Gentera SAB de CV

BMV:GENTERA

Earnings Call Transcript 2022-Q3

[Operator]

Good morning, and welcome to the Third 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 in previous to our management team. With us today are Mr. Enrique Majos, Gentera's Chief Executive Officer; Mr. Patricio Diez De Bonilla Garcia Vallejo Chief Executive Officer; and Mr. Mario Langarica, Gentera's Chief Financial Officer. Enrique Majos, Mario Langarica will present Gentera results for the third quarter period and 9-month period of 2022, as per the report that was issued yesterday. And Patricio Diez De Bonilla, 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 statement account for future economic circumstances, industry conditions and 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 are used to contact call.

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 day to everyone. Thanks for your interest in Gentera. And as always, your presence and participation is very encouraging for us. We are proud to announce that this quarter comparing results are again showing record numbers. In fact, we have been showing sustainable growth along all this year and good results are not only limited to our financial results. We are also improving the product offer and financial services that we provide for our customers. At the same time, our digital transformation journey continues rolling out through the strategic initiatives we have described in previous calls and corporations with you. So let me be more specific and update you in the 3 main economic engines of Gentera, Banco Compartamos, Finantia Compartamos and ConCredito. Banco Compartamos in Mexico is clearly showing very solid growth in its loan portfolio with a healthy asset quality and with good profitability levels. Due to our solid position in the market, we are being able to attract more customers and at the same time, increase the balance and share of wallet of our existing customers. Financiera Compartamos has had an outstanding recovery path even under the complicated economic and political conditions at Peru is living.

Portfolio growth, asset quality and profitability are already showing a strong recovery compared to the past couple of years. In Peru, we are having now similar dynamics to the ones we had in the pre-Covid years. And ConCredito is showing growth as expected. The synergies with Banco Compartamos has been very relevant for the portfolio growth of ConCredito. On the other hand, NPLs have had a slightly increase in the last quarter, mainly as a consequence of the aggressive portfolio growth and geographic expansion. However, we see this increase as part of the cycle of growing and controlling, which is a very natural formula and dynamic in the micro-lending business.

Having said that, Gentera's loan portfolio concluded the third quarter at MXN 51 billion, which means a 27% growth versus the same period 2021. And the accumulated net income during this year was grown -- has grown 126% versus the same third quarter of last year, reaching MXN 3.8 billion. At Visonali, our overall portfolio quality is remarkable. Gentera continues presenting sound and stable levels of asset quality, showing now a consolidated NPL of 2.9%. It is also important to mention that despite the context of economic slowdown in the last 9 months, Gentera has disbursed the largest amount of loans in our H2 over MXN 120 billion.

Our transformation strategy continues showing relevant progress, and we have been able to accelerate the benefits of some of these initiatives. Approval this is the productivity of our loan officers in Mexico, which has increased over 30%. And as the result of the use of data intelligence and altered, we have been able to increase the share of wallet of our own customers through an effective cross-selling strategy while maintaining a healthy portfolio. So in summary, regarding our business results, let me point out the following: One, Banco comparison portfolio has grown better than expected. 2, Peru performance has been recovering and improving better and sooner than expected. 3, ConCredito is growing at sectors. 4, Gentera's overall asset quality has remained in the best levels ever. 5, expenses have been well managed, and they will remain under control. 6, as a direct consequence of all of the above, we have a 9 months accumulated net income of MXN 3.8 billion this year. And finally, 7, our teams have been fully committed to operate efficiently, being disciplined with our methodology and providing our customers the service that they deserve.

Around 1 year ago, we said that 2022 was going to be the year in which we would return to pre-Covid business results. As of the third quarter of the year, we can definitely say that we delivered. So what can we expect for the end of this year. With the outstanding dynamics reached so far, our expectation is that our EPS will close between $2.82 and $2.95. This is a great news. This new increase of our guidance can be explained mainly by the combined effect of 3 elements, which in every case, were above expectations. One, a better portfolio growth to a better asset quality and 3, lower expenses.

Let me finally move to some good news that I want to share with you today. Yesterday, our Board of Directors decided to submit to our shareholders' meeting the following. First for the shareholders meeting taking place this November, the Board will submit for approval an extraordinary dividend payment of MXN 469 million. This represents a 20% dividend in addition to the one that was distributed in the first half of the present year. If this is approved, the dividend will be paid no later than November 23. And second, for our Annual Shareholders Meeting to be celebrated in April 2023, the Board will also submit for approval the proposal of returning to a dividend payment up to 40% of the net income generated in 2022 results. As CEO, I am happy to announce these resolutions. For me, this is a recognition to your support as investors along the difficult times we have all faced in the last years. So just to make it more explicit, thank you for being in Gentera for supporting the team and thank you for supporting the clients that we serve.

Well, this is all for my remarks. And now let me turn the call to Mario, who will explain more details about the recent results and our expectations for the rest of the year. And after this, Patricio Mario and myself will be happy to take your questions.

[Mario Langarica Ávila, executive]

Thank you, Enrique, and good day to everyone. As always, we appreciate your interest in Gentera. As Erica signaled in his remarks, we are very enthused with the results we're presenting and what we have achieved in the past couple of years. Now as I have -- as we have done in previous conference calls, we will focus our remarks on the following concepts. One, our strong and improving net income generation and profitability with strong liquidity capital liquidity and capital positions. Second, our portfolio growth and the performance of our margins. Third, our asset quality, including cost of risk, allowances, NPL and coverage ratios for our operational expenses; and 5, our expectations for year-end.

In these remarks, we will compare 3Q results and metrics to their 21 comparables. But more important, we will continue comparing some of these results and metrics to 2019. That was the full normal year before the pandemic started. Also, it will be very industry to see the progress seen in the 9-month period of this year compared to '21 and 2019. Now let me start one. Net income continues growing well above pre-pandemic levels. Gentera's 3Q 22 net income amounted to MXN 1.514 billion and it is the highest quarter ever. Gentera controlling participation in C22 amounted to MXN 1.501 billion, representing an EPS for the quarter of $0.95. On an accumulated normal basis, net income amounted to MXN 3.8 billion, showing a strong growth of 127% compared to 21% and 52.8% compared to 2019. As of September, the accumulative EPS is at MXN 2.35, representing 58.8% growth compared to full year EPS in '21.

Important to note that we had a positive MXN 180 million nonrecurring discontinued operations income in the quarter. Gentera's 3Q '22 total and controlling ROE amounted to the 23.7% and 26.1%, respectively. And for the 9-month period, these ratios amounted to 20.2% and 22…

[Operator]

Ladies and gentlemen, please remain on hold. We are going to connect this speaker's line again.

[Mario Langarica Ávila, executive]

Hello. Are you listening to me, sorry, there was a problem in the communication. So as I was mentioning, Gentera's total and controlling ROEs amounted to 23.7% and 26.1%, respectively. And for the 9-month period, these ratios amounted to 20.2% and 22.2%, respectively, compared to 17.6% in 2019. Important to note that Banco Compartamos our largest subsidiary reached very strong levels of ROE at 32.9% and ROA at 10.4%. All of this maintaining very healthy liquidity positions in 2Q '22, amounting to MXN 11.8 billion and slow capitalization levels. And 3Q '22 Gentera's capital-to-assets ratio amounted to 34%. Banco Comparator's capital adequacy ratio or ICA, amounted to 38.2% in Compartamos Financiera solvency level amounted to 19.1% and compared to capital to assets ratio to 52.8%.

As we have mentioned in different conference calls, we have strong access to different and incremental funding options for the holding company and our subsidiaries. And we have kept a healthy balance in the composition of our liabilities in short-term loan tenors and in fixed and floating rates. Liquidity levels for Gentera and subsidiaries are solid and sufficient to fund the growth and to face the opportunities that this year and the next will bring to the company.

Second, our portfolio has kept growing to reach a new record and our margins have continued improving. As mentioned by Enrique, Gentera's 3Q '22 loan portfolio reached a new historic level of MXN 51.4 billion, growing 27.2% compared to 3Q '21 and 30.4% compared to 3Q '19. This performance makes us believe that we should finalize the year with a portfolio growth around 17% at the high end of the range guidance for '22, expecting to reach our highest ever historic portfolio. We have also observed continuous improvement in our margins. Accumulated net interest income for the 9-months of '22 was 23% higher than the first 9 months of '21 and 19.7% higher than the same period in 2019, representing a $40.2 million in the 9-month period of '22. These results were mainly driven by a 26% growth of accumulated interest income compared to the 9-months in '21, coming from the portfolio growth of 32% in both Banco Compartamos compete and 70% portfolio growth in Compartamos Peru.

It is important to remember that the interest expense line now reflects the expenses associated to the credo origination and leasing agreements, which were reclassified from '22 onwards according to financial reporting standards in Mexico and IFRS and second, the financing expenses. For your convenience, now we're presenting the effects of these lines in the separate line so you can identify the movements more easily. In the 9-month period, financing expenses represented MXN 1.868 million, do MXN 1.868 billion, a 25.5% growth compared to the first 9-months of '21, while expenses associated to trade originations represented MXN 459 million.

Accumulated 9-months '22 provisions for loan losses amounted to MXN 2.67 billion, a higher level compared to MXN 2.8 billion registered in the first 9-months of '21. The higher level of provisions is explained by the strong growth of the portfolio in all our subsidiaries and the changes income credit provision methodology and its new Predator profile. Noting provisions was compensated by NII growth, resulting in a 9-month accumulated net interest income after provisions of MXN 14.56 billion, a 21% growth compared to MXN 12 billion in '21 and 12.1% above 2019, resulting in a 9-months mean after provisions of 32.1% compared to 28 in '21. It's important to say that even considered reclassification impact in the interest expense line described above, the menace provisions reached a 3Q 22% saved 2.3% and it's slightly above to the one reached in the second Q, and it's the best level since the pandemic start.

For the year-end, we expect NIM to close around 38.5% and after provisions around 30.5%. Regarding asset quality, cost of risk for the 9-months period showed stood at 9.9%, better than the 10.5% guidance for the year. Allowances amounted to MXN 3.99 billion on a consolidated level. As of today, we still maintain around MXN 100 million in additional reserves in Peru. NPLs stood at 2.9% an improvement compared to 3.03% in 3Q and similar to these ratios seen during 2019. We're highlighting is that Banco Compartamos and Peru continues showing very stable asset quality performance.

Our coverage ratio in 3Q '22 amounted to 268, which is basically the same level in percentage in 3Q '21. for operational expenses. Operational expenses for the quarter stood at MXN 3.7 billion, which is basically at the same level of last year. For the 9-month period, expenses stood at MXN 11.076 billion, representing a 3.7% annual growth compared to that same period in '21 and 8.9% above 2019. Once again, it's important to note that expense linked to credit origination and lease agreements are now reflected in the interest expense line above, as explained. Considering all of these changes, we expect to grow operational expenses around 5.5% compared to '21, which is lower than the 9% growth signaled in previous conference call.

It's important to note that we're expecting to import in some proportionally higher expense levels in the next quarter compared to 2Q, mainly driven by the acceleration of expenses and investment in transformation initiatives that we have explained in the past and communicated in the past. And 5, last but not least. As you can see and based on what we have just described, we expect to finalize the year with a very strong result, the best net income ever, in which we will have some operational dynamics and margins with a cost of risk below the 10.5% that we guided for the year and which will always be closely monitored and control and forecasted operating expenses that are mostly driven by above acceleration of transformational initiatives that we feel will continue investing in this year.

With these dynamics, we feel confident that we will reach a loan portfolio, as I mentioned before, around 17%, and we expect to fill the year with the highest historic net income. As Erica said, will be between MXN 4.65 billion and MXN 4.85 billion, representing a controlling EPS between MXN 2.82 and MXN 2.95, keeping our pace to reach our medium-term growth ROE objective of 20%. As Enrique mentioned before, our Board of Directors will submit for approval to our shareholders' meeting, an extraordinary dividend of MXN 469.4 million to be paid this November and for next year numbers to propose to the shareholders meeting to return to our CR of a 40% payout ratio, obviously, subject to 2022 full year net income performance.

Thank you all for your attention. This is all from our presentation, and we can now move forward to the Q&A session.

[Operator]

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

[Ernesto María Gabilondo Márquez, analyst]

I do want to say congratulations on your strong third quarter results on your new guidance, and that can tell back to the 20% ROE levels and again, offering a 40% payout ratio. So congrats on that. I have a question, and it will be on asset quality. We have seen an important expansion of the loan book, but also it has been followed by some deterioration in your products. So I just want to double check if that is explained because of the expansion of the portfolio. And related to this, we continue to see concrete with still high NPLs. I think the ROE is around 17% on that business. So we'd like to hear your last thoughts on ConCredito and your strategy for the medium term.

[Enrique Majós Ramírez, executive]

We've guided as we've guided the year, we said we were going to be expecting a cost of risk around 10.5%. We expect to end the year below that number. And for next year, as we have also mentioned in the past, we expect to normalize the cost of risk level to more historic type of numbers, and we expect to have a cost of risk for the next year around 11%, we will give, obviously, the right expectation and guidance in our next conference call. But obviously, it's a normalization in general, is a normalization of cost of risk.

[Mario Langarica Ávila, executive]

Thank you, Enrique. Nice to hear from you. And regarding on creditor and the asset quality, yes. As I explained in my remarks, we have a slightly increase on the NPLs in ConCredito. This is something that, for us, is pretty normal in an operation like ConCredito and our micro lending operation. And it is more usual even when you are in a moment of aggressive growth, which is the case of ConCredito, as we explained in the last call, ConCredito's strategy for this year and next year at least, is to have a very aggressive geographic expansion through digital platform and with this branchless strategy and also to grow through the synergies with Compartamos clients, which we call [indiscernible] so if you take that in account, then it is quite easy to understand that we are in this usual or normal cycle of growing and controlling.

This is something that I remember many years ago, maybe 5, 6 years ago, we were in Banco Compartamos going through these cycles, and we were explaining that this is like, let's say, a quarter-to-quarter cycle in which you grow. You know that you will have some level of increase on your NPLs. But at the same time, you are controlling that those NPLs pay at normal level, and then you start growing again. So as I said, it's something that we have very identified in ConCredito. The management team is doing what they have to do and what they know because of the experience they have managed in this business. So we feel comfortable that we are looking at a pretty normal kind of operation there.

[Ernesto María Gabilondo Márquez, analyst]

Congrats again on the results.

[Enrique Majós Ramírez, executive]

Thank you, Ernesto.

[Operator]

Your next question is coming from Juan Recalde at Scotiabank.

[Juan Recalde, analyst]

Congratulations on the results and thanks for taking my question. My question is related to the competitive environment. So you have showed increasing number of clients. You also mentioned that you are gaining share of the wallet of those clients and profitability has been better than expected. So I was wondering how are you seeing the competitive environment in Mexico and Peru? And how do the higher rates, how do you see the impact of higher rates in this competitive environment?

[Patricio De Bonilla Garcia Vallejo, executive]

Thank you, Juan, and this is Patricio. In terms of the competitive market, after the pandemic, most of our competitors got impacted operationally. Some of them had higher-than-expected delinquency ratio. And as such, funding their businesses have been challenging. Therefore, the competitive landscape throughout Mexico. And I would say that also in Peru, it has weakened quite a bit. We've seen some competitors not only facing difficulties, but actually closing their operations in Mexico. And again, something that, of course, harm competition. But at the end of the day, it brings opportunity to the table to serve those customers that are left behind by our competitors. So again, in terms of the market, as you know, in these conditions, the addressable market growth is still very large, only in Mexico or in Peru. So the market is large and the consecutive landscape is relatively weak. Therefore, we will continue to do things carefully to maintain the double-digit growth, not only for the end of the year, but for the next year as well.

[Operator]

Your next question for today is coming from Luis Yance at Compass.

[Luis Yance, analyst]

Enrique, Pato and Mario, again, congrats, great results actually on the quarter. A couple of questions. One is, I guess, a follow-up from what ends to was asking about credit quality, et cetera. I know you mentioned that cost of risk going to 11% next year. And I think in your press release, you mentioned 3%, 3.5% of NPLs in normal. But in my first question is what sort of levels of both NPLs and cost of risk to kind of bring a yellow flag for you guys to perhaps start being a bit more cautious on origination, just to get a sense of our cost of risk goes to what 13%, 14%. That's the signal. Just to get a sense, that will be my first question.

[Enrique Majós Ramírez, executive]

Yes. No, good question. I think that something above 11.5% cost of risk to start making costs more cautious about the increases. Now I've also mentioned in the past that we are standing in a very good position to take opportunities and to take more risk. So that's a part of our business, not just to manage risk. So even 11.5% would be a number that we feel comfortable managing. But obviously, we would be to be looking at big element, products and or geographies to make sure that we are under control. And probably, I don't know, Patricio, NPLs something above 4% could be something that we will start to mention.

[Patricio De Bonilla Garcia Vallejo, executive]

Yes. And Luis, thank you for your question. As Andre said, the normalization of the business after fast growth periods requires a process of controlling NPLs. We've seen fast growth, not only on the group lending methodology but also on the individual piece of our portfolio in Mexico, same dynamics in Peru. And you shouldn't be worried if next year, we see after there's no maritation of processing, which NPLs start to pick up because we will then focus on consolidating this fast growth period that we had and set the foundations for future growth in the coming years. So again, as Mario said, we don't feel worried about the trends that we are seeing yet. Again, the first semester of the next year, you should expect a little bit of an increase still. But at the end of the 2023 is the second part of the year, it should get back to normal.

[Luis Yance, analyst]

Mario, then another question on ROEs. I know you've been saying for quite some time that you were looking for ROEs of 20% or so. You're there. So congrats on that. But when I look into the last 2 quarters, it's actually been a bit higher than that 23.7% and 20.4% that still was from raison Peru, still below 20. So just wondering, number one, could those the idea of 20-plus also involves all 3 businesses being above 20. And if that is the case, once concreted Peru get there, I'm assuming Mexico stays where it is. So that's another question, whether the 30% that we're seeing in Mexico sustainable. Just wondering if now we should start thinking more of a mid-20s ROE as a potential target even because it is just ambitious. So if you can comment on that, that the way.

[Patricio De Bonilla Garcia Vallejo, executive]

Yes, very good question. Well, specifically the last quarter had more than positive effect because of this continued operations, non-recurrent income that I mentioned, but just a gap in on a cumulative basis, we are already above 20%. We expect to keep a 20% and growing with time. Obviously, we will provide you the plan and our expectations for next year, but we are happy that now we're reaching that level. And obviously, for Peru specific we need to get their ROE back to the benchmark of 20%. And basically, I would tell you that for next year, we should expect something between 20 around 20% and maybe a little bit higher.

[Luis Yance, analyst]

Noncredit or goes above 10, do you think?

[Mario Langarica Ávila, executive]

Yes. The idea is to about historically have been above 10.

[Luis Yance, analyst]

Okay. Great. And I know you my last question, I know you'll give more detailed guidance next quarter, I guess, for 2023, but could you give us some qualitative color in terms of some of the main variables. I know you mentioned cost of risk around 11%. So just wondering if it's loan growth should continue at double digit means where they are, perhaps ROEs. And I guess, in general, I mean, you're going to have an amazing year in terms of net income growth. Can we expect another year of double-digit net income growth also?

[Patricio De Bonilla Garcia Vallejo, executive]

Yes. I would tell you that, again, this is a soft guidance. We are not, but we expect to continue growing the portfolio at double digit. And obviously, the net income at least that would be our objective for the plan of 2023. And you should project normalized means and normalized cost of risk, as I have mentioned. And for expenses, obviously, next year, we will have higher impact on expenses because of the inflation catch up. But at the end level, we expect to have a growth in net income at above 10% for next year.

[Luis Yance, analyst]

What's normalizes because you mentioned cost of risk all the normal like what would that be?

[Mario Langarica Ávila, executive]

Well, as we mentioned, they should be around 30% and around 40%, 30% after provisions and 40.

[Luis Yance, analyst]

Congrats again that for the quarter.

[Operator]

Your next question for today is coming from Thiago Batista with UBS.

[Thiago Bovolenta Batista, analyst]

Congrats for the results, very strong numbers again. I have a follow-up about the ROE of Compartamos Mexico. The 30% that you guys are delivering year-to-date, do you believe that this is occurring or we can see a decline in the level of profitability. And the second one, if you are looking for any type of M&A, any specific segment that would make sense for you guys to look.

[Patricio De Bonilla Garcia Vallejo, executive]

Thank you, Thiago. This is Patricio. In terms of ROE, the mine has is still running is very profitable. The growth in portfolio is sound, and we expect that to maintain for the coming year. As I said, Mario answer previously, we expect the NIM to remain healthy. And all the initiatives that we've done to digitize our business model should allow us to maintain still a strong return on equity, despite the fact that we have -- we will maintain a strong capitalization for the bank. So you should expect that, I mean, low 30s should be a number that for the bank is still doable for the coming year, and we don't expect a further softening for 2023.

[Enrique Majós Ramírez, executive]

Thank you, Thiago. [indiscernible] let me tell you that we all are aware that despite the trouble that we all have when we are facing difficult times and pieces, that also means that there can be opportunities in the market. And we understand that the current contract may bring those opportunities were open level rate opportunities that bottom line, I can tell you that today, we need to be aligned and focus on our current strategy. So no, we don't have -- we don't foresee in the short run any new acquisition. We want to be very, very concentrated on the transformation that we are making, which is a big and very profound and relevant transformation not only for the efficiency of the company, but also for the experience that we want the customer to have. And we'll see -- we don't -- the thing here is that despite of this concentration and focus that we want to maintain, we should be always open to see what is happening out there.

[Operator]

Your next question is coming from Alonso Garcia at Credit Suisse.

[Ricardo Garcia, analyst]

My question is on your outlook for expense growth. I think last quarter in the last conference call, you had guided for OpEx growth this year of 9%. Yet, you are running considerably low below at 9%. So my question is how much of this expense that has not been executed as of September will be charged in the fourth quarter and how much will be kept increase. And considering that, what would be your new guidance for OpEx this year? And how did it look for 28?

[Enrique Majós Ramírez, executive]

Yes. Thank you very much. Well, what we have been is that we have been having more reason in general, that's what we expect at the beginning of the year. So yes, we will end up the year with a lower level of operating expenses than expected. Although in the last quarter, we will have some specific payments that you will see. And that basically reflects on the net income guidance for the year-end that we have showed you that will be between MXN 4.65 billion and MXN 4.85 billion. And we are, again, calendarizing of the expenses of both the above including the inflation that is catching up for next year. And also the all those expenses in the transformational initiatives that nice has described for next year. And probably, we should expect for next year a growing expenses a little higher than inflation. But obviously, we will give you that specific number as soon as we finalize the plan and in the next conference call.

[Operator]

Your next question is coming from Oliver Gomez at HSBC.

[Carlos Gomez-Lopez, analyst]

This is Carlos Gomez. Congratulations. So I wanted to ask you about Peru. You mentioned that it's recovering better than you expected. So what type of growth do you expect for 2023 and 2024? And also, how much of the business is now group versus individual? And could you give us an approximation of the yields that you charge on the group lending and difficult.

[Enrique Majós Ramírez, executive]

Thank you, Carlos. Peru's recovery took costs longer than in Mexico due to the type of portfolio that they have and the restrictions that Peru are implemented to cope with the pandemic. As such, we took until 2022 to get back Peru to the pre pandemic levels. Now again, Peru is growing not only on the individual piece of their portfolio, which represents close to 80% of what they do. 20% of the portfolio in Peru is group lending. And the yields are fairly different. In Peru, as you know, and the individual lending fees, competition is fierce with larger players. The dynamics are different, and there -- we are lending at around 29% or so.

And in group lending, we have a cap in interest rates that allow us to land now above than 83.4%. Having said that, the opportunity that we see in Peru is, of course, in group lending, where we don't face as much competition as we do on the individual lending fees. And again, the reality is that we expect to continue to grow at double digits in Peru, not only the 2023, but also in 2024. So again, as you can see, the -- in group lending, we're still doing very well despite the fact that the regulation capped the portfolio. And again, we are optimistic of the performance of this subsidiary going forward.

[Carlos Gomez-Lopez, analyst]

So to follow up on that, on the cap, I mean, from what I hear, the 83% constraints, the profitability you would normally have, would you be able to operate with a lower to, let's say, 70% or 60%?

[Enrique Majós Ramírez, executive]

Yes, of course, the capital means we cannot go above 83%. But as long as we are getting efficiency, of course, we can going below that. As you remember, we opened aggressively branches to take the rural part of the portfolio and growing in customers last 3 years. Now we are more focused on group lending when getting the productivity that we set, for example, in Mexico in order to be able to decrease further the retail. Again, as I said, the CapEx close to 83%. And in November, it will increase closely to 88%. So there's an ample room still to make profitable business in Peru, and we expect that this subsidiary continues with the strong momentum that they show in this 2022.

[Carlos Gomez-Lopez, analyst]

Okay. And last question on Peru. Do you have any react on much?

[Enrique Majós Ramírez, executive]

Yes, of course. Yes, I mean, yes, the reality is that we use it and it but a small piece of the portfolio.

[Operator]

Your next question is coming from Jose Cuenca at Citigroup.

[Jose Cuenca Gonzalez, analyst]

Congratulation on the strong quarter. I have just to follow up in terms of growth and OpEx just did want to make sure I understand -- so in terms of growth, when we look at ConCredito, I think you've been very clear in mentioning that competitor is currently on a very aggressive path to expansion and grow. Do if I understand correctly, if we look at Peru and Mexico, would it be safe to say that for 2023, would you be looking at double-digit growth in loan portfolio for Banco Compartamos and Financiera Peru, I just want to understand how do you see these other 2 subsidiaries. That would be my first question.

[Patricio De Bonilla Garcia Vallejo, executive]

Well, yes, as you said, on Graco has been having faster growth than the other subsidiaries. But for next year, what we are planning is to have a double-digit growth for the 3 entities. Obviously, Compartamos, we will expect to have the highest. But the 3 entities, we expect to have growth above double digit.

[Jose Cuenca Gonzalez, analyst]

And the question is a follow-up on expenses. I know you've already explained some of this, but I just want to understand a little bit -- so you mentioned on the past call that during the second half of this year, we would see an acceleration of expenses due to all the investments in digital initiatives and so on and so forth. I just would like to ask for a little bit more color why it seems these expenses, it seems as if they have been delayed or something like that. I just want to understand how is this, why the change, so to speak, or why are we now expecting lower OpEx for the second half, which obviously positive, but I just want to understand the rationale behind.

[Patricio De Bonilla Garcia Vallejo, executive]

Yes. The implementation of the transformational initiatives have been a little slower than expected. Most of the investments that we have done so far have been reflected more at our CapEx level. So the OpEx you want rainfall is a little behind. Even though, as I said before, in the last quarter, we expect a higher level. And then obviously, as I mentioned before, with the intention of expenses during next year, we will provide you a guidance for next year. But it has been more related to some adequacies and...

[Operator]

Ladies and gentlemen, please remain on the line while we connect the speaker's line.

[Patricio De Bonilla Garcia Vallejo, executive]

Sorry, I'm very sorry. As I mentioned. We will keep showing you what's the path of OpEx going forward. And as I mentioned before, for next year, we should expect something a little bit about inflation, but we will give you the right numbers as we calendarize all expenses in a '23.

[Unknown Executive]

We have a question in our webcast to solar. Partial it I would like to ask you if in the current market conditions with more pipe going in the market. Do you think that degree engine can be maintaining as original consider? Have you think about your has individual or long-term products to support your offer.

[Enrique Majós Ramírez, executive]

Thank you. And yes, of course, the fintech companies that are present, not only in Mexico audit will try to offer digital products that individualize the relationship with our customers. Of course, as you've seen, for example, in Mexico, we are now growing faster the individual lending piece of what we do. We know that through technology and better origination using data, we can assess individual products much stronger. Therefore, in the future, you should expect that digital products with origination using our business intelligence will be critical to reach more customers faster and cheaper. I hope I answered your question.

[Operator]

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

[Enrique Majós Ramírez, executive]

Thank you. Thank you, again, all to all of you for your support for long this year. I'm talking about maybe since the pandemic. And of course, before that, especially in the last 2, 3 years, your support, your trust in this management team has been fundamental for us. So thank you, again, for that. And our commitment to keep working for all of our stakeholders, of course, clients, shareholders and the communities in which we operate. So we hope we can see each other the next conference call with some more good news and an update of what we are doing now, which really has a very happy, passionate and encouraged towards the future that it is promising not only for the following quarters, but of course, and I think that more importantly for the following years. So thank you to all of you for that, and have a nice day.

[Operator]

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