Gentera SAB de CV

BMV:GENTERA

Earnings Call Transcript 2018-Q4

[Operator]

Good morning, and welcome to the Fourth Quarter 2018 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 am Enrique Barrera, the company's Investor Relations Officer. I am very pleased to introduce our management team. With us today are: Mr. Enrique Majós, Gentera's Chief Executive Officer; Mr. Patricio De Bonilla, Banco Compartamos' Chief Executive Officer; and Mr. Mario Langarica, Gentera's Chief Financial Officer. They will review the results for Gentera for the fourth 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]

Hello. Good morning, everyone. As always, we really appreciate your interest in our quarterly report. In this call, we will address 3 main topics. One, I will talk about our 2019 plan and strategy. Two, Patricio will tell you about the results of Banco Compartamos and the microfinance industry in Mexico. And three, Mario will provide more detailed information on the group's financials. And afterwards, we will be glad to have a Q&A session.

So let me start by talking about Gentera's 2018 results. And tell you -- I want to tell you that after a year full of big challenges and accomplishments, we are very proud about our 2018 results. We surpassed the original guidance given at the beginning of the year. We appreciate the support by many shareholders that continued believing in us even though the uncertain and difficult times during the end of 2017 and the beginning of 2019 -- '18 in Gentera. We are happy to say that we delivered, especially by recovering growth in our customer base and achieving again double-digit growth in portfolio. Since we're not looking good at the end of 2017, for the first time in our history, we were losing customers and portfolio in Mexico. However, since the beginning of last year, we established a specific recovery plan that was designed and executed by our management team with outstanding results.

To mention a few facts. After 20 months of losing customers in Mexico, by the end of the year, we grew our customer base by 5.6%, attracting more than 90,000 clients during the second semester. We also grew our portfolio by MXN 3.6 billion for Gentera, which means an 11% on a year-to-year basis.

I want to take this opportunity to congratulate Patricio De Bonilla and his management team for the flawless execution of the plan we established a year ago.

In addition to the successful execution of our recovery plan in Mexico, they do accomplish impressive growth results, driven by the big market opportunity we see in the group lending microcredit market in Peru. As we reported last year, in Peru, we reached the 0.5 million customers mark in April 2018 and finished the year with 610,000 clients. By the end of the year, Peru accomplished 24% growth in portfolio and 28% growth in clients. We believe that the foundation of a solid management team in a high potential financial market has been the key for a successful expansion and diversification strategy for the group in Peru.

As of the fourth quarter 2018, Peru represented a 33% of Gentera's total portfolio and 16% of profits. In 2017, these numbers were 30% and 7%. This is a statement of how important and well executed has been our entry into this market.

I want to take this opportunity to congratulate Ralph Guerra, our CEO in Compartamos Financiera, Peru and his team for the extraordinary results that they have achieved so far. And by the way, after not growing in Guatemala in 2017, our management team achieved a double-digit growth again in 2018, so also congratulations to Adolfo Peniche, our CEO at Compartamos, Guatemala.

It has taken us 7 years -- and going back to Peru, it has taken a 7 years for Peru to have a significant weight in our results. This is the type of patience that one has to have as management when you enter into new initiatives. I assume, and I assure that you in a few years we'll be looking about -- or we will be reporting about other initiatives that we are launching today and we will have the same -- good results to report.

Low NPLs have been another key element in the equation to Gentera 2018 results. The quality of the portfolio in our 3 markets, Mexico, Peru and Guatemala, is in great shape.

Total NPL for the group was 2.73%. We have not seen these end-of-year NPLs since 7 years ago. So the last time we had this kind of level of NPLs was in 2011. This represents a very positive indicator that will allow us to continue growing with confidence. Besides, better levels of NPLs also allows us to save more than MXN 900 million in cost of provisions during 2018. It is also important to mention that for the first time in our history, our expense growth rate was within a single-digit range with an 8.8%, yet, we believe, there are opportunities for improvement in our cost structure. And for 2019, we expect to generate positive income-to-expense growth rate.

Let me now talk about Gentera's 2019 planning strategy. After a very challenging year, we are now in a much better position to capture opportunities to grow. We feel very enthusiastic about the promising 2019 due to the following 4 elements: First, we believe we have a big market opportunity that still exists in the 3 countries in which we operate. Our guidance for 2019 for Gentera is to grow our portfolio between 17% and 19% and EPS will be between MXN 1.85 and MXN 1.95. Second element, we are bringing a better value proposition for our customers. We have improved our product and processes, which will bring a double-digit growth in our customer base during this year. Part of the better value proposition for our customers will come by reducing our interest rate on average between 300 and 500 basis points. This will take place mostly in the group lending methodology. This will slightly reduce our financial margin but, however, it will place us in a stronger position to keep growing our market share in Mexico, especially.

The third element is the transformation of our credit business model will also start bringing benefits. We're working hard on finding efficiencies in our core processes and improving them through the use of digital technology. And fourth, as I mentioned, positive [ charts ] will show that our income growth rate will be higher than our expense growth rate by the end of this year.

Our strategy for 2019 is to put all our efforts in creating more value to our credit customers, providing them with the insurance, savings and payments opportunities traded around the credit products. We are sure that this will improve their financial experience with Compartamos and at the same time, will help us to capture a larger share of wallet from every customer. We firmly believe that with this strategy, we are in the right path to provide our customers a better experience, maintaining a double-digit growth in our portfolio and at the same time, improving the efficiency of our operations.

We really believe 2019 is going to be a year of great opportunity for our business and for our industry. Historically, times of uncertainty have always been an opportunity for us to provide our customers with financial products to maintain their business running. We are aware of the government's plans and programs and the particular orientation that they have in creating additional opportunities for millions of Mexicans. This, by the way, is totally aligned with Gentera's foundation purpose. We have studied each of those proposals, and we see a lot of synergies between the government and the financial industry.

Increasing financial inclusion in Mexico and better serving beyond bank populations are clear common goals we share with the Mexican government, and we believe we can make important contributions to achieve those goals.

Let me now talk about the other business units we have in Gentera. YASTAS continues to provide convenience to our customers. During 2018, we received more than 15 million payment transactions of which 44% were financial transactions, and the rest were cell phone pop-ups or bill payments. By December 2018, YASTAS had over 3,000 transactional points that offer the option of processing more than 60 different kinds of bill payments. ATERNA, our microfinance insurance broker, processed 19.6 million insurance policies during 2018, which represented an 8.2% growth compared with the previous year. INTERMEX, our remittances provider, handled more than MXN 25 billion in payments, which represented a 7.6% growth compared to 2017, and at the end of fourth quarter 2018, INTERMEX had more than 2,700 payment points.

Regarding our investments in ConCrédito, we continued participating in the company's dynamics with 2 seats in their board. This has given us the opportunity to learn more about their business model and at the same time, get involved in some decisions. We continue to be very excited about this investment and its synergies with Gentera. As we -- as you already know, we start to consolidate this company into Gentera starting from June 2020, once we have a majority stake in the company.

And after turning the call -- before turning the call to Patricio De Bonilla, let me just comment about an agreement from yesterday's Gentera board meeting. Yesterday, our Board of Directors approved to propose in the next shareholders meeting to be held in April, an ordinary dividend payment of 20% to be paid no later than July 31, 2019. The board will review, in October 2019, the possibility of an additional dividend payout, depending on the capital needs of 2020. We see a relevant growth opportunity in the months ahead. As such, we want to capture this opportunity while assuring our investment grade for the bank which is a strong asset for the group. Maintaining a strong capitalization rate has been our long-term strategy since it has allowed us to fund the business regardless of the economic cycles and more so when we expect double-digit growth for the year ahead. As you can see, we have a great year ahead and to provide you more detailed information, let me now turn the call to Patricio De Bonilla, our CEO of Banco Compartamos.

[Patricio De Bonilla Garcia Vallejo, executive]

Thank you, Enrique. I will now review Banco Compartamos' performance prior to the financials. As we mentioned in the previous conference call, the recovery plan was expected to show positive trends until the second semester of 2018. After strategic decisions that we made at the end of 2017 and during 2018, we are pleased to highlight some of the improvements that we continued seeing during the fourth quarter. During this quarter, we grew again in the number of customers served, finalizing the year with over 2.48 million customers, representing more than 50,000 additional customers compared with the third quarter of 2018. Considering this growth in clients and the growth experienced in third quarter 2018, in the second semester, we grew more than 93,000 customers. It is a relevant figure because, for us, it reflects that as signaled in the previous conference call, the customers are coming back to the bank due to the perceived benefits of the financial products and services that we improved during the year. Customer retention rate continues in very solid levels, and now we are moving at 85% compared to the low 80s 1 year ago. Growth can be seen in every product. And as we anticipated in our third quarter conference call, the growth momentum in the fourth quarter of this year helped us to finalize the year in a better position than 1 year ago.

On the portfolio side, demand for credit was solid during the quarter. We grew 3.7% compared to the previous quarter and 5.6% growth if you compare the portfolio versus 2017. The result obtained in 2018 is reflection of the operational adjustments and commercial decisions made which are now gaining traction.

Let me recap some of them. First, strong focus on enhancing our product offerings, improving our credit origination process and monitoring activities. The latter is related to weekly or biweekly receipts to the customer group meetings. Second, change in the incentives of the sales force, focused on service and asset quality. And third, a strong commercial proposition that will allow us to grow the customer base in a more solid way.

The implementation of all these initiatives have been focused and effective. Another highlight of the year has been asset quality. Due to a strict credit origination and monitoring processes in Banco Compartamos, write-offs in 2018 decreased 38.4% from MXN 3.6 billion in 2017 to MXN 2.2 billion in 2018. And NPL is now at 2.6%, which is better to the 3.3% levels reached at the end of 2017.

Finally, employee turnover also showed very positive trends, finalizing the year in 26% which is the best ratio ever seen in 28 years of history of the company. This reflects a positive work environment for our more than 16,000 employees in Mexico. In addition, due to the lower turnaround of employees, we can be more effective on the service side with customers as we have more experienced personnel in front of them and should reflect solid customer retention.

All in all, after more than 18 months of facing different challenges, now operational dynamics and financial metrics are improving and we expect to have a 2019 year with better trends in most metrics and with stronger credit demand as was previously signaled by Enrique Majós. Thank you for your attention. I will now turn the call over to Mario Langarica to review Gentera financials.

[Mario Langarica Ávila, executive]

Thank you, Patricio, and thank you, Enrique, and good day to everyone. In the fourth quarter, interest income stood at MXN 5.58 billion representing a 6% increase compared to 4Q '17. The interest income increase observed in this year-to-year comparison is very relevant and this is the first positive result after 4 consecutive quarters of annual contractions. These results were mainly driven by a larger loan portfolio in 4Q '18 compared to 4Q '17 and a larger contribution of Compartamos Financiera in Gentera's consolidated interest income.

Interest expense grew 40.1% compared to 4Q '17. This increase is mainly explained by: one, the increase in Banco Compartamos portfolio; two, the MXN 3 million in extra liquidity that Banco Compartamos took at the end of November; three, the 100 basis point increase in the reference rate in Mexico; and four, the 24% increase in Compartamos Financiera portfolio.

Net interest income showed a 3.6% increase compared to 4Q '17 with a net interest margin of 49.7%, representing a contraction compared to the 54.1% achieved in 4Q '17. This result was mainly driven by Banco Compartamos' extra liquidity and a smaller contribution of the subsidiaries in Gentera's consolidated portfolio, which represented 64.7% at the end of 4Q versus 68.3% in 4Q '17. If Gentera hadn't had the additional liquidity described above then NIM before provisions for 4Q '18 should have stood around 51.5%.

As we already mentioned, asset quality is improving with provisions decreasing 22.8% compared to 4Q '17. Net interest margin after provisions stood at 42.3%, a similar level compared to 42.7%, which is 3Q, and slightly -- 3Q '18 and slightly below the 43.4%, which obtained in 4Q '17. However, as previously explained in NIM before provisions, this ratio after provisions was also affected by the extra liquidity taken in November. If Banco Compartamos hadn't had this extra liquidity, Gentera's NIM after provisions in 4Q '18 should have stood around 43.9%.

The cost of goods for the quarter stood at 8.7%, and for the full year 2018 stood at 8.22%, which, as already mentioned in the previous conference call, this ratio ended below our original expectations and was a key element that helped us in our decision of moving upwards net income and EPS guidance for this year and last quarter.

The fee income during the quarter decreased 3.2% to amount MXN 360 million compared to 4Q '17. This contraction is mainly explained by a smaller figure generated in late payment fees charged to clients with delinquent loans at Banco Compartamos, which in this 4Q contracted 19.4% compared to 4Q '17 due to better customer performance in asset quality than in 2017.

Fees and commissions that were generated at other subsidiaries or by cross-sale of other products also contributed to the decline. Fee expenses increased 20.6% mainly due to the flexibility that we gave back to our clients to use third parties' infrastructure to execute the disbursements and payments at their convenience. Net commission fees showed an 11.4% contraction compared to the period reached at the end of 4Q '17.

Operating expenses grew 1.6% compared to 4Q '17 and 8.8% on a year-to-year basis, a single-digit growth for the first time since Gentera's consolidated financial statements. As we explained in previous calls, this increase was mainly driven by: a change in sales force compensation, more fixed than variable and the incentive program for the sales force described before; marketing initiatives to attract and reward good customer performance; and infrastructure.

It is important to mention that for 2019, we will maintain a strict control on operating expenses growth in order to achieve, for the second consecutive year, a single-digit growth below 8%. More emphasis in cost control will be put in Mexico since Peru is still having a very strong expansion and we have plans to scale to a national level.

Efficiency ratio for the quarter stood at 81.6% and for the full year at 77.5% compared to 75.9% in 2017, for '19 -- sorry, in 2017.

Gentera closed 2018 with an accumulated net income of MXN 2,990 million, including nonrecurring income of MXN 186 million, representing a net 1.8% growth compared to 2017. Excluding the nonrecurring income, the net income for the year would have had a contraction compared to 2017. In 2018, return on equity stood at 17.1% and return on assets at 6.3%, which are slightly below the 17.7% and 7%, respectively achieved in 2017, but aligned with our expectations for a challenging year for the company. Thank you.

That is all for our presentation. Please, operator, can we move forward to the Q&A session?

[Operator]

[Operator Instructions] Our first question comes from Manuel Gonzalez of Signum research.

[Manuel González, analyst]

Congratulations to the administration for a good results in the quarter. I had a question regarding the NIM, net interest margin. I see there is a decrease that has extended for quite some period. And I see it has to do some to reduce extra liquidity requirements. My question is, are we going to see this going forward? Or is there a strategy to lift up this indicator?

[Patricio De Bonilla Garcia Vallejo, executive]

In terms of extra liquidity, we took some measures to be more comfortable in terms of liquidity. We have now, in the balance sheet, 100% of the funding secured for 2019 growth. So as growth materializes throughout the year, we expect this excess liquidity to come down. Also, we will be playing with the balance sheet, refinancing some debt. So just to be very clear, the excess liquidity that we finalized the year is to secure the funding that we require for the growth expectations for 2019. And as the growth materializes, it will come down in the months ahead.

[Manuel González, analyst]

Okay. And regarding the net interest margins, so we're not going to -- can we expect to see like a little stabilization towards the future?

[Patricio De Bonilla Garcia Vallejo, executive]

In terms of NIM, as one of the commercial strategies that we put in front of the customers would be reducing the rates of certain products to the most important customers as a benefit of being part of Banco Compartamos. With that strategy, we plan to be the best offering for credit financing in Mexico. Due to this effort, the NIM or the active rate of the bank will come down, however, on a NIM after provision basis, due to the good asset quality that we are having, it will not be one-to-one impact. So today, you are seeing the bulk of this impact, it should normalize throughout the year.

[Mario Langarica Ávila, executive]

I would like to add a couple of comments. Another important aspect of this is, as you know, Peru is having more participation in the portfolio and margins in Peru are a little lower than Mexico. And just for you to have the full numbers, what we expect and just to tell you it's for 2018, the margins before provisions amounted to 42 point -- 49.1% NIM before provisions and excluding the liquidity effect, it would have been 51% and the NIM after provisions was 42.2% and excluding the liquidity effect, it would have been 43.8%

[Manuel González, analyst]

Okay. Can I just make another quick question. Regarding to the asset qualities, I remember reading in your press release that you expect NPL to go up a little bit in the future quarters due to, I guess, some products, dynamics or something. Can you amount like how much would it rise?

[Patricio De Bonilla Garcia Vallejo, executive]

Yes, in terms of asset quality, I mean, you need to bear in mind that throughout the year, there is some seasonality in the first quarter. January, February normally picks up a little bit due to the economic dynamics of such months. But all in all, at least most of the NPLs in Mexico, what we expect it to obtain the current levels, which we think are adequate. So you shouldn't expect at Gentera's level, nothing material in that regard. Around 3% NPL for the year should be something that you should look after.

[Enrique Majós Ramírez, executive]

And as we mentioned, the Peru is now representing a larger part of the portfolio, Gentera is 33%. So it's relevant to mention that Peru might have the same dynamic that Patricio is explaining for Mexico. So I think it seems to be pretty stable.

[Operator]

Our next session comes from Gilberto Garcia of Barclays.

[Gilberto Garcia, analyst]

Have you had any dialogue with the new administration regarding the -- how your services can complement with the new social programs that are being proposed?

[Enrique Majós Ramírez, executive]

Sure, yes. Let me tell you that since the new government took office, Gentera has been close to different public institutions and authorities to find different ways to collaborate jointly to increase the finance -- to increase the financial inclusion in national goals. So just to provide some examples, we are actively participating in the program Jóvenes Construyendo el Futuro and we will receive around 1,000 young people here in Banco Compartamos in Mexico. We are ready and we are working with the ABM, the Asociación de Bancos de México on this and things are going pretty well there, and we are very excited about receiving these people. We also offered our debted accounts for disbursements through BANSEFI platform and the use of YASTAS transactional points which, by the way, have BANSEFI official correspondence. It's something that has been in the interest of the government due to its convenience and presence in the last mile. In addition, we also are working on the digital code payment transaction initiative called CODE of Banco de Mexico. So as you can see, there are several opportunities to generate synergies and to help our government in their financial inclusions to growth for Mexico.

[Mario Langarica Ávila, executive]

Going forward, I mean again, the focus of this administration is to include financially those people that still are left behind. And I think that we are talking the same language there. Now the communication should be close in the following month and -- through the ABM, through -- or individually, and we have been with open access with the Ministry of Finance. So the dialogue is open and the goals are aligned. Of course, the discussion on how to achieve such financial inclusion metrics is where we need to collaborate to find the best ways to serve more people in the Mexican market.

[Patricio De Bonilla Garcia Vallejo, executive]

Yes, as you know, Gentera's purpose has always been financial inclusion and I think the government is very interested on this and I believe we can help. So I have the -- I believe that we have a huge and strong common motivation so we are very excited about this.

[Gilberto Garcia, analyst]

And in your dialogue with the authorities, has there been any mention or let's say encouragement for you to reduce the interest rates that you charge? And how receptive have they been to the point that the relatively high interest rate that you charge is a reflection of the required structure, which is obviously quite expensive?

[Patricio De Bonilla Garcia Vallejo, executive]

Even as we know that this is something that has not been in the table of discussion and we haven't talked about interest rate caps. As members of the Mexican Banks Association, we are very close to the conversations around the fees and commission with legislators, which is something that it is on the table, and we don't feel that there is a high risk at this point. And additionally, we all know that our president announced that he doesn't see any change related with this, I mean, commissions and fees within the following 3 years. So we feel comfortable that we have a close communication with government, legislators, our regulators. And I think that being close, talking about this topic maintains our expectations in a good shape.

[Operator]

Our next question comes from Neha Agarwala of AUPC (sic) [ HSBC ].

[Neha Agarwala, analyst]

This is Neha from HSBC. My first question is regarding some sort of guidance. Last in 2018, you mentioned you expect about getting 10.5% for your cost of risk and the number was slightly lower than that. What should we expect for 2019 in terms of cost of risk? And what should we expect in terms of the efficiency ratio that you're targeting for the group? And now you see more improvements in Mexico, but what should we expect for the group? And my second question is on the target market. Peru is becoming increasingly important for Gentera. What is the target market in Peru in terms of total number of clients that you see? So that gives us an estimate of how much growth we can expect. And is the strategy in Peru any different from Mexico? Anything there that is worth noting which is different? And also if you could tell us again about your targets, the size of the target market in Mexico as well, that would be very helpful.

[Enrique Majós Ramírez, executive]

Thank you, Neha. And let me start with the second question and then Mario will address the first one. Talking about Peru, yes, we are really excited and we are happy that our strategy of going to other latitudes has worked. The strategic decision was that we wanted to have a cross-fertilization between the digital lending market and the group lending methodology since we believe that here in Mexico, we had a lot of experience in the group lending and in Peru, had a lot of experience in the individual lending. So what we are looking at now in Peru is the result of that strategic plan in which the growth is coming not only because of individual clients but mostly from the group lending clients. The -- just to give you some features that last year -- I already explained that we grew portfolio in Peru around 24% and from this 24%, 50% comes from the group lending clients portfolio and 20% from the individual portfolio. So looking ahead, I can tell you that this strategy is working. I think that we are also accomplishing our purpose of financial inclusion for a segment in Peru that have not been served before because the group lending methodology was not in place there. And we believe that for the next year, we will have growth of above 20% again.

[Mario Langarica Ávila, executive]

And in terms of Mexico, when we talk about the addressable market and when you see any figure for financial inclusion, you realize that the market is very large, still, in Mexico. We have estimated a market for working capital loans in Mexico of around 19 million people. Of those currently served, there are around 5 to 6 million. So the opportunity in Mexico remains very large. It's still very large and we think we can achieve still interesting growth in the coming years.

[Enrique Majós Ramírez, executive]

And regarding your questions about the guidance, we expect to be in the levels of around 8% in cost of risk for 2019 and our efficiency ratios would be between 76% and 78%.

[Neha Agarwala, analyst]

That will be the efficiency ratio, 76% to 78%?

[Enrique Majós Ramírez, executive]

Right.

[Neha Agarwala, analyst]

Okay. And any change in the tax rate that we should expect?

[Patricio De Bonilla Garcia Vallejo, executive]

No, the tax -- I mean the corporate tax rate in Mexico is 30% and the dynamics that you have seen are more related to certain mechanics -- of tax mechanics in Mexico and that was the effect that you saw in the last quarter. But in reality, we should always expect between 29% and 30% of tax rate.

[Neha Agarwala, analyst]

Okay. And also could you please give us a number on Peru. What is the number of clients that you can target in Peru? And how many have you already touched in some form?

[Enrique Majós Ramírez, executive]

As I said, in Peru, now we have a little bit above 600,000 clients in total, and we believe that for the next year we are going to be growing around 20%. So I think that will give you the numbers.

[Operator]

Our next question comes from Rodrigo Ortega.

[Unknown Analyst]

I think my questions have already been answered.

[Operator]

[Operator Instructions] Our next question comes from Jason Mollin of DB (sic) [ Scotiabank ].

[Jason Mollin, analyst]

My question is related to your guidance as well. I mean, you've now given us some expectations for portfolio growth on average in the fee market 17% to 19%. You're saying you're going to grow in Peru above 20%. I guess we can -- we have a number -- implicit number for Mexico? And I wanted to see if that's mostly going to come again from group lending? But I wanted to see if you could provide more color on this concept of reducing rates by 300 to 500 basis points. How is this -- is this already happening? How is this going to happen? How should we expect this? Is that -- if we look at the other numbers you've talked about, is that how we get to this EPS of MXN 1.85 to MXN 1.95? Obviously, the growth is much less than what we see in terms of portfolio growth and I imagine it's coming from this lower margin. If you could provide us some color, that would be helpful.

[Patricio De Bonilla Garcia Vallejo, executive]

Thank you, Jason, this is Patricio. In terms of margins or the active rate, if you remember, in 2016 and '17, when NPL went up a little bit, we increased the active rate for the products at the bank to maintain margins and that, of course, had an impact in the market in the customer satisfaction. And again, was a rational measure because the rates were going up and as well the NPL was going up. So it was a tool to maintain the margins as solid as we need to cope with the operating expenses. 12 months ahead, we've been improving a lot in terms of cost of risk. Therefore, we were more aggressive in getting the rates where they were to the market. And again, we are not doing something throughout the customer base. We are playing with the best customers with larger tickets in order to give them a stronger benefit to keep them with Banco Compartamos for a longer period of time. So this is commercial strategy that we started in August last year and this is something that we will maintain in 2019. And going forward, we really think that we want to have the best commercial or credit alternative in the Mexican market to gain market share locally. Now we've been very successful. The market share that we lose throughout 2017, we are gaining it back. We are now like 50% market share in the microfinance industry. We were down at 45% so it was a strategy that is paying back. And the rates, regardless of going down what we expect to pay off is volume because a number of customers jumping into Banco Compartamos as well as larger tickets to increase to share of wallet of each individual with Banco Compartamos rather than having different credit offerings for one single person.

[Jason Mollin, analyst]

That's helpful. Perhaps on the cost of funds and -- I mean, it seems as if you're not as focused on the deposit side, raising deposits. We actually saw it looks like those number of clients for savings and insurance going down a little bit. Is there -- I mean, is there a trend -- is that a trend we should continue to expect or should that turn around? And is there still an opportunity, in management's view, for 2019, 2020 on gathering deposits from customers and clients?

[Patricio De Bonilla Garcia Vallejo, executive]

Let me talk about the strategy of deposit now. We were very aggressive in 2016 and '17 to grow the customer base, right? That created certain friction in the origination process for credit and that was one of the reasons why we were losing customers in 2017. The focus that we have today is, yes, we want to have the saving account. And now it -- but it's optional whether you want to open the account or not. So we are not so pushy, if you will, in terms of gaining new accounts but to serve the actual credit customers with debit capability that they didn't have 24 months ago. So the rationale in terms of funding is to -- to -- I mean, savings, it's to be able to have the product and to allow the customer to decide whether they want to increase their balance rather than finding additional savings with different sectors or with aggressive commercial strategies that could put pressure in the origination process. So all in all, what you see today in terms of funding, which currently forms like 18% of the Mexican portfolio, that's something that should remain stable in at least 2019 and '20.

[Mario Langarica Ávila, executive]

And to complement Patricio's comment, I would tell you that as you know, for the last couple or 3 years, we started taking a strategy to fixed part of the funding costs. As of today, as you can see we have 7.6% in Mexico funding cost compared to DA that is around 8.5%. So that has been the strategy that we have followed in the past. In our plans, we are expecting a 25 basis points increase in Mexico and -- anyhow if rates stabilize or start coming down, we have either the option to prepay some of the fixed funding or either build in through the use of the real fixed.

[Operator]

With no questions in queue, the question-and-answer session concludes. I will now hand the call over to the management of the company for final remarks.

[Enrique Majós Ramírez, executive]

Thank you, operator. Well, thank you for your interest. It's always a pleasure to talk with you and update you about what we are doing in Gentera, which always excites us a lot and we love what we do. As we have pointed out in our messages during the call, we firmly see an exciting year ahead. And we feel very comfortable by saying that we have a solid operation that is stronger than ever due to the execution of the challenges that we faced last year and solid strategy plan for 2019. So thank you very much. Thank you for your attention, and have a nice day.

[Operator]

Thank you, ladies and gentlemen. This concludes today's teleconference. You may now disconnect.