 500 million convertible debt for a 36% of the shares of the company. As we have explained before, the strategic rationale of this operation has 3 main elements. The first one, ConCrédito business model addresses the same market segment that we do. Second, their products can make our product offer more complete. And third, ConCrédito's business model provide us an alternative and innovative distribution channel through their distribution direct sales network. In addition, ConCrédito is developing new digital technologies that can give us new opportunities and more efficient ways to grow our businesses. We welcome ConCrédito's team as new partners, and we firmly believe we will accomplish great things together.

As you can see, in Banco Compartamos Mexico, during the first semester, we have mostly stopped the loss of clients and, as promised, second semester will be consistently growing again. At the same time, for the rest of Gentera's business units, results are solid and on track. So let me just finish by saying that we are comfortable and feeling strong with the business plan we have for this year. We have a compelling marketing strategy based on what our customers have told us that is valuable for them. We feel very enthusiastic about what is coming in the second semester of the year, and at the same time, we are developing innovative initiatives for the future years. Let me now give the space to Patricio, who will give us more details about our results and plans for Banco Compartamos, and afterwards, Mario will get us into more specific of financial information. Thank you, Patricio, and please, go ahead.

[Patricio De Bonilla Garcia Vallejo, executive]

Thank you, Enrique, and good morning to everyone. As we pointed out since October last year, our recovery plan to stabilize the business has 3 phases. The first phase was during the fourth quarter of 2017, where we identified what went wrong and designed the plans to stabilize the business in 2018. The second phase of this plan happened in the first half of 2018, where we rolled out the improvements that were required to do so. The improvements were: First, changes in our corporate structure to better execute our plans and being efficient. Secondly, improvements in our product offering focused on the credit side, specifically in Crédito Comerciante's origination process. And third, changes in the incentives of the sales force to be focused on service and asset quality. Fourth, prioritize strategic projects to give better and faster results. And the third phase will happen in the second half of this year, where we have already launched an aggressive commercial proposition that will allow us to grow the customer base and surpass the customers that we have in 2017. The results of the second phase that can be seen in the second quarter of 2018 are encouraging.

Let me go through the most relevant aspects of the business dynamics. On the customer side, after 2017, where we lost over 35,000 customers per month, during the first 6 months of 2018, we lost on average 10,000 customers per month, mostly due to the write-offs that we have to make of 2017 vintages. The bulk of 2017 vintages have been already written-off. Therefore, due to the excellent short-term asset quality that we have seen in the first half of the year, we expect write-offs to come down and be able to grow the customer base by year-end. On the credit side, after a seasonal effect that increased the portfolio factor in the first quarter of 2018 due to the Easter holiday, since April, we have consistently grow the portfolio in May and June, reducing the contraction loan portfolio versus the second quarter of 2017.

For the second part of this year, portfolio growth will be driven by customer attraction, and we expect to maintain the growth momentum in the following months despite some seasonality affecting certain months. Customer and credit demand will be higher because we have faster and simpler processes on the street, motivated personnel due to the adjustments that we have made in the incentive and gross, disciplined execution. And finally, we will launch in August an aggressive commercial effort that will position Compartamos as the best financing alternative in Mexico, not only in the service but in the diversity and the terms and conditions of our products. We are confident that our efforts to grow the business will allow us to meet our growth expectations for the year.

In other subject, we always said that our goal is to offer development opportunities for our customers with efficient products. To do so, we need to grow with quality. On the NPL side, asset qualities is strong and NPL is below 3% for the first time in over 24 months. This is a reflection of our efforts to originate better in every product category. Due to this factor, we were able to grow the NIM after provision in the quarter despite the portfolio contraction of 8%.

In other pieces of the business, the saving products are gaining share in our liabilities side, which form part of our portfolio with retail deposits now. The strategy is to focus on the usage of these products, while increase the minimum balances of the existing customers. We want to stabilize the business before ramping up growth in this product specifically back again.

On the insurance side, the acceptance of our products is still strong, not only in life insurance but demand for other products is also rising, helping with the loyalty of the customers since they are products that are not present in most of our competitors.

The second half of the year will represent a great opportunity to increase our market share and take advantage of the strong brand and financial position of the bank to finalize the years with better trends than the end of 2017. Thank you, again, for your interest, and I will now leave the call over to Mario Langarica, who will review Gentera's financials.

[Mario Langarica Ávila, executive]

Thank you, Patricio, and thank you, Enrique, and good day to everyone. In the second quarter, interest income stood at MXN 5.1 billion, representing a 1.7% contraction compared to the same period of 2017. This result was mainly driven by the contraction experienced in the loan portfolio in the Mexican subsidiary.

Interest expense grew 1% compared to the same period in 2017. This result is explained by a contraction in the bank portfolio, compensated by a portfolio expansion in Peru. Two, the mix of fixed and floating rates of our funding portfolio. Three, the growth in clients' deposits, both in Mexico and Peru. And four, better cost of funding in Peru. As a consequence of these dynamics, net interest income showed a slight 2% contraction compared to second quarter 2017. Net interest margin stood at 50.2%, representing a contraction compared to the 54% achieved in second quarter 2017. It is important to mention that this result was affected by our decision to increase our cash position in Banco Compartamos to cover for 2018 uses of funds, such as portfolio growth, maturing liability, dividend payments, et cetera, anticipating potential market volatility.

Other dynamics affected NIM in the second quarter 2018 were: One, smaller average loan portfolio implying lower interest income. And second, increase in the reference interest rate in Mexico. If Gentera hadn't had this additional liquidity described above, NIM before provisions for second Q '18 should have stood around 52.5%.

As we already mentioned, asset quality continued improving. Provisions moved to -- downwards by 29.8% compared to second Q '17. Net interest margin after provisions stood at 43.2%, a similar level compared to 43.8% reached in the quarter and also to the 43.5% obtained in second -- in 2Q -- second quarter in 2017. Taking out the effect of the extra liquidity at Banco Compartamos explained above, NIM after provisions for second Q 2018 would have been around 45.2%, above first Q '18 and second Q '17 metrics.

The cost of risk for this quarter stood at 8.2%, which continues to be below our full year guidance of around 10.5%. This result was mainly driven by a better performance in early NPLs, as described before. Fee expenses contracted 4.6% due to the incremental use of proprietary network versus third parties' infrastructure. As we mentioned in our previous conference call, we expect that the number of transactions in Gentera's channels will change in the coming quarters as we're deciding to give additional flexibility to Banco Compartamos clients to use channels either proprietary or third party at their convenience. Additional contract [ fee charge ] in the coming quarters may be limited.

Net fee income contracted 7.2% compared to second Q '17, mainly as a result of lower late payment fees, which goes in line with our improvements in asset quality.

Operating expenses grew 12.3% compared to second quarter 2017. As explained in previous conferences, this growth is due to the opening of Compartamos bank branches in 2017 and service office infrastructure that in aggregate represent a network of 890 points. Two, to the hiring and training of loan officers and the incentive program for them during this year. Three, marketing and other strategic initiatives, such as our loyalty program. And as a -- we want to confirm that our objective for the year is that operating expenses for the full year should grow around 7%.

The efficiency ratio for the quarter stood at 76.3% compared to 73.9% one year ago. For the 6-month period, efficiency ratio stood at 75.7%, which is still above our midterm objective but in line with our projections for the first semester. Gentera reported net income of MXN 821 million, which represents a 3.3% growth compared to the MXN 795 million reached in second quarter '17 and a 13.1% growth compared to the MXN 726 million reached in the previous quarter.

In this quarter, we had 2 nonrecurring events as we have described in our press release. We canceled a MXN 165 million legal dispute reserve in Banco Compartamos. This reserve we announced it in 4Q 2017. And the second nonrecurring event is that we released a MXN 71 million deferred asset reserve, [ main stock ] related losses of Gentera during the first years of the holding operation. Excluding these 2 events, net income for the second quarter should have amounted for -- to MXN 635 million.

In terms of profitability, return on average equity and return on average assets stood at 19.2% and 7.2%, respectively, for second quarter 2018. For the 6 months' period, return on equity and ROA -- and return on assets stood at 18.2% and 6.9%, respectively. We also want to highlight that in the second quarter, both rating agencies, Fitch and Standard & Poor's affirmed our BBB level scale credit ratings. Thank you for your attention. Operator, could we please move to the Q&A session?

[Operator]

[Operator Instructions] Our first question will come from Ernesto Gabilondo from Bank of America.

[Ernesto María Gabilondo Márquez, analyst]

Three questions from my side. The first one is on loan growth. After some quarters, we start to see modest growth in the loan portfolio. However, we noticed that it was led by the international operations, as you mentioned, by Guatemala and Peru. But the Mexico loan book continues to be contracting. So when do you expect the Mexico loan book to start growing again? My second question is in asset quality. We noticed very nice improvements across all the board and the cost of risk is below your guidance of close to 10%. So if we start to see annual growth again in the Mexico's portfolio, where do you see the NPLs and the cost of risk at the end of the year? And finally, after the second quarter results, are you willing to fine-tune your guidance? Or are you feeling more comfortable to achieve the medium to the top end of your guidance?

[Patricio De Bonilla Garcia Vallejo, executive]

Thank you, Ernesto. This is Patricio. In terms of loan growth, as I mentioned during my presentation, the first half of the year for the Mexican operation was to focus on the improvements on the rejuvenation process on the service side, on the sales force -- rebuilt of the sales force. Therefore, we wouldn't expect to grow fast until we have everything in control. Now asset quality is the best sign that we clearly are originating better, that our loan officers are doing what their role is, to be close to the customers. And now that we have good asset quality, now that we have better structured the sales force, we think that the second half of the year will be more on the growth phase. Mostly, we will be focused on customer growth. Of course, that will bring the portfolio growth by year-end. And again, as I -- and as I said, we are -- we will put in August an aggressive marketing or commercial effort that will position Compartamos as the best financing alternative in Mexico and that will be a combination of loan size and price that will differentiate Compartamos from the rest of the players and that will allow us to cope with the high demand that we normally see in the second half of the year. So again, we first needed to have the business under control. We think that we now have a better grip of our operations, and with that, the second half of the year, we will put pressure in the growth perspectives for the entire sales force. On the asset quality side, of course, for this year, we expect good asset quality. What we've seen is as portfolio grows during the second half of the year, of course, asset quality will show better trends by year-end. So it will be around 3%, nothing different from what you saw this quarter. And next year, the expectations is to keep our products within the ranges that we've mentioned in the past.

[Mario Langarica Ávila, executive]

In terms of our guidance, we have not decided to change our guidance. But we expect that the results for the year will probably be on the high end of our guidance and maybe slightly above.

[Operator]

Our next question will come from Jason Mollin from Scotiabank.

[Jason Mollin, analyst]

Two questions. Following up on the growth of the loan portfolio that you showed and you gave us pretty detailed numbers, how do you view what's going on in Peru with this 35-plus percent growth? I believe part of that was due to the move in the FX. If you can quantify how the operations are going in Peru, the asset quality looked to improve materially, which was good. And secondly, on costs. Just wanted to understand better the outlook for costs since you're looking, I believe -- we were thinking about costs slowing dramatically for the full year from the run rate that we're seeing in the first 6 months. If you can talk about that dynamic, is that a base effect? Is that because you're cutting more costs as we go forward?

[Enrique Majós Ramírez, executive]

Thank you, Jason. This is Enrique Majós. And yes, talking about Peru and the growth that we are expecting there. As I told you, we know that the Peruvian industry is planning to grow in the following year, I'm talking 2019, at a rate of around 10%. And we feel comfortable that we can grow slightly above that number. Our trend is, as you can see and you told, is very good. And our growth in Peru is based on our initial strategy when we decided to go to that country taking there our group lending methodology. And we have been very successful there. Actually from the 0.5 million customers we have there, 305 -- 350,000 customers are for Crédito Súper Mujer, which is our group lending product. And 150,000 is from Crédito Individual. So the growth rate is mostly from Crédito Súper Mujer, which has still a big potential for the following years. So as you can see, we can say that we will be growing in our portfolio in Peru around 10% to 15% in the following year.

[Jason Mollin, analyst]

And what about -- just comment on the growth organically in Peru and the impact of the FX?

[Enrique Majós Ramírez, executive]

We have been growing organically there, and we believe that we have to still to go deeply in some of the areas in which we have started having presence. And so I think that most of the growth we are looking for the following years are organically, and we don't have any other plans in terms of inorganic growth.

[Jason Mollin, analyst]

Okay. And expenses. How are you thinking about the evolution of expenses in the second half?

[Mario Langarica Ávila, executive]

Yes. As we mentioned in the past, and as you can still see, obviously, in our results, the level of -- the growth in expenses compared to the first semester of 2017 was 4.2%, was -- again, what I just said in our remarks is that we expect to reach the 7% growth that we guided. And that's basically because, as we have spoken in the past, most of the growth on the 2017 expenses base was -- came for the expansion in branches that we did in Mexico and also for the expenses on loan officers that we hired in the second part of 2017. So now at this point, we think that we have a very clear visibility of our expense base during the rest of the year. So we feel comfortable saying that the full year to full -- the year to year comparison to 2017 will be 7%.

[Operator]

Our next question comes from Alonso Garcia from Crédit Suisse.

[Alonso Garcia, analyst]

My first question is regarding the renewal rates of your clients. I would like to know if you can share what was the level that you had last year in terms of renewal rates? And what is your level now and what -- where do you think you can take it? I mean, what has been like the historical recurring level in the past? I'm just touching base, again, on the OpEx side, how -- I would like to know how sustainable is this 7% that you are targeting for this year considering stronger client and loan growth in the coming years and also the fact that you have restructuring process impact the corporate level this year?

[Patricio De Bonilla Garcia Vallejo, executive]

I couldn't understand well your second question, Alonso. Could you repeat it back again, sorry?

[Alonso Garcia, analyst]

Yes, I mean -- yes, no problem. How sustainable is this OpEx growth in the levels of 7% that you are targeting for this year? I mean, how sustainable is it for the coming years given that you are planning -- that you are expected to grow more going forward?

[Patricio De Bonilla Garcia Vallejo, executive]

Okay. On the renewal rates, last year -- I mean, we normally operate with around 83%, 84% renewal rate. Last year, it came down in certain products, I mean, as low as 76%. We are now at the 83% levels, and we expect to take it up to the 85% by year-end. So the efforts that we are doing on the commercial front have to do very much with incentives for the customer base if they renew the loan with us, and that's been a strategy that we expect to increase the share of renewal up to 85%. So it's trending upwards from the lowest point of 76%, and still a couple of points more should be expected for the year-end of 2018 in Mexico. On the OpEx growth, as we have mentioned in the past and we recognized in past conferences, our growth levels of OpEx in the past were 2 digits, were growing at even a faster rate than the income. And as we said, the first goal of the year, we said that one of our main objectives was to bring back growth on operating expenses below 10%. And that we hope is what we are going to achieve this year, and that will be also what we want to achieve going forward. As Enrique said, the first goal of the year, our objective is to return to double-digit growth on -- in income, in 2019, was to keep control of operating expenses in single-digit growth for following years. As also -- as we have also mentioned, our efficiency ratio is still high to what our medium-term goal will be, which should be 65% in the medium term.

Is everyone connected?

[Alonso Garcia, analyst]

Yes, I am.

[Operator]

Yes sir, we still have you on the line.

[Enrique Majós Ramírez, executive]

Alonso, and just let me give a little bit more information around your second question. But talking about our expense growth rate, in the first quarter of 2018, this year, we had 16% growth versus the first quarter 2017 on a year-on-year basis. And the second quarter of this year, the growth was not 16%, but 12%. And we feel that the trend is going to be the same for the third and fourth quarter. So we believe we are on track to accomplish the guidance that we defined in the beginning of the year.

[Operator]

We'll now move to our next question from Claudia Benavente from Santander.

[Claudia Benavente, analyst]

I have 2 questions. The first is a follow-up on Peru. Don't -- maybe I feel like the 10% or a little bit slightly above 10% growth in terms of loans is a little bit conservative. Maybe I would suspect that you intend to drop a little bit the growth on individual loans and focus more heavily on group loans. Do you feel the 32% year-on-year growth on group loans -- on the number of customers is sustainable? And my second question is about ConCrédito. The last figures that you provided was when you announced the acquisition. I remember that you said, I think that at September 2017, you -- the net income that ConCrédito was posting was 25%. What's -- how has been the growth so far in 2018? And what should we expect for the following years?

[Enrique Majós Ramírez, executive]

Thank you, Claudia. Yes, regarding Peru, I believe that the growth that we have been having in the last months or maybe a couple of years is sustainable. It is a big market opportunity there with -- especially where the group lending methodology sits since this product addresses a lower segment of people that don't have access to the traditional microfinance individual loans in Peru. So -- and we believe that we have a big potential market yet there. So yes, I think that for the next, at least, 2 to 3 years, we are going to have this kind of growth. And yes, I don't know, maybe the growth is going to be above the industry estimation. We don't know how above can we grow because we are also always dealing with the average loan size of the Crédito Súper Mujer, which is always a challenge since we are addressing a lower market segment. So that's the reason why it is difficult for us to be very aggressive in terms of the growth of the portfolio since we really don't know if the average balance per loan is going to be that high. So that's why our guidance is around 10% to 15%. And yes, it's sustainable for the following, let's say, 2 years.

[Claudia Benavente, analyst]

Sorry. Just a follow-up on Peru. I remember that the superintendent there was requiring like in -- much stricter reserves requirements. Has that changed?

[Enrique Majós Ramírez, executive]

Sorry, I missed the first part of the question.

[Claudia Benavente, analyst]

I remember that the superintendents in Peru was requiring you to reserve much more provisions than compared to Mexico. Has that changed because I remember that they were trying to capture more statistical information before making your reserve requirements much softer?

[Enrique Majós Ramírez, executive]

Yes, what we have been talking with them, with the superintendents in Peru, it has been very productive discussions. And yes, we are following their rules, and we have reserved enough to accomplish with what they are asking for. So we feel comfortable with the forecast that we have for the year, even considering what the superintendent is asking for.

[Mario Langarica Ávila, executive]

Okay, Claudia, you want to move to ConCrédito?

[Claudia Benavente, analyst]

Yes, please.

[Mario Langarica Ávila, executive]

Okay. So what we are seeing in ConCrédito and probably the best way to see it is that we are expecting an 18% growth for the full year of 2018 on a -- 25% on the loan portfolio and 18% growth on the net income. Probably the best way to see it and the way we wanted to present it to you is that the contribution that we expect to receive for these 6 months that we are going to start receiving part of the net income of ConCrédito, is that we expect to receive around MXN 75 million for these next 6 months. For 2019, the contribution that we expect to see in our income statement will be around MXN 175 million next year. And that basically considers also an 18% growth for 2019. With the numbers that we have for December, the transaction closed at around 6.2 PD and around 12.2 PE.

[Operator]

Our next question will come from Yuri Fernandes from JPMorgan.

[Yuri Fernandes, analyst]

I had a question on your [indiscernible] on loan growth for the second half. If you can comment on what the strategy is? Like, how you are seeing pricing for loans in Mexico, if you are willing to reduce the lending rates in Mexico? And then -- and my point here is to discuss a little bit the margin because I remember you're always talking about maybe margin before provisions expansion by the second half given the higher volumes, but now we see like Peruvian portfolio growing faster and we know that the margins in Peru are lower than what we see in Mexico, and also maybe, I don't know, some more competitive appetite here on lending rates. So my point on this question is to know like how you are seeing the margins for the second half and, particularly, how your means should behave? And I'll make my second question after this.

[Patricio De Bonilla Garcia Vallejo, executive]

Okay, Yuri, this is Patricio. In terms of the strategy, again, as we said, in Mexico, demand for credit remains strong. The opportunity for financial inclusion remains very healthy. Even though there is competition, there is not necessarily one single competitor that is competing with us on a nationwide basis. As we said, the lack of growth in last year had been due to operational issues that we had ourselves. Therefore, now that we feel comfortable with all the restructure that we made, the focus for growth for the second half of the year will be mostly on the Crédito Mujer side. Crédito Comerciante still will maintain strong origination. We have raised the bar in terms of the origination metrics. And individual lending is still [indiscernible] more to the entire portfolio. So the focus will be on Crédito Mujer. As I said during the call, the strategy that we have for this -- for -- I mean, will start in August 6, is to allow customers to increase the sizes of their portfolio with Compartamos, and as they do so, they might enter to better terms and conditions, mostly in terms of pricing. The entire effort for the pricing it's not -- no more than 3 percentage points for this portfolio for the coming 12 months. So it's not necessarily a very strong effort given the fact that Compartamos is today one of the best financing alternatives that this segment have in Mexico. So again, product offering with motivated personnel with good -- aligned incentives, both for the customers as well as the loan officer, is what we think is necessary for the -- for -- to capture growth for the second half of the year given the fact that, again, not one single player in Mexico is growing in this piece of the market aggressively as we expect to do for the year-end.

[Mario Langarica Ávila, executive]

In terms of margins, we expect that -- we're not changing the guidance, but we expect that both the NIM and NIM after provisions will be on the lower side of the guidance. And it's important to mention on the terms of NIM, for example, in Mexico, despite the fact that the portfolio contracted by 8% in a quarter-by-quarter basis, the NIM after provision actually grew a little. So even though we might reduce the rates of certain products, given the good asset quality that we have will allow us to maintain the growth as we increase the volumes of the loans for the coming quarters. And so another point to add is that, as you have noted, we have extra liquidity in this quarter that, as we have mentioned, we took the decision to have excess liquidity adjust to prevent certain risk of funding during the electoral process, and that has also impacted our numbers. As I mentioned in the remarks, NIM would have been 52.5% and NIM after provisions would have been 45.2% if this extra liquidity was not taken. So we are going to discuss in the next weeks whether, after seeing the political environment in Mexico and expectations, we keep that extra liquidity for the rest of the year or not. So I think that is also important point on why the NIM was at that level this semester.

[Yuri Fernandes, analyst]

Super clear. My second question here is on this topic, on the political environment. Given Mr. López Obrador election, do you anticipate any important policy for banks? And not only on the traditional questions on interest rate cap, but on a bigger view on like public banks, if you can receive more cheap funding from the public banks? And how that may benefit maybe your business, if there are some ongoing discussion on this topic?

[Patricio De Bonilla Garcia Vallejo, executive]

No. So far, Yuri, the conversations that we had with the new administration are going underway. They are on the economic front, talking about things that are necessarily as the independence of the central bank, as regulated markets, but not necessarily something to talk about capping rates or nothing like that. In terms of funds, as you know, we fund part of the business with development banks. The conversations that we've had with them as well have been on the same line. Nothing has been changed at all. So, so far, I would say, so with the information that we are having, for the business, it's adequate. So we expect to have the benign environment to continue in our growth expansion for the year in the coming -- in -- during the López Obrador administration.

[Operator]

Our next question will come from Frederic De Mariz from UBS.

[Frederic De Mariz, analyst]

I just have 2 follow-ups. The first one on ConCrédito. Could you just -- can you repeat the multiple that you mentioned. I just wanted to understand if it's based on 2018 numbers. And then I also wanted to confirm that ConCrédito, the contribution for this year, is it part of the guidance or it's not included, it's on top of it? And then I will come back with my second question.

[Mario Langarica Ávila, executive]

Perfect. It's all -- based on December 2017 numbers of ConCrédito, it's PD 6.2 and PE 12.2.

[Frederic De Mariz, analyst]

That's great. And then second question is related to -- sorry, go ahead.

[Mario Langarica Ávila, executive]

And you're asking [indiscernible] part of our guidance. No, it was not. This MXN 75 million were not. So that would probably add around MXN 0.04 to the EPS. That will be the EPS contribution, MXN 0.04.

[Frederic De Mariz, analyst]

Yes, that's great. And then second question more on the qualitative side, and I apologize if you mentioned it during your presentation. I remember you mentioned some very useful and interesting metrics on your loan officers, your employees, whether payments are done on time and the kind of internal statistics that you were following to make sure that the business was going back to normal or going back on track. What I'd love to hear from you is how advanced you think you are in the normalization? So do you think you have the business where it is right now as of July is where you want it to be? Or do you think we have another maybe 3 months, 6 months for those internal metrics to be back to normal?

[Patricio De Bonilla Garcia Vallejo, executive]

No. I would say that the internal metrics are now where they have been in earlier years, Fred. Of course, there's always room for improvement, and we want to continuously improve those metrics. But again, as we said, the incentives that we have for the loan officers were focused on credit, how many groups paid on time, how many -- how much of the portfolio was change within the loan officers, how many loan officers were visiting their customers on time and how much of our disbursements were done specifically in the day and time that were promised. And most -- I mean, I would say that all of those metrics are now in historic highs. Of course -- and this is why, again, now, we now think it's the right time to move to the growth phase because the operation is under control. We wouldn't grow -- this is why we didn't want the growth in January because we needed to get better grip of our operation before to do so. So now again, most of all -- again, as I said, there's always an improvement that you can make in your operation, but today, we are running with the metrics that we had in the previous year before the contraction of the business.

[Operator]

[Operator Instructions] Our next question comes from Carlos Gomez from HSBC, New York.

[Carlos Gomez-Lopez, analyst]

Two questions. First, you have 2 extraordinary items, one on liquidation and one on taxes this quarter. Can you give us any guidance as to whether we should expect any more those type events in the future? You have any accumulated deferred tax assets or any legal contingencies that may result in either releases or extra provisions in the current quarter or years? Second, would like to know if you are -- after the ConCrédito transaction, if you are still looking at any other possible transactions for the next, let's say, 6 quarters?

[Mario Langarica Ávila, executive]

Okay, on your first question, Carlos, no, we don't expect anything else on nonrecurring or extraordinary items in the second semester. And the next question, maybe, Patricio or Enrique...

[Enrique Majós Ramírez, executive]

For -- and we don't have any specific new transactions planned for the future. Of course, we are always open to new opportunities, but as we have said in the last quarters, we want to concentrate on rebuilding the business during the following months and to make a strong product offer and an aggressive marketing strategy and to go deeper in the markets that we serve, specifically be -- go deeper more in Peru that represents a good opportunity now. So I think we have a lot to do in the following quarters, and we don't have any specific opportunity in mind. But you never know. So as soon as we identify something, you will be the first to know.

[Operator]

With no questions in the queue, the question-and-answer session concludes. I would now like to turn it back over to Mr. Enrique Majós.

[Enrique Majós Ramírez, executive]

Thank you. Well, just as a summary, tell you that we feel comfortable with the work we have made during the first semester to reestablish our growth trends, and we really feel enthusiastic about the results that we have achieved and that we will achieve for the following months. So thank you for attending this call. Have a nice day, and we look forward to hear from you in the next quarter report. Thank you.

[Operator]

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