Banco de Credito e Inversiones

SGO:BCI

Earnings Call Transcript 2018-Q1

[Operator]

Good morning everyone and welcome to Bci's First Quarter 2018 Results Conference Call. Before we begin I'd like to remind you that the call is being recorded and that the information discussed today may include forward-looking statements regarding the company's financial and operating performance. We undertake no obligation to update and maintain updated any such forward-looking statements after the date of this conference call. All projections are subject to risks, uncertainties and other factors that could cause actual results that will differ materially from current expectations. Furthermore, please refer to the detailed notes in the company's presentation disclaimer regarding forward-looking statements.

Please note today's call is being recorded. I would now like to turn the conference over to Andrés Atala, Bci's Head of Investor Relations. Please go ahead, sir.

[Andrés Atala, executive]

Thank you. Good morning to all of you and welcome to our first quarter 2018 conference call. I'm Andrés Atala, Head of Investor Relations. Today I'm joined by Jose Luis Ibaibarriaga, Bci's CFO; Daniel Kushner, CFO of City National Bank of Florida; Sergio Lehmann, Corporate Chief Economist; and Eduardo Nazal, Head of Corporate Development and M&A.

The figures in this presentation were prepared based on Bci's consolidated financial statements in accordance with the International Financial Reporting Standards methodology and the regulation of Chile's Superintendency of Banks and Financial Institutions.

Now I will leave you with our Chief Economist, Mr. Sergio Lehmann, who will firstly analyze the main macroeconomic figures.

[Sergio Lehmann, executive]

Thank you, Andrés, and good morning. The growth of the annual national account shows average growth of 1.5% in 2017 relatively in line with expectation. However it's also revealed that while the first half of the year was worse than has been foreseen with almost no economic growth, the second half beat expectations.

The better external scenario, the recovery of expectations, the [indiscernible] financial conditions [indiscernible] the end of 2017 had an effect on upgrading of the economic growth forecast for this year. Thus our, based on scenario forecast total GDP growth of 3.5% this year and 3.6% in 2018. These projections assume that private consumption will gradually return to higher annual growth rate in line with the increase in national income growth.

On the investor side, after some years of construction this is expected to grow above GDP over the next 3 years. Investments could grow around 4% year-on-year and the stronger [indiscernible] from abroad will boost extra growth. Additionally better copper prices should improve mining figures. These forecasts are consistent with the improvement in consumption of consumers and business expectations which have improved last 2 years. Now they are in the optimistic area and with [indiscernible] 2018 and 2019. [indiscernible] below forecast and [indiscernible] inflation to 3% will take longer than forecast figures because of the national [indiscernible] of the peso and lower [indiscernible] prices.

By 2018 and 2020 [indiscernible] should accelerate [indiscernible] relatively because of economies which will be [indiscernible] closing this activity gap. Considering that on average economies will be growing above potential [indiscernible] 2018 and 2020 period. In that sense we estimate annual inflation to reach 2.6% at the end of this year and 3% in 2019.

Finally regarding to the monetary policy in the current scenario the bulk of the Chilean Central Bank has kept interest rate at 2.7% and [indiscernible] estimate that it could keep up the number of [indiscernible] current level at the end of this year. Subject to the inflation perspective the monetary policy authority aims to [ decrease ] the interest rates 25 basis points at the end of this year. Overall, the balance of risk of Chilean economy growth is mainly balanced by the external developments and strict policies and geopolitical conflicts could moderate the economic forecast in emerging and developing countries.

Now I will leave you with Jose Luis Ibaibarriaga who will continue with the presentation.

[José Ibaibarriaga Martínez, executive]

Sergio, thank you. Good morning everyone and my name is Jose Luis Ibaibarriaga, Bci's CFO for almost 7 years and I'm pleased to be with you again. In this quarter we have been able to focus on key drivers of our strategic pillars with remarkable performance in Chilean [indiscernible]. Increase in market share in all of our loan book while maintaining prudent and low risk.

Please move on to the next slide. As of March 2018 Bci had assets of over $57 billion and almost $42 billion in loans with City National Bank of Florida accounting for 18.3% of those. Our loan market share is 15.91% including City National Bank of Florida and 13.82% in the domestic market, growing 65 basis points in the market share compared to 2017.

In this quarter Bci had a strong bottom line of $181 million. Also in this quarter, and taking advantage of historical prices of the shares of Credicorp, we have decided to sell a percentage of the portfolio given that we have defined this as a nonstrategic asset. The return on average equity was 12.61% in this period. The return on average equity was affected for a negative one-time effect in December last year of nearly $50 million due to our [indiscernible] position in deferred taxes regarding the tax reform in the United States.

We also like to reaffirm our commitment to have strong capitalization ratios, this is reflected by our last annual shareholders' meeting held last March approving a capital increase to maintain our capital ratios similar to the current levels given the acquisition announcement of Totalbank and Walmart Financial Services.

I would also like to highlight the bank's soundness which was particularly confirmed by accelerating upgrading our rating from AA+ to AAA [indiscernible] in the domestic market.

Furthermore, the strong performance of our stock was reflected by our market cap which reached an historical $9.2 billion last March.

Please move on to the next slide. As we mentioned in past conference calls, our ultimate goal is to be the best bank for our customers and become the overall bank of choice. To achieve this we have focused, aligned and [indiscernible] strategy based on these three pillars. One of the most important [indiscernible] is to develop a top-of-line digital customer experience in order to gain a competitive edge to achieve deeper relationships and high revenue per clients.

Please move to Slide 11. Regarding our digital transformation plan our strategy aims to lead the way in customer centricity and drive business value through disruptive innovation. This is to achieve [indiscernible] customer experience leadership, grow our client base and increase cross-selling and share of wallets.

In this quarter we continue to make significant improvements. We have in terms of customer [indiscernible] 20% of the total checking account sales are fully digital. Regarding SME loans 55% of the total operations are done through digital channels. Also in terms of data analytics, 60% of our sales in retail, banking and 75% in SME [indiscernible] were generating by campaigns.

In our mortgages loans journey we are the only bank in Chile to offer instant approvals in mortgage loans. On the other hand, in terms of the disruptive innovation we have nearly 200,000 customers in MACH which -- and we continue to launch new features such as [ One Click ], ATM withdrawals and the recent issuing of the MACH card.

Please move to slide number 12. As part of second pillar we aim to drive sustainable growth while maintaining prudent risk. We will focus on productivity and return risk per client by means of a strong risk management culture. We want to develop a unique value proposition for each customer based on granular knowledge through our intense use of data analytic tools.

It's important to note that regarding our latest announcement of the acquisition of Walmart Financial Services and Totalbank. So far both are proceeding according to plan and we estimate approvals and closures between the second and third quarter of 2018 and the capital increase should take place during the fourth quarter of this year.

Please move on to the next slide. You can see that operating revenue amounted to $533 million this quarter, an increase of 10.3% compared to the first quarter 2017. This is mainly explained by a better performance in the commercial areas, the contribution from our subsidiaries and a positive result in the financial services division.

We aim to continue outperforming our competitors in selected segments and products, focusing to improve dividend and return risk per client through a strong risk management culture. In the domestic market BCI had 11.1% annual loan growth this quarter, well above the industry's 5.4% growth. This trend was reflected in the different segments where we've been gaining market share in all the different products.

In commercial loans we grew at a rate of 9.2% year-over-year. Even though there has been a better macroeconomic outlook the commercial loan industry is still flat. In this environment Bci has been able to anticipate the competition due a sectoral and regional focus.

In the retail segment, by implementing business intelligent tools that so far continue to be highly effective we continue to outperform the market for net income risk. This is reflected by healthy growth of consumer loans, especially credit cards and mortgages loans with the lower risk rate of the market, these have helped us to increase the share of wallet of our customers.

In the next slide, in the domestic market we have been able to increase our exposure to the retail segment. Since first quarter 2016 we have increased 380 basis points in the mortgages and consumer loans. It is worth mentioning that we had been growing in the [indiscernible] segment by 130 basis points in the last 2 years with a special campaign and rate for mortgages, loans and consumer portfolio purchases. In the case of [ Bci Nova ], we should emphasize that these loans are mainly generated by payroll discounts consistent with our risk strategy in this segment.

Please move on to the next slide. Despite the low inflation we would like to highlight our successful funding strategic focus on the following pillars. The first is to increase retail financing [indiscernible] management and improving the digital processes along with the use of data analytics. All of these have helped to the write the retail finances balance without needing to increase the funding costs.

The second strategy is getting the domestic market with longer-term financing with financial institutions through [indiscernible] placement strategy mainly managing the terms and timing to leverage the benefit of the [indiscernible].

As we had mentioned in the last presentation, our product mix has impacted our net income -- interest margin, especially the growth of mortgages loan by $1.4 billion year-over-year where we continue to place a special focus on maintaining the healthy risk ratios over time combined with our cross-selling strategy.

We estimate that after acquisition of Walmart Financial Services our net interest margin could increase by around 30 basis points. We want to highlight that BCI's fee income ratio continue to grow this quarter and was 25.37% and in line with the aforementioned cross-selling strategy.

Let's continue with the provision expenses. Our provision expenses decreased by 11% year-over-year. This is worthwhile mentioning that in the same quarter last year we have a higher base [indiscernible] specific customers in the commercial segment.

This improvement in the provision expenses is particularly relevant in the context of our loan portfolio grew 11% year-over-year. Regarding additional allowances, it is important to mention that this year we have made near $30.2 million in this quarter anticipating any change in the current provision models.

Please move on to the next slide. We have solid risk management maintaining a leading [indiscernible] and in turn we continue to make progress with the development of a new capacity of the risk transformation plan to consumer.

The main objective of this plan is to develop dynamic risk management process anticipating, integrating and [indiscernible] to all areas based on leverage, data, model, and integration with the ecosystem.

We believe that the Risk Transformation Plan 2.0 will allow us to have a sound data management structure and [Indiscernible] to process this as [ better ] elements to achieve the digital transformation plan, delivering a proactive and micro-segmented value offer proposition.

This will allow us to achieve greater anticipation of risk with a portfolio view [indiscernible] expansions before changes of specific sectors, countries and/or geographical area, complementing the monitoring function in each business. Finally, it's important to know that this plan will continue to promote a strong risk culture in the bank, considering employees as the first line of defense for all risk.

Please move to slide number 20. As we have been pointing out for the last couple of years, the risk transformation process combined with data analytics has continued to have a positive impact on the nonperforming loans ratios.

As you can see in the different charts we want to highlight that mortgages nonperforming loans have dropped from 1.62% in the 2016 to 1.24% this year, one of the lowest ratios in the industry. This quarter operating expenses were $286 million, growing roughly 11% excluding City National Bank of Florida.

As we anticipate the previous quarters, you can see an increase in our efficiency ratio. This increase can be explained by our digital transformation program which will allow us to offer a differentiated and best-in-class customer experience which is one of our core strategies.

That is why we have been investing heavily in this initiative and the main cause associated with consultancy, software, hardware, and change management programs. Despite the temporary deterioration mentioned, this year we aim to improve our efficiency by 200 basis points. We also maintain our target of 42% to 44% efficiency ratio by 2020 by implementing our efficiency plan, working in both sides of the equation.

In revenue, in the revenue side we aimed to deliver a granular value proposition mainly by data analytics and our customer churns, growing our client base and increasing cross-selling and share of wallet. We are adapting our branches [indiscernible] boosting omnichannel solutions through different models and [ best ] functionalities in order to improve our customer experience.

We are redefining our process from end-to-end aimed at reducing cycle time of operation through paperless processes which will allow us to lower our processing cost. This year we estimate our spending will grow at levels of 5% to 6% while income at levels of 10% to 12%.

Net income amounted to $157 million this quarter which was 24.79% decrease of previous years. This decrease is explained by the fact that last year's results include one-time net income of $82 million due to the change in the valuation of our investments in Credicorp [indiscernible].

Also we want to highlight the contribution of our subsidiaries which complement our customer value proposition which represent 40% of our consolidated net income. The return on average asset and return on average equity decreased in comparison to last year, reaching levels of 1.12% and 12.6% respectively, including net income of City National Bank of Florida.

This is mainly explained by a negative onetime effect in December last year of around $50 million due to the tax reformed in the United States. If we adjusted this effect, return on average equity would have been 13.63%. Despite this effect by the end of this year we are forecasting a 40% return on average equity.

Now I will leave you with Dan Kushner, CFO of City National Bank of Florida.

[Daniel Kushner, executive]

Thank you once more, Jose Luis, for the opportunity to join you on this quarterly earnings call. Good morning everyone, my name is Dan Kushner, and I've been in City National Bank's CFO for the past 10 years. I'm pleased to join Jose Luis, Andrés and the rest of the BCI team on this call.

I'm proud of the bank's significant growth especially in recent years. I believe that we continue to build a premium [indiscernible] franchise as we continue to grow and outperform our peers in one of the most dynamic markets in the U.S.

Let's move on to slide 27. The bank has achieved remarkable success since the acquisition by Bci in 2015 and that success has gained additional momentum that we expect to continue well into our future.

On this call we will focus on first quarter results for 2018. Before I get into the details of what has been another stellar year for City National Bank I'd like to mention 2 important milestones for CNB.

First, as you know, in November we agreed to acquire TotalBank and Santander, our first acquisition. This transaction will allow us to further complement our growth in our core markets by acquiring an established banking institution as well as strengthening CNB's position in this market. The planning for the closing and integration is almost complete.

Second, in December we crossed the $10 billion asset threshold, an important milestone in our history and one that we achieved organically. At quarter end we were $10.8 billion in assets. Q1 was another great quarter for us, and as we have noted in previous calls, we continue to focus on the drivers that have made it successful over the years.

Our focus on regulatory excellence, maintaining asset quality, sustained growth and profitability, diversification along business lines and geography, creation of new businesses and continued focus on human capital, attracting and retaining talent, for example, our leasing and residential teams in prior years and our new wealth management and trust units which we will roll out soon.

This focus has consistently produced strong results over the years as City National Bank continues to represent a uniquely-positioned growth platform, please turn to the next slide.

As I mentioned earlier, Q1 was another breakout quarter for us, as we continue to consolidate our position in the market, let me point out the financial highlights.

As to our balance sheet at the end of Q1 total assets grew by $2.3 billion or 27%, reaching $10.8 billion compared to March of 2017. Most of the growth continues to come from loans and leases including our specialty finance activity.

During Q1 we originated over $760 million in new loan and lease commitments, representing a 33% increase compared to last year and generating solid loan growth of $1.9 billion or 34% over March of 2017. We ended the quarter with $7.4 billion in net loan and leases outstanding. Every line of business contributed to the growth, further diversifying our portfolio.

CRE at Q1 represented 40% of our portfolio versus 46% in 2017. Our investment portfolio which consists primarily of investment-grade government-backed securities, represents 23% of earning assets and has grown by $209 million since last March reaching $2.2 billion.

Deposits increased by $2.2 billion or 36% compared to March of 2017, reaching $8.3 billion with DDAs accounting 30% of total deposits. Our deposit growth has outpaced our loan growth for the last 12 months. Growth has been driven by existing lines of business as well as the creation of a new group focused on government and institutional deposits.

As for our earnings for Q1, first quarter net interest income of $73 million represented a 26% increase versus the same period in 2017. Loan and lease interest income generated $78 million during Q1, representing a 46% increase over 2017 which represents 77% of our total income. Our investment portfolio and cash generated $14.5 million in interest income, representing a 27% increase in 2017 and representing 14% of our total income.

As a result of the tax reforms that took place in December, our net income was augmented in the first quarter to lower tax rate. This tax rate change improved net income by $4.9 million. We also focused on core earnings at 2 other institutions which is a non-GAAP metric and a more consistent measure of profitability. We define core earnings as pretax earnings plus amortization expense and net of nonrecurring items. Core earnings were $39 million dollars, a 16% increase over the same period in 2017.

As to our key metrics Tier 1 capital stands at [ $1.006 billion ], total risk based capital ratio at 12.26% and Tier 1 leverage ratio is at 9.66%. Our asset quality remains very strong and we are well reserved for any potential issues.

Nonperforming loans to total loans only 37 basis points, nonperforming loans to total capital of only 2.66%, the allowance in loan mart to nonperforming loans at 156% and CRE to capital at 265%.

As always we maintain a different approach to our lending business and asset quality remains a key focus point for us. Our efficiency ratio is approximately 52% which is slightly higher due to the integration costs incurred for the total bank purchase. This has led to improved return. Return on average tangible common equity improved to 10.57%, return on average assets was 1% and core return on average tangible equity is at 16.12%.

Please turn to the next slide. On this slide you can see that the majority of our revenue, 75%, is generated by our loan portfolio, in particular CRE loans which comprise 40% of generated revenue, this is followed by commercial loans at 19%, then investment income and cash generating 14%. As we have grown we have focused on maintaining our lending guidelines which is illustrated by our asset quality.

Finally, fee revenue in an area of opportunity as we move forward. As a result the asset side of our balance sheet consists primarily of loans at 69%. This is followed by investments at 20% and other assets which is comprised primarily of deferred tax assets, intangibles and fixed assets at 11%.

Regarding our credit portfolio composition, more than 96% of our loans have collateral and approximately 74% have some sort of real estate as collateral. The chart illustrates the diversified nature of that collateral. Concentrations are closely monitored and commercial real estate constitutes 74% of all real estate collateral and the asset classes within that portfolio are very diverse.

Concentrations in real estate collateral have declined year-over-year due to the commercial diversification of the portfolio. On the liability side of the balance sheet you can see that deposits are our primary source of funding at 76% followed by other borrowings at 13% which is primarily comprised of federal home loan bank funding.

Money market growth has been strong for the last 12 months and is now the largest deposit type. DDA [indiscernible] to be the next largest contributor comprising 34% of customer deposits. As we move forward into 2018 deposit generation will continue to be a priority for us.

Please turn to the next slide. Over the past 5 years our focus has been on maintaining our controls and profitable growth. As you can see from this slide, we continue to successfully grow to consolidate our position in the marketplace. The tables on this slide illustrate the results of our strategy across the board; net loans, deposits, tangible capital and net income have grown significantly over this period of time. Q1 was another banner quarter for CNB as I previously mentioned.

Please turn to the next slide. Finally let us show you a summary of CNB's performance during the previous 5 years. We've already discussed most of the information illustrated here in the table so let me point out that there has been consistent performance over the last 5 years. Before I wrap up let me focus on what we expect for 2018 as we continue building up our pipeline and now focus on having a strong second quarter. Our key priorities during the coming year are continuing to focus on regulatory excellence as a pillar of our business and also focus on our asset quality, maintaining the momentum of our organic growth and the ongoing business, the successful integration of TotalBank and diversification along business and geographic line. We will continue generating new business opportunities such as we did with leasing and continue consolidating our positions in Tampa in Orlando.

In order to do this we have hired a dedicated team of integration experience to minimize distractions in addition to hiring external consultants. As a result we do not expect the integration process to affect our business. We firmly believe that CNB represents a uniquely positioned growth platform due to our current market positioning as it relates to scale in our business model, our relationship-based value proposition, our ability to continue recruiting the best talent in the marketplace and the strength and support of Bci. Our management team is extremely dedicated and focused and we are confident that CNB will continue to produce results for Bci as we expand our teams and our business. Our value proposition is well-received by the overall marketplace as the big bank alternative. In closing, CNB is well-positioned to continue improving its already stellar performance as we focus on building the iconic Florida banking institution. I thank all of you for your time today. I look forward to next time I join you on an earnings call. Now let's turn the call back over to Jose Luis for final thought and a wrap-up.

[José Ibaibarriaga Martínez, executive]

Thank you, Dan, as always. Please move to the next slide. In order to achieve our digital transformation plan we have put in place a change management plan based in 6 pillars as you can see in the chart. This plan will enable us to create transversal skills and simplify how we are organized, ensuring focus and harnessing synergies, fostering a power internal culture based on our core values. Bci already has competitive advantage in this area as well as our unique commitment to developing leaders. This is why we create an integrated model of organizational studies and competencies which is aligned to our evaluation process.

This allowed us to measure and enhance our customer-focused strategy, quality collaborative work, open innovation, our challenge execution and integrated leadership. This will develop individual and organizational strategic capacities in which we must see if we are able -- if we are -- if we can be most loved and preferred bank by the year 2020. Our intense collaboration among different areas of the bank to find synergies that enhance their efforts, that simplify our way of doing things, sharing information and knowledge to innovate openly without fear of their failure through experimentation. With this we can open now the question-and-answer session. And thank you very much for being there.

[Operator]

[Operator Instructions] And our first question today comes from Felipe Kim Ikari with Itau BBA.

[Felipe Kim Ikari, analyst]

I have 2 questions. The first one is regarding loan growth. In the first quarter we saw a 13% year-on-year expansion, portfolio expanding [indiscernible]. Given the strong first quarter do you still expect portfolio to grow around 10% for the full year or are you more optimistic regarding loan growth for 2018 especially in the commercial portfolio which seem to be strong for this quarter. And the second one is regarding taxes. In the first quarter we saw a big drop in the effective tax rates, posting a number in the neighborhood of 20% in this quarter, at what level should we expect tax rate to be for the rest of 2018?

[José Ibaibarriaga Martínez, executive]

Thank you to you, Felipe. Regarding the first question, yes, we have been growing at a good pace in the loan portfolio in the 3 main areas commercial, consumer and mortgages. We expect that we will continue having a good performance and earning market share in those segments that we are focusing and we want to -- and we have declared them as preferred. In the commercial side we expect to have a loan portfolio growth of our around 8% to 9%, in the consumer area between 11% and 12% and in the mortgages loan between 14% and 15%. We have not seen, as of today, a pickup in the commercial loans as Sergio Lehmann explained in the beginning. So we will see how it behaves in -- during the rest of the year, but we are not expecting something different than the -- than what we already talk. And in the tax rate, the tax rate that you saw in the first quarter is something that we expect that we will continue having in the rest of the year. We estimate that we will have an effective tax rate of around 21% to 22% during the rest of this year. And the difference between Bci historical consolidated legal rate and the effective rate, if you do the tax savings by means of monetary correction of our equity we reach about 5.3% in terms of effective rate.

I don't know if that answer your question Filipe.

[Operator]

The next question comes from Neha Agarwala with HSBC.

[Neha Agarwala, analyst]

Could you please repeat your loan growth guidance by segment? And which is the segment where you seem most downside risk in terms of your potential target? My second question is in terms of your branch network with all the emphasis on digitalization, paperless transactions, do you plan to close any branches or revamp the ones that you currently have and make them more paperless?

[José Ibaibarriaga Martínez, executive]

Sorry, Lia, the second question I didn't understood it. Can you repeat it, please?

[Neha Agarwala, analyst]

Yes. My question was on your branch network. Are you looking to close branches or to revamp your branches to make them more paperless and more digital and efficient?

[José Ibaibarriaga Martínez, executive]

Okay, thank you, Lia. Regarding your first question, the loan growth, we estimate that we are going to have a loan growth portfolio overall of 9.5% to 10%, in the consumer area we are estimating between 11% to 12%, in the commercial area between 8% to 9%, and in mortgages area between 14% to 15%. Regarding the downside we are not expecting a significant change that we have seen during this first quarter. And regarding your --

[Neha Agarwala, analyst]

[Indiscernible] on your mortgage growth is a good part of this 14%, 15% longer term by the high online approvals and moving to digital channels?

[José Ibaibarriaga Martínez, executive]

We are estimating that growth because we are heavily investing in the customer journey over mortgages area where we thought and we believe that creating and eliminating all the issues associated with the mortgages loans and make it easier for all the customers we will obtain a significant -- we will obtain a significant part of the market. The strategy to have and be focused in the mortgages is associated to the value of those customers as soon as they are -- they have the mortgages with us. The net present value of our customers having the mortgages is 2 times more or less after a couple of months. And the reason for that is because they bring the economy with us, we are able to cross selling them and in the long term all the things that we do in Bci is a very good decision. And answering the question why the net interest margin decreases in Bci is associated with a mix that this mortgages rates bring with us. But we are really focusing in the long term and we really believe that focusing in the mortgages area will give us a lot of value for BCI. And regarding branches, adapting our branches is a current model and we are boosting omnichannel solutions to different model and [indiscernible] functionalities in order to prove the customer experience. But at the end of the day we are working heavily on an omnichannel strategy where branches will continue to have a role. It's going to be a different role. And we are moving from the typical role that we have seen to a more automatic, a more advisor kind of branches than what we have seen in the past. This is something that will be done step-by-step. We have done some in the first quarter where we have closed some branches without -- maintaining our employees in order to maintain the relationship with our customers. So we have closed some branches and we have put all those people in other branches in order to fulfill them and assure that our customer experience, which is our strategy, is not being affected.

[Neha Agarwala, analyst]

If I can ask one additional question. On the IFRS implementation, if I'm not wrong, Chile is not adopting IFRS9 but they're making some changes in the estimated loss models which will impact the provisions. Do you have any estimate of this impact this year or next year on your provisions?

[José Ibaibarriaga Martínez, executive]

I think that your question has 2 areas. One is IFRS9. We are working on that. We have some -- we have hired an advisory company in order to help us in the creation of the different models that we need to implement it. We estimated that we are going to have that in order to be ready early in 2019. That is one thing. And the other thing that, I assume that your question is regarding the provisions models for -- that the authority has sent to consultants. Obviously we have made some calculations, but as we don't know how the regulation will end I think that it's not serious to give some numbers to you now. As soon as the regulations are defined we can share with you how much we estimate that is going to be the impact. And Andrés Atala will be more than willing to do it and we will not need to wait for a conference, quarterly conference call to answer that question.

[Operator]

[Operator Instructions] Our next question comes from Sebastián Gallego with Creditcorp Capital.

[Sebastian Gallego, analyst]

I have 3 questions this time. The first one is related to nonrecurrent events. You talk about the Creditcorp's shares but can you comment also on the unusual income coming from the FX on the income statement? The second question is regarding OpEx, you guided 5% to 6% OpEx growth for this year, but you continue to heavily invest in the digital transformation process. Can you comment on what areas are you going to implement a more stringent cost control? And the final question is on CNB. Mr. Dan talked about, a lot about the forward-looking guidance on a qualitative basis but can you provide some quantitative guidance on what you expect for CMB in terms of profitability, in terms of loan growth, in terms of efficiency? Yes, more numbers -- can you provide more numbers?

[José Ibaibarriaga Martínez, executive]

Okay. I will go with 1 and 2 and Dan you help me with the third one please. Regarding the nonrecurrent events one of the thing that we did during the first quarter is that as we define Creditcorp as not a strategic asset and at the same time the price of that share hits the maximum historically we took advantage to sell some part of the position and that is reflected in the profit and loss of the year. Regarding the second question of the net, the FX, the income statement, I think that what you are talking is about the some investments that are done in the sales position and we do not have any a specific thing that happened except that we have had a very good performance in the first quarter in the financial area. If you mention there is any issue except that very good performance I don't have anything to tell you. I think that all the positions that finance team has done is a good performance. So and regarding the OpEx. OpEx is obviously a -- something that is very important for us. The -- if you see, the historical performance of Bci has been always been very careful with expenses and with the risk obviously. We are investing in a very deep transformation plan. We are working in customer journeys, we are working in data analytics, we are working in the IT architecture, we are working in operations, the [indiscernible] processes and all of them has increased our efficiency ratio as you mentioned, and how we are going to come back to the 44%, 43% efficiency ratio on the 2020 is basically by 2 things. One, we believe that with all this transformation that we are doing we are going to grow at a double pace at the growth of our expenses. Basically we are going to -- we expect that we are going to grow our revenues around 10% to 11%, our expenses between 5% to 6% in the next couple of years, so not only we are going to achieve the goal by reducing cost but increasing our revenues side as well. Focus in the cost side, in the cost side obviously we have basically 2 cost areas in any bank. You can see that human resources and IT operations we are working in both of them. Regarding human resources there are some decreased. But as Bci has a tradition any decrease in the personnel will be done at the Bci way taking in consideration and with respect and dignity that all personnel needs, so it's going to be as smooth transition. And in IT we are starting to see some improvement in some digitalization end-to-end of some processes. And we are -- we believe that we are going to start seeing it with a bigger impact in our profit and loss statement by this year and especially in 2019 and 2020. If you ask me specifically which area, it is difficult to answer that because we are working in several areas in order to achieve that. I don't know if I was clear in the formal presentation but this year we believe that we are going to decrease around 200 basis point, finishing between 48%, 49% [indiscernible] ratio this year. So I don't know if I -- that -- I answered the question, Sebastian.

[Sebastian Gallego, analyst]

Yes, Jose Luis. Just before going to Dan I would like to follow up on the initial question on the FX because definitely it was a good performance, but let me rephrase the question then. So during the quarter there was CLP 53 billion income from this line and this compares to 4.8 billion on average on a quarterly basis since June 16, so my question is, is this kind of performance sustainable?

[José Ibaibarriaga Martínez, executive]

Of course, Sebastian, you know than better than me that it's almost impossible to tell you that that is going to be the performance for the next quarter especially coming from the financial area. This is an area that moves according to the market and who knows how the market is going to move, so very difficult to give you a straight answer. I hope so.

[Daniel Kushner, executive]

Sebastian, I think your question for CNB is a very good one. I want to preface my answer by saying we generally don't want to give any kind of forward guidance for the company. I'm not really sure that that's 100% appropriate for us at this time. That being said, I think that in general it has been our goal to achieve and maintain returns on equity in excess of 10%. We would expect that to happen this year. We already have it for the first quarter and we expect that to continue for the rest of the year. Additionally we have budgeted for the year to surpass $100 million in net income. I think we're well on our way to accomplishing that. And in terms of our loan growth, I would expect our loan growth to be something probably not quite as much as it was in last year but maybe in line with about a 15% growth rate.

[Operator]

At this time this will conclude the question-and-answers section. I would like to turn the floor back over to Mr. Jose Luis Ibaibarriaga for any closing remarks.

[José Ibaibarriaga Martínez, executive]

Thank you very much for all your questions. We believe then we have strong first quarter results and hope to have you in the next quarter conference call. And if you have any questions, any doubts that you want to go through please contact Investor Relations team which will, gladly will take all your doubts. Thank you very much and have a good afternoon.

[Operator]

Thank you. This concludes today's presentation. You may now disconnect your line at this time. And have a nice day. Thank you.