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Ladies and gentlemen, thank you for standing by, and welcome to the Regional's Third Quarter 2020 Conference Call. [Operator Instructions]
I would now like to hand the conference over to your speaker today, Mr. Manuel Rivero Zambrano. Thank you. Please go ahead, sir.
Good morning, everyone. Welcome to our conference call for Regional's Third Quarter Results of 2020. First of all, I hope you and your family are healthy and well. We appreciate everyone's participation today.
The prolonged health contingency has undermined the world's economic activity and has generated a slowdown in the financial system. However, our prudent culture focused on asset quality, adequate expense control and profitability has allowed us to achieve a positive result. We have continued strengthening Regional fundamentals. On liquidity, we currently have a MXN 16.6 billion buffer, thanks to our increase in core deposits. As needed, we could expand this buffer to MXN 35.9 billion.
We have a solid capitalization ratio reaching 15.0% for Tier 1 as of August 2020. And we estimate reaching levels of above 16% by the end of the year. During the third quarter, we have reached 1.2% the NPL ratio. And we have been able to collect more to past due loans and have accelerated the rate at which we write-off. We also increased provisions reaching 1.7x the NPL, and expect total provisions in 2020 to be between MXN 1 billion and MXN 1.1 billion, and write-offs between MXN 800 million and MXN 830 million. For 2020, we expect total provisions to be between [ MXN 1.15 billion ] and MXN 1.3 billion, and write-offs between MXN 600 million and MXN 650 million.
Those clients that have entered the referral programs earlier were Class 2. And the good news is that they are performing better than expected, and we expect payments to perform better as the customers who enter the programs later on have lesser programs to repay.
We have been able to adapt to a new normality through designing our operational processes and integrating new remote working modalities for our staff. We have been -- maintained our focus on specialized services in our branches while promoting the use of digital solutions. Our digital tools, such as electronic banking and mobile apps, have had a positive impact in our core deposits, which grew 21% year-on-year, and wholesale, SME, growing 18% and 29%, respectively.
Our digital offering remains a main differentiator, and we will continue developing and enhancing our digital capabilities. We expect to maintain the positive results in core deposits and cross-selling as we relaunched Banregio's app, and [indiscernible] continued to grow exponentially. We continue promoting income diversification through nonfinancial income, products, expanding our customer base through specialized channels, which have resulted in a 15% year-on-year growth in nonfinancial income, excluding leasing.
The following are our results for the third quarter. In terms of growth, the total loan portfolio grew 3% year-on-year, while for the different segments, the growth was 1% in wholesale; SME, consumer, auto and mortgage grew 11%, 5%, 12% and 2%, respectively. The growth by region, at Jalisco, we had a growth of 8%; Mexico City 4%; Nuevo León, a decrease of 1% and the rest of our regions with 5% growth. We had a significant growth year-on-year in demand deposits of 21%, driven by our strategy to improve funding mix, which also resulted in customer time deposit growth of 15%.
The financial margin for the third quarter was MXN 1,818 million. The NIM contracted only 55 basis points to 5.8%, and the total loan NIM was 6.1%. This is decreased response to a decrease of 350 basis points year-on-year on the reference rate. The NIM decrease was lower than we expected, thanks to a better funding mix and a better pricing for new loans. We estimate that the NIM will reach the lowest level this following quarter and from then on, we should have a positive trend.
In the third quarter, the nonfinancial income reached MXN 652 million. Among the nonfinancial income revenue that stands out costs were 26% growth, electronic banking fixed was 18% growth and cards and merchant fees were 12% growth. Expenses grew only 2% as a result of our expense control strategy to amount MXN 1,112 million. The efficiency ratio, therefore, was 45.2%, representing an increase of 200 basis points over the previous year.
Looking above, the net income was MXN 775 million, which represents a decrease of 24% year-on-year, reaching to an ROA and an ROE of 2.3% and 16.5%, respectively. We have had issued a dividend of MXN 2,000 million. We have -- we would have an estimated ROE of 18%. Regional is characterized by focus on asset quality, and our portfolio is one of the healthiest in the Mexican system -- Mexican banking system.
As of the third quarter of 2020, the NPL remained low, reaching 1.2, while the NPL for the wholesale segment was 0.5. And for the retail segment, was 4.4, for SME; 1.9 for consumer and 2.3 for mortgage and 0.4 for auto. During this quarter, provisions amounted to MXN 260 million, with an increase of 100% year-on-year growth, while the last 12 months cost of risk was 0.8%. As you know, 92% of our portfolio has some kind of collateral, which mitigates the payment risk.
Thank you. We appreciate any further questions.
[Operator Instructions] Your first question comes from the line of Ernesto Gabilondo of Bank of America.
My first question is on loan growth, which was only around 3% this quarter year-over-year. Was this explained due to lower demand or because you are implementing a stricter lending? And how should we think about the loan growth next year? What do you think will be the drivers to expect an acceleration in the loan growth?
And my second question is in operating expenses. We have seen a very good cost control discipline. Do you think this would continue in the last quarter and next year? And what has been the strategy to reduce the costs?
And then my last question is on your capital ratio and dividends. As you mentioned in your press release and in your presentation, you expect to have a common equity Tier 1 of 16% by year-end. So this is positioning you with a lot of extra capital. So I would like to know if it would be reasonable to expect Regional paying, again, ordinary dividends next year and to pay the dividend that was postponed this year? If yes, do you expect to pay both dividends in 1 execution?
Yes. Thank you, Ernesto. Thank you for your questions. Definitely, loan growth decelerated mainly because corporate loans that we have that we didn't want anymore for loan mix reasons. That's practically the main reason. All the other lines and segments were at a very healthy pace, still very slow, definitely. I'm not saying the same loan growth that we're used to, but it's getting much better. We're seeing demand in very good segments and healthy industries that are producing good results, and will -- we are very helpful for those clients and trying to really allow them to continue their operations.
And that's -- I think that's a very positive thing to do right now. And clients are very receptive in trying to regain operations and in making sure the things are continued in a good trend. For next year, the loan growth that we're expecting is between 8% and 10%, probably a bit more depending on the quarter, but that's where we think the demand will be and mainly in every segment line, more or less the same.
Ernesto, Enrique Navarro. In terms of cost control, basically, as we talked in -- during the second quarter conference call, we did a reduction of personnel. Basically, we, every quarter, evaluate all the employees and the lowest evaluated go out. Usually, we replace them, always looking to have a better team. But during second quarter and during third quarter, we didn't replace any of these employees. Then again, the number of employees is lower from the one that we had in first quarter. In terms of salaries, also, we want to be very transparent.
As you know, we capitalize projects, and we have done a lot of technology investment during the quarter. The project is finished, and then we decided to capitalize or was not decided because we do it regularly based on the accountability rules. And in the general expenses, we expect a single-digit growth moving on in both lines, in salaries as well as in operational expenses, not the Tier 1, 2 that we saw this quarter. It was a very good quarter. But to maintain ourselves within a single digit, close to inflation for the next year above, obviously, of inflation, but not very far from there. Right now, we are very -- we are not traveling, that helps a lot. And we are not doing number of publicity and advertisement. And at some time -- some point in time, we will resume that activity.
Well, in terms of capital and dividends, definitely, we have a very strong capital position that allow us to have dividends eventually. I'm not sure how about timing. But definitely, in terms of regulation, there are still some hinges that we need to talk with our regulators and see how things are going to be pan out. But definitely, we do have enough space. It's going to be depending on time there.
And as a last question, can you repeat your guidance for provision charges for this year and next year? And do you think that after the third quarter results, you will be able to achieve your net income guidance of 0 to minus 15%?
The last thing I did mention, and you said and if we...
If you were able -- if you are going to achieve your net income guidance of 0% to minus 15%.
Yes. Okay. Perfect. So about -- we have around MXN 1,000 million to MXN 1,100 million in reserves for this year. And around MXN 800 million to MXN 830 million in write-offs. And for next year, we're expecting between MXN 1,150 million to MXN 1,300 million. And write-off would be less between MXN 600 million and MXN 650 million. We're expecting around MXN 450 million in reserve this following quarter. So that should give you more of an idea of how we're seeing.
And then the next quarter, we think it's going to be much lower than MXN 450 million, by far, it's going to be -- what we're doing this following quarter or this quarter we're at is we are putting reserves on clients that we know that are riskier and that might have a problem in repaying. So that's where we're seeing that pickup in reserves. And then from then on, we are expecting a lower amount quarterly, for sure.
Yes. So we are accelerating the write-offs this year, and we're accelerating the reserves this last 2 quarters, as you've seen. And that should be more than able to withstand anything that was negative during the pandemic. And from then on, we should expect things to carry on in an upward trend for better.
Perfect. And the last question about the net income guidance for the year.
No. Ernesto, if you do the math with the numbers of provisions that Manuel mentioned, that will be more than MXN 400 million for next quarter. On provisions, we expect to be around 20% reduction on net income for the whole year, closer to the MXN 3,000 million.
The next question comes from the line of Ricardo Borgerth of BTG Pactual.
Hello? Can you hear me?
Yes.
I have 3 questions. First, I want to understand a little bit and have an update on Regional digital initiative and digital transformation. And then I also CoDi has been evolving so far?
Sorry. Can you repeat your questions? We couldn't understand.
Sure. I want to have an update on Regional digital initiatives and digital transformation that we have been doing in that front. And also want to have an update on how CoDi payment has been evolving so far?
Okay. Okay. Perfect. Okay. The digital transformation and payments, right?
Hello?
Yes. Was that right?
Okay. Yes. Could you understand my question, sir?
Yes, yes. What I'm asking is, you're asking for our digital transformation strategy and how things are panning out in terms of payments?
I'm asking for how -- if you can give us an update of how has your digital transformation has been evolving? And what happened in 3Q trend? And a separate question, I want to understand how CoDi, the instant payment initiative, has been evolving for Regional?
Yes. Okay. Perfect. Well, in terms of the digital transformation, things are panning out very good. We've deployed our solutions for businesses fully, and it has produced great results for managing the liquidity of our business clients. And we are just -- we updated Hey Banco's digital app, which is pretty amazing, and it's working pretty well. And the same app, we are just about to deploy in Banregio, so they're going to have the same app, different -- obviously, different products and different offerings and different solutions, but with the same -- the same architecture at the same seamless operation that you're going to see in both apps.
That's going to be, I think, pretty well received. We've already received pretty good feedback about Hey Banco's app and people are loving the product and how things are easy to operate. And we're very positive about that.
In terms of Banregio, what we're doing is we're helping our clients fully go to digital. There is a lot of interest right now in -- for that for obvious reasons, and transactions are up 40% from last year. So it's -- everything going digital and people are very engaging for obvious reasons. And that's, I think, a very good trend for the near future. And right now, we are working on a project to fully digitalize our clients in some cities, and it's working out very well. And then things keep going that way. I think, next year, we're going to see more efficiencies in that sense.
In terms of payments, things are going much, much better than we expected. We're in -- we're up 28% in total payments, which is awesome. Same clients are growing 12%, which is great. And we've gathered a lot of clients from many segments. We've already deployed the solution for e-commerce sites, and it's going out pretty well. And that's gathering steam. We've -- we think that's going to be a great part for payments in the near future. And we've just deployed a new terminal -- a new POS terminal, which is a free architecture that you can use, and it's hybrid, where you can use QR payments. It's pretty amazing. And it's the same cost that we have already with the same the provider that we had in the past.
So it's a pretty good machine that's going to work pretty amazing to lower our costs and get better products and better solutions for our clients. And we're very happy for that. So definitely good things about payments and how things are going out. And we think there is a lot of positive things that are going to happen for next year, for sure.
And just a follow-up...
And just a good thing. We've -- we are -- right now, the number -- just give me one second, the seventh. We're in seventh place. I think it's a very good place that we're at. We're better than Scotiabank, Bajío, HSBC and the trend is coming up. And I think we're definitely going to see better results in the near future.
Sorry. Your last question, I'm sorry?
And about the CoDi, the instant payment initiative, how has been the client adherence to this new solution, this new payment solution? CoDi.
CoDi...
CoDi.
Yes, yes.
CoDi. CoDi from the Central Bank. It has been working pretty well in terms of person-to-person payments, but it has not really start to get a spike of use because it's not been accepted in many -- with many merchants. The Central Bank is doing in some efforts. I understand that this week, they will start working with [indiscernible] trying to push more merchants and with Pepsico for another type of this big retailers, pushing the payment acceptance of CoDi in the retail merchants.
Yes. We need the POS to accept the QRs or some other way in order for that to really get more momentum. And I think that's going to be something that's going to be gradual because infrastructure cannot be changed as easy. And there's other ways that we're implementing cardless charges, which are as well as CoDi. So I think you're going to see a myriad of solutions and depending on the segment and depending on what's the type of transaction and -- things are going to be, I think, a mix of solutions that you're going to be able to see going on forward.
But CoDi definitely is going to be, I think, more accepted next year. And then on forward, we -- as I said, the new POS that we are rolling out have this solution, you can charge with a card or you can charge it with CoDi. And it's one of the first in the -- I think it's going to be the first in the system. And I think you're going to see more and more institutions rolling out those types of solutions going on forward that you could -- we call it hybrid. Because you can do it from the terminal with a card or you can do it with the QR, which is the pay solution that we have as a system. So it's a hybrid terminal. And you're going to see -- I mean, right now, we're probably the only one, but you're going to see that probably more so in the near future.
Your next question comes from the line of Brian Flores of Citi.
First question. The question I have is on fees. They improved significantly on a sequential basis. So just wanted to understand more the dynamics going forward. Was this more attributable to the pricing, to the volume, both? Or -- and how recurrent do you think these trends are for the coming quarters?
Yes. In terms of fees, basically, as Manuel mentioned, in payments, we have a very good recovery. Also, we have a very good recovery in FX exchange or foreign exchange, transaction fees and some of the smaller ones, but also that are taking a good increases fiduciary and trust fees, and very stable on leasing and insurance.
How do we see them in the future? As Manuel already mentioned, payments will continue growing. We have a very aggressive strategy to grow in different fronts, not only in POS, but also in e-commerce and not-present-card transactions. In terms of insurance and leasing, we could expect double-digit but not very aggressive for the next year. And the remaining ones, very stable, around 10% or so growth, 10% to 15%, as the recovery continues.
You can see the only one that is at level that is before COVID, after COVID, is payments. The merchant acquiring business is doing very well. Those ones are slowly reaching that level. And as you know, the fourth quarter is very good for payments. We have the [indiscernible] that will be in November. And then we have Christmas seasons, then will be a very good transactional opportunity to increase the average.
Your next question comes from the line of Neha Agarwala of HSBC.
I wanted to talk a little bit about the support programs that you mentioned about last quarter. Sorry, if I missed some of the earlier comments. But in 2Q, you mentioned that 27% of your loan portfolio has been under the support program. Could you give us a little bit more color on how this has evolved? How many of the clients started to repay? Is there any percentage of the portfolio who you think would need for the support? So any trends and colors on that regard would be very helpful. And then I'll ask my next question.
Yes. About the repayment of the programs, as we have mentioned, 27% of our loan book subscribed or requested some help during the April to July period. And basically, we granted 4 and 6 months. Right now, 33%, 3-3, already finished the relief program. And these customers were the ones that have started earlier in the program on the deferral and were the ones with the lowest quality or with more delays and past due. They -- right now, the percentage that paid is 85% that paid and 15% that didn't pay.
On the other, 67%, there are still going to finish the program, mainly during October and November, most of them, 52% of them will finish in the next 2 months. They have a previous were payment track record, then we expect average or less than 10% in payment. In fact, we have seen a better behavior from some of the customers -- on some of the clusters of customers in this initial amount.
Perfect. Very helpful. And I think is that what is driving provisions to be lower than what you initially expected? Because you were expecting a range of MXN 1 billion to MXN 1.4 billion for this year, and now you're expecting close to MXN 1 billion in provisions for this year. Is that the reason for better provisioning trends?
No, no. As a trend, I don't think so, will be around 1% for the whole year this year. And we will not guide that for the next year. But we expect a lower number to go back to where we were before COVID.
In terms of cost of risk, it should decline in 2021 versus 2020?
Pretty much not, but should decline.
Your next question comes from Yuri Fernandes of JPMorgan.
I had a follow-up in the last question. So you said the 27% of the total loans that were renegotiated was the same figure as last quarter. And from that amount, 33% was already finished. And from that amount, 85% are paying loans on time and 15% are not paying. And for sure, not all those 15% are going to become losses, right? Your portfolio, I guess, 90% of that has collateral, maybe you can renegotiate again. But still, if you do the math of this 15% in 33% -- in 27%, that's like 1.3%, 1.4% cost of risk, right? And the normal cost of risk is like 0.7, 0.8, 0.9.
So if you add 1.3% plus 0.8, 0.9, your cost of risk should be above 2%. Where I'm wrong, like what's the method that I am like for getting this equation? Because it seems that 2021 should be a year with higher provisions and this picture of lower cost of risk. I don't know, like I struggle to get unless it's because of the -- I don't know, the collaterals or anything else?
And my second question is regarding the payments. It was a very good quarter. You have been doing amazing here. So can you just share some data on the number of POS? Any estimates on how quickly your volumes are growing because, again, congrats on that, it has been very strong like your merchant unit. And if you can provide more color on that, I guess that we will welcome and start to look to that unit with more attention.
Okay. Now in terms of the math, basically, I don't know if you remember at all our provisioning methodology works, that is the CNBV 1. We follow strictly the CNBV 1. Before -- when the customer is paying on time, the provision is around 0.5% per loan, is the lowest one that we could have. Some customers have 1% depending on different factors. But when you have an early view from 1 day to 90 days, the provision that we usually do is around 15%, then maybe where is the difference. If 1 customer is between 1 day to 90 days past due, the provision is around 15%. And then when the customer arrives or the loan arrives to 91 days or more than 90 that it becomes nonperforming loan. We do 45% is only until 18 months or 540 days that we do 100% of provisioning for a loan.
And right now, what we have is some of these customers that we are mentioning on the 15% that are not paying, they have 1, 2, 3 at most 30 days of past due then the provision is still very small. And some of them that was -- were due before the COVID already had provisions, then they only came back to be due.
I understand like the schedule of the provisions, right, in each provision as you -- the past due is increasing, and that explains the cost of risk for 2020. But in 2021, we have a full year, right? And if you assume the worst case, you may need to provision for those guys, right? Because it's going to be more than 360 days there.
Yes. In the first quarter, if they don't pay, but that's the assumption.
You're assuming -- the thing is the first, and this information is pretty recent. And every bank did their different approach and how they did. This -- the clients right now have information about how they're repaying are clients that were past due prior to COVID. So those -- that information that you're taking is one you're by aiming your light into just one part of the portfolio, and you're trying to make sense out of everything. It doesn't -- obviously, it's not going to add up. That's your approach, it's not going to work, obviously, not.
Because you think that because of one piece of the portfolio, every piece of the portfolio is going to be the same. And that's the assumption you guys are normally making. And obviously that's -- because that's the information that you have. But that's not the information that we have from our clients, and we are confident that the information that we're giving you about reserves and how things are going to pan out is the best effort that we can make on the information we're gathering from clients and how they're repaying and their needs on any additional support that they needed.
No, no, no. Don't get me wrong. Like I know you have a very good underwriting. 15% in collection is not a high number. That's the number we have been hearing, like in many conference, like 10% of collection, like 15% is a good number. Don't get me wrong. The point is having 1% cost of risk, even for a bank as you, with a very good underwriting, is a pretty low-cost of risk for a crisis with 10% decrease and a very slow return next year.
So my point is, if you add 15% to 33%, to 27% of our portfolio, that is more than 1% cost of risk, and you're having a normal cost of risk. That's only -- like it's not a bad number, like 2% cost of risk would be amazing in a crisis like this. My only point is that I don't see cost of risk coming down next year.
Okay. Well, perfect.
But we can take this off the line, just explain...
Yes. Well, I can't help you there. Sorry. We're doing our best. As we said, we are doing our best to be as transparent as we can in terms of gathering the information from our clients, seeing and addressing the situation how it is. We're putting on more reserves from the clients that we see that have additional problems. We write-off more accelerated in the last 2 quarters. We think that's going to be more than enough. And the reserves that are right now, we think are going to be more than needed.
We see a trend in terms of more demand. We see a trend of better operations in every line in every segment. There's obviously different stories you're going to see from other banks. They have a different portfolio, they have a different way of doing things. For example, we are not in tourism. We don't have hotels in Cancún, we don't have hotels in Cabo San Lucas. We don't have any supplier from [indiscernible]. So those are very risky. We don't do credit cards to very vulnerable families. We don't do subprime loans. We're not in that segment. We're definitely not in that segment. And that's where we operate right now.
And the thing that you're saying is I can't -- I think your prudent view is let's see what happens. That's a good point of view. And I think I respect that and I think that the position you should guys have. But our work is here to give you the information as we see it and as clear as we can see it. And that's the information right now. The bank is very -- I mean, it's big and small in the sense that we can have the right conversation with our clients and a very clear understanding of their situation. And as we've talked, we are in a very, I think, much safer place than we were 6 months ago. We're more tranquil. We're more -- have more information, and this really help -- has helped us a lot. And in giving clients the money they need to restart their operations and things are going well, I mean, not for everyone, definitely.
And -- but in the segment that we are and how we're restructuring every loan in every segment, and how things are going out in terms of the pandemic and how has it hit in the industry that we're in, we've been very -- I wouldn't say lovely because we've always done our job to make sure that we are very prudent in how we structure and how we loan and how we operate the bank. And hopefully, I can give you more information later on and satisfy, probably time is going to be the only answer.
Right. No, no, perfect. No, no. And again, 15% collection -- noncollection is not a bad number. It's a good number.
And do you see -- when you see the results that we have had in checking accounts, that you see that those are the clients that we are aiming for. And those are clients that are producing liquidity and they are deleveraging, and they're restarting their operations, and we see that as a very positive trend. We see more and more, as you can see in payments. Same clients from last year are growing 12% in terms of transactions, obviously, not in every segment. I'm not talking about restaurants, but other segments are producing. And I see the trend not only in our payment system. I see it in everyone.
I mean we are at levels in payments as well as pre-COVID in terms of the whole system. Every big bank has more payments of around 10% or 8% more in the last -- in September compared to the pre-COVID. So I think it's -- that's a good trend, not only for us but for the whole system. So -- yes, we're not definitely very optimistic. I mean we are definitely very prudent. We are not in a way that we're saying, let's continue aggressive growth, definitely, we're not in that position, still. We are very cautious, as always. We've been prudent. But definitely, we are -- right now, we're helping our clients grow and with better pricing. And I think that's a good thing because we have the liquidity to help them. We have the capital to help them. We're gaining more loans with good clients that we know there are -- that have great operations and with better pricing.
So in that sense, we're not happy for that reason, but we're happy that we can gain a bit more of pricing and more -- in having more percentage with good clients, which is very positive, obviously.
Your next question comes from [ Sébastien Lazo ] of [indiscernible]
I have 2 questions. First, regarding NPLs, could you explain how did you have such a big decline against the second quarter, especially on the SME portfolio? And then the second question is that according to the CNBV, you have an exposure of roughly 45% of the commercial segment is construction. Could you explain what is under deadline? And how has been the performance of your construction portfolio?
In terms of NPLs, there are 2 main reasons. We have some good collections in terms of recoveries. But we're very transparent, and you can see in our quarterly report, with the MXN [ 319 million ] of write offs, as Manuel mentioned, we accelerated we usually wait until the 18 months for -- to do a write-off. But in the last 2 quarters, we decided to accelerate that piece to recognize that some customers are not going to pay. And then we did a higher amount of write-offs. That's the 2 main reasons.
And also helped that were in place the relief programs, then it was not a new information of new NPLs that is regularly what happens that we will start seeing in -- as Yuri mentioned, in January or February of the next year, then it's the mix of the 2 reasons.
In terms of our portfolio of construction, basically, we divide the portfolio in 3 different lines of business. One is construction of housing, both vertical and horizontal homes, that is doing pretty well. In fact, all the -- our customers are impressed that they are having more sales of homes, mainly because all the mortgage supply that we have in the country. I don't know if you're aware that we have seen the lowest rates on mortgage in many, many years or to say the truth is ever because it's fixed rate around 8%, 8.5%. Then the sale of homes -- of new homes is growing before -- even better than before COVID.
The second line is everything that is related to leasing like offices or commercial centers, even some industrial parks that where the main source of funds of the payment of the -- for the payment of the loan is rent. We have seen some deferrals as some of the commercial centers are requesting -- granting deferral for their customers, they request deferred for their loans, and we are working on restructuring. We feel pretty safe there because we have a double collateral. We have the payment of the rent as a payment via an interest, and also we have a collateral the full, whatever it is that is renting the commercial center or the office -- building office or the industrial parks.
And the last part that we are doing pretty well is industrial parks. We have seen an increase in the activity on industrial parks, mainly in the north and in the center Guanajuato in general and Querétaro, but also on the whole north. We believe it's derived through the [indiscernible] or to the USMCA new treaty. And we are doing pretty well. Then the only one that is concerning us a little bit, and we are working on that and we have very good collaterals for the reasons that I already mentioned is in renting and leasing. They are the 3 largest portfolios we're in. We don't do any of infrastructure or similar type of construction.
And sorry, just a follow-on. What the exposure to that line that is complicated commercial operation?
Sorry? Can you repeat the question?
Yes. What's the exposure of your portfolio to those clients that have been giving or granting deferral to their clients?
It's like 3% of the portfolio.
Sorry, 5%?
3%.
There are no further questions at this time. I turn the call back over to the presenters.
Well, thank you very much. Any further things, please let us know, we're happy to answer anything else. And hopefully, we see each other in the next conference call. Thank you very much.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.