Regional SAB de CV
BMV:RA
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Earnings Call Analysis
Q4-2023 Analysis
Regional SAB de CV
Regional has shown strong financial performance, leveraging Mexico's economic growth and demographic opportunities. The company's focus on sustainable growth, operating leverage, and profitability led to an expansion in operations. The fourth quarter reflected significant growth in both the loan portfolio and nonfinancial revenue, efficient expense management, and a rise in net income to MXN 1,622 million.
The efficiency ratio improved quarter-on-quarter by 77 basis points, to 40.9%. The past year saw a 247 basis point decrease overall. Loan growth is strong at 13% year-on-year, with core deposits up 19% from the previous year's quarter.
Aggressive cross-selling strategies have driven double-digit growth in nonfinancial income, with insurance and FX fees up by 32% year-on-year and commissions and fees growing by 13%. Geographical expansion and improved commercial capabilities ensure a robust profitability and customer experience.
Retail banking saw a 12% growth in the preferred banking portfolio and an 11% expansion in SMEs, emphasizing support for these demographics. Market share is increasing through cross-selling and expansion plans, leading to more deposits and lower funding costs.
Anticipating strong NIMs due to growth in profitable loan portfolios and improved funding strategies. These metrics are monitored and adjusted quarterly to ensure sustained strength.
Hey Banco's loan book grew by 59%, with financial margins increasing by 54% year-on-year, positively impacting net income margins and efficiency. The POS segment saw a billing of MXN 1,227 million, with active terminals up by 12%. Strategies in brand awareness and community engagement have been successful, indicating an ability to outperform traditional banking models.
With sustained profitability and asset quality, the outlook for Regional remains strong, driven by loan demand from industrial development. The company's guidance for 2024 projects loan growth between 12% to 17%, a net interest margin between 6% to 6.4%, net income growth between 12% to 15%, and a return on equity between 20% to 22%. Efficiency ratio goals are set between 40% and 42%.
Credit card delinquency has been managed, and the small business portfolio is under control. The cost of risk is expected to decrease from almost 7% to around 4%, as the credit card and product growth continues.
The company is honing in on portfolios with better margins and asset quality, such as small businesses, credit cards, and personal loans. It plans to move away from aggressively marketing mortgages and focus on delivering high-quality customer loans through their digital platform.
Credit approval rates are being tightened from a peak of 25% to around 5%, with potential stabilization at 10%. The focus is now on formal employees and small businesses, indicating a cautious approach to risk management.
To improve NIM, the company is reducing exposure to low-margin investment securities and depo business, inviting customers to self-direct into securities or mutual funds. This, along with a better mix of higher-rate loans and optimized funding costs, aims to protect margins even in a down interest rate cycle.
Customer retention strategies include rate enhancements for premium customers and a focus on digitally capable small businesses, with targeted commercial efforts and competitive offerings.
Cost efficiency is a focus area, with improved ratios down to 69% and a target of reaching 50%. Automation, analytics, and operational streamlining are key to this improvement, without the need for additional technology hires, reflecting effective customer service with less overhead.
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Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Regional's Fourth Quarter 2023 Earnings Conference Call. We're joined today by Manuel Rivero Zambrano, Chief Executive Officer of Regional; Enrique Navarro RamÃrez, 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 would now like to hand over the conference to your speaker today, Manuel Rivero Zambrano. Thank you, and please go ahead.
Thanks. Good morning, everyone. I hope you and your families and health in well. We appreciate everyone's participation today. We are very satisfied with Regional's fourth quarter results as we believe we are harnessing the opportunities offered by Mexico economic expansion as near assuring and demographic dividend presents us with a unique window of opportunity to achieve sustainable growth, further increase our operating leverage and boost our profitability. The recent period has been marked by robust expansion across our operations. Regional has experienced a significant increase in our loan portfolio and our rise in nonfinancial revenue, coupled with disciplined expense management.These factors have contributed to a notable rise in income and an enhanced efficiency ratio, reflecting our strong performance both on a quarter-on-quarter and a year-on-year basis. We are pleased to report that regional quarterly earnings have continued to demonstrate robust performance. Our net income for the quarter reached MXN 1,622 million, a solid growth of 4% quarter-on-quarter and 18% year-on-year. Year-to-date net income has grown by 14% to MXN 5,673 million. Our efficiency ratio has improved with a quarter-on-quarter reduction of 77 basis points, now standing at 40.9%. Our efficiency ratio last 12 months has decreased 247 basis points.Regional has achieved a robust loan growth of 13% year-on-year growth with core deposits increasing 19% compared to the same quarter last year. Although our financial margin has decreased slightly by 3%, we remain focused on maintaining our 2 margin, and we've shown our resilience with a quarter-on-quarter increase of 4%. 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 and a 21% excluding leasing. Our insurance and FX fees have risen by 32% year-on-year, while commissions Banregio and fees have grown 13%. has broadened its geographical footprint and improve its commercial capabilities, maintaining a unique customer experience and robust profitability.Banregio loan growth has accelerated by 10% year-on-year. Core deposits have surged 21% and the efficiency ratio last 12 months now at 39.1%, demonstrating our commitment to operational excellence. Factors continue into the company's growth, including increased investment in key regions and a stronger labor market. We anticipate further growth, potentially enhanced by our decreasing rates. Efforts are being made to expand the sales force and enhance capabilities to maintain a competitive edge and increase market share. In our retail banking segment, the preferred banking portfolio has grown by 12% year-on-year, and the SME portfolio has expanded by 11% year-on-year. These figures underscore our commitment to supporting both individuals and small businesses.Strategic initiatives, including cross-selling, tactics and our expansion plan have been instrumental in driving growth. We're successfully increasing our market share and anticipate the expansion that will lead to an establishment of efficient branches. These branches are expected to contribute to an increase in deposits and reduction of funding costs. Banregio distinguished itself through exceptional service as evidenced in the industry linked the NPS of 74, the strategic approach of providing comprehensive customized solutions caters to the needs of both businesses and enabled clients with emphasis on attractive premium customers and enhancing cross-selling opportunities.Banregio's MPL ratio has improved, decreasing by 16 basis points year-on-year and 21%, and we successfully reduced our cost of risk to 0.42%. We anticipate that NIMs will maintain their strength based on the growth of our profitable loan portfolios and improvements in our funding strategies. We will continue to monitor these metrics and acquire on a quarterly basis. As of now, Hey Banco is making progress with its operations operation from Banregio and is planning to commercial operations in the first quarter of 2025 according to the estimates provided by our regulators.Hey Banco continues to focus on achieving profitability for this recently growing its customer base organically and concentrating its lending efforts on formal and new income individuals as well as businesses. These tactics are expected to result in a smaller but more profitable client base, consequently leading to reductions in both acquisition and operating costs. As you are aware, our digital bank operates within certain constraints, including the equity cap approved by Board and Regulatory limits set for our operations. These constraints are crucial in guiding our strategic decisions, particularly regarding our capacity to grow our lending and depositor base.Considering these limitations, we have decided to focus on enhancing the mix of our loan portfolio. This strategy enables us to work within our equity and regulatory boundaries while striving to improve profitability by selectively offering loans, focusing on sectors with higher margins and lower risks, we aim to achieve a more sustainable and profitable operation from the outset, which remains our top priority.Hey Banco's loan book has expanded 59% year-on-year with our financial margin increasing 54% year-on-year due to MXN 217 million on a quarterly basis. Our net income margin over the last 12 months has improved 90 basis points to 8.7%. Our cross-selling index and customer usage has significantly improved and the marketing expenses has reduced positively impacted lifetime value cost of acquisition ratio. Hey Banco's efficiency ratio has decreased to 69.1%, reflecting year-on-year and quarter-quarter basis improvements. This demonstrates the impact of our strategies to operate more powerful without compromising customer experience. Hey POS Monte billing reached MXN 1,227 million with active POS terminals growing 12% year-on-year. Quarter-over-quarter, we've observed a total billing growth of 3%, and our profitability has increased, which allows us to continue investing in growth strategies, further developing our strengths.Our brand awareness strategies Hey Yield extemporary results. Hey Media has reached 1.7 million towers across all platforms with mounting interactions climbing to $5.1 million and social media reach standing at $42.3 million. This enables to engage more effectively with the community and impact them in a way that traditional banks cannot. This year, Hey Commercial efforts are focused on small businesses and solid proprietors where there is less competition and where we have a superior offering and market knowledge. We are enhancing our services with new business features such as payroll services. Our commitment to our strategic objectives remain unwavering, and we anticipate that regional will maintain robust financial results in the forthcoming years, marked by sustained profitability and outstanding asset quality.The growth outlook for the upcoming year is promising, and we are already witnessing an uptick on loan demand, particularly driven by industrial development due to the rising trend of the insuring in Mexico. We expect this demand to further intensify across sectors like agro-business manufacturing, logistics and commerce. Coming to our trajectory, we aim continuously to enhance shareholder value by consistently delivering loans an earnings growth that not only meets but exceeds our industry averages, while also upholding our position as a leader in profitability with consistency through different economic cycles. These trans-foundations and growth momentum, we anticipate delivering top-tier results again in 2024. As our guidance for this year is to grow loans between 12% and 17%, net interest margin between 6% and 6.4%. Net income growth between 12% and 15%, return on equity between 20%, 22%, efficacy ratio between 40% and 42% NPL below 1.8% cost of risk between 0.7% and 0.9%.We thank you for your continued trust and support as we strive to achieve greater heights and deliver sustained value to our shareholders. Any questions? Please that so.
[Operator Instructions]. Our question comes from Olavo Arthuzo.
I would like just to explore the topic on Hey Banco because we saw segue of it again in this quarter, a decrease of active customers, the total loan book also on deposits. So I just wanted to hear from you guys from a broader perspective, what are the bank's plans to these operations going forward? What has been discussed to make a turnaround on this metric, just for us to understand what you guys are exactly thinking about the strategy on Hey Banco going forward? And also on Hey Banco, if you could just share with us which credit portfolio was the main responsible for the delinquency rate hike in this Q that reached 2.7%, just first to understand is seemingly from the credit card portfolio, the auto, the mortgage, just for us to understand this a little bit. Thank you very much, guys.
I will start with the second question. Is credit card, for the whole year has been credit card the main portfolio that is in delinquency? And this quarter and specifically, also small businesses, but small businesses is already controlled, then we don't have anymore. We won't see during this year a higher delinquency and a small business. Neither in credit card, as we mentioned, within the results in the presentation that Manuel did, we expect the cost of risk to reduce in Hey Banco from almost 7% to around 4% as we will continue growing credit card and credit card product that demands and requires a lot of provisions. That's for the second part.For the first part, about the strategy going on. If you remember, we decided to concentrate in some portfolios, specifically small businesses, credit card, personal loans and proportion of auto lending. There are the ones that have better margins and with lower NPLs or better asset quality. That's part of the strategy. We will not continue granting mortgage massively to open market. We continue offering mortgage and auto through the app fully digital, but we will not continue offering through references or external references, mortgage.That platform, our digital platform, not only for requests, but also for approval and dispose of the loans will be trespass 2:1 ratio. And the growth of mortgage, you will see it will move to ratio numbers. Going back to Hey, without mortgage, we will focus on the other 4 type of loans and with a very high-quality customers, and the growth will be not that fast as it was in 2022 and the first quarter of 2023, at least not in credit cards, small businesses will continue growing. And that's for the part of the loans, the mix of the portfolio.In the deposit side, we are controlling our cost of funds. We have a promotion within the time deposits due to the competition, and we are focusing more in less customers but more profitable. I don't know.
And just a follow-up for a better understand the credit appetite on Hey Banco. What is the approval rate in the loan concession today? And if you could share this percentage comparing to the beginning of 2023. Just for us to understand what is the magnitude of the approval rates here that we are talking?
In credit card?
Yes, you can say.
Basically, we moved from 25% approval rate in the highest time to around 5% right now. We believe it could go to 10%. We are continually calibrating our great scoring models. And we believe we can stabilize around 10%. One change that we did is that we are focused only on formal employees, and the small businesses or sole proprietors.
Next question comes from Ernesto Gabilondo.
Congrats on your fourth quarter results. My first question will be on your NIM expectation. I think the NIM for the last 2 months came at 5.9%. And I think you are guiding between 6% to 6.4%. So I wanted just to understand what will be behind your assumption for the NIM expansion? Like when are you expecting the first cut in interest rates? And where do you see the level of the rate by year-end? And considering your scenario, what will be the element again to see the NIM expansion this year? And then my second question is on deposits. We have seen Fintech, [indiscernible] and car offering deposit yield up to 17%. So I wanted to hear your opinion in sort of Hey Yield and what would be the pay bank strategy to compete against them?And then for my last question is on Hey, Hey reported a loss in the fourth quarter, as you explained because of higher provision charges and cost of risk. You have mentioned that you expect provisions and cost of rate improved 2024. So just wondering if you continue to see that they could be profitable in '24. I think the last number was that you were expecting around MXN 200 million for Hey this year. So I just wanted to confirm if that will be the case? And if that will come from still good revenue generation and normalizing the cost of risk. Thank you.
In terms of NIM, basically, what we are seeing is that we are reducing our exposure to investment securities and reducing the depo business, there is a very, very low margin business. And we decided strategically to reduce and move these customers, invite these customers to buy securities directly by themselves or by mutual funds that we offer. That's part of the explanation because the assets will reduce in the investment securities part.The second part will mix not directly with the deposit question, but we're improving our cost of funding, also reducing the rates that we are paying in time deposits and increasing the checking accounts with low cost and 0 cost. That's what is included. And finally, the mix of the portfolio. As you can see, we are growing faster some of the loans that have higher rates, and we have a fixed rate portfolio that is larger than used to be mortgage auto, the leasing, all the leasing that we move from pure leasing to financial leasing is fixed rate, then that will help during the day in cycle. Then that's what we are seeing, but it's mainly the investment securities which have continued. You will see on CMBB delivers the data for January that we have reduced it even more than what you saw on December.Then for the mean that will be the answer going on and why is that we expect to improve. Obviously, we expect impacts on the reducing of the rate, the policy rate. But as you remember, it takes around 3 months or average 3 months, all the repricing, both in loans as well as in deposits going down. And the average of the year that we expect is around 10.7% for the whole year. That is what really impacts the NIM that is the average. We expect reductions, obviously, but the average, our expectation is April, and we will see.The deposits that other new banks or Fintechs has been promoting, what we decided was 2 main strategies. We decided to increase our rate for the Hey Pro customers that are our better customers, our larger customers, and we increased it to 13% in 28 days’ time deposit, and it worked. We managed to retain most of our deposit base. As you can see from September to September to December, and secondly, we are focusing more on businesses, the small businesses. We have developed during the year, good capabilities, digital capabilities for small businesses, and we are focusing our commercial efforts this year on the small businesses, both businesses, what we call in Mexico personal morales as well as all proprietors.We will be paying on the -- or we have already been paying starting this month on the demand deposits for small businesses. Paying interest, we call it a High-Yield account for businesses of 10%. And we are offering a payroll with some advantages for the small businesses and for the employees and we're offering also time deposits for the small businesses. And for profitability, we are working very hard on that. I already mentioned on the strategy about the cost of funding as well as the mix of loans to improve, and we are working very hard in cost efficiency. As you saw, our cost efficiency ratio has improved to 69%. We were aiming for 50 during the year as a goal, and we are improving our processes using automation in general. I want not only focus on AI initiatives because we have initiatives of different types of analytics and not only artificial intelligence.Also, we are not hiring any more people from technology, and we are being more efficient to serve our customers as maybe I didn't mention in the first question we're focusing on lower customers or less customers but larger, and that requires less people for service. And yes, we are not guiding this year, the MXN 200 million looks challenging, but definitively, we will be profitable this year as a Hey Banco, before the operations commencement in the first quarter of 2025.
Just to follow up in terms of NIM. So I just wanted to confirm that at the end, we can expect the NIM expansion. As you pointed out, there will be 3 elements to expect the NIM expansion, and that would offset the impact of lower rates, right?
Right.
Our next question comes from [indiscernible].
First, can you please repeat the lines of the 2024 guidance that you share? I couldn't hear some of them? And for my second question, I understand that there are a lot of moving parts for NIM this year. And if you could please share some color regarding the magnitude of each of the impacts you mentioned the previous question between the asset mix between depos and loans, the change in loan mix in your portfolio and also your NIM sensibility to the reference rate and also comment if these tailwinds on NIM, then that should offset some of the impact on the lower interest rate, it should also continue for 2025?
Well, I will repeat the whole guidance. The total loan growth will be between 12% and 17%. Net interest margin between 6% to 6.4%, net income growth of 12% to 15%, ROE, return on equity of 20 to 22, efficiency ratio between 40% to 42%; NPL below 1.8, right now is 1.3%, cost of risk between 0.7% to 0.9%. And that's the ones that we usually guide. And in terms of the NIM components, the largest one is the reduction of the investment securities portfolio. We have a goal that should be closer to the equity size. It's a goal because we are not sacrificing income to reach that goal. And the other ones are -- the second largest one is the cost of funding, both increasing deposits.We have decreased the amount of deposits for governments. It's our most expensive demand deposit. And we have been also decreasing proportionally to the [indiscernible] or the policy rate, decreasing the cost in time deposits will be in that order. I don't have the exact magnitude and proportions, but the impact will be on that order. And finally, the mix as the wholesale portfolio, wholesale business portfolio is the largest one even though the auto and the credit card, the small businesses are growing faster, it will take time, and for this year, it is the last of the 3 levers.In terms of sensibility is between 3 to 4 basis points upwards or downwards on the 25 basis points increase.
And if I can make a quick follow-up. In your guidance, you mentioned a high level of ROE, and you already have a pretty high capitalization ratio. Should we expect any extraordinary dividend for this year? What should be a feasible number for payout in ‘24?
44 for the whole year. If you remember, we split it, and we will do it again, we will split the approvals on the general assembly. We will have a general assembly during the first half, end of March, beginning of April. And the second one, similar to the last year during November, once the board approves the second part. Right now, we will be presenting to the general assembly a 22% dividend payout. The proposal has been approved already by the board yesterday and is only a matter of time that we presented to the Annual General Assembly in March.
Our next question comes from Jose Cuenca.
Just a quick follow-up on provisions. I wanted to hear from you or get from your additional insight on what led to the cost of risk we saw for Hey Banco just got RI a little bit that being around 7% to 8% of the total loan portfolio. This quarter's provisions represented like something close to 74% of total provisions, which were EUR 305 million. So if we could get a little bit more insight on that. And you already mentioned that you expect some improvement in Hey Banco cost of risk. And I just wanted to hear from you, how do you see that evolving? Do you see this improvement coming towards the second half of the year? Or what direction do you see for Hey Banco's cost of risk?
Jose, I couldn't understand the first part about the 70% of the portfolio.
Jose, I couldn't understand the first part about the 70% of the portfolio.
Basically, as I mentioned, is credit card are the 3 products, but for deterioration is credit card, for growth is small businesses and auto. The two requires provisions as we are growing more than 50% in auto. More than 30% in auto and more than 50% in the small business loans, but that's natural growth. In terms of deterioration, as I mentioned, we changed since April, we started changing and then again in July, our credit scoring models and our credit policy rates for credit cap. And around May, we will start seeing a much better number for cost of risk in Hey.
Our next question comes from Patrice Abreu.
My question is on loan growth. So in your guidance, you do expect some growth -- loan growth acceleration this year. If you could maybe discuss between the different segments, what type of loan growth you're expecting? And if you have a target proportion of consumer loans versus commercial loans this year that you could share that would also be great. And a second question would be on expenses. So what are you expecting for expenses this year? And what should drive growth if you expect growth acceleration expenses for this year as well, that would be great.
Yes. In terms of expenses, -- we're expecting 10% to 12% growth for the full year. But as I mentioned, we have a lot of initiatives to improve our efficiency, both in Banregio as well as in Hey, where this growth is coming is coming mainly from the expansion in Banregio, where last year, we opened 15 branches. Most of these were opened in the last quarter, then the full expense will be shown during the 2024. And this year, we will open 20 to 25. Our goal is at least to open 20 more branches during 2024. And we have already a pipeline. In fact, we have already opened the first one last week, then we will be opening branches through the expansion plan, and we will continue hiring bankers for medium and large companies, what we call bank empresarial around the country, mainly in Mexico, Monterrey and Guadalajara. That will drive the increase in salaries and benefits.In Hey, we are not increasing. In fact, we are reducing part of the cost. Well, in general expenses, both related to sales as well as what we can call fixed expenses is mainly inflation that is around 5%, plus the growth of the businesses. There are some lines that are growing still above 20% that we're expecting on nonfinancial income in some lines, but the expense related to that is also growing at that pace. But in general, in total, we expect between 10% to 12%, even though our goal is 1 digit, but in the budget and in the guidance it would be 10 to 12 million.
And regarding loan growth?
Loan growth by portfolio, sorry, give me a second. In the large loans in general is in the low range, around 12%. And the small and medium and consumer lending will be in the high 10s that will give you a color why we're guiding between 12 and 17 because all the smaller but more profitable portfolios, we expect to grow faster, above 15%, all of them.
A quick follow-up, if I may. For Hey Banco, are you still expecting net income of around ARS 200 million for this year?
Just considering the payment business plus the Hey Banco that we are working to make profitable both. Well, the Hey Banco business is already profitable, and we are working, as I mentioned, to make profitable to Hey Banco. Both together, that is what we call the whole Hey controller or Hey, Yes, that's our goal.
Our next question comes from Nica [indiscernible].
A quick question on asset quality. Loan growth has been quite strong of rate and you expect another good year in 2024. Are you seeing any pressure on asset quality in any particular region or any particular segment in small or medium loans? Any inhibitions on that front? And the second is, could you please repeat what are your expectations for the policy rate? And when do you expect for rate cuts to start in Mexico, whatever is implied in the guidance that would be very helpful. Thank you so much.
About the first question, no, we are not seeing any concentration of deterioration in any specific region or sector. We usually have higher NPLs in the center and south that is not concentrated in a specific city or in a specific sector. As I mentioned, it was mainly a credit card, both in Hey as well as in Banregio, mainly in Hey. Then for other products, we don't see any concentration on deterioration. And we don't foresee in the future either any deterioration due to the growth as we are still proportionally to the market as small, and we continue with the same credit policy just taking advantage of the opportunities for nearshoring and all the opportunities in growth that are in the regions that we have presence.And in terms of policy rates, our project is very aligned with the consensus, both we usually watch both Banco de Mexico survey as well as Citibanamex survey, and we are expecting to go all the way to 9.25% in the policy rate that will be around 9.2050950 in the year. And we're expecting it still not for February, maybe for March, or Feb or April. But basically, our projection says April. That's what we have right now.
And the ROE guidance for ‘23 as ‘24 was 20% to 22%. Do you consider that as a sustainable level now for regional as a whole? Or do you think in next year, when you have the average rate in Mexico, much lower than this year, we go back to between 18% to 20%?
We are conscious that in '25, the rate will continue going down. And then we could see next reduction, both in NIM as well as in ROEs. For us, the normal will be around 20%, not the 20% to 22%, but neither 18% is around 20% because the reduction in the margin, we expect could be offset with the increase in loans. We expect larger demand or bigger demand for loans as the rates go down.
Next question comes from Marlon Medina.
So if I may ask you on the noninterest income, I think fees, insurance and trading have been strong. So if you could provide some color on how much these lines should grow or how should they behave in 2024? And a second question, if I may, a follow-up on G&A. You mentioned the double-digit growth for this year, which is driven by the expansion in the 20, 25 branches. But how should this behave in coming years? Should we still expect double-digit growth like to mid-singles? How should G&A behave more in the midterm? And also, where are you focusing the opening of those new branches in terms of regions?
I will start for the last question. Our objective is to reach around 300 branches, 284 or something like that is what we have planned. 300, yes. And it's mainly in the regions where we already have a presence to consolidate our presence in that region. Specifically this year, we will be opening more out of that 20, around 5 are in the Alesco region, Guadalajara and Puerto Vallarta. Mainly Guadalajara, obviously, for the size of the city. Last year was Monterrey and Mexico City out of the 15 and some all the way around, we're opening a new one in Chihuahua, and Tijuana Merida, but there are 1 or 2 per city. This year, the concentration will be on Alesco and Guadalajara mainly.We already opened a couple here in Monterrey additional ones. That's about the, in general, the expansion plan of branches and physical presence of Banregio. In terms of the cost expansion, we can expect for the next years, even we will continue opening branches that it could be maintained around 10% or even a single digit, high single digit, 8% or 9%, will depend both on inflation as well as the pace that we open the branches.And the pace that the ones that has been already opened became profitable that right now is between 13 and 18 months the breakeven then that will move the goal, but our goal is 9% or less than 10%, let's say, for '25 and onwards. On nonfinancial income, we are expecting between 15% to 20% growth for the next year, for '24, for this.
And from this 15 to 20, most of it should be like fees or insurance or kind of every line growing at that pace?
Every line, especially if you saw our growth in what we call financial markets was flat this year, we expect to go back to these levels, but should be every single line, especially insurance, also the transactions we're growing a lot of transactions in cards and the interchange fee is also growing at that pace. Basically, that will be the lines and the smaller ones, but are also representative like trust fees also are growing.
Our next question comes from Sylvia [indiscernible].
I have a question on funding pressures. I just wanted a clarification that the funding pressures that I guess you're feeling are just and this would come from the aggressive offerings of some of the Fintechs. I just wanted to clarify that you were just filling those pressures at the Hey Banco level and not at the Banregio level. I guess from the answer that you gave to Ernesto on the NIM assumptions. It seems that you're just feeling the pressures, which is, I guess, forcing you to respond with aggressive rates on Hey Banco. It seems that you're just feeling them in Hey Banco, but I just wanted to clarify that to make sure that I understood correctly what's going on? What are the trends on funding.
The pressure is only on the Hey Banco customers. The deposit base is EUR 10 billion and time deposits is EUR 7 billion, and the pressure was on that EUR 7 billion. As I mentioned, in the rest of the customers of Banregio, we have even managed to improve the cost of funding, mainly growing the demand deposits more than reducing trades on time deposits. That is also happening on the higher rates.
Alejandro Lavin, please go ahead.
I have just one quick question on your shoring. So typically, if I recall well, you would like to sort of downplay the benefit from nearshoring, right? If it arrives, it will take some time. And if it arrives, it would be like an extra, like a bonus to results, right? But if I listened correctly, at the start of this presentation, you mentioned that you are seeing some increased activity driven by new sharing? Is that correct? And if so, could you give us more color on that? And are you considering some benefit from nearshoring in your guidance?
Well, the thing is that we're nearshoring, it's been happening for many years. Obviously, there was a slump and now we're recovering for the last 18 to 24 months, we've seen an uptake on investing and there's still a lot of figures that back that up obviously. So we are seeing more and more demand across all sectors and across many markets. Obviously, there is a robust labor market, so that's continuously ongoing. What we are saying normally is we don't see it as a boom or a hockey stick type of thing, right? So it's something that consistent -- sorry, most of the investment done is on the industrial side that that takes a lot of time.So obviously, it's not something in the short term, right? So it's going to be there present for many years to come. And that's mainly our thing that we're not saying we're seeing an exponential growth, right? So we're seeing an uptake on the investment now for 24 months, and we are expecting it to continue. So the trend on loans will continue on further, we don't think it's going to be something for the next 2 or 3 years. We obviously think it's going to be in the next decade. So that's the main thing that we convey.
We do look at some data, and we also support that view, of course, is here to say and will take several years, right? But I guess, in your day-to-day activities, in your day-to-day conversations with clients and your pipeline, have you seen some pickup now that the year 2024 is starting or just the same as usual?
No, not for sure, we're seeing a more demand each quarter. It is building up. And again, it's not exponential.
Congrats on the results.
Next question comes from [indiscernible].
I just wanted to understand how you are thinking about capital. So do you see any potential anything you can do around AT1, Tier and Tier 2 in order to unlock some value from capital structure? How is your thought process around this in ’24?
No, we don't have any plan to raise any type of capital or debt perpetual debt or something like that, sub-ordinary debt to form AT2, our capital is all fundamental Tier 1 or AT1. And we prefer to continue monitoring our capitalization index and we'll be continually paying dividends. As we did last year, it worked pretty well because we never were below 14% of capitalization index, full Tier 1 if we can manage to maintain that level, even with the growth that we are expecting for this year in loans and assets. We will maintain that dividend payment in April and November approach.
Congrats on good results.
Our next question comes from Michael Debrach. 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 receive many of your questions. Please don't hesitate to reach out to Alejandro and our Investor Relations team. Thank you, and have a good day.
Thank you.
Thanks everyone.