Regional SAB de CV
BMV:RA
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Good morning, everyone. I hope you and your families are healthy and well. We appreciate everyone's participation today. We're pleased with the bank's first quarter performance. We achieved solid financial indicators mainly driven by a good asset performance and a more dynamic growth on most of our revenue sources, an adequate expense control and our strategies to enhance our margin to a better price of -- pricing of our loans and our growth in noninterest-bearing deposits.
During the quarter, regional reported a net income of MXN 804 million. This represents a 57% quarterly increase and a contraction of 9% year-on-year, resulting in an ROE of 13.2% and an ROA of 1.9%.
In this same period, we reached a financial margin of MXN 1,818 million, mainly due to our growth on higher-margin loans growth and an increase in demand deposits. The NIM decreased 62 basis points, reaching 5.5%, and the total loan NIM was 5.8%. The margin contraction is linked to the reduction of the reference rate, having a sensitivity of 11 basis points for each 50 basis points of variation.
We are satisfied with the performance of our asset quality, reflecting a better-than-expected cost of risk, resulting in a 1%. During the first quarter, MXN 237 million of provisions were creating, being January and February, the months with higher reserves due to the ending of the referral programs.
This quarter, we did not create any additional reserves, and we explained on the last conference. We expect provisions to normalize to pre-pandemic levels during the second quarter. Nonfinancial income reached MXN 708 million, a 5% growth year-on-year, mainly driven by our insurance and FX fees business, which expanded 10% and 12%, respectively.
All of these factors generated a total income of,000 MXN 2,278 million. Our implemented cost control initiatives has successfully achieved stability, maintaining operating expenses are in control, resulting in [ MXN 180 ] million and an efficiency ratio of 48.4%. We continue our digitalization and automation efforts, seeking constantly to improve our productivity without sacrificing profitability or customer experience.
Looking at the balance sheet, you can see we had almost no growth in our loan book, mainly due to the lack of demand on the wholesale business. However, other smaller portfolios like the SME and other loans are presenting a more dynamic and solid growth.
We're happy with our efforts of bettering our customer experience, which is why we had such a great performance in our core deposit growth, boosting our liquidity and lowering our cost of funds. Demand deposits grew 19% in all of our segments, explained by our strategy of attracting new SME customers and POS volume growth.
Additionally, time deposits grew 14% year-on-year.
Regarding the performance of our business segments, in the wholesale portfolio, we had a loan growth of minus 3%. This due to the low demand higher repayments. This lack of growth is observed in all the regions where we are present, but more accentuated on the central and South regions of the country. The cost of risk stood at 0.5% and the NPL at 0.8%, even though the full impact from the relief programs have been already reflected.
We are very pleased with our retail banking performance. We achieved a great commercial and loan quality results. In the SME portfolio, we grew 8%, mainly due to our participation in the special guarantee programs as well as serving our existing client base. Meanwhile, the auto consumer and mortgage portfolio grew 11.6% and 1%, respectively.
We had an amazing demand and time deposit growth, both on SMEs and individuals. In time deposits in SMEs, we increased 45% and individuals 22%. And as for asset quality, they remain very healthy in every product, always much better than the system.
For SMEs, the NPL was 5.5%, auto at 1.5%, consumer to 5.7% and mortgages to 2.9%. Last but not least, we continue to expand to see exponential growth in Hey Banco, concentrating our efforts in maximizing our value offer to clients, being able to grow and cross-sell financial products in a very productive manner. We saw whopping growth in core deposits rising 372%. And likewise, in active customers as they grew 155%, reaching the mark of 150,000 active customers.
As for Hey business segments, we continue growing in a very accelerated manner, achieving an expansion in total volume payment of 133%, mainly driven by our higher volume clients. As for income growth, we observed a 29% growth. The deferral programs concluded in January, and we have seen that the behavior of these clients have been better than before they join the programs.
Only 1% of the clients have not made any prepayments and 3.2% are nonperforming. As for the NPL and regional, the nonperforming loans decreased 6%, and the NPL contracted 10 basis points, reaching 1.7%. Capitalization ratio remains solid, showing excellent figures with a capitalization ratio of 16.0% as of period 2021, which generates an excess of capital of 400 basis points compared to our internal limit of 12%.
In terms of liquidity, we have a buffer of MXN 24,000 million, and we have the capabilities of adding MXN 23,000 million more. Our efforts have been reflected in consistency of our asset quality in higher deposits that allow us to operate with adequate liquidity levels. And this continuous growth of nonfinancial income and the excellent results of our digital solutions.
We maintain our guidance for the year as we expect even better results for the next 3 quarters. We do not expect any additional impact from customers that were under relief programs. Furthermore, if the economy continues recovering, we expect to have more credit demand and resume loan growth in our wholesale business.
In addition, we will maintain our cost control efforts and organizational efficiency programs, while keeping our digitalization efforts in both Banregio and Hey. This following quarter, we will have very exciting products and solutions launching for our digital customers.
We will integrate capital markets and proprietary mutual funds to our app, something no bank has done in the country. Moreover, we will relaunch our debit and credit cards focusing on more financial control for customers as well as the use of credits but in a safer manner, which much more control with a guaranteed credit card as part of the -- of our credit card offer.
We will continue to add more insurance products carrying more consumer segments, and lastly, we will launch our acquiring business bundle, which -- with a full banking and payments offering, which no fintech or bank has been able to do so. We will continue investing, as we know, we are leading the financial experience arena in Mexico while promoting financial wellness to our clients. Thank you very much. We appreciate any questions.
[Operator Instructions] Your first question comes from Ernesto Gabilondo with Bank of America.
Congrats on the results and thanks for the opportunity. I think operating expenses and provision charges were very positive. So were prices. However, when looking to loan growth and net interest income was kind of weak.
You were saying that individuals and SMEs are growing at a very high base. So do you think those should have to offset the prepayments and the low demand in the commercial loan book? How should we think about the potential evolution of the loan portfolio and NIMs through the rest of the year?
And then my second question is on your digital transformation and Hey Banco. I agree -- I believe you are leading the digital transformation when compared to other fintechs in Mexico, which tend to be more mono product.
If I am not mistaken, you want to make profitable Hey Banco since year 1 as you expect to have a cost-to-income ratio of 20%, 25%. But what are other key performance metrics or targets that you plan to have for the next years?
For example, the target of number of clients, cross-selling ratio, profitability. We have heard that Banregio plans to do an Investor Day to communicate all this. So just wondering if you are planning to do the same during the year at some point?
Thank you very much for your questions. For loan growth, we are seeing more demand in our wholesale business, not very strong demand, but much better than the previous quarter. And if these trends continue, we are -- we think we have the guidance -- we can hit the guidance at the higher part of -- at the end of the year. We've seen some repayments of clients, big corporate clients that come in and out. So you might see some volatility in terms of volume growth.
But the message I wanted to convey is, we are seeing a bit more demand. And if these trends continue, growing at a 6% to 8% for the year, it's pretty probable.
In terms of NIM, we think this is the bottom part of the NIM, we see it rebounding in the next following quarters in a very gradual manner. We don't see much pressure from competitors in terms of lowering the price. And in some segments, we've been able to hike interest rates and price 30 to 40 basis points more on loans than previously, even pre pandemic.
So we're very comfortable in saying that NIMs are at the lowest part. And from here then on, it should be much better. Now when you see NIM, you have to be watching the NIM of total loans because we have, as you know, repos that when we have excess liquidity, we transfer that excess liquidity into the repos, which obviously increase the number of assets, which obviously decrease the NIM.
So you have to be pretty careful about that because it's obviously -- we don't have much to do with that amount of liquidity. So we put it into repos which later on, when we have the necessity, if loans grow at a very fast pace, we can transfer that back from repos to the balance sheet in the figure of time deposits, you're going to see that from time deposits to repo.
So that's something very easy, interchangeable for us. And it's pretty easy to do, and that's what we've been doing in the last 8 months that we've been receiving a lot of liquidity, and we have nothing to do with it. So we put it into repos.
The NIM of total loans, that's what we say is, we think it's right now at the bottom part, and we think it should go up dually within the next 3 quarters.
In terms of -- well, and then you have some segments that are growing at a good pace. We see some regions that are growing at a much faster pace, more dynamic. The North part region is growing at a more dynamic pace than the center part. And we do see a very strong demand on manufacturing. We're speaking with some clients, they are focusing on manufacturing and building manufacturing facilities.
And we know that there's a lot of interest right now, and the market is pretty much very hot. So there is an expectation of a manufacturing boost for the last part of the year and the second part of the year. I mean we see that happening pretty sure in the North part of Mexico, probably [indiscernible] as well. The most lagging part of Mexico would be the ones pending more on entertainment, the more dependent on hospitality, the more dependent on traveling, that would be the Peninsula of Yucatán, for example, in Tenero, which we do have operations, and we do good business there.
But we're starting right now to see the same volume of passengers that we saw 12 months ago, but this is just a very recent figure. So we have -- we know that it's going to take a little bit more time to reach pre-pandemic levels in those regions that are more dependent on traveling and then hospitality and entertainment for obvious reasons.
And definitely, we see good -- in the system. We see good growth in mortgages. We see good growth on auto loans, credit cards, definitely in the system. It's -- there's a lot of derisking for -- in clients.
And that's going to -- I think that's going to be a hassle for the next the 3 to 6 months, but we do see a better trend going on forward as we see consumer spending going in a very healthy trend. So I think right now, we're not very optimistic about demand. Demand is not strong. But the trend of demand, I think, it's very positive. It's going in the right direction.
And hopefully, we -- it can continue to do so throughout the year. In terms of Hey Banco, well, thank you for your comment. We do believe we are leading the experience and -- of the financial -- in the digital arena, we are very happy with the results that we've been achieving so far.
We're very happy with what we're going to be able to launch this summer, very exciting new products. The market is already expecting them. I think it's going to be very well received. In terms of what figures we're looking, obviously, volume is pretty interesting for us in terms of volume in check-in accounts and in-time deposits.
And for us, that's the most important part of this effort because growing loans in a digital manner, it's pretty much very easy. Obviously, growing at a good quality, it's this tougher thing. But creating a franchise that has been able to generate good volume growth on deposits. It's pretty rare. It's pretty -- I think it's pretty amazing. And it allows us to not be pressure into sell loans in a very aggressive manner.
So it allow us to go in a very steady manner. And as you said, concentrating on being profitable, concentrating on being very productive and concentrating on having a profitability in a client bases, right.
So volume is pretty important. Obviously, the number of active customers, active customers, we're saying that engage normally with the app, which is something we are -- we don't -- I mean number of account openings, which is not a very good indicator. We see more of the active customers that really are using the tool, right? So it's active customers.
Another would be the cross-selling index. We are right now at 1.2%. Our goal is to go up to 1.8% to 1.7% this year and go up to 2.5% in the next year. So it's gradually going up. As I said, there's a lot of launching of solutions and products that are going to be pretty good about cross-selling insurance, credit card, capital markets funds.
So there's a lot of things that our clients are buying in other institutions and that obviously are going to be very happy to receive it through Hey Banco. Fees, for sure, these are very important for us. We think fees should generate a very good amount of profits in Hey Banco.
We have a lot of initiatives going that way. Credit card, transaction fees, payment, payment [indiscernible] fees, capital equity fees. There is a lot of products that we're launching in order to go for more in fees. And obviously, service, right, because service is pretty important part of digital.
You have to have a much better service than that of the traditional retail bank because that's obviously #1 priority, right? That's what we were aiming to do. What's that our customer experience is way above that of the retail. That's pretty -- that's the thing we have as a daily reflection in how we could better the service of our customers in having by far the best and most differentiated offer for the retail segment.
Your next question comes from Yuri Fernandes. No. Your next question comes from Neha Agarwala.
Can you hear me?
Yes, we can hear you well.
Okay, awesome. So just following up on the NIM sensitivity that you mentioned in your initial remarks. I think you said it's 11 basis points to 50 basis point change in rates. I think previously, the communication was more like 10 to 16 basis points NIM sensitivity to 100 basis points change in rate. So can you please clarify that? And what has led to this change in NIM sensitivity?
Neha, this is Enrique. Yes, we have seen -- this is the real number, let's say, with -- after the 250 -- 350 basis points that has been decreasing and the 63 decrease in the last 4 quarters. Our expected was around 10 basis points. What we have been guiding is 4 to 5 basis points per 25. Then if you go to the highest part, as Manuel mentioned, we expect, as long as the rate doesn't go down again, to improve a little bit and gradually the NIM in the future quarters, the pricing of the liabilities finished.
And also we start improving our -- the repricing of the loans. We have been working with our teams to price a little bit higher, the renewables loans. And that's -- I don't know if I answered the questions -- will be 63 basis points is the reduction year-on-year against the 350 of the reduction.
Understood Enrique. And that is what gives you a 22 basis points NIM sensitivity to 100 basis point change in rates. So now when rates go up, that is what we should -- that is how we should think about NIMs going forward, 22 basis points.
Around 20, yes.
Around 20. Okay.
If rates -- we hope they go up.
Yes, yes, hopefully. And a second follow-up, Enrique, on asset quality, how is the portfolio performing right now? I mean, we are done with the restructuring, you had good performance there. But are you seeing that more clients are needing further help from you? Are you doing any -- are you talking to them one-on-one and seeing if they need further assistance from your side? And on Hey Banco, I noticed that the NPL increased a lot. It's -- you're almost 20%. So what led to that increase in NPL? And how should it look like going forward?
Yes. Well, it depends and vary among all the segments. The first thing that we have noticed in the conference call is that all the programs, all the relief programs already finished in February. Then we have seen most of the impact of the customers that are out of the relief program in this quarter. There is still a small tailwind on the next quarter.
We have seen better-than-expected NPLs and quality in general. And particularly in March, if you follow, and I know you follow the CMBB data, you will see that March is much better than in January and February. January and February were high levels of NPL formation and high levels of provisions.
But March was very low due to collections. There are no restructures. There are not write-offs. You have seen the number of write-offs, it's 98% for the whole quarter. Then we have seen in general, in the main portfolios that are small businesses and large businesses or wholesale and improvement. Where we have seen some deterioration is in consumer, but nothing that should alarm us.
You can see in consumer, 5.5% and it's growing in [ ARO ] 1.5% from 1.2%, but still is the best in the market with 1.5%, the 1.5% and in mortgage, something like 2.7% of 2.5%. All of these are customers that are going out of the programs, relief programs, and should stabilize. And the same happened with Hey.
We stopped lending to new Hey customers around August -- between August and September of last year, but many of these customers went to the progress in July for 6 months, then many customers are getting out of the program. And in consumer specifically in credit card [indiscernible], credit card for [indiscernible] and credit card for Hey are not being able to pay or repay after the relief program.
But say that even though the number sounds alarming, 20% is a very slow portfolio of MXN 120 million then -- and it should stay there or start going down. Yes. And we will restart the growing on that portfolio during the next month. We will launch the cross sell efforts, and we will launch a new credit card that is warranted, we call it or collaterized with the deposits.
And I think that will be available to selected customers, not everyone? Or it will be more widely available because it's [indiscernible]?
The warranted could be for everyone because it is warranted, is you have to leave your deposit as collateral. But the cross-sell is going to the very high level. As you have seen, our deposit in Hey has grown price in 1 quarter from $1.2 billion to $2.6 billion. Many of these customers are very affluent or medium to high affluent. To them, we will give a regular credit card that will have all the attributes similar or even better than the [indiscernible] one with rewards, with cashback and with a very attractive rate. But that is only for the investors and quality customers. And for the ones that doesn't comply with that requirement, we have the warranted one.
Okay. Great. Last question that I had was on the efficiency ratio. Efficiency ratio has increased over the last few quarters, it's now around 48%. Where do you see this ratio going in the medium term, say, in 3 years or 5 years? And how much contribution do you think Hey Banco can have in lowering your cost-to-income ratio?
Yes. Well, we see, Hey, as running on an efficiency ratio of below 40%, very -- I'll say, close to 35% in the next 5 years. So that's going to take a little bit of time, and that should impact obviously, Regional in a very positive way. And I think, obviously, Banregio has still a lot of potential to lower that and be more productive still. There's a -- we have a very low operating leverage. We have a lot of capital. So we could loan very easily, a lot.
So we have still infrastructure that has to be absorbed. And we have a lot of cost-cutting strategies that are going to go throughout the next 12 to 24 months that should fundamentally allow us to be more productive.
Hey, in our point of view, should be very, very productive as we don't see much operating expenses in terms of people, and we see that we are being able to automate service. So really being able to create a solution of auto service. So definitely, very good trends in that aspect in the long term.
Your next question comes from Yuri Fernandes.
I guess, you can hear me now? Sorry, I guess I had an issue, the first time I tried to ask questions. So congratulations, Manuel, Enrique and Alejandro for the credit cycle. It's pretty impressive. So congratulations. Like your cost of risk. I have a first question on that. I think you are maintaining your guidance, right, from 0.8% to about 1% cost of risk.
And I think the expectations was for the first Q to be slightly higher, right, like an improvement during the year. But now the first 2 was better than expected, right? So what should we see for the coming quarters? Is this like this 0.8% or I don't know, like, what is the chance or maybe you delivering better results than your guidance are implying on cost of risk? That's the first question.
And my second question is regarding Hey. Checking the amount of deposit, it is about like 5% of your total deposits today. But I'm not sure how much of your revenues are coming from Hey, from the 2 business, right, from [indiscernible] and the business side of, Hey. Should we assume a similar proxy for revenues? It's much less, like what -- how big is Hey today on your revenues? And how big you think Hey will be in 5 years for your -- for the revenues of Hey as a group, as a whole?
I will answer first, Yuri, the cost of risk. Yes, as I answered to Neha, March was a very good. I don't want to use the word surprise, but it was kind of a nice surprise in terms of collections, recoveries, then. Even though January and February were high in provisions and high on NPL formation.
March was almost 0 provisioning and 0 NPL formation, both. And the best part is that it was due to recoveries and collections from customers that were on [indiscernible]. What do we see for the future? We expect the next 3 quarters to be around the guidance, 0.8% to 1.1% or to 1.0%, not more. We don't foresee any specific problem in the next 3 quarters. But as we are going back to day-to-day businesses, in January and February, we have some NPLs that we were not expecting, not related to the pandemic, just companies that couldn't pay because their business weren't in good shape. But it's more where we're going back to a regular day-to-day business, where we are not exempt from some customers to have problems. We feel we'll be more stable around the same levels, 0.8%, 0.9% for the next quarters. That's our expectations. That's why we maintain the average for the year in the same guidance.
And what do you think explains that, Enrique, is basically a better recovery in the economy, the U.S. They [indiscernible] like what could -- because I think even for you right, I guess, if we go back to second Q '20, third Q '20, I guess, I mean, Hey [indiscernible] was never that concerned because you have a lot of collaterals and historically a very good underwriting. But I think the expectation was slightly higher than what we are seeing today. So what is explaining this better-than-expected asset quality trends?
Yes. It's a little bit of everything. Is the recovery in United States, that we are positioned, what we call the Banregio's country. That is the states where we are recovering faster, mainly due to the relationship with the United States.
As you know, we are not in the southeast or in the center, the states, we are more in the North on the West and a little bit in the South in Mérida and Yucatan, and Cancun, obviously, or Quintana Roo. But at this stage, if you separate them are growing faster, if the whole country is going to grow at 4.7%, if we agree with the store base or with the consensus. We -- well, it's not consensus on average. With the average, we are in states that will grow faster.
And also as you mentioned, it's also part of the collaterals that we have. And in general, the structuring, not only the collaterals, but also the structuring. We have seen improvement even from some customers that were past due or due, not past due, not above 90 days, but they were due before the relief program. And right now, they are paying the 6 months or 4 months, help them to restructure their businesses, and they are paying. That's the good news, let's say, that I -- we saw an improvement year-on-year on the quality of customers that were not paying before the pandemic, and they are paying right now. Obviously, we have the other cases to some customers that were paying before, and they are not paying right now. But in the overall, the mix has improved. That's for the current base.
As Manuel mentioned, we see a very slow but very positive trend in demand for new customers that also will help the NPL index in the future. But from the current portfolio, we feel very comfortable. We have been working with the customers, most of them 1 by 1, are at least the largest ones, and we see a better results than expected. You are right. In December, we were expecting a higher number of NPLs even going around 1.9%, but March was very good, and we don't see any problems in April that is very close to finish.
It's very clear. And regarding Hey, I know probably, the revenues are much smaller nowadays. You basically -- on probably the products you have, you are offering. It's basically some small loans and deposits. But can you provide some color on how big it is for your revenues? I know for EBIT, it's going to be much less because probably the costs are much higher, right, like [indiscernible] a growing operation. But how big it is for revenues today? And how, in your view, will be Hey 5 years from now?
Yes, Yuri. As part of the -- just what was part of Hey, the acquiring business really produces a lot of fees. So we have a very good revenue stream of fees and income being generated through the acquiring business we already have.
As you know, it's growing at a very fast pace, as already mentioned, event fees at 29%. We think that, that trends should continue. And we're adding more banking products, so we could cross-sell and have an operating leverage in the short-term with those clients. And for the individuals, we -- as you know, we've started with the checking, the debit and the demand deposit. So obviously, that doesn't generate any profits, right?
So that's the cost for us. We have been not -- we've -- the second part of the equation is developing the loan growth, which is what we're doing on this following quarters through a set of products that we already mentioned, auto loans, credit cards and mortgages, mainly mortgages and auto loans, doing it a very productive manner through many channels. And we think that's going to have a pretty good demand and being able to generate very good productivity and profitability to Hey in the short term.
We're not pushing very aggressively the loan growth on credit cards. We want to do it in a -- I wouldn't say as steady as steady as Banregio, because Banregio obviously, it's not the main focus. And most of the clients of Banregio are -- have more deposits so the need of credit is not that much. But it's in Hey, we think that cross-selling credit cards to depositors is going to be very productive.
It's going to be very -- generate good quality in terms of loans. But we don't expect a huge growth on loans in credit cards in the short term. So that's going to take a little bit more time, and we're completely fine with it. We know that if we wanted to do so and grow twice as much or thrice as much or 4x as much, we could easily do so.
As you know, every debit card that we have is a credit card. So we just have to push a button and the client has a credit card in their hands because they already have a debit card. So we could just do it as one click and pretty much is done. So we're taking the high road, we have the guaranteed credit card. We're giving them that experience and allowing them to have a positive experience with a credit and then cross-selling a non guaranteed credit card, which obviously they already generated better financial decision capabilities, right?
So it's is going to go steady, right? And throughout the years, the profitability of Hey Bancompany as we see it, if Hey Banco continues to grow, it's around 10% per year on its net income. We think that within 5 years Hey should have around 30% -- add 30% more to Regional.
So we do see a very positive effect on Hey Banco on taking a lot of the growth of Regional. We don't see even ratio not growing because we still have ample of growth in terms of geographic growth in Mexico City and Guadalajara and most of the places we've not been -- we've just been 5 years there. There's a lot of room there.
And we think if Hey Banregio can easily grow 10% per year. And in Hey Banco, should add -- if that happens, should add around 30% more in 2025.
That's very clear, Manuel. If I may, just another question on Hey. I understood your strategy. You have those 2 verticals, right? If you view those in the business and you are going to go for safer kind of products, this collaterized credit card, and you don't want to push too hard on credit card and like riskier products, right?
I guess that's the kind of message. But don't you believe this could be kind of a race because there are other fintechs here. We have New Bank going to Mexico. So I don't want -- just as a advocate here, don't you think that if you go to slow or too cautious -- it's hard to balance the risk and reward, right? But don't you think you can be behind if you go too cautious in this kind of digital growth environment. Because I see you have the product, you are developing some products, you have capital.
So how do you feel about that? Like no, the view of the banks to be safe, we're going to be safer. So we don't want to go too fast, even though we can lose some market share here and there? Or how should you think about the competition in this fintech environment?
Well, I love the environment. I love it. I think it's pretty positive for us in terms of making clients aware of the digital offerings, right? So that's pretty amazing, and we're pretty hyped about it. We don't have any pressure to do so. I mean, we have the capital, as you know, we do have the resources. So there's no need to grow whatsoever.
What we really want to make sure is that we have the best digital experience. So that's what we're focusing on and not trying to escalate without being able to do so to have a digital experience, which is very differentiated. And at a place where others are going to be very, very lagging. We see pretty positive -- I mean, New Bank, for example, we think it's pretty positive that they're opening market here. I mean they're going to fight a little bit with [ Copelo ] or Banco Azteca. They're opening market, and that's real positive for us because we have a higher value offer.
We have a much complete solutions for them. And when they find a -- they want to have a more value-added offer, they're going to look for us. And it's pretty easy to go down. So we could easily just start lowering our bar and having a more penetration on our loans to smaller clients. That we see it as a very easy thing to do in the future.
I think that the most difficult part of the digital effort is creating a growing the deposit base. That's what's really tough. Having their deposits, having their debit as their main account, being able to receive their they -- most of their deposits, their salary.
And that's going to be something that's pretty valuable in order to later cross-sell whatever you want, it's pretty easy. So the amount of information we have of our clients is pretty amazing, and we could easily cross-sell in a very easy manner, just click and buy, pretty easy. And that's the toughest part to really generate.
So we're pretty focused on creating the most valued offer in the market. We know for sure that the retail bank here in Mexico's, the offerings are pretty lacking, not exciting. And this is going to be quite a [indiscernible] in terms of the massive retail banking segment in Mexico.
Later on, growth should be very easy and growing at a very fast pace. And right now, I think we're going to finish this year with [110,000 clients ] and at the same pace of growth. So maybe when we get the debit -- we would relaunch the debit and credit, we're going to have a bigger growth and when we launched the capital equities on the app, that should probably have a bigger growth.
So we can even grow more than the 3,000 -- 300,000 clients at the end of this year easily without investing in digital ads or paid media or any sense, so pretty organic. So I think that's -- we are very excited about it. And we think we're going to be able to cross-sell more and more products in a very easy manner for sure.
No sounds very rational, Manuel. Sounds -- a good strategy did actually because, as you said, like retail is a very big market. So it's better to grow when you're ready for that to have the full wafer. So it's a very clear strategy, and thank you for the detailed response.
Your next question comes from Rodrigo [indiscernible].
I have a few of them. First of all, can you help us understand the type of efficiency efforts you're making so that OpEx is running much, much lower than you have guided in the previous results conference call?
Basically, it comes in 2 sites in terms of salaries and remuneration we have had 2 efforts of predict between, one in July, August of the last year and the other one that will be effective in April and May of this year. That's very specific. We don't like to do layoffs by percentage, basically, what we do is productivity analysis and efficiency and this is department by department area by area.
This type of effort is going right now, and we'll finish during May. That's on the side of -- obviously, that is compensated with the growth that we have in the innovation and technology departments.
We are growing in technology, people and in innovation and design, both for Hey and also for one ratio. Then that's a little bit compensated. But still, it's a bigger for that organization is doing. And the other part that we are doing is in all the main items.
We have stopped new large acquisitions and we have negotiated prices. And the most obvious is, we have reduced a beta and we have reduced traveling. But in most of the line items, we have been renegotiating with our suppliers and providers or even doing efficiencies like in telecommunications, we renegotiate. Most of the network agreements and with changes on the architecture, that type of airports.
Thank you, Enrique. Very clear. Just a follow-up on this. Do you think -- or to be more clear, how big is the savings compared to the regional guidance you provided us of OpEx growth between 10% and 12% for the year and whether this is [indiscernible] sustainable [indiscernible]?
Sorry, can you repeat the question?
Yes. Sure. I was wondering if these savings are recurring or not. And for the answer, did you provided, since many of them are, so my question is, would you be revising down your guidance for OpEx growth for this year? And if so, to how much? Hello?
No. No, the answer is no. We have the -- do you mean the specific guidance for profits? I guess.
No, no, the guidance for OpEx growth.
Well, we usually don't guide, but no. No. We expect a better result, as you mentioned. We have guided close to 10%. One single-digit is what remember that we said last quarter, meaning around 9%. Yes, we expect to go below 9% but it won't be 2% or 3% between the 2, the OpEx and this remunerations, people and remuneration will be between 5% to 8%, then we don't see any reason to change the guidance as is not really material.
Okay. Just 2 more questions. I'm sorry to take so much time. Just one of the most relevant issues I saw in the balance sheet was that you -- I mean, you staged a very strong growth in the demand deposits. And now they make roughly 48.5% of total funding but it also resulted in very -- in a sharp decrease in the average finding cost.
So I have a couple of questions here. Can you provide details as to the nature of demand deposit growth, if these are increasing for reduced credits that you have already granted? Or is this coming from retail? And can you also provide some sensitivity on the cost of funding for this switch between time deposits and repos?
I think the end question is whether if loan growth really comes on top of the guidance, which appears achievable, the decrease in the funding rate that we saw in the quarter might not be sustainable. So I just wanted to get your feeling on this?
No. We don't see a pressure on the cost of funding. We don't know how sustainable is this 20% growth year-on-year. Answer partially your question. Most it is in all the segments, the growth and up to know, it's is helping the mix but we don't see -- because the cost when we move customers from pagaré or time deposits to repos is very similar. The cost, it's just moved from one bucket to another, let's say, and we don't see pressure cost of -- in the cost of funds.
Okay. And then last one, if I may on Hey, follow-up on what you were saying just minutes before. Many of the largest banks use the mortgage products as an anchor because clients usually have their primary banking relationship with the bank that is funding their homes.
You just mentioned that the biggest challenge is to get deposites. And it seemed more on the lines of payroll loan or of getting their payroll. So what are your thoughts on the way mortgage products should evolve within your retail strategy?
No. We are growing mortgage in Hey this year. We're starting this summer. And definitely, we think that's a very good positive thing for us in [deposits] leverage in a very easy manner given them an experience completely convenient, digital, et cetera, right? So definitely mortgages being part of Hay in the short term.
Our next question comes from Olavo Arturo.
Can you hear me well?
Yes. Perfect.
Okay. And to be very briefly, my first and second questions are totally related to Hey Banco, in which the digital bank recorded unimpressed increased the number of users in this first Q. But on the other side, the NPL is sky rocket as explained the reasons of it just before. So firstly, I would like to understand the reasons for this large increase in the number of users of Hay Banco in this quarter if we compare to the 4Q of the last year if it was related to higher market expenses, et cetera?
And what is the customer acquisition cost or the average cost to have a new client? Then I'll go to my second question.
Yes. Well, no. Marketing expenses were not involved on growth. And that average costs per client right now is around $6.
Okay. $6, okay. So straight to the point to my second question. So I would like to question you guys about a potential spin-off of the operations of Hey Banco at this early stage, just to capture the higher growth rates to the bank's valuation. So a potential lease in eyes, as an example, is in the plans of the bank for the future. I may say this way.
Yes, definitely.
Just for us to have as an example of the potential time line for this. Would you expect it to happen in the next 2 years or within the next 5 years.
A snip off from Banregio or from or from Regional completely?
No, no. Hey Banco from the rest of the bank. What is the digital part of the bank?
Yes. So having a bank completely for Hey Banco. That's what you're saying, right?
Yes, yes. That's correct.
Okay. Yes. So we are expecting to have a different bank for Hey Banco the end of the next year. So we've already talked with our Board, this last meeting, and we agreed on following our plans on asking our regulators for another banking license, completely for Hey Banco. And that should take us all to 16 months.
So at the end of next year, we think we're going to be able to do so. The way we're going to put it is we're going to share some technology with Banregio in order to generate operating leverage. So we're going to be able to enjoy being more productive because of sharing of the digital assets, not digital assets, not the hard technology, the infrastructure. So we're going to be able to do it in a very productive manner. So yes.
Your next question comes from Brian Flores.
Can you hear me okay?
Yes, Brian.
One quick follow-up and a question. The follow-up is on Mika's question previously regarding the -- I don't know if you have some color on deterioration, the average duration of your assets. This question was about your NIM sensitivity? And the second one was with the excess capital that you're seeing and in light with the recent news from the regulator regarding dividend payments, how are you thinking the distribution of capital going forward?
I will start with the dividend part. With the new regulation or new recommendations that the CNBV released last week, we had a -- last Tuesday, our annual general assembly or -- and we agree to pay the 25% that it is recommended by the authorities.
We will do just one single payment of the 25% for 29% and 21 -- 25% of the 2020. And we expect this to be paid in the -- during the next week, between the 6 and 7 of May. Then we will follow the recommendations of the CNBV, as we mentioned, in the -- we were expecting to pay MXN 2 billion or MXN 2,000 million in the first half of the year.
And then to request approval for a second MXN 2,000 million in the second half. But with the current recommendations that window is close until new recommendations, then our intention is still to pay more dividends. But we will fully comply with the recommendations of the CNBV.
We will be working very close to them. And we will see the results of the second and third quarter. Once we have the second and third quarter results, we can go back to the authorities to request an additional approval. But for now, we will pay the 25% in the -- during the next week.
In terms of no -- duration. You said duration, if I understood well, Brian?
Yes, that is correct.
Yes. Well, duration is between 2 to 3 years, depending on the portfolio. Obviously, mortgage is larger, mortgage is around 7 years. If you talk about a specific duration, not the tenure or the term, we grant -- in mortgage, we grant loans from 15 to 20 years, but the duration is between 7 and 10 and it's more close to 7. The but in the commercial and businesses, is 3.1, the average duration -- 3.1 years.
Our next question comes from Jorge Henderson.
Congratulations for the results. I just wanted to ask one more question on Hey Banco is very quick. So following impressive deposit growth, I was wondering if you have seen cannibalization of clients on the deposit creation from Hey Banco to Banregio, and if you monitor this? Or how do you minimize the risk of cannibalization? Do you have any color on where the new customers are coming from? And what is its typical profile?
Yes, Jorge, thank you for your question. Yes, definitely, we measure it, it's pretty low. Both of our clients are right now in Mexico City. So there's a lot of our clients in the central part of Mexico in most other regions. Banregio is definitely good for us right now. It's growing at a good pace. But the client that we are catering, it's pretty different at what Banregio is at. We're at least 3x smaller -- the clients are smaller that we're aiming for Banregio. So it's -- there's no cannibalization in terms of segments because the offers are completely different.
As you know, Banregio, it's mainly focused on relationship managers and Hey Banco's clients are outer service and much smaller accounts than the average of that Banregio. And the average of Banregio, that would be around MXN 20,000, Hey Banco is MXN 5,000. So it's pretty different. It's something we've never done so.
So it's a segment that we'd never -- in Banregio history, we've never gone for that segment because of this reason because we wanted to maintain our branches pretty well in terms of services and not crowding them up.
So we never went for payroll lending because that's kind of -- that would cramp up our branches. So now we've been -- we're going be able to do so because of this reason because clients are going to maintain a completely outer service experience, which will allow us to -- and it's allowing us to go for this segment, but in a very productive manner, right?
Yes. And I mean, just going a little bit further. So you're aiming to what specific segment like? What is the profile in terms of ROH? And if you're in aiming higher end customers or lower end, and I, do you have a little bit more color on that?
Yes. The average, as I said, they are rate MXN 5,000. The average savings is MXN 20,000 and the average the time deposit, it's around MXN 70,000. That would be well above what would you consider, for example, for new bank that has an average credit card of MXN 2,000 approximately. So the credit cards that we're aiming at the moment in this relaunching of the product are for credit cards that are MXN 20,000 and above. So definitely above the very low end.
And mainly for credit, now I don't want to say that we're not opening smaller accounts. We do have that service. We do have the service that you can open an account without even a debit -- physical debit or credit card. So you can open a debit account very easily without going somewhere. So there's a lot of uses that people are using this for. So they're using it for gaming, they're using it for services, they're using it for -- a lot of users that they sometimes user accounts for.
So that's where we're aiming to measure active users because that's our main focus on being able to be the #1 bank for those customers and being able to give them an experience no bank whatsoever has at the moment and being able to lead that experience from then on.
Your next question comes from Gilberto Garcia.
I have a follow up on, Hey, also a clarification on whether the time frame you mentioned for it to have its own banking license. At that point, will Hey remain part of Regional or will you stick to listed separately?
Yes. Well, yes. Well, at the first part, definitely, we'll think about owning, Regional is going to own 100% of Hey. If we invite for some reason, and we consider it a good reason for an institutional investor or a strategic investor to come in, we might do so. And definitely, the aim would be to IPO Hey Banco in the next 5 to 7 years -- more 5 than 7. Yes.
Your next question comes from Juan Ponce.
Thanks for taking my question, which is more on the legislative side. The Mexican Congress recently passed the bill that will prohibit outsourcing and in sourcing, except for what qualified as specialized labor according to the Ministry of Labor. What do you think is the potential impact on Regional operating expenses, if any?
The impacts for the operating expenses will be very low because we started since last year that started all the negotiation of this law. We started moving the small percentage of employees that we had with outsources. That is mainly IT programmers or developers, IT developers, to our payroll. We don't have any other issue in terms that 95% or 99% of our employees are employees of Banco Regional or we don't have different entities. We don't have in-sourcing then our only impact that is, as I mentioned, is very small. And it won't have impact in cost because it's just changing from one employer to another will be, as I mentioned, like 80 persons in technology.
For the rest of the departments, we don't have outsourcing nor in essential -- in any essential activity. The other part that we have outsourced there is a security and cleaning. It's allowed in the new regulation as they are not considered to be part of our essential activities. Then the summary is very low, very, very low.
Contrary to other large banks, we have never had 2 payrolls or 3 payrolls or differentiated schemes for employees. We have just 1 employer that is Banco Regional. The 5,000 -- the 5,000 employees, we are employees of Banco Regional with the same benefits, with the same everything, then that's why we don't see any material impact.
Since there are no more questions, on behalf of our senior management, I would like to thank everyone for joining the call, and we look forward to speaking with many of you in the coming weeks. If additional questions arise, don't hesitate to reach out Alejandro and our Investor Relations team. Thank you for your interest in Regional, and have a good day.
Thank you very much for everyone. See you soon, hopefully.