Regional SAB de CV
BMV:RA
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Earnings Call Analysis
Q2-2024 Analysis
Regional SAB de CV
In the second quarter of 2024, Regional displayed remarkable resilience and growth. The net income surged 24% year-on-year to MXN 1,608 million, accompanied by a return on equity (ROE) increase of 161 basis points, reaching 21.4%. This solid performance can be attributed to a robust loan portfolio, which outpaced the industry average, growing by 12% year-on-year compared to the 9% average in the broader banking sector. The expansion in core deposits, which increased by 10%, further demonstrates the firm's operational strength and appeal. This is a clear indicator that Regional is successfully capitalizing on favorable economic conditions in Mexico.
The company reported a financial margin growth of 20% year-on-year and 3% quarter-on-quarter. This remarkable profitability is underpinned by a strong efficiency ratio, which improved by 200 basis points year-on-year to 39.9%. The strategy of reducing securities investments while boosting non-financial revenues showcased the company's commitment to a lean operational structure. Non-financial revenues also grew at a significant pace, marking a 13% increase. Notably, fee income from foreign exchange services and cards saw substantial increases of 35% and 27%, respectively, highlighting effective cross-selling strategies.
Banregio remains competitive in the retail banking segment where its preferred banking portfolio and SME lending also grew by 13% year-on-year. As the bank expands, with plans for new branches and increased hiring of sales personnel, it positions itself to capture a greater share of the market. Importantly, the bank's asset quality remains strong, indicated by a non-performing loan (NPL) ratio of 1.2% and a cost of risk target returning to 0.9%, signaling a controlled approach to asset management in competitive landscapes.
The management remains optimistic about maintaining double-digit loan growth, specifically targeting sectors such as agri-business, manufacturing, and real estate. They anticipate continuing strong performance into the latter half of the year, despite external pressures. The company's guidance projected a net income growth of approximately 14% for the year, with expectations of improved performance in the fourth quarter. The results for upcoming quarters are expected to reflect moderate growth, particularly as they recalibrate risk models that affect consumer lending slowdowns.
Hey Banco, the digital banking arm, has reported an impressive growth trajectory. Its active user base grew by 2% in just one quarter, indicating strong market demand. Moreover, the Hey Pro segment boasts a staggering 98.9% monthly active user rate. The bank's approach to customer acquisition, emphasizing product innovation and operational efficiency, is proving successful, as non-financial income surged 80% year-on-year. These factors collectively underscore Regional's commitment to harnessing digital transformation in banking, paving the way for sustainable growth.
Facing competitive pressures from fintechs and regulatory challenges, the management is focused on maintaining share while cautiously expanding. There is heightened attention to sectors showing stress under current interest rate pressures. The measures to adjust credit scoring and a selective approach to consumer lending reflect a prudent risk management strategy that aims to enhance asset quality while driving growth.
Overall, Regional's earnings call underscored a robust financial health framed by strategic growth initiatives and operational excellence. With a committed focus on innovation in both traditional and digital banking avenues, alongside an adjusted risk approach in consumer lending, the outlook appears positive. Investors should be encouraged by the financial metrics and future strategies discussed, indicating a bank well-positioned for sustained growth.
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Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Regional's Second Quarter 2024 Earnings Conference Call. We're joined today by Manuel Rivero Zambrano, Chief Executive Officer of Regional; Enrique Navarro Ramírez, Chief Financial Officer, and Alejandro Lobeira, Head of Strategy and Planning and Investor Relations.
[Operator Instructions] Please be advised that today's conference is being recorded. I will now hand the conference over to your speaker today, Manuel Rivero Zambrano. Thank you, and please go ahead.
Good morning, everyone. I'm hoping your families are healthy and well. We're pleased with our second quarter performance, our loan portfolio consistently outpacing industry standards and our profitability on a steady rise. Our approach keeps delivering solid results as we seize opportunities, represented by the Mexico's economic expansion, near-shoring trends, robust labor market and favorable demographic conditions.
These factors present a distinct opportunity for sustainable growth, enhancing operational efficiency and driving profitability to new heights. Regional has experienced a significant surge in our loan portfolio while maintaining an exceptional asset quality. We keep optimizing our balance sheet through the reduction in our securities investment portfolio.
Concurrently, nonfinancial revenues continue to grow at double-digit rates. Regional's quarterly earnings have continued to demonstrate robust growth. Our net income for the quarter reached MXN 1,608 million, showing solid growth, 24% year-on-year, and the ROE expanded 161 basis points, reaching 21.4% year-on-year.
Regional has reported a strong 12% year-on-year loan growth, outperforming the banking sector at 9% as of April. Meanwhile, core deposits increased 10% overall year-on-year, while the system saw a 7% expansion. The financial margin expanded 20% year-on-year and 3% quarter-on-quarter, reflecting our consistent progress in profitability.
Our cross-selling strategies have effectively enhanced our nonfinancial income, which has been a significant double-digit growth rate, showing a remarkable year-on-year increase of 13%. Our FX fees had risen 35% year-on-year: cards and merchant, 27%; insurance, 20%; and trust, 17%.
Our efficiency ratio remains below 40% threshold, standing at [ 39.9%, ] with a year-over-year contraction of 200 basis points. This contraction in the efficiency ratio was driven by a solid growth in revenues that keep outpacing operating expenses.
Banregio's loan portfolio had an increase of 13% year-on-year. Core deposits have charged 10% year-on-year, and the efficiency ratio last 12 months contracted 330 basis points to reach 36.8%, demonstrating our commitment to operational excellence. Our branch expansion will allow to us capitalize on the opportunities arising from the favorable economic dynamics and a robust labor market. We keep intensifying our efforts to broaden our sales force and enhance capabilities, ensuring we maintain a competitive edge and to capture a greater share of the market.
In our retail banking segment, the preferred banking portfolio as well as the SME portfolio grew 13% year-on-year. These figures underscore our commitment to supporting both individuals and small business. Banregio continues to hold its outstanding trajectory of levering exceptional service and quality as evidence of this consistently industry-leading NPS that stood at 76 as of March. The bank maintains an outstanding asset quality with the NPL ratio improved 4 basis points year-on-year to 1.2%, and the cost of risk of 0.5%.
As of Hey Banco, it showed remarkable growth and resilience in the second quarter, solidifying our position as a leading fintech in the Mexican market. Our focus on customer acquisition, product innovation and operational efficiency has led us significant milestones that underscore potential for sustainable long-term success.
Hey Banco's emphasis on profitability and customer engagement has paid out handsomely. Our active user base for Hey Banco grew 2% quarter-on-quarter, showcasing our platform's growing appeal. Even more impressively, our Hey Pro segment maintains a 98.9% monthly active user rate, demonstrating the unparalleled user engagement and satisfaction.
Our diversified revenue streams have yielded exceptional results, with nonfinancial income surging [ 80% ] year-on-year. This growth is driven by the phenomenal success of Hey Pago, our innovative payment solution, which registered a 31% year-on-year increase. This performance not only validates our product strategy but also positions us favorably in the competitive digital payments landscape.
We have made significant strides in optimizing our operations, as evidenced by our efficiency ratio improving dramatically from 85% to 66% year-on-year. This 19% improvement translates to significant cost savings and demonstrates our commitment to lean agile operations that drive profitability.
Our focus on building lasting customer relationships' paying dividends. The last 12 months lifetime value per customer stands at impressive MXN 5,092, highlighting the long-term profitability potential of our growing customer base. This figure not only justifies our customer acquisition cost but also underscores the effectiveness of our engagement and retention strategies.
Our product ecosystem continues to respond with user -- resonate with users as reflected in our cross-selling index. Hey Individuals boasts a solid 1.79 cross-selling ratio, while Hey Pro leads at an astounding 2.38. These figures demonstrate our success in creating a comprehensive financial platform that meets diverse customer needs.
Hey Pago has emerged as a true game changer in the digital payment system space, with monthly billing growing at 8% year-on-year and a remarkable 2.4x growth in payment facilitators. We are rapidly gaining market share, surpassing MXN 12 billion in total billing as of May 2024. This marks a significant milestone in our journey to gain market share in the digital payment landscape.
Our unwavering commitment to our customer experience is reflected by our impressive NPS. Hey [indiscernible] maintains a world-class NPS of 75, while Individuals stands at 62. This score is not only outperform many traditional banks but also underscore our ability to deliver superior digital banking experience. Despite the challenges in the broader market, our time deposits grew [ 3% ] year-on-year. This growth demonstrates customer trust in the platform and provides a stable funding base for future expansion.
Hey Banco's [ proposition ] to capitalize the growing demand for digital financial service in Mexico. Our strong performance across key metrics from user growth and engagement to operational efficiency and customer satisfaction provides us for the foundation for future success. With our cutting-edge technology, customer-centric approach and proven ability to execute, Hey Banco's not just participating in the digital banking revolution. We're leading it.
As we look into the future, we remain committed to delivering exceptional value in our customers and shareholders alike, driving financial inclusion and reshaping the landscape of the digital bank in Mexico. The growth outlook for coming years remains promising, an already noticeable increase in loan demand that will allow us to accelerate and escalate further across various sectors, including agribusiness manufacturing, logistics and commerce.
We are committed to continuously enhance the shareholder value by consistently delivering results that outpace industry average. We are dedicated to maintain our positions as a profitable leader, demonstrating consistent results through various economic cycles. We thank you for your continued trust and support as we strive to achieve greater heights and deliver sustainable value to our shareholders. Our objectives from January remain unchanged as we firmly believe in our strategies, initiatives to continue increasing our shareholder value. Thank you. We appreciate any questions.
[Operator Instructions] Our first question comes from Ernesto Gabilondo.
I have three questions from my side. The first one will be on loan growth. Just wondering how are you expecting loan growth to behave during this new administration. Do you expect it could remain at the double digit? And on the corporate side, can you share with us in which sectors are you detecting stronger lending activity?
On the other hand, we saw that the consumer segment showed a slower pace of growth, mainly -- or largely explained by a stricter lending at Hey. So just wanted to hear from you if this can reverse in the coming quarters. As you mentioned in your remarks, this could be explained by strong labor market, higher salary, social programs. So any color on that will be helpful.
My second question will be on asset quality. We know these cost of risk stood at 1% of average gross loans in the second quarter. This is modestly I think above your guidance, between 0.7%, 0.9%. So just wondering if we should expect cost of risk at these levels or it should be returning to your guidance range.
And finally, my last question will be on your earnings growth expectations for the year. When analyzing the first half, it implies a net income growth of [ approximately 14% ]. So this is, I think, at the midpoint of your guidance range. So assuming that the second half tends to have a stronger seasonality, would it be reasonable to expect the earnings growth at the high end of the range? Or do you think still too soon to tell and we still have to pass the U.S. elections?
Thank you, Ernesto. I will start with the asset quality. Yes, as you can see, we have had an increase on Stage 2 loans that has been requiring more provisions from the corporate side, and as well as in the consumer on the Stage 3, mainly for Hey Banco but also for Banregio. Then the short answer is we expect to go back to guidance, but in the higher end, around 0.9%.
Then in terms of earnings, we envision, in general, very similar quarters for the next 2 quarters, but with an improvement in the last quarter. As you mentioned, there are some seasonality and some adjustment of rates also in the margins moving forward that will offset the potential increase of the rate -- decrease, sorry, of the rate in August or September. This quarter, we expect a very similar quarter, and fourth quarter, we expect a better one. Then we will be between the mid and the high range on the growth -- expected growth or the guidance for total earnings.
And in terms of growth, basically, we continue very open on the corporate side. We are as we mentioned or Manuel mentioned in the summary about growing in agro business to resume manufacturing and still growing a little bit in construction related to real estate. And we maintain our guidance. Obviously, we will stay around the lower range.
In terms of consumer, as you can see in the Hey section, we are growing only 1%. And in credit cards, we decreased as we are calibrating and testing our credit scoring models. As we talked in the first quarter, we went all the way down to less than 5% of approval. Right now, we are around 5%, and we will continue increasing the approval rate and taking back the growth. But for now, it's very flattish, Hey credit card. In general, consumer credit in Hey.That's what drives the 7.2% point mixing [ with out of loss ] credit cards.
Perfect. And in the Banregio's consumer or retail portfolio, what should we expect?
We expect to continue above high teens. This quarter was -- year-on-year was 21% on credit card and 7% or 6% in auto. We expect to maintain similar growth even better in auto for the second quarter. Credit card, similar.
Our next question comes from Tito Labarta.
Two questions, actually. I want to follow up on the Hey Banco loan growth there, just to understand why the relatively slow loan growth. Is it just some asset quality concerns that you're seeing? Are you seeing just increased competition, making you more cautious? What's sort of driving the sort of more cautious stance on Hey Banco?
And then second question, we did see a bit of a pickup in expenses, growing mid-teens for the full year, I think, more in line with what you're saying. But just how do you think about expense growth from here? What drove the jump in the quarter? If you could give a little more color on that.
Well, in terms of the growth of loans, specifically in consumer, is -- as we have mentioned, we had an asset quality deterioration during the first semester of [indiscernible]. We decided to be more selective starting July. Then since July onwards, we have been recalibrating our credit scoring models. We started lending faster in April of this year, then we will see a growth, but a small growth in the next quarters. And that's the main reason is asset quality more than competition.
And in auto and all the other products and small businesses, we are adjusting our rates. Then we are improving the mix or changing, because it was not about mix. It's a different mix with higher rates, adjusting for the higher cost funding that we have from January in Hey Banco.
Great. And on the expenses?
Yes, yes. Sorry, sorry. I will open. Well, we expect this level of expenses to be the peak. Basically, we saw 2 effects. I will go by the 4 lines that we disclosed in the quarterly report that is basically -- sorry, let me just put myself there.
Compensation and benefits, that level should be maintained. It should increase a little bit more, MXN 1.066 billion per quarter. We had a great increase for our employees in March, then it was fully reflected in the second quarter, April to June, of more than 6.5%. The average was around 7%, then it's already reflected there.
And the growth should not be significant as we are continuing expanding our branches through the country. We have already opened 6 branches. We expect to reach September with 200 branches. As you know, we are celebrating our 30 anniversary, 30 years, and we expect to achieve 500 ATMs and 200 branches for that moment.
In terms of administrative expenses, the level, if you see, it's not seasonal, but it goes up and goes down, if you see different quarters back. We expect to go back because some of the expenses that were paid in second quarter are annual expenses or should have been paid in the first quarter, but we'll be in that range between MXN 350 million, MXN 400 million for the next quarters. And finally, while rents should continue growing, not fast, but as we are increasing ATMs and branches, will move up. But at that pace, we are not worried about rents.
And tax basically is BAT. And the explanation is kind of simple. We provision at the end of the month and then we have to pay on the 17 day. And we overprovisioned in the first quarter, and we underprovisioned in the second quarter, then an average between the two is what we should expect. All in all, if you adopt, it will be a similar to the second quarter. A little bit lower next quarter. And then the [ as in ] earnings and income, a little bit higher in the last quarter.
Our next question comes from Eric Ito.
I have a couple of questions regarding your NIMs, your margins. So first half of the year, your guys have reported 6.6% NIMs in the first quarter, 6.7% in the second quarter. I think the guidance for the year is 6% to 6.4%. So I just wanted to -- if you could recall us what's the sensitivity of your NIMs to the interest rates, and if it's reasonable to assume to finish this year above the guidance? And what can we work with NIMs for next year?
Yes, we can expect to finish above guidance as we were expecting a lower rate when we made the budget and also the guidance. Our sensibility is around 3 basis points -- between 3 to 4 basis points per [ 25 ]. It's around 12 to 16 per [ 100 ]. And that's the expectation for the next year. We haven't really made a budget, and I cannot give a color or guidance for next year as we will wait to see how the Central Bank reduces the rate and at what pace.
And remember, the -- we always publish the net interest margin and the total loans NIM, because the official one, I don't know how to call it, the net interest margin includes the securities and the repo business. And we have decreased the securities portfolio from a peak of MXN 60 billion to MXN 40 billion, and that led to an improvement in the margin. And we are not proactively looking to reduce it more.
Our next question comes from Ricardo Buchpiguel.
I have a couple here on my side. So first, we've observed a slowdown in fee income growth during the quarter, was growing at around high teens, and now it's more towards mid-single digits, mainly pressured by current account service fees and online banking fees. So could you please explain what was the drivers for this weaker performance on these lines?
And also related to the fee income space, how do you see the future for this revenue line considering that probably the banking will be marginalized and we might see more competition with fintechs? In Brazil, we saw more and more banks doing exemptions for these types of fees, so I'm trying to figure out if we could see something similar potentially happening in Mexico, and how would you prepare for that?
And for my second question, an important profit pool that we see for Regional and Mexican banks in general come from the spreads you have on deposits since you charge -- since the returns on deposits are lower than the reference rates. Right now, we see that Nubank and other fintechs are -- right now too small to make a difference, but they are growing a lot on their deposits and offering much higher rates with a leaner cost structure. So in the next 5 years, do you believe this is the dynamic that could be a risk for Regional? And if so, how the bank is preparing for that?
Well, thanks, Ricardo. On the first question, we expect -- I guess, you are seeing page -- just to be exactly in the same page, Page 7 of the quarterly report. We don't see a reduction or a flattening in the cards and merchant. In general, for the merchant acquiring business, we're increasing around 50% year-on-year. And cards, it will grow as we recover growth.
If you see the number of customers in Hey Banco, that has been reducing, and this quarter, it turned that up, and we increased 2.6% versus last quarter. That will bring more transactionality. This is purely related to transactions, and it depends also what happens during the quarter. Last quarter, we had the -- in Hey Banco specifically, the Pa'l Norte festival that we sponsor, and it's an increase on transactionality. And as we mentioned on the merchant acquiring business, it's acquirer with more transactions. Then we see, let's call it, a recovery.
On the other lines, it has been flattish, let's say, current account services or online banking cost, that is mainly for companies. We don't charge for individuals. Then we don't expect a radical change in there. How are we preparing? We have been -- in terms of fees, we have, in Mexico as you know, a similar fee for all the acquirers and issuers. And what we have been doing is paying rewards or cash back. And in some cases, some banks have decided to stop paying or to move to a more profitable or higher margins in the loan side. Then that's what we are doing in Hey.
Banregio has maintained their profitability, and Banregio maintained the same fee income structure up to now. And in terms of deposits, we -- as you know and we have talked in the previous quarter, up to now, we have increased our cost of funding [ in K ] to maintain our offer competitive in terms of we are paying 12.5% in our Hey account, Hey Pro, at 28 days term deposit.
And with the difference with Nubank, that is unlimited, we pay that amount -- that rate to any amount without limit. And most of the other fintechs have smaller limits. Even Mercado Pago has a MXN 25,000 limit. Then the offers are different and attracts different segments. We don't know, once the rate starts going down, if the offer will be maintained by the other competitors.
Just one quick follow-up. When we compare, for instance, your returns on Banregio, which is much lower than Hey, and assuming that Nubank will eventually could charge, I don't know, 90% of the reference rate or 85% of the reference rate, wouldn't that be a concern for your bigger business, which is Banregio?
No, not really. We believe that we are one of the banks that pay more in time deposits in Banregio, not only in Hey, then maybe BBVA or Citi or the larger ones should expect a higher migration. But in Banregio, we pay very close to TIIE. In fact, we pay CETES, basically CETES in time deposits that is 25 bps below TIIE. Then maybe we should move to TIIE, but it will be not a huge impact.
Our next question comes from Yuri Fernandes.
I have one somewhat related to this, but on insurance and FX. On FX, it was a little bit higher this quarter, so just checking it this is driven by effect seasonality in June or not? And how should we think about this line? I'm just asking if more volatility in the peso should continue to boost this line or if this line should return if peso volatility kind of dissipates? That's the one.
And if you can comment also on the FX exposure as a whole for Regional as an entity. We see the breakdown of deposits in pesos and dollars, but not sure if the dollar -- a weaker peso is somehow relevant for you, for loan book or for NII or anything like this. So kind of FX is the first question.
And then a second question I have is regarding your wholesale book, the growth we are seeing. And correct me if I'm wrong, but I guess part of the thesis is that you should grow, especially in Mexico City and some other regions. And we are not seeing a lot of growth lately, but this quarter, when you go to a quarter-over-quarter, Nuevo Leon is reaccelerating. So Nuevo Leon is also growing like 3%, 4% quarter-over-quarter.
So trying to address where the growth in the wholesale will come from on Regional. If you continue to see Mexico City, Jalisco, I don't know, other regions growing faster than Nuevo Leon or if we're seeing a better growth in your home state?
Thank you, Yuri. In terms of FX in the line of fees, we expect a similar level for the next quarters as long as the volatility maintains. Then -- that's mainly the explanation. Also, there is a higher volume. It's a mix of the spread opens, plus there are more demand for U.S. dollars. Then talking with our team of markets team, they expect similar next quarters. And we expect volatility will be maintained until the United States election happens or until the new President in Mexico, the new term starts, then that should happen.
In terms of impacts to the balance or revenues, we have around MXN 900 million in U.S. dollars, and the impact is that basically when we reevaluate them or evaluate them to put in the financial statements in the balance, that part of the deposits increase or decrease. We have less than half of loans denominated in dollars, then we don't have that much impact. Basically, we request either the customers that we run loans in dollars to export or import, or to have an account -- no, but a cap or a swap or some type of protection. Then the transfer should be not besides the evaluation of both, but as we have more deposits is the side that valuates faster.
Super clear. Just making sure I got correctly, Enrique. So loans are about half of the size of you have in U.S. dollars? That's it, right?
Yes. It's like $400 million.
Okay. And regarding the growth by region, like where should the growth come from?
Yes. You mentioned 4%. I've seen 6%.
Yes, I think Nuevo Leon was 3% quarter-over-quarter, but last quarter was also very good for Nuevo Leon. So we are seeing 2 quarters in a row that Nuevo Leon is doing pretty good on a quarter-over-quarter basis.
Yes. Well, we expect and we maintain our expectations very high, mainly in Mexico City and Jalisco. And here in Nuevo Leon, we continue being one of the three largest lender for medium and what we call large companies differentiating from corporates or international. Then we expect also growth from Nuevo Leon. But as the base is higher and it's difficult to maintain the double digit, but we expect to go back to very close to double digit, [ 9, 10, 11, ] something around that.
Our next question comes from [indiscernible].
I just wanted to clarify on the deposits. You mentioned that you're paying about 12.5% for the Hey Pro accounts for the term deposits, and which has no limit unlike those for the fintechs. Why wouldn't you see some flow of deposits coming from the Regional's account to Hey Pro? What are the rates that you offer for the Regional time deposits? Because they've been growing quite strongly. So if we can start with that part.
It's -- basically, it's the service. And as I mentioned, right now, in Banregio, above MXN 500,000, we are paying a rate that is basically CETES, and CETES right now is around [ 10.75% ], something like that. And for most of our customers, that rate plus all the service, all the advice that they receive from the bankers has been attractive to stay at Banregio. There is not any limitation. There is not any restriction. That's the word, thank you. There is no restriction from moving from one side to the other side, and they know the offers.
The only drawback to move to Hey is there is a self-service, and the deposit side is fully digital, mainly through the app. Also, we have the web, but mainly through the app. Then the customer chooses if they prefer to maintain the service and the advice from the bankers. And in Banregio, we have for that segment -- for the segment that we call the preferred segment and above, the -- also the private one, we have even 3 different levels of service. We have the concierge plus the banker and plus the call center. Then we believe is that.
Understood. Very clear. If I can ask about how you reached the Hey Banco clients, right? Previously, you mentioned that you were doing a lot of performance marketing, and that attracted customers that you did not like -- did not want in the Hey Banco segment. So how have you modified your approach towards getting the customers for Hey Banco to get the right kind of customers? And how does that impact your CAC? That's my first question.
And second is on asset quality. And this is, in general, not related to Hey Banco as such. Are there any pockets where you're seeing stress because of the higher-than-expected rates coming through? Should we be concerned on monitoring any specific sector or segment or region where we could see a bit of worsening in asset quality?
Well, in terms of what we changed to start attracting new customers in Hey Banco, if you remember, we used to do a lot of digital advertising through, name it, any social network, any Google or any web page, even through the local media, but we decided to reduce cost. And you can see how it's improving the efficiency ratio, mainly because we reduced this part of the expenses. And right now, what we started doing is focusing more on businesses and sole proprietors.
We started back to doing some digital advertising, but very focused on specialized media pages, and we started a new referral program within Individuals where we pay the customer and the new customer also, to the referral and to the referrer, both of them, we pay and we pay higher amount if they verify the account or if they open a credit card. And that has worked very well, at least for the initial 3 months, in terms of new accounts, as you can see.
Now the challenge is to make it profitable, that accounts, because to motivate them continue using the account and bring their deposits and acquire a credit card and all the full life cycle, that will be the main way to attract customers, both in businesses as well as individuals.
And with the -- as I mentioned, we have still some events. We sponsor 3 different music festivals, and we are sponsoring right now a school gathering sports competition focusing on promote our minors account. We are the only digital bank with a minors account, and we are making noise in that type of events, mainly through schools or parents associations or related events. Then it's more focused. That will be the short answer, more focused and based on referrals.
A lot of, what you say, gaming. We have also some -- a lot of rewards every weekend. There are any different promotion or activation, we call it in Spanish. And in terms of asset quality, can you repeat your question in terms of asset quality?
Sure. Just wanted to check if you see any pockets of stress in terms of asset quality. Any sectors or any regions which specifically are you more concerned about, given that rates have been higher than average?
No, no, not really. As we have mentioned in previous calls, the largest customers have been specific cases in different sectors, in different regions. And in the consumer side, it has been mainly in Hey. Banregio is controlled right now. Then some pressure for rates is general in small businesses. But there is not yet any concern about NPLs. It's more that it's getting difficult to get new financing at these rates.
Understood. And Mexico City has been growing extremely well. A few years back, we had some asset quality issues in Mexico City. You still remain very comfortable with the growth that you're seeing, around 25%?
Yes. Well, you know us from a long time, the portfolio went down when we did all the changes on the structure. Right now, we feel very comfortable with the 3 heads that we have there, and we are opening new branches. We -- it's still a very small network, branch network. But we doubled the size from 9 to 18. Almost doubled. It's 16 right now. It will be 18 for the end of the year. And we have more not only bankers but also more credit analysts located in Mexico City that have been helping -- that they know the market.
Their cases for medium and large companies are evaluated and graded in Mexico City. Then we will continue growing. Yes, we have said that since the IPO, Mexico City is half of the market. If we want to continue growing, we have to grow in Mexico City. And right now, we are confident that we have the team, and the asset quality has improved a lot. Also, we have changed, as I mentioned, most of the people in all of the areas.
Since there are no more questions, on behalf of our senior management, I would like to thank everyone for joining the call. We look forward to speaking with many of you in the coming weeks. If additional questions arise, please don't hesitate to reach out to Alejandro and our Investor Relations team. Thank you for your interest in Regional, and have a good day.