Gentera SAB de CV

BMV:GENTERA

Earnings Call Analysis

A Strong Quarter Marked by Record Results

In the third quarter of 2024, Gentera demonstrated remarkable performance with a record net income of MXN 1.749 billion, reflecting a substantial year-over-year growth of 29.6%. With a cumulative net income amounting to MXN 4.549 billion for the first nine months, this figure represents the highest the company has ever seen for comparable periods. Such robust growth underscores the effective strategies that management has implemented to enhance operational efficiency and customer reach.

Expanding Client Base and Loan Portfolio

Gentera's client portfolio achieved a historic peak, reaching 5.58 million clients, which signifies a 16.5% growth compared to the previous year. The loan portfolio also grew significantly, amounting to MXN 75.4 billion, showcasing a 24.5% increase YoY. This growth was largely driven by a robust expansion in the Mexican subsidiaries, particularly Banco Compartamos, which recorded an annual growth of 27.3% in its portfolio, while ConCredito demonstrated a growth of 20.6%.

Interest Income and Margins on the Rise

The interest income increased by 23% to MXN 10.2 billion, while net interest income surged by 24%, reaching MXN 8.45 billion. This performance fed into Gentera’s impressive net interest margin (NIM) of 40.5%. After factoring in provisions, the NIM stood at 28.6% for the third quarter, and the company expects to maintain an NIM after provisions around 29% by year-end.

Understanding Cost of Risk and Provisions

While the overall costs of risk have reached higher-than-expected levels—recorded at 12.7% in the first nine months and 13.8% in Q3—Gentera has proactively managed these risks, particularly regarding the loan portfolio in Peru. It was noted that if the unexpected impacts from Peru were excluded, the cost of risk might settle around 12% by year-end. The provision for loan losses totaled MXN 2.49 billion in Q3, reflecting a high coverage ratio of 231%.

Operational Growth and Future Expense Guidance

Operational expenses increased by 12.4% YoY to reach MXN 14.066 billion, which is notably below the projected growth expectations for the year. For the coming quarters, management anticipates total operating expenses will rise about 14% for the year, maintaining efficient operational levels while investing in strategic initiatives to enhance productivity and service delivery.

Strategic Focus on Insurance and Fee Income Growth

Gentera has seen a remarkable growth in net fees, which amounted to MXN 1.17 billion in Q3, a striking increase of 55.4% compared to the same period last year. This growth has been largely attributed to exceptional performance in the insurance division, responsible for nearly 90% of the fee income, indicating a successful cross-selling and product expansion strategy aimed at serving their customer base more effectively.

Guidance for Future Growth and Margins

Looking ahead, management is confident in maintaining portfolio growth within the guided range, with expectations to continue seeing robust performance in both portfolio and earnings per share (EPS). For 2024, Gentera plans to exceed a return on equity (ROE) of 20.5%, potentially reaching between 20.5% and 23%, depending on the performance of subsidiaries, particularly in Peru. They also plan to issue formal guidance in February, projecting double-digit growth in loan portfolios.

Leadership Transition and Corporate Stability

Gentera recently underwent a leadership transition with Ivan Mancilla assuming the CEO role at Banco Compartamos. His extensive background and leadership in the company since its inception are expected to stabilize and further enhance Gentera's strategic direction. Management feels confident in the company's direction and remains committed to fulfilling the financial needs of its clientele while generating shared value.

Earnings Call Transcript 2024-Q3

[Operator]

Good morning, and welcome to the third quarter 2024 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 day to everyone. 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. Mario Langarica, Gentera's Chief Financial Officer. Enrique Majos and Mario Langarica will present Gentera's results for the third quarter 2024 as per the report that was issued yesterday and 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. Good morning, everyone, or good afternoon. Once again, Gentera is delivering record results in line with our guidance. Naturally, we feel very proud about it. However, I can tell you that personally, I feel even more proud about the strong team that we have. As we have always said, if we make sure we have a strong professional and committed team, our results will come as a natural consequence. This quarter, Gentera's accumulated net income is 19% higher than 12 months ago. This quarter, after 9 months of the year, we accumulated MXN 4,549 million.

Gentera's total portfolio grew 25% if we compare it with the third quarter of last year. And we reached a historic figure of MXN 75,400 million. And in terms of number of clients, we reached 5.5 million customers. This represents a 16.5% growth in the last 12 months. The quality of our portfolio stands at 3.5% of NPL, figure that remains within our 3.5% to 4% reference range that we have guided to define a healthy portfolio. And only Peru is above this limit. However, NPLs are decreasing with a positive trend in June in Peru, and we see that this trend will continue for the rest of the year. Also, ROE is already above the 20.5% that we guided for this year.

So this will be another guidance that we will accomplish at Gentera. As you have seen, we have consistently delivering the results we guided quarter-by-quarter and year after year. We estimate we will close the year in the mid-range of our guidance in terms of portfolio growth and in the high end of the guidance in terms of EPS. After the pandemic and for the third year in a row, by the end of the year, we will reach a record figure in net income with a double-digit annual growth in average in the last 2 years.

But now to be honest, this is not what I would like to highlight today. Mario Langarica will get into this and another business results in a moment. Meanwhile, today, I want to talk about our team, from the loan officers and field people to our top management team. Since I took the CEO position 7 years ago in 2017, my goal has been to work in 3 main and strategic tasks as responsible of Gentera.

The first one, to define a clear vision and strategy for the organization towards our digital transformation to provide our customers a more convenient experience. The second one, to build a strong professional, accountable and passionate team that loves what we do and that delivers. And the third, to coordinate Gentera's management team to accomplish results all across our business units. Having a team like this with a clear vision with a specific strategy and with an explicit road map has become our stronger strategic advantage.

There will be times in which we will have good results as we have had them in the recent years. And I am sure that there will be moments in which we will face hard and challenging times as well. However, having the right people and talent will always be the best guarantee to assure that we will remain relevant for our customers and for the rest of our stakeholders. So let me take it from here to talk about the succession process we just went through for the CEO position of Banco Compartamos.

On September 17, Ivan Mancilla was appointed as our new CEO for Compartamos Banco. As we explained when we announced Ivan designation, he is one of the cofounders of Compartamos. Together with Carlos Labarthe and Carlos Danel, Ivan builds Compartamos operations since its inception in 1992. And for more than 30 years, Ivan has played several relevant roles in the organization. I have no doubt that Ivan has the perfect fit for this position.

He has the experience, the leadership and the execution skills to take Banco Compartamos through the transformational process that we are navigating. Ivan also has a profound knowledge of our customers and the market segment that we serve as a true commitment with Gentera's mission and purpose. So we welcome Ivan on this new role.

Finally, I want to confirm you that the second and last dividend for this year will be paid on November 14. The payout will be MXN 0.60 per stock which along with dividend paid in May in the past May is in line with our 40% dividend policy. And now Mario Langarica will take you through our third quarter business results. And after him, Enrique Barrera, Mario and myself will be happy to take any questions you may have.

Please go ahead, Mario.

[Mario Langarica Ávila, executive]

Thank you, Enrique, and good day to everyone. As always, we appreciate your interest in Gentera. As Enrique signaled in his remarks, we're very excited with the historic and solid results that Gentera is reporting for 3Q '24 and in line with the objectives presented to the market at the beginning of the year. In this period, we have reached new historic amounts of client portfolio and quarter net income that give us the confidence to finish 2024 with glowing historic results.

As of 3Q '24, we have reached a new record of 5.58 million people using our financial services, adding 799,000 people in a year with a 16.5% growth versus 3Q '23, achieving deeper financial inclusion. Gentera loan portfolio amounted to MXN 75.4 billion in 3Q '24, growing 24.5% compared to 3Q '23. Worth highlighting are the strong annual portfolio growth of 27.3% in Banco Compartamos and 20.6% in ConCredito.

As mentioned before, in early 2024, we observed incremental NPLs and cost of risk that made us slow down the portfolio growth in Peru and take both actions to prioritize asset quality. The recent dynamics observed in 3Q '24 allow us to think that the inflection point in Peru is behind and that we should expect to see better dynamics going forward. Having said this, the robust portfolio growth in our Mexican subsidiaries has more than compensated the slowdown in Peru. So we expect to end 2024 with the portfolio growth within the guided price range. Now let me just talk about the evolution of different lines of our income statement.

As anticipated 1 year ago and as we informed in the last quarter, the growth in our interest income and our margins have materialized following the growth in clients and portfolio. Interest income grew 23% versus 3Q '23, reaching MXN 10.2 billion. Net interest income grew 24% to amount MXN 8.45 billion. Consequently, NIM amounted to 40.5% in this quarter and 39.7% in the 9-month period, in line with our expectations for the year.

Gentera's cost of risk amounted 12.7% in the 9-month period and 13.8% in 3Q '24. These numbers, which have been higher than expected, are mostly explained by: one, a higher-than-expected risk of our loan portfolio in Peru as explained before; two, a larger individual portfolio which require higher provisions; three, the strong portfolio growth observed during the year; and four, some potential risk associated to the methodological events, which have been present in second Q and 3Q.

We have already addressed risk issues that generated incremental provisions in Peru during the year and have been observing better and stable NPLs and cost of risk that have allowed us to restart growth again. Our expectation for Gentera year end is to have a cost of risk around 12.9%. Important to note that if we remove the unexpected impact from Peru, our cost of risk will probably ended around 12%.

Provision for loan losses for 3Q '24 amounted to MXN 2.49 billion with a coverage ratio of 231% in the quarter. NIM after provisions in 3Q '24 amounted to 28.6% and 28.8% for the 9-month period. For the year, we expect to maintain NIM after provisions around 29%. Net fees amounted to MXN 1.17 billion in 3Q and to MXN 3.06 billion in the 9-month period, representing a 55.4% growth compared to 3Q '23 and 49.6% compared to the first 9 months of '23.

These fees have been mostly driven by extraordinary and better-than-expected results of our insurance business that represents almost 90% of collected commissions. It is also important to remember the important contribution of Yastas and Banco Compartamos branches in our business model that allows Gentera to depend less on third-party channels, therefore reducing fee expenses in relative terms.

Accumulated operational expenses amounted to MXN 14.066 billion, representing 12.4% growth compared to 3Q '23, below the expected growth guidance for the year.

Most of this growth comes aligned with the growth of our business, including a larger sales force and upgraded infrastructure. And of course, with our strategic initiatives and investments that will make our operation more productive, efficient and modern. The positive effects of these efforts have already started to flow to revenues and expense lines, generating, again, a virtuous trend of positive jaws that we plan to keep going forward. It is important to highlight that given the recent dynamics that we have seen in this line, our expectation for expenses for year-end is to grow around 14%.

Net income amounted to MXN 1.749 billion in 3Q '24, 29.6% growth compared to last year. While cumulative net income in the 9-month period amounted to MXN 4.549 billion, making them our best figures ever for comparable periods. Gentera's controlling participation net income in 3Q amounted to MXN 1.646 billion, representing an EPS of MXN 1.04 for the quarter, 32.7% above the number in 3Q '23.

Gentera is reporting ROE for 3Q amounted to 23.6%. And for the 9-month period, it reached 20.9% with Banco Compartamos posting an ROE of 33.6%. Before finalizing my remarks, I will make some additional comments on ConCredito and the corporate announcements. ConCredito business line CrediTienda have started operations in Peru in synergy with Compartamos Financiera. The entrance of CrediTienda to Peru will allow us to offer more than 2,000 products to our digital platform. Additionally, during 3Q '24 and as part of the process of integrating more ConCredito into Gentera, we've made some adjustment to the corporate structure of ConCredito in order to be able to get more synergies and efficiencies in our operating model, for which Fincrementar together with Fin Útil will be the credit originators for Empresarias in the next periods.

Fincrementar will allow us to keep serving more clients in a more efficient manner and with the use of borrowing and future digital solutions. Now to conclude my remarks. With the results of service as of September, and as Enrique mentioned before, we maintain Gentera loan portfolio and EPS guidance expecting to finalize the year-end in the middle to high end of the guided range, with controlling ROE around 20.5%. All of this, maintaining solid and healthy liquidity levels strong and diverse access to funding sources and robust capitalization levels. We at Gentera are strongly motivated with a solid evolution of the company, and at the same time, very interested to continue working hard in servicing the financial needs of millions of clients generating shared value for all. That is all for my remarks. Thank you for your attention.

And now we can move forward to the Q&A session. Thank you.

[Operator]

[Operator Instructions] Our first question is from Ernesto Gabilondo with Bank of America.

[Ernesto María Gabilondo Márquez, analyst]

Congrats on your results. My first question will be on your longer expectations. So you were saying that you expect the midpoint of the guidance range for this year. But starting to look for next year. And if we have a Mexico's GDP growth of around 1%, how should we think about the loan growth next year? Do you see it could remain at the double digits? And then my second question is on asset quality. So we saw the NPL deterioration quarter-over-quarter. But as you mentioned, very reasonable considering the expansion of the loan book and the rainy and the hurricane season. So you have anticipated a cost of risk around 12.9% in '24. But if you move like the metrological impacts and the challenges in Peru, could be lower than that. So how should we think about the trend for the cost of risk next year?

And the last question is on your fee income duration and other income. This can -- this year has been outstanding in terms of the insurance fees. And I think this quarter also, we were favored in other income by ConCredito's marketplace. So how should we think also about this fee income growth or net fees growth during the next years.

[Mario Langarica Ávila, executive]

Thank you very much, Ernesto. Very good questions. Well, as you know, we will give our guidance in February. But what we can anticipate at this point is, number one, we expect to continue growing the portfolio of double digits. We will give the precise guidance in February. In terms of asset quality, what I could tell you is that we would expect something around 12% once we normalize Peru's performance. And regarding fee income, we have been very successful with the cross-selling of insurance products. What I would like to tell you right now is that for next year, we would probably expect a little higher growth on fees above the portfolio growth, but still aligned to the expansion of the portfolio.

[Ernesto María Gabilondo Márquez, analyst]

Excellent. Excellent. And just a last question. Considering the first 9 months and you annualize your net income, it implies a growth trend of 20%. So already at the high end of the company guidance range. So considering that usually you have like a stronger business seasonality in the last quarter, loan book expansion is performing very well. And then you can have some potential interest rate cuts by the end of the year. Do you see the possibility to be more at the high end maybe modestly above the guidance range for this year?

[Mario Langarica Ávila, executive]

What we are saying right now is that we expect to be in EPS on the high end of the guidance.

[Operator]

Our next question is from Olavo Arthuzo with UBS.

[Olavo Arthuzo Duarte, analyst]

First, I just wanted to understand a little bit more on the loan mix going forward because we noted the strong growth on customer loans, mainly driven by [ individuals ] . So given the political and macro backdrop in the country, how should we think about this dynamic going forward? And I mean -- are you seeing further room to explore the individual segment in both Mexico and Peru? Or should we see some shift towards the group lending? And if you also please put the answer into the context for the next year, that would be great.

[Mario Langarica Ávila, executive]

Okay. Thank you. Well, we don't have a specific objective on a loan mix of the portfolio. What we think is that we have a strong opportunity to grow in group lending and individual lending in both countries. Specifically in Mexico, individual lending is growing faster and will continue growing faster than group lending because it's a whole new segment that is underserved where we see a lot of potential to keep growing.

On Peru, individual lending, obviously, is the core product. We will -- we have a growing business, and we expect to keep growing individual lending. And where the faster opportunity for growth in clients and portfolio come from group lending. So the mix of all will allow us to keep penetrating with both products. Important to note that products are focused to different needs and to different segments. So there's opportunity to grow in both products in both countries.

[Olavo Arthuzo Duarte, analyst]

Understood Mario. And if I may, my second question, some more broad one on ATERNA because the banking, it's kind of about to reach some milestones at the end of this year in terms of policies. And I think the bank had almost 16 million policies if I'm not wrong. And I just wanted to have a little bit more color on this challenge here related to ATERNA. And I mean the focus is to gain market share, trade and explore the current customer base because I understand that at the end of the last year, there were some M&As over third-party channels to distribute policies. And this partially explain this performance so far, the strong performance so far. So this appetite over more M&A is still in place. Mario, any update on this business would be help.

[Mario Langarica Ávila, executive]

Yes, excellent question. And yes, our insurance business is very important. I would dare to say that if Mexico and Peru are [ under bank ], they are much more on the insured. And we were pioneers launching microinsurance in both countries and the reception has been amazing. We believe now that there is a lot of acceptance of the product by the people. It has been a lot our effort, but obviously a word of mouth. And we have been expanding products. So it's a combination of more awareness of the existence of a product for the population to cover for unexpected losses that already exists together with the products that we have been expanding.

And not only that, this year has been very successful because we also allowed expansion to other members of the families in a commercial strategy that has been very successful. So the social contribution of the insurance business to the base of the pyramid that we serve is very important and getting traction. So we expect to keep expanding in products, expanding in geographies. And we think that today, it's almost 10% total revenues, what we generate in insurance business, and it should keep being a very important part of it.

[Operator]

Our next question is from Brian Flores with Citi.

[Brian Flores, analyst]

Just two questions here. The first one is maybe a [ double click ] on the structural cost of risk, right, because I'm trying to reconcile what you're trying to do, you're expanding ConCredito in Peru. ConCredito is running with high cost of risk, I think, structurally. And I think, I mean, revenues kind of compensate this, right? So it's not out of context or unexpected. I think it's reasonable within the economics of the segment. But my question is, Mario, as ConCredito gains relevance not only in Mexico but also in Peru, should we see the structural cost of risk going upwards going forward?

[Mario Langarica Ávila, executive]

We -- as I just said in the question of Ernesto, we expect to have a little higher cost of risk in general because of different reasons. The change in the mix of the portfolio, including individual lending in Mexico, including the products of ConCredito, what is a risk that we want to take and that we feel very comfortable taking. And we think that the most important is price and cost that correctly to be able to deliver the profitability levels that we have. This year, both the bank and ConCredito are at the cost of risk that we planned and expected for the year. The exception was Peru for all that we have already explained before.

But I think that we feel comfortable with additional risk, expanding our products to new clients and new regions. Therefore, we feel comfortable with what we're doing in -- specifically with ConCredito.

[Brian Flores, analyst]

No, perfect. But here this week, we saw some recommendations by [ Cofesa ] right, trying to level the playing field between fintechs and banks. I just wanted to get maybe a bit of your notion because there was a big initiative on correspondent agents, right, trying to level. And I think you're maybe the second largest player in the segment. So just wanted to hear from you, Mario, how's your view in terms of the development and the potential threats from fintechs entering these very, I would say, relevant part of ATERNA and the correspondent agent that you have?

[Mario Langarica Ávila, executive]

I think that we're very well positioned. I mean, we have, as we have explained many times, a full product offering, and channels to serve it. We have digital channels, as you know, but we have physical channels. And we think that the physical presence to serve the base of the pyramid is very, very important. And that's why [indiscernible] does plays a key role and also our branches.

So we think that, obviously, fintechs usually come more from a nonpresidential type of proposal, but we believe that physical presence is very important for being close to the customer for collections, for cross-selling, and I think it's a key component of the whole equation. So -- and we are always looking at different competitors and different ways of doing things. But we think that our strategy and our footprint is, as we understand, the best way to serve the segment.

[Operator]

Our next question is from Tito Labarta with Goldman Sachs.

[Daer Labarta, analyst]

I guess a bit of a follow-up on your guidance. I know Mario you said you expect to be at the high end of your EPS guidance. I mean that would imply that earnings would fall in 4Q. So just to get a sense, is that right way to think about it? And what would drive that decline? Is it the last couple of years, you've had some seasonality, I think, in provisions have gone up. So are we right to think that we should expect a decline in earnings in 4Q? And what would be the driver of that?

And then my second question, I guess, just on your profitability right you said about 20.5% for the year. I mean, this quarter, you were running above that. How do you think about the longer term or the sustainability of the ROE. Can it increase from here? What's the right level of ROE for the business given the trends that you're seeing?

[Mario Langarica Ávila, executive]

All right. Perfect. Yes, in terms of your first question, there is seasonality in the last quarter. that's always the case. We have one-off, [ one down ] one off [ one down ]. But again, the amount of expected net income for last quarter is also very strong. I would add that we have some -- we need to be very, very careful still to see what happens with the impact of the methodological events in Mexico, we have already reserved what we think it makes sense, but we just need to make sure that the end of the quarter goes well. And regarding expenses, typically, in the last quarter, we have higher expenses because all of the payments that we have to do for year-end.

So again, we expect to end the year in the high end of the guidance. And regarding long term, as you remember, we increased the expected ROE to 20.5%. We are aiming with all the modernization and strategic initiatives that we are putting in the field as of today, and that will be running out on a national scale next year, we believe that we will be able to reach additional levels of productivity and efficiency. And therefore, we could expect to have increases in profitability given the positive jaws that these projections will generate. So we will give the guidance in February for what we expect next year, but what we think that it's -- we will feel very comfortable saying that the floor will be now 20.5% and something between 20.5% and 23% is feasible.

[Operator]

Our next question is from Yuri Fernandes with JPMorgan.

[Yuri Fernandes, analyst]

Congrats also. I would like to follow up more on expenses. From what I understood, Mario, you should expect the growth around 14%. And I'd like to confirm if this is only the quarter or is this the full year because if it is the full year, the quarter should grow a lot, right? It should grow some, I don't know, 15%, 18% year-over-year. So you get to the full year of 14% because you're growing around, I don't know, 12%, 12.5% in the first 9 months. I understood you are hiring employees. I think there was a big increase in employees, maybe they were hired at the end of the quarter, and this explains the increase. But I just would like to confirm that this is the magnitude of high expenses, we should see for the fourth Q.

And regarding the operating leverage, Mario, I totally understand like your revenue should start to accelerate and your revenue -- your expense started growing less. I just would like to understand in 2025, whatever you can comment about this strategy of hiring more employees because I think this is the third year that we are seeing high or double-digit growth of employees. And in 2025, this should continue to be the case because maybe you're seeing opportunities, you're still gaining market share, and this is the right thing to do? Or if not, like with the number of head count you have, we should start to see more operating leverage. And I'm focusing on employees because I know more than 60% of your expenses are coming from this bucket, right?

[Mario Langarica Ávila, executive]

Yes. Yes. No, you're right, what you said on the expenses for the last quarter, the number that we give is for full year, 40%. And on an annualized base, the growth quarter to quarter -- fourth quarter to fourth quarter is 18% more or less. So you're right on the numbers that you gave. So -- and again, it also has to do with most of the incentives and the extra payments that we have to do at the end of the year. So for the full year, 14%. Regarding the hiring of employees, we are doing it very selectively. We have a P&L methodology in each office, and we only allow the hiring of new people if the productibility level has reached the highest potential at the specific place. So we don't want to say that we're going to limit growth in hiring. We will keep hiring as appropriate. But it's linked to a P&L contribution. So obviously, we can give you additional thoughts when we give the guidance of the year, but we are not going to limit the growth of employees if we need them in specific locations where the metrics and profitability allow them to happen.

[Operator]

Our next question is from Carlos Gomez-Lopez with HSBC.

[Carlos Gomez-Lopez, analyst]

Congratulations on excellent results. So the first question is about your loan growth in Mexico. Now you are reading, I think it's 27% year-on-year at Compartamos. Is there a point in which you get concerned that it could be excessive, as we all know, we only realize these things looking back, but would you feel tempted to cap your growth at some point? Or you think that these very elevated levels are okay and are sustainable?

And second, would you indicate given this growth where the dividend might be for next year, would the 40% payout that you now have the sustainable and a good guidance?

[Mario Langarica Ávila, executive]

Perfect. Yes. Well, as we have -- thank you, Carlos. As we have spoken in the past, the market is very large. And we think that it's underserved and that makes the case for us being able to tell you that our expectation for loan growth in both markets -- it's going to be in the double digits. So we feel comfortable that for the next 3 years, at least, we can keep growing double digit solidly in Mexico and in Peru. And now on the dividend, I will let Enrique participate now, Barrera.

[Enrique Barrera, executive]

Thank you, Mario. Thank you, Carlos, for the question. Yes, the dividend policy is, as you know, is up to 40% and according to the projections that we are estimating for next year and with the information that we have as of now, we are estimating that the 40% is going to be there. Probably next year, will grow mid-teens. So yes, I mean -- and the formal guidance will be given next February. So thank you.

[Operator]

Thank you. There are no further questions at this time. I would like to hand the floor back over to management for closing comments.

[Enrique Majós Ramírez, executive]

Thank you. Well, I don't want to end the call without mentioning that, as you know, we are in this succession process on the CEO position in Banco Compartamos. And I really want to thank Patricio Diez de Bonilla for the work that he has made and the legacy that he left here in Gentera along the 16 years that he was with us. So thank you, Patricio. We are very proud of you. And as you know, we are happy for him because he's taking a very relevant position in a very relevant bank in Mexico. So thank you for that. I'm very proud also of Ivan having this new role. We are even grateful with the Ivan because he accepted to take this big challenge. And we believe we are very confident that he will make a very good job, and we will take Banco Compartamos to its next step. So thank you, Ivan.

And thank you also, Enrique Barrera and Mario Langarica for helping us here in this call but all the work that you do with our investors. You guys know very well these 2 members of the team, you have very frequent contact with them. They always do an amazing job, and thank you 2 for that.

[Unknown Attendee]

For the Gentera's team, there is a final question from the click meeting control from Thiago [indiscernible] of BTG. He asks, "Hi team! Just to understand if ROI could go beyond 25% levels, assuming a strong normalized performance from the Peruvian subsidiary, assuming the continued strong performance in Mexico, coupled with interest rate cuts? Thanks. Sorry for the inconvenience, he is the last one.

[Mario Langarica Ávila, executive]

Sorry, the question was -- can you repeat just the 25% refers to what?

[Unknown Attendee]

Yes, for sure. Just -- the question is just to understand if return on equity could go beyond 25% level assuming a strong or normalized performance from the Peruvian subsidiary, assuming also the continuous strong performance in Mexico, coupled with interest rate cuts. That's the question.

[Mario Langarica Ávila, executive]

Yes. No, we -- as I mentioned in the previous question, our expected level of ROE should be between 20% and 23%. We don't see 25% in the short run.

[Unknown Attendee]

Okay. Perfect. With that question from the platform, all the questions are taken and answered by the management and I let the word to the management for the final remarks.

[Enrique Majós Ramírez, executive]

Well, I think we already gave all the messages that we want to share with you today. So thank you for your interest and attention to this third quarter report. As we mentioned, we expect the fourth quarter in line with our plan and very good results for the end of the year. And we look forward to talk to you in our next quarterly report to present you the final results of the year. So thank you very much, and have a nice day.

[Operator]

This concludes today's call. You may disconnect your lines at this time and log off your computers. Thank you for your participation.