Unifin Financiera SAB de CV
BMV:UNIFINA
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Unifin Financiera SAB de CV
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Good morning, and welcome to UNIFIN's First Quarter 2019 Conference Call. [Operator Instructions] It is my pleasure to turn the call over to Mr. David Pernas, Director of Investor Relations and Corporate Finance at UNIFIN. Sir, you may begin.
Thank you. Good morning, everyone, and thanks a lot for joining us today to discuss UNIFIN's First Quarter 2019 Earnings Results. This morning, UNIFIN's senior management team will discuss the company's first quarter 2019 consolidated results per the press release distributed yesterday. If you have not received a copy of the earnings release, please contact Investor Relations team to receive a copy. Prior to introducing the management, I would like to remind you that forward-looking statements may be made during this conference call. These do not account for economic circumstances, industry conditions, the company's performance or financial results. As such, these forward-looking statements are based on several assumptions and factors that could change, causing actual results to materially differ from current expectations. Therefore, we ask you that you refer to the disclaimer located in the earnings release prior to making any investment decision. We are very pleased to introduce today Mr. Sergio Camacho, Chief Executive Officer; and Sergio Cancino, Chief Financial Officer. At this time, I would like to turn over the call to Sergio Camacho for his presentation. Please go ahead, sir.
Thank you, David. Hi everybody, good morning. Thanks to you for joining us today. While the Mexican economy had a low start, we felt positive shift in sentiments and trends as the quarter progressed, this helped us to post solid results, supported by the strength of our business model. Our interest income grew 26.6% compared to the same period of 2018. While the financial margin and net income grew 40% -- 40.8% and 19.7%, respectively. Our total net portfolio increased by 26.1%, thanks to the growth in total originations in the past 12 months. We were able to maintain our funding cost at a healthy 10.1%, and our NPL ratio at a stable 3.6%. As the quarter progressed, our performance was helped by the economic backdrop, financial assets rallied, the FX exchange rate appreciated, the Mexican stock exchange rose, and the yields on sovereign bonds declined. Nonetheless, uncertainty over the government economic policies, high interest rates, slowing economic growth and concerns over Pemex's financial situation, limited risk appetite. These affected originations particularly at the beginning of the quarter after which we observed a recovery. We expect that the recovery experienced by the end of the quarter continues and help to increase originations during the rest of the year. This is also supported by the company's strategic initiatives and [indiscernible] economic stability. Moreover, during the coming months, we expect that the, NAFTA 2 to be approved, the Central Bank to maintain rates and calls or even begin to ease monetary policy towards the end of the year and government spending on social problems and infrastructure projects to take effect.
[ These all choose ] contribute to a more stable and stronger economic activity.
From October last year, we launched a program that over the long run will transform UNIFIN. We are changing our salespeople from being promoters to advisors, providing our clients with a complete service that will guide them through the process of requesting and receiving loans.
We will require new certifications from the Tecnologico de Monterrey to all of our advisors, and enhance transformation of the business model with the development of new technological tools, as well as the creation of new support areas such as our economic studies area. UNIFIN launched the largest campaign in the company's history to date, Receive the call. This is a mass media advertising campaign with the goal of reaching over 240,000 identified companies and turning them into customers. To support this campaign, we focus on reinforcing one of our key areas. The client prospecting center, which is made up of more than 80 telephone consultants with the goal of reaching the previously mentioned companies. We are confident that UNIFIN's business fundamentals are sufficiently strong for the company to grow revenue steadily and improve levels of profitability despite the numerous change -- challenge ahead, we are prepared to make the best of what is to come. We are confident in Mexico [indiscernible] long-term mix -- long-term potential, and we'll continue investing in the country, and the development of small and medium business as we have done up to now. We also reaffirm our commitment with the shareholders to continue our efforts to improve the profitability of the company while maintaining a prudent and responsible financial strategy. By any means, we will never jeopardize our financial health to support growth. Regarding UNIFIN, on March 22, 2009, the company forms that in accordance with the resolutions adopted, that an annual general ordinary and external shareholders meeting held on March 23, it was approved, among other matters, to amend the company bylaws, by virtue of the modification of the company regime from a nonregulated multiple purpose financial company in the form of a publicly-traded company. We achieved [Foreign Language] from a publicly traded corporation, [Foreign Language].
Consequently, with the previous approvals of its Boards of Directors, and the favorable opinions of its audit and practices committee, the company has opted international financial reporting standards issued by International Accounting Standards Board for the preparation and audit of its financial statements. In terms of the applicable deal provisions, this change in regime and accounting standards will allow the company to achieve greater transparency and comparability in this financial information, considering the nature of its business. So all the numbers -- and all the numbers you are going to be reading or hearing today are based under these IFRS considerations. UNIFIN was able to navigate and adapt to a complex economic environment, once again showing the strength of our business model, closing the quarter with a growth in total interest income of 26.6% versus the same period of previous year. The interest expense increased by 25.2% to MXN 1.5 billion due to incremental debt that supported the growth of the company's operations. During the first quarter, the weighted average funding cost was 10.1% compared to 9.9% in the first quarter 2018.
It is important to highlight that only 2 basis points increased in determining costs was caused by interest rate price. The remaining 18 bps is related to incremental debt. This year is very volatile, considering the recent increase in cost of debt, providing the importance of the conservative nature of the company's bid to shave the balance sheet months ago. As a result, the financial margin from the quarter ended at MXN 854 million, an increase of 40.8%.
This growth was helped by ongoing repricing of our implicit yields and commissions, a strict analysis of financial cost efficiencies and profiting from market opportunities. As previously forecasted, and in line with our strategy, our financial margin as a percentage of the total income increased to 35.3% compared to 31.8% in the first quarter of 2018.
Moreover, the net interest margin for the first quarter improved by 140 bps to 7.6% from 6.2% recorded 1 year ago.
One of our strategic initiatives, this transition from promoter to advisor, as well as investments in our IT platform and the certification of our advisors by Tecnologico de Monterrey, resulted in an increase in OpEx of 26 -- 27.6%. Although as a percentage of sales, OpEx remains at a healthy 14.1% versus 13.9% reported in the first quarter of 2018.
This investment prior to the development of the largest campaign in the history of UNIFIN, Receive the call, will allow us, as previously mentioned, to reach more than 240,000 identified companies. Our operating income for the quarter reached MXN 429 million, a 24.2% growth on the MXN 346 million reported during the same period of last year. Consolidated net income from the quarter grew at 19.7% to reach MXN 459 million during the first quarter from MXN 392 million in the first quarter of 2018.
As a result of the aforementioned, the total net loan portfolio reached MXN 45.2 billion, an increase of 26.1% compared to the portfolio of MXN 35.9 billion in the first quarter of last year. Thanks to the growth in total originations the past 12 months. NPL, under the new methodology, which basically consists of new portfolio at 91 days past due, and factoring amount of loans, NPLs at 31 days past due, ended up at 3.6% in the first quarter.
This number does not consider the estimates recovery value of our assets related to such nonperforming loans. Our loan loss reserves are based on an expected loss methodology, which consists of positioning the full amount of factoring [ also ] and other loans' NPLs.
As to the leasing portfolio, the expected loan loss provision is [indiscernible], based upon historic payment behavior, the current environment and additional provisions for future statements. The total loan loss in reserve is MXN 957 million. According to historical data, the [ sensitivity ] analysis for write-offs estimates a break-even value of 40% of their commercial value of the asset before recognizing impairments.
Stockholders' equity grew by 14.2%, reaching MXN 9.4 billion at the end of the first quarter. Excluding the mark-to-market, UNIFIN capitalization ratio was 16.8% at the end of the period. We continue to focus on improving efficient capital allocation and increased share repurchase activity. During the first quarter 2019, we acquired 5.1 million shares via the repurchase program. We believe that share buybacks at the right price is one of the most effective ways to return value to our investors.
It is important to highlight that the annual shareholders' meeting approved the cancellation of 5 million shares reportedly held in treasury that corresponds to the share buyback program.
With this cancellation, the earnings per share for the quarter has stood at MXN 5.32 showing our commitment to our equity holders.
Now I would like to address the main change and impact in our book value driven by the adoption of IFRS. It is important to highlight that any conversion effects as a consequence of adopting IFRS must be allocated into equity, specifically, on the return earning. The nominal effect on book value, given such adjustments was MXN 2.5 billion. Consequently, the main variations subject to the aforementioned change are: First, revenues and insurance recognition. There was MXN 1.8 billion due to the changes in the amortization tables of our lease contracts and the deferral of other interest.
Loan loss provision. We created an additional MXN 300 million in loan loss provisions for a total amount of MXN 957 million to date.
These additional provisions created is explained by the adjustments on the methodology for provisioning the NPL.
As we currently raise the allowance on an expected loss basis. Under the share repurchase program, we have an effect of MXN 300 million due to our continuous plan and share repurchases the company provisioned consequently. The total net portfolio under IFRS, represent the net present value of the total leasing portfolio, was the outstanding balance of factoring on early loans. While net GAAP includes factoring out loans on all our accounts receivable and memorandum accounts composed of frenzied outlooks approved interest, fixed assets under IFRS account only our own assets, while under net GAAP we register the total fixed assets under operating [indiscernible] assets.
Finally, some adjustments have to be made to revenues. IFRS, with revenues considered interest income of our 3 business lines, as well as the commissions, while net GAAP consider operating lease income. Interest income from the factoring on our loans and other lease benefits, mainly generated from asset sales at the end of each leasing contract. Overall, the change from MEX GAAP to IFRS affords to make the market greater transparency with respect to the company results, driven by the disclosure of additional financial information. Moreover, reporting results in IFRS provides more comparable information with our peers in the financial sector that use the same accounting methodology. By adopting these international standards, we will provide better, clearer and more transparent information to the market. To our investors and our bondholders. With that, I would like to [indiscernible] and open the floor to Q&A.
[Operator Instructions] Our first question comes from the line of Carlos Rivera with Barclays.
My first question is regarding asset quality. Looking at the NPL ratio under IFRS. My understanding was that by considering the value of the collateral, the NPL level was going to be lower than the 3.6% that was reported. Of course, higher than the 1% in the prior methodology, but a little bit lower than these levels, but it's even higher than the adjusted NPL ratio that you used to disclose, so. I'm just wondering if you could just comment a little bit here. And if you were also surprised a bit by the 3.6% level. And related to this coverage, despite additional provisions is below 100% or 68%. Is this a level that you're comfortable with? Do you have any plans to increase that to 100%? I understand the strong framework for recovering collateral, I know that, but if you can comment on that, that will be very helpful. And my second question will be related to the financial results line, but I'll wait on that one.
No, we were not surprised. Actually, if you see the 3.6% that we are presenting right now, it's in line with the previous number that we present based on the total amounts of the lease contract. If you go on Page 9 of our press release, we are presenting there an aging on balances for the different businesses. This number, this 3.6% does not consider the recovery value of the asset. So when you see, on that aging balances, and see within the different businesses and see particularly in the case on the leasing business, you can see that the only way that we will need to record a loss or a potential write-off or charge-off that -- then probably you want to mention that, will be, if we sell all of our assets related to those nonperforming leases, below 40%. So in a strict way, we are over provisions in that sense.
And just to add a little more context, Carlos, first, if you compare -- and let me put it a little bit in context from historical information.
As you recall, we posted a 3.1% NPL back in the full year 2018 results, okay. The change here is that under MEX GAAP, the comparison between the NPL, the adjusted NPL at that time was that you would take the full outstanding amount of the lease contract, no, to the -- of the NPL contract to the lease contract, no, or to the lease portfolio altogether, no? The change here is that the previous portfolio consisted on the nominal amount of the complete rentals to maturity. Today, we are only considering the principal amount or the net present value of the account. So what you would expect is, for the percentage to increase nonetheless, even though that is the same number forming accounts that we have from before, or the same metric or controlled metric that we have before, no? So remember that before we used to have a nominal amount, and today, it's only the net present value.
Okay, I see. A numerator effect there.
That's correct. There's the numerator effect. And additionally to that -- and just to finalize the comments on the nonperforming loans, no, you take the full outstanding amount of the NPL, okay, and you provision only what's left between the breakeven value before any permit, okay, and that's why you get to provision the rest. You don't get to subtract on the methodology. You don't get to subtract GAAP breakeven value to the nonperforming loan account. You subtract it from the -- from specifically the provision, no? And that's for leasing. And for factoring on other loans, it's basically provisioning the full amount.
Okay. Regarding the coverage, if you're comfortable at 58%?
We do feel comfortable at 58, because at 58 -- at loss, the breakeven value before any potential guidance, no?
Historically, the company cuts off [indiscernible] assets at approximately 80% of the commercial value. So if you consider that history, we are a...
Yes, we're over-collateralized in that sense, no? Remember that book value, vis-à-vis commercial value of the assets, is considerably lower. So in any repossession case, no, the company is not the same, it's not the same yield or the same margins you would trust to charge throughout the life of a performing yield, no, but if you get to repossess and sell it back, the secondary market of the value -- sorry, of the asset is higher than the book value. You typically still receive a gain, and that's why we put out the breakeven value as of the first quarter, which is 40% of its value.
Okay. Thanks for that. And on the financial results line, my second question. So that is going to be now an important line on your P&L.
What part flows to the NPL, what flows to the equity? I mean the mark-to-market in the equity this quarter was negative, but it's still reflected some positive on the P&L. So you can give us more color on how to think about this? I mean this has some memories about the time of the IPO, and the financial income line was pretty strong and caused a lot of volatility on the results. How should we think about this?
Of course. No, I think we need to clarify a little further. Because this is not a -- this income or loans on the P&L, it's not related to the hedging of our debt. So we still have full hedging considerations on the balance sheet, okay?
The effect that you see there is, for some debt that we withdrew or that we took upon, from some financing lines that was not yet within the quarter, okay? That -- we have the revaluation of that account in the cash and equivalents, no, and in the P&L, offset the result. The rest of the debt of the company, okay, is completely hedged. And in addition to that, I also have to say that the cash and equivalents account from the withdrawal of the debt also have a valuation loss. So typically, you wouldn't expect this account to be substantial or large, as we've tried to catch all of the debt entirely. And what you'll start -- momentarily effect because of the withdrawal of that particular last line of credit.
Okay, so going forward and on a more medium term basis, that should be coming towards 0 or an amount [indiscernible]
That is correct. It's never going to be -- a material impact on the P&L, no?
Our next question comes from the line of Alonso Garcia with Crédit Suisse.
My first question is regarding the direction that we observed in OpEx growth, mainly because of the initiative that you are taking to transform the company.
I just want to know if you could provide some guidance in terms of -- I mean, the expense growth this year. And for how long, you expect expense growth to be pressured by these initiatives? That would be my first question. And my second question is regarding the outperform for margins, considering now this new accounting. What do you expect -- how do you expect margins to evolve going forward?
Sure. Can you repeat the first question, please, Alonso?
Sure. The first question is on OpEx growth. I mean, if you could provide some guidance on the kind of OpEx growth that you are expecting for these, considering the initiatives that you are investing on? And for how long OpEx deliberation [indiscernible] by these initiatives?
Of course. I mean -- as to -- we started the expenses on OpEx, no? I think it's going to be controlled over the year. Of course, the metric itself changes because of the accounting, no? Before [indiscernible] you used to have, in the revenue side, you used to have principal and interest from the [indiscernible] receivables. And now you only get to recognize the interest, making the nominator smaller, no? and that's why the main changes in metrics specifically when we pass from 6% to 14% this quarter.
Additionally, to add, of course, as in the natural course of business, the company's strategy in terms of expanding this path to support the company's operations. The launching of the campaign and the opening of regional offices and investments in software IT to support the operations and so on can make these operating expenses increase, no? But we think that throughout the rest of the year, things are going to be steadily behaving as a trend, no? We don't expect necessarily further the deterioration on the metric specific, no?
And as a matter of fact, I mean, I can anticipate that by the end of the quarter, we are going to see a lower OpEx as a percentage of revenues.
Now getting into the margins and based on what we established about 3 quarters ago, in which we set up with you guys, a plan for, in building our profitability, we continue to do that. Now talking about under our IFRS, we see a trend on financial margin that is going up from 33.7% that we posted in the third quarter of 2018 to 34.3% posted in the fourth quarter, and now presenting 35.3% this quarter. So we continue with that trend. That's part of our main strategies to improve profitability. And that of course, it's within our compensation and everything internally. And also, so -- the point here is that we continue with that goal to improve profitability quarter-over-quarter.
Our next question comes from the line of Nicolas Riva with Bank of America Merrill Lynch.
My first question is on growth. I believe that at the last earnings call, you had mentioned that you are guiding for growth in your leasing portfolio, total portfolio, 15% to 20%. We saw, much from a growth and guiding in the first quarter, 26% year-on-year. And I believe that the last earnings call, you had said that you are seeing sometimes on a wait-and-see mode, given the outlook for Mexico. You can provide an updated guidance for the growth of you leasing portfolio this year? That's my first question. And second question on funding. I remember you had said that you needed probably about $1 billion in new funds this year. That was assuming, I think 15% growth of your leasing portfolio?
And that you had secured about $400 million so far. If you can give us your thoughts in terms of potential issuance for the second half of the year on your funding mix?
Sure, thank you for the question. First of all, in terms of the growth of the portfolio. We continue with the same guidance, based that, if you see the second half of the year, usually it's a stronger one. So the comparisons are going to be tougher, ones that we approach in the second half of the year. Therefore, we continue with the same prudence in tracking in means of the previous forecast that we provide.
Of course, whatever that we can achieve -- in excess to, it's going to be taken. In terms of the funding, the same, as we continue with the same expectations for growth, the funding needs are -- remain the same. And yes, we have already secured $400 million. And if we see the markets on bonds right now, we see that there is more, let's say, windows of opportunity for doing something. Of course, we are not anticipating to do something in the early future. We need to see the markets. We also need to see the deals of our current bonds outstanding there. Because once again, we are here for the long run, and we're not going to jeopardize or affect our [indiscernible] something that we are not in the need to. However, if we continue to see this brings us opportunity, that's something that is going to be under discussion internally.
I have one follow up. So you guidance of 15% to 20% growth for the portfolio stance, it wasn't changed this year?
Yes. It stands. On a standalone, yes, it stands.
Our next question comes from the line of Jason Mollin with Scotiabank.
My question is also on growth and the expectation. So the actual, the sequential growth, the originations slowed down, and we did see, if you were just responding to the last question, we saw 26% growth in the portfolio year-on-year, but there was the restatement that you would refer to under IFRS. I guess it's the net present value, the value of the leases historically was lower and that's, in one way, one explanation why the growth rate looks higher at 26%. Is that part of -- is that analysis correct? Or is it just as you were suggesting that the second half comps are much harder? Or is really the growth rate 26% the right way to think about your business going forward? Or should we be looking at originations? And maybe as a follow-up, you can give us an update under the new accounting of the expected pipeline and the conversion.
Sure. I mean there's definitely legalities laying along in the numbers, Jason. As you remember, the first quarter -- and basically the first half of every year is typically slower than the second half. This year is not the exception. And in addition to that, we have a typical circumstances under the economic outlook and under political environment that definitely changed the sentiment and basically the conversions on the pipeline of our clients, no?
There was a very slow start on January, no? Typically coming from the fact that, basically people are -- the decision makers of the targets that we have within the clients are away on holiday, no? They get back basically by the second half of January. Then we have a slow run definitely because of perception throughout February. And we did so -- we did see or identify better performance on March driven by better perception, driven by more stability on how the sentiment was. And that we also managed to convert a little bit more of what was left behind from January and February, no? So that's one thing. Coming the second quarter, no, we are definitely starting on a complicated month because here in Mexico, as you recall, we have Holy Week and then Easter. And these 2 weeks are, for business purposes, they're slow.
But we are expecting a close, a very good close of April, no? And then the coming months, May and June, look promising, no?
The second half of the year is always, always, always [indiscernible] from a historical perspective, way more positive. But it also makes the comps look tougher because the second half of last year was particularly strong in the third quarter. And then we also have a strong close of the year, no? Overall, the pipeline of the company remains very solid. There's a lot of interested parties. We have this new launching of the campaign. We have been able to identify more and more demand coming into the back of the company specifically.
If the sentiment plays along and people decide to continue doing operations, we think we're in line with the original budget of 15% to 20%. And just to complement a little bit from the previous question, no, the MXN 650 million that we said new cash was required for this year, it was on a stretch of the 20-plus percent growth, no? It stings in the second quarter. Don't play along as positive as we expected, the second MXN 650 million will probably come down a little bit, no?
And just to clarify some of the points you made. So I do -- I'm looking at my notes from last quarter and one of the prior comments was, I think you were talking about 20% growth in the portfolio, now you're talking about 15% to 20%. And this is off of the new base, the new lower base that we have under IFRS to the end of 2018, correct?
I mean, really under comparable numbers, no, whether it's IFRS or nominal, the expectation on growth year-over-year remains the same, no, because that basically gets --
Is that 15% to 20%? Or is it 20%? Or is it this range?
You -- I mean we always try to give ranges, no, because we are not necessarily -- the [indiscernible] is not necessarily precise on the underwriting, but 20% is a fair assessment.
[Operator Instructions] Our next question comes from the line of Nick Dimitrov with Morgan Stanley.
I have a quick question regarding capital. I noticed that the adoption of IFRS reduced your capital by about 20%. And the ratio that I normally look at is equity to assets, and I also subtract the perpetuals. So if I look at that ratio currently after the adoption of IFRS, it's 7.9%. And I can't remember that last time we discussed this, you did mention that if that ratio dips below 11%, then you're going to probably consider raising capital. Now granted that in this case, the big driver behind the deterioration of this ratio is really an accounting change. I was wondering whether you could give us some sensitivity regarding how you want to handle capital going forward. When I look at the breakdown of your capital, the hybrid really accounts for about 1/3 of your capital. So it is a very kind of substantial part of it. Yes, any color on that front would be appreciated.
Of course, Nik. I mean, definitely that the low themes normally, which we start considering equity -- additional equity infusion for the company is under, in somewhat a different analysis, no, it just [indiscernible] equity to assets. For us, definitely the change in accounting and the effect on the book value of the shareholders' equity that we described before are a constant of adopting IFRS, and it's a natural effect. It doesn't necessarily mean that there's a deterioration on the equity. For us, on a comparable analysis, it remains with the -- with of course, considering that the growth of the company, things remain relatively constant, no? Today, we think that the equity's still on an adequate position, no? We are currently reviewing the projections for the rest of the year, but today, we don't anticipate the need of additional equity in the next 2 years like we have been measuring before, no?
Remember, Nik, that everything that we have said on the plan of improving profitability, is going to support, the, let's say, a lot of work of the duration on the capitalization ratio because of the growth.
Okay. So organic capital generation should more or less offset the growth in -- asset growth and the rest, and we should start seeing these. Is it fair to assume that this is when the ratios are plateauing and we should probably start seeing some improvement in the coming quarters?
Yes. Naturally, this is the lower point in this. We have initial effects on direction of IFRS, while the [indiscernible], the dividend payments, [indiscernible] . I mean we have these effects on this quarter, that of course, you'd start to recover as long as we work through the year.
Got it. And one quick question on factoring. I did notice that the asset quality kind of deteriorated there. I think your NPLs went up to 5% from less than 1% a year ago. Is there something going on there? Or it's kind of a -- the adoption of IFRS because of an impact there as well?
Hi, Nik. No, not all. Like we -- I believe we did this statement on the previous call, but if not, we'll make it now. We did have one particular exposure in the NPL account of factoring, no? And it's been playing along. We continue to be an underperforming account today. And that's basically the case, no?
It's the same account, got it.
The same account, but it's reserved the whole amount, no?
Our next question comes from the line of [ Nicholas Brando ] with Newfoundland.
It's Luis Adaime here. [indiscernible]. I have 2 questions. One on the share repurchase program. Notice -- well first of all, congratulations on the initiative and on being aggressive as a sign of how much value you see on the shares. The -- you purchased 5 million, you canceled in the same quarter. Is that strategy going forward in order to boost EPS, or are you going to analyze the cancellation of the shares on an annual basis? That's my first question.
We -- I mean the best practice, to say, that you need to analyze that on an annual basis, because you need an annual shareholders to approve that cancellation. However, as you can see that we continue buying shares on the market, and we will continue doing so at the levels that we're trading right now. So in that event, I do not -- we'll say no to another cancellation of shares. However, being very conservative, that will be [ averaged ] till next year, early next year.
Okay. And is there -- that's still part of that repurchase fund that you have that allows you to trade around the shares to promote liquidity? Or is it just a straight repurchase program?
It is -- I mean it's the same fund. However, we haven't sold any share to the market just because of valuation. We have the market maker. We hired UBS' market maker earlier this year to provide more liquidity to the share. And our records have been now, focused on acquiring shares.
And another question on your funding cost. 10-year rates have dropped actually quite dramatically from the peak in -- the Mexican 10-year rates in November. And I believe the perspective, from talking to economists, I'm sure you'll agree -- or I don't know if you agree, but is as -- easing earlier than initially thought, more maybe towards the middle of the year given lower than expected growth in inflation. How do you view that? And when do you think we -- you're going to start seeing, or you're going to start benefiting from a lower cost of capital in that sense?
Yes. I mean we are talking about, I will say, on a weekly basis, our financial advisors, the writers are talking to them on a daily basis, not pushing us to deeper analyze. However, we want to be very careful, as I said on the curve for our [indiscernible]. And second, because we need to go in line with the origination pace that we're seeing right now. As we have said through the call, we saw a recovery in March. We are expecting to have a good quarter this quarter, the second quarter, because we're seeing some more dividends in the decision-making process. And that, coupled with our strategies, all these other types of campaign should enhance the results of the quarter. However, as we said, we have already secured 400 million already. So that allow us to continue being efficient in our carry, in our -- not to have a negative carry with the debt. But yes, we are tracking that on a weekly basis. And of course, we are aware that the [ strength ] of guidance. And that the deals are now on a more attractive level that were perhaps one month ago.
And one final one, if I may. The accounting change you mentioned, the benefit in terms of maybe more transparency reflecting on improved cost of capital. Any -- and the fact that you changed your accounting structure. Does that reflect in any sort of extra requirements in capitalization or in provisioning? Or is it just another form of reporting your results?
It's another form of reporting. I think it's more transparent. Now you can see very, very well. For example the case of our NPL, it's more of the, the aging of the balance, the creation of incremental reserves. Of course, those are measures that are more on a transparent way, but also more conservative towards the market. We -- all of this of course is, it's an accounting thing. And we are not anticipating any financial need for adopting IFRS.
Our next question comes from the line of Pedro [indiscernible] with Compass Group.
My question has been answered.
Our next question comes from the line of Chelsea Colón with Aegon Asset Management.
I have a couple of questions. The first is a follow-up on the funding. You mentioned 400 million has already been secured, but can you provide us more color around how much of that is refinancing versus new debt out of the 650 million or so that, of new funding you may need for this year? And then can you also update us on the progress in refinancing your local securitizations, that's on the funding. And then my second question. I was wondering if you've had any more discussions with the new administration with regard to improving financial inclusion. I was thinking that maybe this administration could actually be beneficial to you from a growth standpoint. So any update there would be helpful as well.
Chelsea, as to the first question and with a little bit more disclosure on the financing requirements, yes, we have secured around 400 million of the original budget. I would say, it's all new cash, no, because we haven't done any refinancings of the debt just yet, no? But partly, a portion of that new cash has come in the shape or in the means of a private securitization deal, which accounts for around $125 million. The rest has come basically from the withdrawal of a facility that we have been provided from both commercial banks here, locally in Mexico, and some investment banks that have put some skin in the game also with the company, no? I would say that additionally to that, we continue analyzing the possibility of issuing in the local markets a securitization. We're continuously monitoring the possibility of addressing the markets and analyzing the potential appetite for pension funds and so on. And we're continuing to expand the, basically the proposals and the terms that we have been receiving from different interested parties for additional debt, no? And we still need to do the refinancing of the securitizations, no?
Regarding the new [indiscernible] administration, we continue to see them as a very friendly tool with our business. In the sense of the support to the economics sector, coupled with being a Mexican entity and several -- a very clean history. The talks with them in terms for additional recommended support and the means of funding continue. And we may expect to have -- finalize something by the end of the second quarter, of this quarter.
And Chelsea, just one more thing. Remember that the company just -- always trying to be somewhat proactive in the approach of meeting the new financing requirements. And if anyone on the outlook in the medium-term, I would say, no, we -- that's why we continue analyzing different alternatives and opportunities, no? In that case, the company will remain or will continue with exploring additional plans, but the project, specifically has remained, no? So it would be, sort of like a cash move to own additional withdrawals and so on. We did the same budget that we perhaps described was at MXN 650 million.
So based on the fact that you're saying MXN 400 million is all new money, should I infer that you only need MXN 250 million more, or given money is fungible obviously, should I assume that some of that MXN 400 million will end up refinancing some maturities you have this year, so your additional...
Yes, you assume correctly, no? The MXN 400 million is definitely new debt, but it can be played out to do some refinancing. So in short-term debt, if you see actually the short-term debt increase throughout the year on an important way, no? So maybe we still require additional debt to refinance that short-term financings, no? And in addition to that, we also carry -- we continue carrying out the analysis for the refinancing of additional securitizations locally.
And is the private securitization you mentioned 125 million, is that categorized within bank debt in your financial liability page?
No, no. We put in the securitizations, no? It's also a nonrecourse -- it's basically the same type of the structure that we have in the public markets. But it's basically just allocated with one player, and they take the entire deal.
Okay, got it. And then finally, have you disclosed what you have available in committed credit facilities, still?
We, yes, we don't [ shut ] necessarily committed credit facilities, to mean, which where I think we have like $100 million in committed credit facilities today, because of the high cost of having committed facilities here in Mexico, no? But I can tell you that we have outstanding capabilities from additional banks in an amount today close to additional $200 million. But like we've have said before in conducted meetings or even publicly, no, I have in my desk around $600 million of additional term sheets that have been presented by banks.
[Operator Instructions] Our next question comes from the line of Enrique Mendoza with Actinver.
Concerning the accounting changes, are you now able to provide some guidance for profit growth for the year? And if I may, another question, do you expect the recent yield to include significant income from the [Columbia ] rates?
I mean the company will continue with the same guidance points that we have maintained some time. I think that the guidance is the same that we have provided in the previous calls, which is basically growing our asset base between 15%, 20%, no? And that remains the same, no? As to the guidance of a punctual figure on the net interest margin, we don't have any, no? What we have disclosed that the company is expecting for the year-end results, to have some important profitability enhancement on the margin side. And we continue with that same outlook.
Okay, if I understand, if I am understanding, what you are trying to do is to target and improving the interest margin rather than barely focusing in improving the original deals? Am I right?
It is, I mean yes. But one is the consequence of the other, but yes, the outlook today is more focusing on the margin than rather than one [indiscernible] of our business line, no?
Sure, sure. And having said that, are you expecting the interest rate -- the short-term interest rates in Mexico to -- going down in next quarters?
If there is anything, I think it's likely to happen by the year-end. And we have our internal economical advisors here in the company. And basically the expectation on rates is to either remain stable or mainly decline by, at the most 50 basis points towards the year end. To be fair we have never considered that in the potential expansion of the margin, no? We are continuing with the repricing. We are continuing with the efforts because we are not entirely reliant on only the reference rates. We're also reliant on new issue concessions and new funding and so on, no? So depending on the curve, the interest expense of the company will either remain stable or even increase a little bit depending on how the market is playing along.
Our next question is a follow-up question from Chelsea Colón with Aegon Asset Management.
I just was wondering how if at all, this accounting change impacts your clients? Because I thought under the other methodology, they benefited from greater tax deductibility of their rental expense. So I'm just wondering if this impacts them at all, and if you're seeing any effect on demand?
Thank you for the question. It's actually an excellent question. We haven't -- I don't think we have said it before throughout the call. It's important to highlight that, even though we have an accounting change, it doesn't change anything from a legal standpoint, and from a -- from a fiscal standpoint to the company to [indiscernible], okay? There's no changes there. Now as to the environment and the clients, IFRS 16, sorry, does make the company put in additional leverage. You show the contract as a liability, no? We don't participate. We have done an analysis on this front, and we don't anticipate any complications on the demand side because first, we did know upfront what the company that were basically starting to operate in or how they were levered because of the credit bureaus that we review on the operations, no? But additionally to that, the SME market in Mexico is significantly under levered because of the whole outlook of the market and the very low penetration therein of financial services to the market. And so I don't think it is going to complicate things. From a fiscal standpoint, and from a legal standpoint, and nothing changes at all to the clients either, no? So I, or the company does not expect any significant changes on the demand side.
We have no further questions at this time. I would now like to turn the floor back over to the management for closing comments.
Thank you for the call, thank you for the questions. For any follow up, please feel free to contact us at any time, and we will be more than happy to further continue with any discussions.
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.