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Unifin Financiera SAB de CV
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Greetings, and welcome to the UNIFIN Fourth Quarter 2021 Conference Call. [Operator Instructions]
Please note that this conference is being recorded. I will now turn the conference over to our host, Mr. Sergio Camacho, Chief Executive Officer for UNIFIN. Thank you, sir. You may begin.
Thank you very much. Since it's the year-end results, I would like to the audience a message from our President, Chairman, Rodrigo Lebois. So operator, please.
Good morning, and thank you for your assistance. 2021 was a challenging year, full of financial ups and downs that tested businesses in new ways and placed considerable pressure on the economy. This last fiscal year was marked by contrast. The economic conditions remain difficult across the world for much of the year with [ lift ] growth trajectories limiting the return on investment and output to pre-pandemic trends. Despite the sign of improvement emerging in some sectors of the world economy, the COVID-19 pandemic is still taking its toll. A resurgence in cases led to a tightening of containment measures, which dented the recovery pace. However, the impact was less severe due to a more targeted approach of specific restraining and very stringent supply restrictions. Rebooting investment, expanding access to financial service and boosted productivity will be key priorities for the economic recovery. As we look to the challenges ahead, the short-term outlook for Mexico points to a moderate economic recovery in 2022 as issues in the global supply chain and uncertainty in the labor market are likely to persist for some time. The OECD forecast a GDP growth of 3.3% in 2022. Although we acknowledge that the market remains susceptible to inflation outlook and the economic and geopolitical uncertainties, we are cautiously optimistic.
For Mexico, activity has trended up in agriculture, industry, export and services. The latter displays some heterogeneity with the recovery in high contact sectors such as leisure and hospitality lagging, while activity in some other sectors is above pre-pandemic levels.
Despite the tough operating environment and global uncertainty, UNIFIN delivered a resilient performance, thanks to the consolidation of the company's financial position due to access to several sources of funding. We entered 2022 with strong finances, positioning us well to respond to market conditions and capitalize on opportunities. As part of this year's strategies in the first semester, we will pay special attention to our liquidity position, being vigilant of national and foreign debt markets.
Our clients value our continuous innovation mindset and count on us to anticipate to their needs so they can lead in their industries. As a result, UNIFIN accelerates and consolidates its digital platform, Uniclick, placing special emphasis on the digitalization of UNIFIN. Together with AI power insights from our platform, we are delivering a more personalized customer experience and looking forward to offering new products that will reinforce our integral service. This will enable SMEs to invest more, grow and increase productivity. Sustainability is the core of our future. Our ESG agenda aims to make us more competitive, resilient and accountable in the way we treat people and the planet. The opportunity to have a positive impact in our environment is a key component of our growth plan. UNIFIN has recently joined the UN Principles of Responsible Banking. This is the world's largest global banking community that focuses on sustainable finance, sharing best practices and working together on practical guidance that benefits the entire industry. UNIFIN wants to take a leadership role in accelerating the fundamental and necessary changes in the economy for current and future generations to achieve shared prosperity.
I would like to thank all UNIFIN staff for their outstanding response to the challenges faced over the past year and their collaboration to deliver exceptional performance. Also, we acknowledge our stakeholders and financial partners for their continued trust and support. I am confident that we are in the right path for a successful recovery, focusing above all, on helping our clients achieve their best potential, increasing our market share and offering new and improved services for a reality that demands a flexible and disruptive vision. Thank you.
Thank you. I hand the floor back to Mr. Camacho.
Thank you very much, and once again, good morning, everyone. Today here with me are Sergio Cancino, our Chief Financial Officer; Mariana Rojo, who recently joined the company as Head of Corporate Finance and Investor Relations; and Nayeli Robles, Head of Economic Analysis and Strategy.
After our full year and fourth quarter 2021 results discussion, we will open for our usual Q&A session.
In light of the recent volatility and challenges faced by one Mexican nonbank financial institution, I would like to start this presentation by highlighting UNIFIN's strength and solid financial position. We have a resilient portfolio thanks to our unique combination of prudent origination capabilities and strict lending rules backed by solid assets. We are, of course, in a very different segment to the company in difficulty as we have no exposure to payroll loans with our focus on SME leasing and lending. Our asset quality continues to improve as does our return on equity.
Given the unjustified but nonetheless concerning contagion to the prices of [ all our ] Mexican nonbank financial bonds, we are actively seeking additional sources of financing, including accessing local markets to do it and sustainable transactions such as Eco-Business Fund and [indiscernible]. We are also increasing our current balance with the commercial banks in addition to new relationships with other counterparties to diversify our funding sources and mitigate risk in the event that international bond market remains affected for some time by the current situation. If the bond market remains closed or challenged, we will reinforce our recently adopted strategy of slowing down originations and build up cash levels.
Finally, I would like to state that this should be necessary and just as we did in late 2020, the controlling shareholders are prepared to inject about another $100 million of fresh capital into UNIFIN to reassure the market, to further strength UNIFIN balance sheet and to send the message that our controlling shareholders see a tremendous opportunity with the equity and bond trading at current distressed levels. Historically, our cash conversion has been weaker at the end of the year. Despite the seasonality, we increased our collections 25% year-over-year. Therefore, we are pleased with the numbers reported.
Moving to our quarterly results. We are satisfied with the fourth quarter and full year results. Originations were up 48.7% during the quarter. And we added more than 800 clients to our portfolio, reaching 9,342 clients by the end of 2021.
The UNIFIN commercial strategy was focused on 2 main objectives during 2021. The first one was targeting our prospective strategic economy sectors that have high growth potential and low risk. As a result, in the fourth quarter of last year, 80% of new credit was allocated to such industries. This figure has been increasing quarter-over-quarter, and by 2022, we expect it to be around 85%. The second objective was to diversify the portfolio by segment and appetite. As you can see on the screen, no single sector represents more than 25% of the total originations.
Turning to our portfolio, we were able to close the year with our most diversified portfolio in terms of sectors to date thanks to our continued efforts to target the more resilient sectors with a debt conversion rate. The total loan portfolio reached MXN 73.8 billion in the fourth quarter, a 13.4% increase when compared to MXN 61.1 billion (sic) [ 65.125 billion ] in the fourth quarter of 2020, demonstrating a prudent origination strategy focused on key products. I would like to emphasize that this origination strategy is based on our sophisticated risk metrics. Given the current economic conditions, in the coming year, we plan to slow the growth rate of our origination in order to favor cash flow generation. We remain well diversified across economic sectors and type of assets with services and manufacturing leading the way, respectively.
I would like to highlight Uniclick's excellent results in last year. Interest income related to Uniclick increased 7.7x compared to 2020. Uniclick achieved record originations of MXN 661 million during the period, a 32.7 times increase when compared to the same period of 2020. Uniclick represents 1.9% of our total portfolio and 11% of the quarter originations. Asset quality remains in line with expectations.
In 2021, we made significant advances in our digitalization process, especially with the launch of Unilease, a multi-asset digital platform with leasing clients for up to MXN 10 million and credit authorizations in just a few minutes. This launch reaffirms our commitment to be an innovative digital and customer-focused company. As we have mentioned before, Unilease follows the successful performance of Uniclick.
Moving on to asset quality. Nonperforming loans fell by 30 basis points compared to the fourth quarter of 2020, closing at 4.5%, showing a sequential improvement since the beginning of the pandemic. We expect NPLs to maintain similar levels through the year. We are not expecting further deterioration of our portfolio. On the contrary, we are expecting [ rather relief ] going forward.
Collections increased 25.1% when compared to the same period of last year, closing at MXN 5.8 billion, a decrease versus the third quarter of last year due to the seasonality that historically has been weaker due to holidays. We are expecting a gradual recovery in collections throughout the year, mainly due to better economic conditions for this year.
The NPL coverage ratio for the fourth quarter closed at 79.4% versus 81% in the fourth quarter of last -- of 2020. The loan loss reserve for the fourth quarter was MXN 2,625 million, 3.4% higher than the fourth quarter of 2020. Split by business line, our auto loan factoring and other line increase are 100% covered. Leasing, our largest business line, has a coverage ratio of 79.4% (sic) [ 74.8% ], above our historical recovery value.
Total financial liabilities closed at MXN 76.2 billion, an increase of 16.4% compared to MXN 65.5 billion in the fourth quarter of 2020. Average maturity was 49 months and the total average rate was 10.4%. Our fixed rate financial liabilities fell to 73.6% from 78.3% in the fourth quarter of last year, with floating rates increasing to 26.4% from 21.1% in the same period of 2020. Unsecured loans stood at 77.3% and secured loans accounted for 22.7% of the total at the end of the quarter. UNIFIN financial liabilities are split between U.S. dollars and Mexican pesos, 75% and 25%, respectively.
At the beginning of last year, we approached the international market and issued a new deal for $125 million (sic) [ $135 million ], of which $127 million were used for liability management exercise via an exchange offer. We also closed credit facilities for an amount of $106 million, achieving our first sustainable credit line with Eco-Business Fund. This demonstrates our solid financial position and active performance continues helping SMEs reach their full potential. For this year, we continue to seek alternative funding sources. We are engaging in new sustainable-linked transactions. We have been approached by the government banks to extend new loans, receiving indications to increase some of our credit lines with commercial banks, and we are tapping local markets [indiscernible] in the next weeks.
In conclusion, we are actively searching new funding facilities to continue strengthening our funding profile and allow us to diversify our debt structure. And again, as I mentioned at the beginning of the call, should it be necessary, our controlling shareholders are committed to underwrite another capital increase, thereby demonstrating their support to the company.
The capitalization ratio stood at 18x -- 18% in the fourth quarter, a decline versus 21.4% in the fourth quarter of 2020, explained by our share buyback program that was very active during the year. The financial leverage ratio rose to 5.3x from 4.1x in the fourth quarter due to capital decrease and new funding facilities. Interest income increased by 6.2% versus the fourth quarter of 2020 to MXN 2.9 billion, driven by significant growth from Uniclick. Leasing represented 71.5% of interest income compared to [ 74.3% ] in the fourth quarter of 2020. The portfolio yield stood at 17.5%, a 40 bps decline when compared to the immediate previous quarter due to the increase in rates during the fourth quarter. The adjusted financial margin for the fourth quarter closed at MXN 847 million, a 35.8% increase compared to the fourth quarter of 2020, explained by the decrease in reserves and cost efficiencies. Interest costs increased 7.9% to MXN 2 billion. NIM remained stable at 5.6% for the quarter, and we expect that this ratio will be gradually increased during the year.
OpEx as a percentage of sales remained stable at 13.7% for the quarter and 13.1% for the full year, consistent with the levels reported during the year, driven by a strict control cost policy. Net income for the quarter increased 36.9% versus the same quarter of 2020 to MXN 418 million, driven lower provisions and cost efficiency. Return on assets increased slightly compared to the third quarter of 2021, explained by portfolio growth during the quarter. Return on equity increased 100 bps when compared to the third quarter of last year, driven by higher net income.
In this slide, I would like to introduce to all of you our sustainability strategy. As you know, this year, we have made great strides in sustainability, and with this, we reaffirm our commitment to maintain operations aligned with ESG best practices. This strategy is based on 5 fundamental pillars: corporate governance, profitability, tech inclusion, community strengthening and climate change. These pillars are based on the contribution to SDG you can see on your screen. This year, we became an official signatory of the United Nations Principles for Responsible Banking, a unique framework for a sustainable banking industry, developed through a partnership between banks and financial institutions with banking activities worldwide, and the United Nations Environment Program Finance Initiative.
Finally, I would like to go over the same idea with UNIFIN's framework. First, our primary sustainability purpose will be to support the growth of Mexican SMEs by providing financial solutions for underserved segment. During 2020, we initiated a process to integrate our sustainability vision into our business strategy. In 2021, UNIFIN became a signatory of the United Nations Global Compact and the Principles for Responsible Banking. We also intend to allocate net proceeds to finance or refinance eligible green and social projects and assets. We have already invested over $400 million towards ESG.
Thank you for listening. We would like now to begin our Q&A session.
[Operator Instructions]
Our first question comes from Nicolas Riva with Bank of America.
Sergio, So I have a question which is first kind of a comment, and I wanted to hear your thoughts on this. So I guess the main thing right now, the main focus probably for investors is the gap that you have between your cash position and your short-term debt obligations, right? So you have cash position of $214 million, but you have about $1 billion in short-term debt, right, which is maturing this year. And I know that includes some revolving bank credit lines. You say that in your earnings report, about $360 million. But still, there is a relevant gap between the cash position and short-term debt obligations. And in this environment, clearly, the market is assuming that the Mexican nonbank financials are going to have close to 0, if any, really funding -- new funding for the rest of the year. And I know that you have gotten some new credit lines, as you said in the report, in January, and you're actually looking for more as well.
But my question there would be, probably the main source to repay the short-term debt should be the collections on your loan book. And there, looking at the dynamics between loan originations and cash collections, we see that in the fourth quarter, basically originations were in line with collections. So you didn't really generate any new cash. My question there would be, why you still haven't changed that strategy and slowing down on originations to build the cash position ahead of all of these maturities this year? I know that you have said that perhaps going forward, you're going to be slowing down originations, if needed. And I appreciate the comment about the commitment from the controller to inject another $100 million of equity, but anyway, I wanted to hear your thoughts about this, how you are thinking of meeting all these short-term debt obligations.
Nicolas, thank you for your questions. First of all, I mean, these results are on the fourth quarter of last year. In the fourth quarter of last year, none of us were aware that what happened with Credito Real was going to happen. And if you recall, when I said that we want to anticipate our maturity for this year, we made a limited review because we were ready to act to the market. And on those days, the recommendation was to wait until January to define or try to get better conditions on an issuance. The recent events that we have seen on Credito Real, they basically start to deteriorate this year. Therefore, it's difficult to somehow try to address that situation when we do not have that information at that time.
But let me tell you this, for the $1 billion -- it's going to be a very simple numbers. For the $1 billion short-term maturity that we have or that we present on our financial results, we have already paid $100 million of that. The half of, let's say, [ $900 billion ] is moving out the balance of that. Of that number, half of it is revolving facilities, which -- and I want to make this very clear, except for the international markets, we have not received any doubt or any message for our commercial banks or development banks in Mexico or even the local markets that they had some questions on the strength position of UNIFIN. So all of those revolving facilities, along with the plans or the alternatives that we have for financing and paying those maturities continue in place, except for the international markets. I want to make that very clear.
As you can see, through the different downgrades that this competitor or this nonbank financial institution has with this situation, UNIFIN has not received any either a comment or change in the view of -- with the rating agency. So it's also something very important to highlight. But most important is that we have available lines as of today of close to $350 million. We have a program that should be announced to the market in the short term. We're just waiting for some documentation from the banking commission on [ Segures ], which account for another $350 million. We have available or additional or incremental lines for commercial and development banks for around $100 million. We have 2 structure finance vehicles that account for $400 million. So in conclusion, we have those available, but most important, I think is the message that we're sending right now. We are -- we start on January 1 or January 2, with a slowdown in our level of originations; we are prioritizing the cash flow generation, and if necessary, as we said, the Board of Directors along with our controlling shareholder already authorized to look and pursue $100 million of equity injection. I don't know if that somehow explains or clarifies your comments.
Yes. One follow-up question, I guess. I'm going back to comment about the originations and perhaps that if you were not to get some of these incremental funding sources, you would slow down in originations. I guess, Credito Real had the same option really. We all thought that they could slow down originations, just focus on cash collections, but that didn't happen. And it seemed to be that perhaps the reason for that was that they were doing a lot of refinancing of their clients. And I know that the business model is very different, payroll lending versus leasing for SMEs. In your case, if you were to slow down on originations, would that also hurt your collections? Is there a significant amount of refinancing then for your existing SME clients?
No. No. If you see the quality of our portfolio and if we get back to 2020, which by the way, I think that -- I mean, I'm not going to make any judgment about management of the different entities, but this company was very clear and very determined in 2020, when we needed to increase equity, there was equity available for us. So there was a very clear message that the commitment of the controlling shareholders and the Board of Directors and management is 100% with the company.
But most important, the quality that we see with our collection levels are with the NPLs and that's based on our strategy of targeting these strategic sectors that we addressed in the presentation and go back to after the cancellation of [indiscernible] and to allocate all of our efforts -- commercial efforts in the supply chain to the U.S. and to Canada because we knew that was something that this administration was going to be very respectful on the [indiscernible]. And that has proven -- I mean we -- if you remember, when we have the COVID situation at this initial stage, we built this plan for support to the SMEs and now that plan is over and basically, we're collecting 25% more than what we collected in the fourth quarter of 2020. So in that regard, we do not foresee any deterioration in collections, even though our origination levels are reduced.
Our next question comes from Martin Lara with Miranda Global Research.
I have 2 questions. How do you see the portfolio growth and NPLs in each segment this year? And where do you see the portfolio yield during the rest of the year?
Well, thank you very much, Martin. First of all, when you analyze our different business lines, you're going to see that we are increasing a little bit more what we name like structural credit because the manufacturing of assets for our clients is taking more than expected in terms -- because of the disruption in supply chain. Now those [ funds ] that we are putting like a bridge loans [ ourselves ] are going to be converted into leasing. On a macro basis, of course, we're seeing a slowdown in the fixed investments in the country. And that, of course, has an impact on the dynamics on our leasing business because just as a reminder, the fundamentals of our leasing business has to do with productive assets, basically linked to CapEx of the SMEs that are our clients. So that, of course, has a slowdown.
The business in which we are seeing more dynamism and it's a very interesting and real -- that is Uniclick, our digital platform that somehow, if you recall, in the previous quarter when we announced that we have -- building this platform and also have created our intelligence -- artificial intelligence lab and all the efforts that we put on digitalization, now they are a reality. And a lot of the initiatives that we have in Uniclick are now implemented in UNIFIN. So that is going to result in an increased productivity going forward. So those are like the main 2 big, I would say, differentiation between the businesses across company.
Our next question comes from Rafa Elias with BancTrust.
I understand and I think everybody does the differences between Credito Real and UNIFIN in terms of the different business segments and activities. But I think -- but it's safe to say that the markets, investors and analysts are wondering about the similarities in terms of the maturity coming up in August. Basically because Credito Real had been saying for months that they had a number of different alternatives that would pretty much guarantee that they were going to make the payment of the bond. None of those alternatives ended up being -- ended materializing. So when you say that you have X amount of millions of dollars in credit lines and also you're giving us a set of alternatives, are these credit lines committed? Is there a way that you can at some point during the first quarter or second quarter have something that has already materialized, that is concrete where investors can feel comfortable that you actually will have the money to pay the bond?
First of all, I think that the way that UNIFIN historically has communicated everything to the market has been a fact. I'm putting [indiscernible] because you're asking me, but I have never made personally saying that we're thinking, we're expecting, we hope or we plan. All of our press releases have been released on facts. In that regard, yes. And actually, one of the reasons why I decide along with the Board of Directors to anticipate our press release, but first of all, to provide certainty to the market and most important to start and to activate our share and bond repurchase program because the fundamentals of UNIFIN, if we compare UNIFIN today from perhaps UNIFIN 2 years ago, are even stronger than what we were at those age. So the plans are there. It may be -- if I have to say that if we have respected the original date of release of February 17, I may be announcing something there, no? But now since I was -- I decided to anticipate, I'm saying about the [indiscernible]. I'm not saying about the fact, but certainly that once -- when we decide to announce something, it's going to be based on facts.
So again, are any of the credit lines committed or...
The MXN 7.3 billion that we have available is committed. The other alternatives that I mentioned to you are not.
Our next question comes from Jamie Nicholson with Credit Suisse.
And just following up on the questions about your liquidity prioritization and your recent bond repurchases in the market. Given that your '22s are trading at a discount, would you be prioritizing repurchasing those in the market in advance of that maturity? I noticed that the 34 million of bond repurchases you've done already, your press release said it was focused on '25, '28 and '29. So I'm just wondering, do you plan to continue more bond repurchases? And will you focus on the shorter-dated maturities, including the '22? And do you expect to continue to repurchase opportunistically?
We have an open communication with the stakeholders of the 2022. And since we're confident that we're going to be there for paying, I believe that it would not be fair to report those at these levels because we have an excellent communication and an excellent relationship with those stakeholders. Therefore, we have been focused more on the long side of the curve in which the discounts are greater, and of course, we are also seeing that -- something to make a profit. By the way, when I decide -- when we decide to sell or purchasing, probably that it has not been easy to capture more volume on those. So I believe that the people who is involved in the fundamentals of UNIFIN is not willing to sell a bond that does not have the fundamentals to be trading at 65 or 60 or whatever. So now we have been focused on the long parts of the curve.
And so I'm sorry, I couldn't hear all that well. So in terms of continuing potential repurchases in the market, do you expect to continue to do that opportunistically?
Yes.
And then also, what is the -- yes? Okay. And then what is the average cost of some of these new facilities? You said that you've been able to refinance and you haven't had any trouble, but has your -- the cost of that financing gone up? And what's your kind of average cost of the new facilities you've gotten?
Actually, Jamie, thank you very much for that question because that opens the room for further explanation. The reason why this company focused on issuing international debt has to do with the maturity that I can get in international markets, which are like 8 years long -- 8 years, 9 years. Because, in my view, as a prudent risk management approach, I have always tend to favor the gap between my liabilities and my portfolio. But of course, that is more expensive when I compare to issuing locally.
Just to give you an idea, if for debt -- let's say, if our loans were trading at par, I will get a rate around 9% or so in dollars. So when I do the full cross currency swap, I may be getting a rate of 12, 12.5 in pesos.
Just to give you an idea. Just to give you an idea, the levels that we are seeing for our local issuances are around 7% in pesos. So on that, I'm going to get a benefit, of course, in the cost of funding. I'm going to reduce the weighted average of my liabilities, but [ needed ] I'm going to get better rates. And the same happens also with the commercial facility that I have in pesos because the rates here are more -- are lower.
Our next question comes from Sam Epee-Bounya with Wellington Management.
As you can imagine, most of the conversation is around liquidity. I don't know if you can comment post the 30 million of repurchase that you've done, where you are in terms of cash position? And what's the expectation? That's question number one.
And number 2 will be on the sort of cash flow. And I think there was a question earlier about slowing down origination to sort of generate more cash. My question is, why have you not done it in the fourth quarter where a few of us have sort of asked for at least more prudent sort of loan growth? And what's the plan going forward?
And then if I can tackle, last one would be, could you remind us what the possibilities are because you went too fast on the option. I just noted the $350 million of credit facility that apparently committed so far, but it would be great if you can run down the rest of it.
It's not that we did not take in consideration some of you -- some comments that I received from some guys in terms of slowing down the originations. Once again, on those days, we were very close to [ tap ] the market. As I said, we have this limited review on our numbers as of the third quarter. And it's going to be very, very difficult to provide with an explanation something that happened at those days we were not expecting to happen.
What I can tell you, again, is that our level of cash continues to be very, very strong in that regard. That's why we have been repurchasing bonds. Trust me, that if I was concerned about how to roll over our maturity that we had in August, I will not be buying bonds. I will be making additional cash for paying that. So the company continues to be very close to everything that is going on, but once again and once again, the only market in which we may not have access for funding is international markets. The rest of my commercial and banking relationships along with the [ loaning ] banks, along with the local markets, are there. And I can tell you, for example, that for our program of MXN 350 million, we have already the commitment or the interest or the approval of the -- these pension funds and insurance companies that are going to be takers of that paper or half of it as we speak.
So Sergio, you mind -- I mean, just quickly again. So when you -- hypothetically, how you think about that short-term debt? As we said, like $1 billion, there's about $200 million of that bond that are due in August, but you have $757 million or MXN 15.5 billion with like bank partners. So just how you think about kind of addressing those, that will be helpful.
Sure. Of that $1 billion that you see on our financial statements, we have already paid $100 million. So the balance of $900 million, it's -- half of it are revolving facilities, and the other half, let's say, $450 million are -- these $200 million of the bond that matures on August, and the rest are amortizations that we need to do to some facilities. On that, we have available facilities, as we speak, for around $350 million. We also have the plan of these [indiscernible] that accounts for another $350 million. We have banking and developing lines of another $100 million. We have 2 structure facilities that we're working as we see with lawyers and everything for another $400 million.
So I mean the alternatives and the options are there. We have -- actually, with our talks that we have had recently with some of our commercial partners -- commercial bank partners, they have already at the internal committees and risk committees, separated the names of UNIFIN and the rest of the nonbank financial institutions, just because of the fundamentals.
Sorry, Sergio, I just want to make sure I get this right. So you said you already paid $100 million of that $1 billion, so $900 million debt. You say you have $350 million committed in terms of this facility. And then you mentioned another $350 million, and I wasn't sure what it was. Sorry.
That's a public issuance in the local market.
Okay. And you need authorization for that, right? Have you gotten it yet?
Yes. I mean, we have the authorization. Let me put it this way. That's why we have been able to be on road shows with these insurance companies, pension funds and so forth, so on.
Okay. And then sorry, and the rest you said DFI. I imagine those are the local development banks in Mexico. Maybe $100 million and then maybe a structure note program of $400 million. Is that right?
That's right.
Okay. And then, sorry, on the cash flow question. I mean how do you think about this, right? How to generate -- I think it goes back to that first question from the Q&A like on an illustrative purpose. I mean if you slow down origination, would you be able to generate cash?
Yes. Actually, we have -- and the reason why we see this improvement in collections year-over-year or, let's say, to the year, sequentially, the second to the third quarter is because we have done significant improvement in the management of our collection department. So we are more active and more proactive in terms of collections. And of course, the quality of the portfolio plays an important growth here. We have and we originate on these strategic sectors that actually recover fast when the COVID starts to release a little bit. Let's say, the first wave of COVID starts release a little bit, we have tried to recover the impact because they were in these strategic sectors. And that's why we have this -- our economic facilities department to be very, very strategic in the way that we want to originate.
Our next question comes from Joao Rosado with Finantia.
I just have a first question on the coverage ratio. I just wanted to understand with rates going up, including in Mexico, should we expect more default in the portfolio compared to 2021? And if so, do you expect to increase the coverage ratio that I think currently is now 79% to higher up, something above 100%? What's the plan there?
No. Particularly our leasing business, it's on a fixed rate -- I mean, it's a fixed rent. That is not going to change despite the rate out there. So we're not expecting a deterioration on that front. What was the second part of the question, sorry?
The second part is in terms of the coverage ratio because even though you have mostly fixed rates, when you refinance or even new loans with higher rates, probability of default for any given issue, everything else constant, is still higher. So the business in itself should have a higher coverage ratio to protect against potential defaults.
You mean for our clients, right?
Yes.
Well, I don't think that the rate hike is going to be as significant to put in jeopardy the continuity of our clients, and I'm talking about the vast majority of our clients because it has been gradual and, basically, everybody is expecting that those hikes. Our department sets out that they are setting 50 bps this new meeting. So I mean it's like something that everybody has visibility on.
So we do not expect and, of course, all of our credit score cards and everything that we put in place to provide or to go forward with a client are not so tight. I mean we have a coverage ratio on the payment of the bank, if it's the meeting or in the different other products, that of course is not material when you see or you expect those rate hikes.
Okay. And the next question I had was just regarding the new lines of funding you're signing. I just wanted to make sure I fully understood just in terms of recent transactions because I think it was at the end of January, you announced $150 million of new commitments. And then with the financial results now, you announced a new $65 million line. So I just wanted to make sure there's no overlap there. So you...
No. There is no overlap, no. There is no overlap.
Okay. So when [indiscernible] 50 plus -- $65 million.
That's correct, yes. There is no overlap.
Our next question comes from Chelsea Colon with Aegon.
I just have a few. You mentioned that you paid down $100 million of debt already. How -- did you use your new lines that you recently announced to pay down that $100 million? Or was there another source?
No. That's another source [ via ] cash generation. One of the reasons why our collection somehow look -- are lower when compared to the third quarter of last year is because there were some deferral of payments due to the holidays. So we received that cash at the beginning of the year and that's the cash that we used to pay the -- to partially pay the $100 million.
Okay. Got it. I mean I guess that makes sense with the holidays, practically speaking. But in past years, it doesn't look like collections went down in the fourth quarter compared to the third. So would you say that this past quarter would [indiscernible]?
No. I will say that it's very difficult to have the 2020 as a year of -- that we can use as comparison because we have the COVID plan in place, and we have so many other things going out there. So -- but if you see, let's say, on past years, that was the trend.
Okay. Got it. And just one clarification regarding the originations in the quarter. Is the amount that you present the -- I think it's $5.9 billion or so, is that including or excluding the down payment that you request of your customers?
No, it does not include the down payment. No, of course not.
Okay. Got it. So then I know in the past, you gave a whole breakdown of the originations by segment and the historical originations. I think that part might be missing from the press release this time.
Yes. And I apologize on that, Chelsea, because since we anticipate everything, we have 1.5 week left. We favor the opportunistic information, but of course, you're going to receive the details in a few days.
Okay. Great. Understood. And then just a couple more quick ones, if I may. Just beyond the leasing part of the portfolio, can you clarify how much of the loan portfolio is secured by assets?
Sure. Just give me one second. About 30%.
So it's 30% of the remaining -- what is it, roughly 30% is not leasing is also secured?
What -- let me clarify. What do you mean by secure? Like is it cash additional guarantees?
Are any of -- is any of the nonleasing portfolio secured by assets?
Yes. Yes.
So is that the 30%? Or does that 30% include guarantees solely?
Yes. Yes. The structure we have on the different businesses, they always have, in addition to the contract, the warranty of the owner of the company in terms of a promissory note. And also they validate or they have those collateral guarantees on those businesses.
Okay. But -- so of the nonleasing portfolio, how much is secured by actual hard assets? I guess that's my main question.
I would say, around 50% at least.
5-0?
5-0, yes.
Okay. And just my final question, if I may. I noticed that your cash balance did go up a bit quarter-over-quarter, but your total current assets did not go up. The line item of their current assets actually went down sequentially. So I'm just wondering what's included in that line item, the other current assets? Like why would that go down quarter-over-quarter?
Give me one second. Basically, on other current assets, you're going to see the deferred taxes and that's basically the main line that changed. I'm going to ask [ Regine ] to send you a [ consolidation ] of that so you can have the full information on that.
Our next question comes from Juan Ponce with Bradesco.
You mentioned earlier, the fixed investments are slowing and affecting the leasing business. I just want to know how much of an impact do you think is coming from the uncertainty around electricity though? I mean -- and if you see clients becoming more reluctant to invest due to this overhang, that would be great just to hear your comments on that.
I mean yes. I mean -- and it's, I would say, a macro issue. All of these noises related to, let's say, the controversial electricity deal and other decisions that the government has taken. Of course, have deteriorated the move for investing in the country. However, that's what we are targeting. These sectors that, no matter what the bills are, have a higher level of businesses -- for the respective businesses. So yes, I mean it is -- that's what the [ innate ] numbers and -- said -- about the confidence and many other indicators out there.
Right. Right. Can you remind me what are the sectors, the ones that you're targeting, please?
Yes. As you can see on the screen, you are going to see that transportation and logistics is one of the first sectors that we target along with services. Manufacturing, basically, on the supply chain to the U.S., utilities as well, telecom and mining, oil and gas. Mining has no infrastructure and everything. We are not so optimistic on that. Those are the originations that we have on sector. I will say that going forward, we will focus more on transportation, manufacturing, telecom and agro industry and, health care, a little bit.
Our next question comes from Natalia Corfield with JPMorgan.
You mentioned this $100 million in capital injection, if necessary. So my first question to you is, what do you mean by necessary? What will this take for you to inject this $100 million?
I think that it will have to be a combination of our talks with the rating agencies, how do we see or perceive the risk of the company. Also, it will have to do with the -- all of these available facilities that I have mentioned during the call, and how do they evolve. So I would say that it's just a message in the sense that the willingness to do it is necessary. But at this point, we do not feel that we need to do that.
Right. And do you already have the money? Or is it like the previous ones that you have to raise with other investors?
No. It will be in the format of a rights offering basically. Basically, the same that we did in 2020. And of that, I would say that we have half of that money now because once our Chairman of the Board and controlling shareholder has half of the company, at least. So on that, I would say that we have half of it.
All right. Just a comment that if you really need -- you really -- if it's -- I think now is, for me, the time for this capital injection, right? This will really boost confidence on the company, and I think that's all that UNIFIN needs right now more than having those credit lines. This probably should have been what [indiscernible] should have done. But also moving on from that, on the topic of slowing down originations, what level of collection in excess of origination do you think we -- you show for us in the first quarter of 2022?
I think that we are targeting to have an increase in the year of around 20% more collections.
Okay. 20% more.
Yes. Yes.
And a [indiscernible] that I have, when you did this buyback of bonds, do you cancel those bonds? Or are you still subject to the volatility of those bonds in your results?
No. We're buying those bonds and those bonds are going to be canceled.
Okay. Fantastic. And perhaps, a last question. Your ability to take debt -- secured debt and do you have a limit for secured debt based on covenants?
Yes. I don't have that analysis right here. We -- certainly, I'm going to have the team to send it to you, but yes, we still have room for that.
All right. If you could provide the number, that would be very helpful.
Sure.
It doesn't need to be now, but perhaps, in a press release, and that would be very helpful for us.
Okay. Sure.
Our next question comes from Ernesto Rizek with Altio Capital.
I wanted to ask, when will the shareholder capital injection take place, if it does? And my second question was, you mentioned good relationship with local funding counterparts, but in Page 11 of your earnings report, we can see that most of your 2022 maturities are with international counterparts. Are you already in discussion to refinance those? Can you comment on the status, please?
Sure. Yes, well, we start talks with -- I would say, with all of our...
Counterparties.
All of our counterparties on the short-term debt early this -- well, actually, last month. So once again, I mean, we do not foresee -- we do not see at this point of time any risk of not having those facilities revoked.
Our next question comes from Gilberto Garcia with Barclays.
I had a follow-up on the collection matter. I was looking at your transcript for fourth quarter of '19. You mentioned that the collections for that quarter were [indiscernible].
Sorry, Gilberto, your line is falling or is breaking.
Can you hear me better now?
Yes.
Sorry about that. So I was looking at your transcript for the fourth quarter of '19, and you mentioned then that originations were also stable compared to the third quarter. So that will be 2 years without this very marked seasonal effect. And also, if I look at the sequential increase from the third quarter of '21 to the fourth quarter, we don't really see a significant increase in the level of the early NPLs, which I guess is a good thing. But then -- what happened with this MXN 600-and-some million that you did not collect compared to the third quarter, where are we talking about clients that paid less than -- or not late, but they are paying at the very end of their period? Can you help us understand what...
Yes. Yes. Yes, sure. No, what you said is correct. I mean there were some times that they were not here actually. They were not here in their offices. I mean when you see the, I would say, the nature or the structure of many of our clients, [indiscernible] plays the role as the CEO, as the CFO, as a Treasurer. Now he's the only guy who has the banking or the checking account. So in many of the cases, they just defer, a few days, their payment and they paid in the first days of January.
Okay. Okay. But I mean in that case, they wouldn't be in arrears with you. They are still on time?
Yes.
Okay. And another follow-up on the matter of the potential capital raise. Two quick clarifications. Is your controlling shareholder ready or prepared to contribute $100 million by himself or half of that since you...
Half of that.
Okay. Okay. And is it too early to think about at what price per share would that be?
It's too early. I mean it's too early to make some convections that -- on the timing of that capital injection. I mean the reason why I'm mentioning this is like an ultimate alternative. Once again, despite the international markets, the company has not received any comments or any change in their relationships with commercial and development banks, with the local issuance or the local market or other sources of funding such as the one that we have with [indiscernible].
Our next question comes from Justin Ziegler with Eaton Vance.
Going back to an earlier question just to clarify. So of the cash collections you're pulling in, in Q1, how much of that total amount is being retained? And how much is actually going out in originations?
Half and half.
Half and half. Okay. And then just real quick. Just want to understand, what is the process of actually the cash coming from the customer to your balance sheet? I mean it seems like a crazy, simple question, but one of the things that I think has been upsetting is, some of the accounting going on at some other peers, it doesn't -- it's not clear how that cash goes from the customer to your balance sheet right away, is it? Are there in between? Are there middle parties that take care of that? Or do you guys do it yourselves? Or do you go outsource the collection? How does that get done?
In the market securitization or product securitization, there is a trough who made the collections. And their portfolio is not within those structures we collect. And that will be for leasing for the rest of the business that we collect directly.
Okay. So if you had to collect -- how much direct collection that is of the -- from the customer from you guys?
Just give me one second. Around 20% is collected through this trough and 80% is collected directly.
Our next question comes from Nick Dimitrov with Morgan Stanley.
I've got a couple of questions. And I remember from our discussions last year, you were saying that your net interest margin will start recovering in the fourth quarter. And as per my calculations, the margin continues to erode roughly 40 basis points quarter-over-quarter. So it's down to like 5.3, 5.4 from the high 5s a year ago. And I was wondering when are we going to see stabilization on that front and possible expansion? And if you decide to curb your origination, considering the fact that rates went up in Mexico and you have to conserve liquidity, is it even realistic to see that margin expand anytime soon?
I think it is flat realistic, Nick, because 2 things. First of all, because as I said, all the initiatives that we have in our digital platform, basically, the cost of acquisition of a client, the cost of acquisition of a client in Uniclick is 8.3x lower than a cost of acquisition of acquiring in UNIFIN. So once that we have the full implementation, those efforts, we're going to see an increase in profitability. So yes, I mean I feel comfortable saying that you're going to see that stabilization maybe -- well, not maybe. First or the second quarter of this year because, as I said, if we switch the funding structure of the company for issuing more local, we're going to have a benefit there.
Okay. So the second or the third quarter of 2022.
Yes.
So we're pushing the -- okay. Talking about curbing origination. Is there a part of your product offering that you're going to curb first? What I'm trying to kind of figure out here is that Uniclick is obviously growing fast, and I see the appeal of the cheap origination. At the same time, a lot of it is unsecured, right? So it's kind of changing the overall mix of your business. If you have the curb origination, what are you going to curb first, the leasing part of your origination or Uniclick?
No. None of those. I will say that we are cutting, as we speak, first, working capital facilities that we have with our clients. Remember that for clients who have been very good payers with excellent track record, we sometimes open working capital facilities. And so those are the ones who are being curb as we speak. We also may not be so aggressive in our factoring business, but Uniclick is not going to stop just because of -- and it's something that we have not advert on the call, but I mean Uniclick now -- who -- it's a reality, it's in the process -- we're going to be in the process of trying to separate them because they are going to be capable of getting a standalone valuation, which if it's -- if we are successful in that, the company is going to have an incremental equity injection just because of the valuation.
I have not commented to the upper market because that would be -- that's another thing that's going to be [indiscernible]. First of all, I'm explaining and going through the different explanations and concerns on a standalone basis of UNIFIN, but Uniclick is a reality. There are some analysts out there who are already including valuation to that business.
Okay. Okay. I see. And finally, on capital. So capital continues to get eroded. Leverage continues to trend upwards. What is the plan for the share buyback program, right? I mean this sends a really bad signal to bondholders when -- I know you talked about the fact that your relationships with the local banks, single development banks and whatever, have not been impacted yet. But the reality is your bonds are trading in the 60s, right?
So are you going to continue to buy some of your shares back? And when I looked at your equity, right, and your equity was kind of flattish to marginally down. And one of the explanation was that the share buyback program was behind it. Are you going to continue to buy your stock back? And by the way, I do agree with Natalia Corfield that if you're going to be putting capital, you might as well do it now rather than get too cheeky. And Credito real was kind of playing the whole game and, in the end, it was a self-fulfilling prophecy. And you saw what happened yesterday. So sorry, I've got to throw out a lot of things at you.
No. No, and I perfectly understand. I mean for the different talks that I have had with your colleagues or some other stakeholders, I perfectly understand the frustration that you have. But trust me, there is no one more frustrated about the situation than me. I'm in the need of providing with additional explanations on the business to pay for something that is not big or not was my decision or my math management, the thing that led to the situation that we are facing right now. Yes, I would say that this -- I mean for the upcoming days, of course, the prioritization in our share buyback program is going to be to do bond buyback program. So we're aware of that.
Our next question comes from Guillermo Diego with Santander.
Maybe the question is, now you have the equity trading at 90% of book value, so practically discounting. Obviously, you're not paying for growth, and you're practically discounting a hit of [ 1.2 billion ] with the bonds, trading 66, 70s, the discount is worse. So maybe can you clarify us, since 1993, since the company was founded, how many write-offs have you had in the whole history in million pesos? Because it seems like the market tends to compare you to another payroll lenders with a higher active rate that didn't make sense at least with -- comparing with peers and that have had many write-offs with more poor profitability. So in your case, where your business is leasing and you have the collateral and, as you said, the nonleasing part has 50% collateral, et cetera. How many write-offs in million pesos have you had in the history of the company?
Yes. I mean, I fully agree with you. I think that the fundamentals of the company are totally different from these guys in question, no? All of our leasing business have an asset who basically collateralize at 100% the value of the contract, in addition, traditional guarantees vis-a-vis from clients. So yes, the fundamentals are totally different, but it is what it is now. We need to deal with the situation.
I would say that a rough number from -- since the company was founded in terms of write-offs, it will be around MXN 750 million in the 29 years of history of the company. So it's basically nothing when compared to everything that we have originated and [indiscernible].
[indiscernible] you have had -- so in 30 years, you have had marginal rights, no?
That's right. That's right.
You [indiscernible] asset, you get the [indiscernible].
And we also have the legal depository figure. You need to remember that on every leasing, we have the legal depository figure to make the owner of the company or the CEO responsible for returning the assets. And if he does not do that, he enters in a criminal offense that take -- that it take him to jail. That's [indiscernible], yes.
And the second question is in the 12 months rolling, we have seen you have taken out 18 million shares, 3% of the company in buybacks, which seems like very good. But liquidity tends to be thin, not just for anything in general, small and mid-caps in Lat Am and Mexico. The question is, for the bonds and for the equity when you decide which is more attractive at least for operational purposes. You have to exclude the perpetual, and it seems like buying back your shares give you 17%, 18% [ plus your ] return, buying back your bonds. Obviously, at these prices, it seems also competitive. So how do you balance those parts? What is more attractive?
I think that due to the current situation, we prioritized, and I'm talking about what we have done in the recent days, bond buyback. And we believe that it's our responsibility to provide a clearer message of support and fundamentals to all the firms that [indiscernible] in our business model, and they were willing to [ create ] a book for when we did [indiscernible], that's a source of -- so that's a way that we can send a clearer message that we are very comfortable of the fundamentals of the company. So to be very honest and very candid with you, over the last days, I have focused more on 100% on the bond repurchases.
Our next question comes from David Lapierre with Loomis, Sayles.
Just 2 quick ones. Wondering if you have had any conversations with rating agencies lately maybe around leverage or anything like that? And then also on some of your funding options, are any of the facilities you're working on there's some development banks involved? Are those local or international? Could you just clarify there?
Yes. They are more local. Basically, the bulk of the development is local. And of course, when I start to see the things with great [indiscernible], I proactively, decide to approach to the rating agencies to see their views and to see their thoughts and everything that is going in the market. And of course, both of them are -- we're very clear in the sense that we have different fundamentals. And that's it. That's what I can comment to you on that regard.
That's all the questions we have for today. I'll now turn the floor back over to Mr. Sergio Camacho for closing remarks.
Well, thank you very much for the call. As we said, we decided to anticipate the release of our numbers to provide visibility, clarity and to somehow provide [ flexibility ] to the market. The team is going to be available for any further questions you may have. Thank you very much, and thanks.
Thank you. That concludes today's call. All parties may disconnect. Have a great day.