Banco de Credito e Inversiones

SGO:BCI

Earnings Call Transcript 2021-Q4

[Andrés Atala S., executive]

Good morning to all of you, and welcome to our 2021 year-end conference call. My name is Andres Atala, Head of Investor Relations. And today, I'm joined by Eugenio Von Chrismar, Bci CEO; José Luis Ibaibarriaga, CFO; Juan Enrique Pino, Head of Credit Risk; Sergio Lehmann, Chief Economist; and from City National Bank of Florida, Jorge Gonzalez, CEO; Jose Marina, CFO; and Hugo Loynaz, the Chief Credit Officer. [Operator Instructions]

To begin our presentation, I will leave you with our CEO, Mr. Eugenio Von Chrismar.

[Eugenio Von Chrismar Carvajal, executive]

Good morning, everyone. I hope you are staying healthy with your families. I am very proud of how our bank responded in this complex scenario to our employees, suppliers, clients, shareholders and society as a whole. It's not novelty to you that the pandemic is changing how people work and consumers engage with companies. Many of you are probably not now in your office and are watching this from your homes. I am convinced that in all these companies that continually seek to adapt and evolve will be successful in this new context.

In the case of Bci, I would like to highlight the deep technological and cultural transformation driven in these last few years, which has enabled us to adapt to new challenges. In the last 4 years, we have invested over $400 million in the transformation we have undertaken, working with leading companies worldwide. Indeed, today, 90% of our operations are in digital channels, as you can see in these slides. Also, personal banking accounts for a 70% share of digital sales with sound customer experience indicators.

Likewise, I would like to highlight the consolidation of our cash management corporate platform, 360 Connect, where 54% of the commercial loans are generated online. This cultural transformation has been driven with the highest corporate engagement indicators was around 90%, with Bci at a level of excellent and above the global market benchmark.

I will also like to inform you that this year, we have implemented our organization of the future, which will be the basis for executing the strategy of achievement, achieving market leadership with a clear digital and international focus. This will mean major investment in talent and technology with 2 new independent vehicles, digital ecosystem and wealth management.

Regarding the ecosystem, the digital ecosystem, we are developing a powerful value proposition based on 4 pillars. Firstly, unify the insurer base of MACH, Servicios Financieros and the bank, which now jointly have about 5 million clients on a single P2P and P2M platform expanding the scale and acceptance network by means of partnership with third parties. Secondly, enhance customer relation with an offering of banking products through MACH and Lider Bci with a 100% digital proposition supported by transactional data. The third pillar entails building top-of-the-line loyalty programs in the country to make merchants and people loyal, and thereby expand the scale of the ecosystem and increase engagement. The fourth pillar is the development of the first one-stop shop platform for small and medium-sized enterprises in Chile, expanding the ecosystem by means on an integral proposition of services to micro merchants.

In 2021, we also secured authorization to start operating the Bci Pagos. Our joint venture with EVO Payments, one of the leader player worldwide. Our objective is to achieve a 20% share of the acquiring market in 5 years.

In the particular case MACH, we continue to make large progress, as you can see in these slides. In 2021, we have over 3 million users and managed to migrate to a new banking core that would enable us to become a digital bank. In the year, we have increased average balance by 35% and credit card issued by 22%. Furthermore, over 120,000 merchants already accept MACH.

On the other hand, we have maintained high user satisfaction leading to a Net Promoter Score of more than 72% in December. We will also like to highlight that we continue to launch new products and services like MACH juniors, an account for youngsters under 18 years old, and we have started the pilot plan for savings and investment products.

Regarding to new wealth management division, our aim is to drive a unique strategy, operating in an onshore and offshore market, deploying advisory skills, a personalized value offering and efficient solution based on data analytics through a combination of distribution network with a large digital and regionals goals.

I would like to highlight the following large progress made with our international strategy. Since we acquired CNB, we have increased assets by 4x and net income by over 5x, attaining this year a record income of $229 million. This has enabled us to consolidate as the second largest Florida-based bank for deposits.

Regarding the Bci Perú, a market in which we have been operating for over 20 years, we have already established the team, systems and processes, and we are considering the start-up operation in the first half of this year. We have identified a profitable and attractive potential market comprising Peruvian corporations and subsidiaries of Chilean parent companies.

I would further like to highlight that our international operation now account for more than 30% of the total assets. In 2021, we have also made large progress in operation and in technology with developing a flexible and modular technological architecture to connect to the ecosystem quickly. All this has meant been able to improve the time to market for our clients and generate robust processes that has been essential for improving our customer experience, as you can see in this slide.

Regarding cybersecurity, we have implemented several models certified under different international standards, which so far has enabled us to minimize incidents and generate a culture that is focused on customer, employees and suppliers to prevent fraud, cyberattacks and cybercrimes.

Related to ESG, our commitment to sustainability is in our DNA. As an organization, we are convinced that the company to get better results in the long term and aware of their role in the society and act accordingly, considering that our employees, clients, suppliers, shareholders and the community in which we operate. We made 7 green bonds issues in 2021. And recently, in January, we made the first public placement by the Chilean bank in the Swiss market. MSCI upgraded Bci rating to A, and we are also listed on the Dow Jones Sustainability Index in the MILA and Chile. In 2021, we become the first Chilean bank certified as a carbon neutral. We are very pleased to inform you that in 2022, we have adhered to the principle of the Responsible Banking of the United Nations Environment Programme, making us the first bank in the region to be part of this initiative.

I would like to mention the market recognition of our different strategy initiative related to corporate reputation, innovation, customer experience, sustainability best practice, among others, and you can see in your screens.

I will lastly like to stress that our transformation process is active more than ever in which the digital economy, the development of ecosystem and international strategy will continue to be the silent drivers of growth and will, therefore, be the main drivers of the strategy of Bci and our investment with our same hallmark conviction.

I am very proud of all our achievement in 2021 with record financial and nonfinancial results. We know that this year, there are still sanitary, political and economic uncertainties for which Bci and its primary commitment to the country, we continue to firmly support our employees, clients, suppliers and the community we were operating. This is the only way we will manage to successfully address the new challenges, along with a great, great team of professional, sound values and a business culture to make us different. Thank you very much.

[Andrés Atala S., executive]

Thank you very much, Eugenio. Now Sergio Lehmann will bring to you a brief about the economy in Chile and in the U.S.

[Sergio Lehmann, executive]

Thank you, Andres, and good morning, everyone. The global economy continued to show a positive trend in last quarter of 2021, although the latest data shows a slight slowdown. COVID-19 new variants, high inflation and supply chain issues have lowered economic projection by 2022.

Recently, the IMF reduced world economic outlook from 4.9% to 4.4% for this year, mainly explained by an adjustment in developed economies and in China. In Florida, we have seen better jobs creation and faster growth recovery than the rest of the U.S. In Chile, GDP growth reached 12% in 2021, one of the largest worldwide, and supported by a large amount of economic transfers to households, a flexible vaccination process and better copper prices, among other factors. But inflation has risen faster than expected and ended 2022 -- 2021 at 7.2%. Interest rates have increased accordingly given aggressive response from the Central Bank to control inflation pressures.

The Chilean peso was one of the most depreciated currency in 2021 due to political uncertainty but has regained value starting this year. Elected President recent announcement reinforcing a moderate tone and better political outlook has somewhat improved the confidence in local financial markets.

On the next slide, we present main economic figure for U.S. and Florida. U.S. GDP grew by 5.7%, one of the largest in recent decades, but this is expected to decelerate in coming quarters. Florida labor and GDP trends have been better than the rest of the U.S. Inflation, however, is the main economic challenge ahead, and the Federal Reserve will substantially increase the federal fund rate during this year.

Please move on the next slide. In Chile, economic growth has been remarkably strong in the second half of 2021 and mostly explained by product consumption of goods and services. We expect a deceleration in the second half of this year due to higher interest rates and contraction of fiscal policy.

Preliminary, we are forecasting a low recession in the fourth quarter, but this condition to expectation and future economic policies of the new government.

On the next slide, we see Chile's labor market. Figures are improving and recovering from prepandemic -- from pandemic crisis, but most indicators still have not reached prepandemic levels. The unemployment rate has diminished, but the labor force participation rate remains constrained. Job gains have been across sectors, mostly in construction.

Please move to the next slide. The inflation in 2021 reached 7.2%, one of the largest in recent decades and well above Central Bank's target. Increasing inflation in Chile was mostly determined by local factors, mainly because of currency depreciation, high domestic demand, another factor.

The monetary policy rate has increased rapidly from 0.5% in June to 4% in December. Recently, the Central Bank raised the rate to 5.5%, and we expect higher inflation in coming months, nearly 8% in midyear, and then it will decelerate. The monetary policy rate will continue to move close to 7%, and we expect a gradual normalization. Risks over inflation remains elevated, and 2-year expectation are still above 3%, which is the target of the Central Bank, but lowering in the latest.

Please move to the next slide. Finally, on this slide, we see local financial markets movement. Chilean peso has regained value and is one of the most appreciated currency so far in 2022. Volatility on the FX market as is recently, but long-term interest rate remains high due to monetary perspectives. We expect that lower political uncertainty and will anchor inflation expectation will help to decompress the FX and fixed income market.

Now I will leave you with José Luis who will continue with the presentation. Please, José Luis.

[José Ibaibarriaga Martínez, executive]

Thank you. Good morning, everyone. Thank you for participating in this call, and hoping you and your family has been safe and healthy. As you can see in this snapshot of the bank, we ended this year once again as leaders in terms of consolidated loans and asset with almost USD 82 billion.

As Eugenio recently mentioned, we have successfully diversified our operations by adding new line of businesses and also by expanding geographically as shown at the top right of this slide.

Let's go through the main figures for our consolidated operations. In a challenging year, we recorded positive operating revenues of 8.26% year-on-year. This was driven by higher inflation regarding income and lower interest expenses as a consequence of a drop in the cost of deposits due to a large increase in noninterest-bearing deposits. On the other hand, risk expenses decreased 33% due to the fact that economic aid from the government and the withdrawals from pension funds were maintained during this year.

In terms of tax, there was a significantly higher tax expense mainly after adjusting the year-end exchange rate, which increased the value of City National Bank of Florida investment. As you can see, the bank had a sound consolidated bottom line, increasing by almost 64% year-over-year despite the recording of additional trade provisions of around USD 217 million.

I would also like to highlight City National Bank of Florida, which continued to achieve strong results. In 2021, City National Bank reached almost $230 million of net income, an 80% increase year-over-year. Jorge and Jose will further provide details of the main drivers behind this success.

Finally, I would like to highlight the 15.5% equity growth, as you can see at the bottom of the slide. In this slide, we take a look at the result at the local level in terms of year-end changes. As usual, the main line items follow a similar trend than the consolidated result.

From now on, we will focus in Bci local results. Bci portfolio amounted to $35.3 billion in the fourth quarter, increasing 11.3% year-on-year, mainly driven by the growth in the commercial and mortgages portfolio. The commercial loan growth is in line with lower liquidity seen in the local market, which has implied that corporate companies are seeking funding from banks.

In addition, we want to highlight the growth in our factoring subsidiary. It should also be noted that in the local commercial portfolio, there is also an exchange rate effect after a significant dollar appreciation.

In 2021, taking into consideration that 15.2% of the local portfolio is in dollars, mortgages loan continue to have a sound growth of 16.5%, as you can see in the bottom right chart, although a slowdown is expected due to the rise -- the raise in interest rates and commercial conditions.

Regarding the consumer segment, loans started showing a sign of reactivation on a year-over-year basis, slightly increasing by 1%. Nevertheless, we believe consumer loans growth is expected to take a significant -- since the liquidity in the market should fall after the end of the government support initiatives. Therefore, this year, we expect to see growth in the mid-single digit.

Regarding local NIM, compared to last year, it has remained relatively flat. As you probably recall, in the third quarter 2021, the ratio was affected by hedge accounting losses after a redistribution of fair value hedge accounting. The aforementioned did not have an impact on the bank's bottom line since it was offset in financial operations. However, it somewhat mitigate the tailwinds associated with higher inflation and lower cost of funds.

Regarding fees, the 8.7% year-over-year growth has been mainly driven by the results of the credit cards business as a result of higher transaction volume as well as positive results from our subsidiaries Bci Asesoria Financiera and Bci Corredores de Seguros.

In terms of OpEx, we managed to maintain OpEx growth well below annual inflation in Chile. The bank ended 2021 with an efficiency ratio of 45.8%, almost 170 basis points below last year. Although we expected to have a lower efficiency ratio, we have not lost sight on the long term by investing with the aim to become leaders in key initiatives such as the new digital ecosystem where, this year, we will continue to invest with great conviction and strength in our transformation process, as Eugenio recently mentioned. These vehicles put greater pressure on expenses and efficiency in the short term.

We want to stress that all of this is not only focused on profitability, but also on the sustainability objectives, democratizing access to the financial system. All these efforts will allow us to reach our target efficiency of 42% by 2023, which will be a key driver to achieve a return on average equity of 14% to 15%.

Over the past years, we have strongly focused our efforts on the liability side of the balance sheet. One, growing Bci's overall deposit base, mainly retail clients; and two, further diversifying our funding sources via our program. We successfully achieved and surpassed our expectation within these priorities.

Our deposit base, including both nonbearing-interest rate deposits and time deposits, grew 14%, while demand deposits grew 27.8%. From a structural funding perspective, we have continued to engage with international investors in the most important market abroad, including green bonds into one of the largest funds in the world.

With regard to Basel III implementation, so far, we have complied with 100% of the schedule associated with the delivery of the new regulatory reports from credit market and operational risk, ended this year with a 9.9% CET1 ratio under Basel III, as you can see in the top right chart. For Bci, the transition from Basel I to Basel III standards has benefited capital ratios.

Lastly, I want to highlight the sound growth in net income where, this year, we had a result of USD 616 million where we must consider 2 relevant effects: one, constitution of additional provisions, which Juan Enrique Pino will address shortly; and higher tax that I explained at the beginning of this presentation.

Now I'm going to pass you over to Juan Enrique, who is going to discuss our asset quality and loan portfolio composition. Thank you.

[Juan Enrique Visinteiner, executive]

Thank you, José Luis. Hello, everyone. It's a pleasure to be here. So let's go to the first slide. As you can see in this slide, our loan portfolio increased during 2021, which was mostly driven by residential mortgages and commercial loans as demand for loans started to recover. In the same period, nonperforming loans rate decreased to historical loans, accounting to 1.1% of total loans by the end of 2021. This is mainly explained by the significant liquidity programs that the government provided in several forms to the individual and companies as well as by the support program implemented by Bci to its customers in the forms of new money, deferrals, restructures, et cetera, most of which was favored by different government guaranteed programs. By the end of 2021, almost all our credit portfolios were totally back to the normal amortization schedules.

As the government liquidity support initiatives approach their end and individuals and companies return to the new normal, we believe it is reasonable to assume that our credit portfolio level should return back to prepandemic levels or eventually worse. As a result of that, we have been building up voluntary provisions in all portfolios where portfolio specific provisions are linked to the level of PDOs and NPLs or in portfolios where our assessment of the payment capacity of our borrowers may be somehow clouded by the transitory effects of the large level of liquidity injected into the economy.

However, we do believe that some support initiatives have been so strong that they may have helped many customers to improve structurally and not only temporary. So the net effect may be better than originally expected.

Let's go to the next slide, please, commercial loans. The commercial loan portfolio has shown signs of growth in 2021, mostly due to business expansion. This has more than offset the portfolio decrease coming from scheduled payment amortizations of loans granted more than a year ago when the COVID crisis was hitting the economy hard. As to NPLs, we remain seeing a very positive trend. Nevertheless, we have continued to build voluntary provisions in anticipation of what we believe should be the post-pandemic level.

As to LLP ratio, loan loss provision ratio, we have made efforts to reflect in our internal credit ratings and, hence, in our loan loss provisions the tighter financial condition of some borrowers, which were more easily identifiable as potentially impacted by the crisis where we have been building, in parallel, voluntary or additional provisions for what is less identifiable on an individual basis.

Let's go to the next one. So residential mortgages loans portfolio have maintained the resilience in the current scenario, with portfolio size increasing nicely and with NPL ratio still performing well below prepandemic levels. As to loan loss provisions, we have built up level of voluntary provisions in order to offset what we believe is only transitory drop in NPL ratio and also to reflect the potential impact of weaker unemployment rate.

Let's go to the next one. So here, we're with consumer loans. After a decline in portfolio size during 2020 as a result of lower demand from borrowers and portfolio rebalancing actions taken by Bci, portfolio size has started to gradually recover in 2021. Customer support measures taken by both Bci as well as by the government, along with the digitization of payments and collections, and with a very active set of portfolio management and collection, actions have all enabled an improvement in the NPL ratio for both Bci's traditional consumer lending segment as well as its affiliated Servicios Financieros formerly Walmart Chile's financial arm. We do expect that excess liquidity in the market should fall as government support initiatives tends to end with the exception of the new guaranteed universal pension. Therefore, some degree of rebound in risk ratios should be expected.

Voluntary provisions have been built as in other portfolios in order to recognize the higher risk in this portfolio, not yet evidenced in PDOs or NPLs, which remain extraordinarily low.

[Andrés Atala S., executive]

Thank you, Juan Enrique. Now I will leave you with Jorge Gonzalez, City National Bank's CEO; as well as Jose Marina, the bank's CFO. Jorge, please open your mic. Not yet. Now we can hear you. Thank you, Jorge.

[Jorge Gonzalez, executive]

Good morning, everyone. My name is Jorge Gonzalez, and I'm the City National Bank CEO. Jose and I are excited to be here with you this morning to discuss our results for 2021, especially after closing the year in such a strong fashion.

So 2021 was a year of significant accomplishments for the bank. Our total assets increased by $3.4 billion for the year as we crossed the $19 billion, $20 billion and $21 billion thresholds in assets and finished just under $22 billion at the end of the year. This growth was achieved by both growing our loans and core deposits in a significant manner.

After being focused on PPP and MSLP during 2020 and also the second round of PPP during the first quarter of the year, we were excited to get back to business of traditional lending as the economic fundamentals in the U.S., and especially in Florida, continue to improve.

City National Bank has a long track record of outstanding organic loan growth and performance. The combination of our organic growth engine with the strong macroeconomic conditions in Florida drove the highest organic loan production in our bank's history and propelled 18% loan growth rate, excluding PPP loans.

As you will see, our loan production was diversified, and we're able to further improve our already strong asset quality metrics during the course of the year. You can also see that the deposit growth continues to be robust, with client deposits increasing by $3.5 billion or 24%, a growth rate that is twice of that of the banking industry as a whole.

Our significant loan-to-deposit growth translated into strong results as well. In fact, our core net interest income, which excludes the impact of PPP and MSLP fees, increased by $63 million year-over-year as a result of our overall growth. This core earnings growth, along with lower loan loss provisions, drove an 81% increase in net income year-over-year.

Additionally, you will also see that the strongest quarter of the year from a loan production perspective was the final quarter of the year. So we're really well positioned for a strong '22 in earnings as well.

We will conclude our comments this morning by discussing the fundamentals that are in place and have positioned us for success in 2022. But first, I'm going to let Jose Marina review our 2021 financial achievements results with you.

[Jose Marina, executive]

Thanks, Jorge. On this slide, you can see that our assets increased by $3.4 billion during the course of the year to $21.9 billion, with $1.3 billion of our asset growth occurring in the most recent quarter. Our 2021 asset growth was purely organic as we did not close any acquisitions during the year. You can also see that our annualized asset growth rate for the most recent quarter of nearly 25% significantly exceeded the growth rate of the banking industry as a whole.

It is also important to note that even after growing our non-PPP loans by 18% during 2021, our loan-to-deposit ratio remains very low at 72% due to the impact of our deposit growth as well as the liquidity received from the PPP forgiveness process, which are 2 items that we will discuss shortly. The key point is that we have ample liquidity to support strong loan growth as we head into 2022 and beyond.

After increasing our deposits by $3.5 billion in 2020, we were able to increase our deposits by an additional $3.5 billion or 24% during 2021, including $1.3 billion of growth in the fourth quarter alone. We continue to focus on cross-selling deposits on all of our new loans as well as doing a loan renewal process.

A substantial amount of our growth is in noninterest-bearing deposits, which now accounts for 40% of our deposit base. Our noninterest-bearing deposits increased by $1.8 billion year-over-year, a 32% growth rate. We have also been able to cut our spot cost of our deposits by nearly -- by about 15 basis points over the prior year as well, providing some NIM relief.

On the right-hand side of the slide, you can see how our deposit growth rates over the last quarter and over the prior year compares to the banking industry as a whole. City National Bank's deposit growth rate significantly exceeds that of the industry for both time horizon, demonstrating that our cross-sell efforts have paid significant dividends. As a result, we have ample liquidity to continue funding our strong loan demand.

On this slide, you can see that we've deployed a significant amount of our liquidity into the investment portfolio, which has grown from $4.1 billion at the beginning of the year to $6.1 billion at the end of the year, representing now nearly 28% of our assets.

On the right-hand side of the slide, you can see that 94% of our portfolio is in agency securities, with only 4% in corporate security. As a result, our investment portfolio possesses minimal credit risk and is highly liquid.

I'd also like to point out that we had over $1.3 billion of cash at the end of the year, comprising 6% of our total assets. This cash will also benefit the bank in a rising rate environment, which we'll address further in a few slides.

The combination of our long-proven loan production capabilities, combined with the strength of the Florida market, resulted in $5.4 billion of loan production, excluding PPP, which is a 67% increase over our 2019 loan production. This record loan production drove $1.9 billion of growth in our non-PPP loan portfolio during the course of the year. We had an especially strong fourth quarter where we were able to grow the portfolio by $1.2 billion, with $2.1 billion of production in that fourth quarter alone. Given that 63% of our loan growth for the year took place in the fourth quarter, much of the impact of our 2021 loan growth will materialize in our 2022 results. Therefore, we are well positioned to get off to a strong start in 2022.

It is also important to note that our record 2021 loan production was very well diversified, as you can see on this slide. Only 41% of our production is considered commercial real estate. And the production within commercial real estate is well diversified, as you can see in the breakout on the right-hand side of the screen. Commercial and industrial loans as well as residential loans are significant components of our production at 21% and 19%, respectively. Residential lending is an area where we have devoted additional resources, and we were able to double our production over the prior year.

On the prior slide, we observed that our 2021 loan production is well diversified. On this slide, we can see that our outstanding loan portfolio as of the end of the year is also very well diversified, with only 43% of our portfolio classified as commercial real estate. You can also see on the right-hand side of the slide that there is ample diversification within the commercial real estate category with no one category representing more than 21% of commercial real estate.

It is also important to note that the real estate secured loan categories have a very low weighted average LTV of only 56%. In fact, CRE, owner-occupied CRE and residential loans all have weighted average LTV of below 60%, indicating that our loan portfolio has been assembled in a very conservative manner.

Finally, you can see that our CRE concentration ratio, which measures our CRE exposure over our regulatory capital, is only 255%, well below the 300% guidance threshold established by regulatory authorities.

On this slide, you can see the evolution of our PPP loans and fees. We funded $1.85 billion of loans a year ago with $57 million of fees. During the course of 2020, we forgave $197 million of those loans and recognized $23.6 million in fees of income, leaving us with $1.65 billion of loans and $33.7 million of fees outstanding at the end of 2020. During 2021, we originated $790 million of loans under PPP 2.0 with $29.5 million of fees. We also proceeded to forgive $1.7 billion of PPP loans, and we recognized $45 million in fees in the process. As a result, we closed the year with just over $700 million in total PPP loans outstanding and $18.2 million of PPP fees that will be substantially recognized over the next year as these loans are forgiven.

Now I'd like to discuss our asset quality trends. You can see that our loan deferments have declined all the way down to $21 million, down from the $290 million at the beginning of the year. As you can see in the bottom left-hand side of the slide, all remaining deferments are in residential mortgages. It is also important to note that the weighted average LTV of the residential loans on deferment is a very conservative 59%.

Our NPLs have also declined significantly during the course of the year from 96 basis points as of December 31 to 51 basis points as of December 31. Our past dues have also declined substantially to 28 basis points of loans, excluding PPP, as you can see in the top right. As a result of these improving asset quality indicators, we recognized a $7 million loan loss benefit in 2021 after recording over $100 million in provisions in 2020. This modest $7 million benefit recognized in 2021, along with the loan growth that we recognized, served to reduce our ALLL coverage ratio to a still strong and conservative 1.14%. Overall, the deferment trend is strong. The remaining deferments are well secured, and already strong asset quality indicators continue to improve.

Moving to our results for the year. Our net income totaled $229 million, an increase of $103 million or 81% over the prior year. Although much of the improvement is due to the $109 million reduction in loan loss provision, you can see that our core earnings before any loan loss provision increased by $34.5 million or 12% year-over-year driven by a $66 million increase in net interest income. We will more clearly display this evolution of core earnings on the next slide.

You can also see in the chart at the bottom of -- that our ROA and ROE for the year are both strong at 1.13% and 10.8%, respectively. Our efficiency ratio is also strong at below 46%. In summary, we are generating strong results in 2021, and our core earnings trend is very favorable.

On this slide, you can see the year-over-year evolution of our pretax pre-provision earnings, which increased by 11%. As you can see, the main driver of the improvement was a $63 million increase in our core net interest income, which excludes PPP and MSLP fees. The $63 million increase in core net interest income reflects the impact over 80% loan growth and our 24% deposit growth. The expense growth of $37 million reflects the investment we are making in our future as well as the impact of some nonrecurring items in the fourth quarter. Our core earnings growth is strong and will continue into 2022 given that 63% of our loan growth occurred in the fourth quarter and had a minimal impact on our 2021 core net interest income.

The left side of the slide, you can see the evolution of our net interest income compared to the linked quarter and the fourth quarter of 2020. The dark green part of the bar represents our net interest income, excluding the impact of PPP and MSLP. And you can see that our core net interest income increased by over $3 million over the linked quarter and by $22 million or 21% over the prior year. Our significant growth in earning assets resulting from a 24% increase in deposits has driven our net interest income growth, excluding PPP and MSLPs. PPP fees exceeded $10 million in the fourth quarter, increasing by $2.3 million as compared to the linked quarter, given the commencement of the PPP 2.0 forgiveness process. Overall, net interest income increased by nearly $6 million over the linked quarter.

On the right-hand side of the slide, you can see our net interest margin evolution as well. Our core NIM, excluding PPP and MSLP, declined by 3 basis points over the prior quarter to 2.6%. However, our overall NIM for the quarter was 2.74%, including the impact of PPP, which had a 14 basis point impact on our NIM. In conclusion, although our net interest margin is declining in percentage terms due to increased liquidity and the impact on asset mix with 28% of our assets in the investment portfolio, the net interest income trend is very favorable.

As you know, the market is expecting about 4 rate hikes in 2022 where the first one expected to take place in March. It is therefore important to mention that our balance sheet is asset-sensitive and that we are well positioned for the eventual increase in short-term rates.

As you can see on this slide, 35% of our loan portfolio reprices within 1 year. 40% of our deposits are also noninterest-bearing, which also serves to provide great value in a rising rate environment. It is also important to mention that City National Bank entered into $325 million of forward starting swaps over borrowings during 2020 when rates were at a historically low level. These forward starting swaps have a duration of about 6 years and will fund during 2022 and 2023 at an average cost of 55 basis points, providing significant value once rates increase. In short, our balance sheet is well positioned and will benefit from the rising rate environment.

Now I'd like to pass it back to Jorge Gonzalez, our CEO, to discuss our top priorities as we head into 2022.

[Jorge Gonzalez, executive]

Thank you, Jose. I'd like to conclude today's call by looking ahead into 2022. As you saw during this morning's presentation, we closed 2021 in an extremely strong fashion, and we're well positioned for another strong year in 2022.

As we carry this momentum into this year, there are 5 factors that provides City National Bank with a strong opportunity to continue outperforming our peers. First, we're operating in the state with one of the best economic environment in the nation. Affluent individuals and sizable businesses are relocating from the Northeast and other parts of the United States to Florida on a daily basis. We have the scale, products and market expertise to continue benefiting from these favorable economic conditions. Second, City National Bank has unparalleled thought throughout -- unparalleled talent throughout the organization. We're focused on continuing augmenting our talent base with the best talent in the market as we also serve to offer a work environment and a culture that maximizes employee retention. To that end, City National Bank has been named one of the American Bankers best banks to work for 4 out of the last 6 years, including the last 2 years. Our results are a direct reflection of our people.

Third, we continue to invest in technology, and our digital transformation initiative continue to build upon our recent digital investment that has enabled many of our key accomplishments in the past year. Over the last 2 years, we have deployed sales force and the nCino loan origination system in our institution, and we're currently working on deploying new models within these tools during 2022.

Fourth, we see ample opportunity in expanding our presence in Central Florida in addition to capitalizing on more opportunities in Palm Beach and Fort Lauderdale markets that are just north of Miami. Although we have a presence in all of these markets, there is a tremendous opportunity for us to gain market share outside of Miami by reinforcing our presence in these important markets.

And finally, we have a very strong brand in Florida that has been developed and earned since we first started operating in Miami over 75 years ago. As a result, we're excited not only about delivering strong results in '22, but also in many years to come.

In conclusion, we have achieved tremendous growth in 2021 that generated strong earnings growth. Our strong 18% loan growth in '21 was also concentrated in the fourth quarter, which really sets us up well for a strong 2022. We also continue to augment one of the best deposit franchises. Our asset quality metrics, which were already strong, continue to improve, and we're generating significant earnings growth. While our results are benefiting from the impact of PPP forgiveness, the strong loan growth that we're generating now will continue to generate and will ensure that our strong results will be sustainable.

And now I'm going to turn it back to our Bci team for final thoughts and a wrap-up.

[José Ibaibarriaga Martínez, executive]

Thank you, Jorge. Thank you, Jose. Finally, I would like to wrap up this presentation by addressing our 2022 guidelines for Bci's main figures, considering the macro variables forecasted by Bci Research and that Sergio shared early in this presentation.

As you can see in the slide, local growth will be in the middle single digit, while NIM should stay relatively flat. In the case of OpEx, it will grow in line with inflation. In the case of City National Bank of Florida, loan growth should be the middle single high digits. Considering this scenario, net income should grow between 15% to 20% year-over-year.

So now we will go to the questions that you may have. Thank you very much for participating in this presentation. Just to remind you, the presentation, the script and the video that we are recording will be in our website as soon as we finish. So please feel free to make any questions that you may have.

[Andrés Atala S., executive]

Thank you, José Luis. Thank you again to everyone. We have the first question from Tito Labarta.

[Daer Labarta, analyst]

Just thinking how do you expect inflation to behave throughout the year? And if you can remind us a little bit the impact on your margin from inflation and also how the higher interest rates could potentially offset that. And on the ROE target for 2023 to get to that 14% to 15%, if you can maybe give a little more color on the main drivers to get that. And then how would that look between Bci and Chile and City National Bank?

[José Ibaibarriaga Martínez, executive]

Okay. Tito, thank you very much to you. Always, you are very active in this call, so appreciate that. Sergio, can you address about inflation, and then I talk about margin and return on equity, please?

[Sergio Lehmann, executive]

Sure, José Luis. Thank you, Tito. Yes, we are expecting that inflation rate is going to remain between 7% and 8% in the coming months. And then in the second part of the year, it's going to be decreasing gradually. And we're expecting at the end of the year, it's going to be close to 4.7%. And this is mainly because we are expecting a significant deceleration in the second part of the year because of the monetary policy going to be contractionary and also the reduction in public expenditure. And for the next year, we're expecting that the inflation rate is going to continue to going down, and we expect it to finish in 2023 in 3.2%, 3.3%. Given that in that year, the economy is going to be almost in the trend current with the potential growth.

[José Ibaibarriaga Martínez, executive]

Thank you, Sergio. Tito, regarding your question, we made some short-term sensibility measurement [indiscernible]. This measure is a shock parallel to the short-term rate curve. In this case, we assume that the monetary policy rate impacts only the items of the banks that are denominated in pesos or in U.S. And we estimate that the amount of 100 basis points is around CLP 16 billion.

And how the NIM is affected by the change of 100 basis points in inflation? Basically, the -- generally, in the balance sheet, the gap of U.S. is around CLP 2.9 billion upgraded assets. Therefore, a movement of 100 basis points will impact around CLP 29 billion on the income statement assuming that the rest of the relevant valuables remain unchanged. The total effect on the income statement will depend on the combined effect of the changes in inflation rates, movement on the temporary interest rate structure and the sensibility of the balance sheet to this movement. On the other hand, we can take a temporary position in trading.

And regarding the return on equity, our expectation is that basically, we are leading in margin and revenue growth. We expect recent -- Juan Enrique mentioned that we will have a rate of risk that is a little bit higher than we have this year that was completely historically. And the expectation is that by -- driven the revenue growth, at the same time, controlling our expenses, we will arrive to the [ 40%, 30% ] interest rate.

Just to remind you, Tito, that this year, we have around 12.5% return on equity. But in that number, we have created USD 213 million in voluntary provisions in order to have space to unusual situations in the future. And at the same time, the exchange rate growth create a value of our investment in City National Bank that affect our tax issue. So if you adapted the 2 things that I'm just telling you, the return on equity of 2021 should be higher than what I'm telling you for the 2023. So I hope that I answered your question. Or if you want to go as in detail, just let us know.

[Andrés Atala S., executive]

Tito, are we okay?

[Daer Labarta, analyst]

Sorry, I couldn't unmute there. That's helpful. Just one follow-up was on how you see the ROE between Bci and Chile and City National Bank?

[José Ibaibarriaga Martínez, executive]

See. Thank you, Tito. We expect that City National Bank, we have a return on equity in 2023 around 12% to 13%. And in Chile, we'll be more close to 15%. So the average will be between 14% to the 15% range. And we are giving this range obviously because you are aware of the impact of inflation in Chile that can improve or not our estimation. We -- in the 14%, 15%, we have been a very conservative approach in all different variables.

[Andrés Atala S., executive]

Next, we have another question. Sorry, another question from Ernesto Gabilondo.

[Ernesto María Gabilondo Márquez, analyst]

Congratulations to your fourth quarter results. I have 3 questions from my side. The first one is on the political landscape. We have seen some moderation of the new government. However, where do you see the potential risks? I would like to know your thoughts on the tax reform, the change in the constitution and in the pension reform. So that's the first question.

The second question is on your expectations on asset quality. What do you see the NPLs and the cost of risk this year? As you have mentioned, you have been building additional provisions. So just wondering if you see room to release provisions this year.

And my last question is on MACH and your digital transformation. In your remarks, you are saying that you want to become a digital bank. So can you share with us what is the time line for the creation of this digital bank, if you're expecting to approach the on-bank clients? And when do you expect the digital bank to be profitable and contributing to Bci's earnings?

[José Ibaibarriaga Martínez, executive]

Thank you, Ernesto. Sergio, can you take the political landscape and talking about the potential risk, tax reform, pension reforms and other? And then Juan Enrique, can you take the second question regarding NPL, release of voluntary provisions, and I can take the third one of MACH, please.

[Sergio Lehmann, executive]

Sure. Thank you, Ernesto. As you said, indeed, the elected President [indiscernible] has a moderated tone. And in that sense, in our view, the politic risk has been diminishing.

Respect to the reforms, as you know, we have today a very balanced Congress. So in that sense, in our view, it's going to be required consensus dialogue and give some agreements in particular issues, particularly in the case of the pension reform, also the tax reform and other reforms that are required in order to confront the new decade for the Chile country, for the Chilean economy. So in that sense, in our view, the risk has been decreasing very significantly.

Respect to the constitutional process, it's still an uncertainty, there is no doubt on that. But for the final proposal of the new constitution is required to third quorum for each of the article. So in that sense, in our view, also, the risk there is, in some sense, very, very limited. But anyway, today, the Chilean assets are incorporating any way some uncertainties. And as you know, the interest rate is still very high. And also, we see that the interest rates are still relatively high if you compare with historical levels. But anyway, the uncertainty has been decreasing. And [indiscernible], we are a little bit more comfortable with the coming government and the performance of the Chilean economy in the coming years.

[Juan Enrique Visinteiner, executive]

Ernesto, as to voluntary provisions, we need to see the economy getting back on track. We need to see it for some quarters. We need to see unemployment rates stabilizing. And then we need to see the credit portfolios starting to show their real performance without the benefit of this transitory liquidity that was injected in the market. So I guess what I'm trying to say is that we see an opportunity in the future in releasing reserves, but there are many ifs and whens. So it's too premature to define right now a time for that. So I think it still depends. It still depends on those 3 factors that I just mentioned, economic recovery, unemployment rate and the bank of the true performance of the credit performance.

[José Ibaibarriaga Martínez, executive]

Thank you, Sergio. Thank you, Juan Enrique. Ernesto, regarding your question of MACH, it's important to mention that we are creating a full payment ecosystem, and we create a new organization that reinforce the importance of this strategy. As Eugenio mentioned, we create the digital ecosystem division that basically has the MACH, all the credit card and debit card of the bank, the Servicio Financiero with the ex-Walmart Financial Services and the [indiscernible] payment. All of them together has around 5 million customers. And if you add with all our data, models and investment that we have been doing during the last couple of years, we are -- we believe that we are in the best position to lead this arena.

Specifically about MACH and when we come to be a complete digital bank, first of all, let me know that -- you know that we have around 5 million customers. In the short term, we are considering to launch the following products: MACH acquisition model where we start to operate transaction completely within MACH. Just remember that we changed the core system of MACH, and that is allowing us to speed all this process.

We are creating an ecosystem being the U.S. acquirer and issuer, achieving a much more competitive fee for the thousands of businesses that want to implement this solution. Today, we have a payment of remuneration, massive payers, MDR for car purchases through trans bank and international acquirers, payments of bills and prepaid charges like utilities, TV, Internet and [indiscernible] And we also like to highlight we continue to launch products and services like MACH Junior that is recently launched with an incredible success and account for youngers below 18 years old. And we have started to pilot plan for saving and investment products.

Basically, what I'm trying to say, Ernesto is that we have everything in place, and we are delivering to the market product and services according to customers' needs, and we expect that we will have a full free for customers bank in the near future. We believe that 2022 will be a key year for us.

And finally, your question regarding profitability. We are working really hard in that. Basically, our revenues are coming from China deposits and commissions that we are charging to our merchants. And what we are trying to achieve is basically to be in the day-to-day lives of our customers. And with that, we are going to be profitable. Yet, answer your question, we believe that by the end of 2022, we will be in a very good position of profit.

We are not giving specific guidelines of MACH for the near term, but we can tell you that we are very satisfied with the financial results, and more than that, with all the achievements that we have done with MACH. I'm very, very optimistic with all the products and services that we are launching and we are going to launch in the next -- near future.

[Ernesto María Gabilondo Márquez, analyst]

Just a follow-up question on the asset quality and your expectations for the NPL of this year and the cost of risk this year.

[José Ibaibarriaga Martínez, executive]

Can you give some highlights there, Juan Enrique?

[Juan Enrique Visinteiner, executive]

So Ernesto, in NPLs, when we're observing closing the year is that, as you saw in the presentation, they have reached historically low levels. We're seeing so far, no sign of them moving up. We're projecting, though, that they are going to be moving up to prepandemic levels along the next 2 years, more heavily probably in the second quarter of this year -- second semester of this year, first semester of next year. So that's us to appeal. I don't know if you have any other indicators that you want to make reference to.

[Ernesto María Gabilondo Márquez, analyst]

The cost of risk.

[Juan Enrique Visinteiner, executive]

Cost of risk, certainly, we expect it to be higher than last year as we see NPL ratios and PBOs moving gradually up during this year. But it's going to be -- that will, we believe, a grower process.

[Andrés Atala S., executive]

And the next question is from Yuri Fernandes.

[Yuri Fernandes, analyst]

I have a first one regarding our earnings growth outlook. I guess you have the 15% to 20% EPS growth for 2022.

[José Ibaibarriaga Martínez, executive]

Excuse me, we are not hearing you very well. Can you speak slower? Because we are not hearing you very well. We can't hear you at all then.

[Andrés Atala S., executive]

You're on mute.

[Yuri Fernandes, analyst]

Can you hear me now?

[José Ibaibarriaga Martínez, executive]

Yes.

[Yuri Fernandes, analyst]

Okay. No, sorry. I have a question regarding your 15% to 20% EPS outlook growth for 2022. I would like to understand where this growth -- this earnings growth will come from because looking to the loan book, the impression I had from the call is that marketers will decelerate, but volumes may not be super strong like loan volumes. And margins will be flat. And regarding asset quality, I guess, was previous questions, you are not calling for additional provisions to be reverted this year. So basically, my question is, where the 15% to 20% EPS growth will come from? It's going to be efficiency, lower taxes? So if you can help us to understand the earnings growth, that would be great.

And I have a second question regarding CNB. You mentioned the asset sensitivity. We know Fed will start hiking rates in the U.S. But I would like to understand a little bit more how important the sensitivity -- that your asset-sensitive -- that's clear for us. You have 40% of your deposits, not paying any interest rates on very interest deposits, but I don't get the sensitivity. And if you can provide any kind of 100 bps sensitivity or 25 that I think it's more reasonable for the U.S. just for us to understand if there is not 4 hikes, but 7 hikes, whatever, and how important that could be for the CNB profits for the year. Congrats for the call.

[José Ibaibarriaga Martínez, executive]

Yuri, Jose, can you address the CNB sensitivity? And I then explain why the range of 15% to 20% increase in net income.

[Jose Marina, executive]

Of course, José Luis. So Yuri, on -- regarding our sensitivity, we look at a plus 100 or a plus 200 scenario. Given in the first year, there's a little bit more of -- based on the timing and the assumptions over the pricing -- the repricing of deposits and the lag and repricing some of the loans, I think we're pretty neutral on year 1 as far as the impact of a 100 to 200 basis point shock on the income statement -- on our net interest income. However, by the time you get to year 2 and all of that noise is eliminated, for a 100 basis point shock, our increase would be roughly 5% conservatively on our net interest income and a 200 basis point shock about -- just short of 10% and then increasing from there as we go out 2 years, 3, 4 and 5.

But again, I think we -- and that's assuming historical betas as well. I think with our very low loan-to-deposit ratio, which is, as you saw, about 72%, we're going to have a lot more pricing power in order to maintain control of our deposit costs and our interest-bearing deposits. And I think the industry as a whole as well is much more liquidity in the U.S. banking system, loan-to-deposit ratios in the whole banking system at historically low levels. So I don't think we're going to see as much of a push as we've seen in the past, much pressure on those deposit costs increasing as we saw about 4 years ago when rates were increasing in the last cycle.

[José Ibaibarriaga Martínez, executive]

Yuri, and regarding the net income increase year-over-year. Basically, we have 3 impacts -- one of -- is in margin. And you are right in order that we are going to grow more in the middle single digit this year. But remember that we grew in the commercial and in mortgages between 8% and 15% last year. So the average loan portfolio in Chile will tolerate that.

And regarding the negative effect that NIM of the lower inflation that we forecast for this year, it's practically offset by an increase in the target inflation gap for 2022. Along with this, with the foregoing, the main drivers for the trajectory described in the margin are associated to, one, we are going to have higher loan margin, especially in the retail segment, negatively offset by higher financing costs. Then we are going to have higher financial margin associated with the management of our portfolio, investment portfolio, mainly driven by the monitoring normalization process carry out by the Central Bank, which has replicated an increase in rates and in the structure of our portfolio. Also, as we mentioned in this presentation, in 2021, the ratio was affected by hedge accounting losses after a resolution of fair hedging accounting.

The other thing that is going to affect is obviously in the risk area. Remember that we had a profit of more than $600 million in 2021. And at the same time, we create more than $200 million in voluntary provision, which we are not -- estimated that we are going to make an amount of that magnitude if we do some voluntary provisions. So you have one important effect there.

And the other important effect that we had in 2021 was the exchange rate increase that affect the investment in City National Bank and that profit or increased investment generate more access that is around [ $18 ] million.

So overall, we are not estimating 2 main effects: one, the tax impact that we did have in 2021; two, the generation of $200 million in voluntary provisions. So those 2 main effects explained by itself. What we are seeing in the rest of the balance sheet, as you expect, is an increase in margin according to what I expect. In OpEx, we expect that we are going to grow around inflation, a little bit less. Risk, we are going to grow, as Juan Enrique said, but lower than what we did have in the past and if you compensate it with the voluntary provisions. And finally, we are not expecting to have as much taxes as we did in 2021.

Andres, I don't know how we are in time. We can continue.

[Andrés Atala S., executive]

Yes, yes.

[José Ibaibarriaga Martínez, executive]

Okay. Let's go.

[Yuri Fernandes, analyst]

That's clear. So basically, the only difference, I guess, and what I understood previous is like the cost of risk exclude additional provisions, cost of risk is going up. However, it will take out these voluntary provisions we did in 2021, you are calling for cost of risk to come down in 2022 versus 2021. In margins, I guess our guidance is flat [indiscernible], but you'll have like kind of a positive bias for margin. So maybe it's flattish but slightly up, right? I guess that's the 2 message from your comments, José Luis.

[José Ibaibarriaga Martínez, executive]

And finally, we are not going to have the tax impact, Yuri.

[Andrés Atala S., executive]

Now we have another question from Daniel Mora.

[Daniel Mora, analyst]

Can you hear me well?

[José Ibaibarriaga Martínez, executive]

Yes, Daniel. Sure.

[Daniel Mora, analyst]

Perfect. Congratulations for the results. I have a couple of questions. The first one is a follow-on regarding cost of risk. We observed a strong surprise during the last quarter to record additional provisions. Now we reached a coverage ratio above, 300%, and the bank decided to maintain a conservative approach. What -- my question here is, what is the bank seeing in the coming months quarter regarding the payment behavior of clients considering that asset quality declares remain at historical low levels? And as you mentioned during the presentation, some of the benefits provided to household during the pandemic had a structural effect on clients, not just temporarily. So with the coverage ratio above 300%, do you expect to maintain this figure in the coming years? Or do you believe that we can return to more normal figures here? That will be my first question.

The second one is regarding Basel III standards. Now with the starting the implementation of the regulation, we reached CET1 of 9.1% -- 9.9%. Do you expect to reach a higher CET1 in the coming quarters? Or do you have an internal target for the CET1?

[José Ibaibarriaga Martínez, executive]

Thank you, Daniel. Juan Enrique, can you address the risk question? And I address the best Basel III one.

[Juan Enrique Visinteiner, executive]

Sure. So your question, Daniel, was regarding the loss coverage ratio. So yes, they're definitely -- in the very high end, we expect them to move down as we see credit performance going back to the [indiscernible]. So there's a numerator effect and a denominator effect. The denominator, that ratio should be moving down because we should now start to see losses manifesting as they were before the pandemia. And as we see that and as we see them stabilizing the nominator shows to be adjusted in terms of the size of provisions, both specific and voluntary. Now that's going to be something that is going to be happening around the next 3 years. We don't see a drastic change.

Even though most of the liquidity programs have ended, you know that the financial system still has a lot of that cash still in the system. So customers have proven to be pretty responsible, both individuals and companies and the holding amounts of cash way beyond what they used to do in the past.

[José Ibaibarriaga Martínez, executive]

Daniel, that is okay?

[Daniel Mora, analyst]

Yes. Perfect.

[José Ibaibarriaga Martínez, executive]

So regarding Basel III, the improvement of CET1 and the Basel III basically is due to a positive impact on credit risk-weighted asset. That more than offset the additional of operational market risk-weighted assets. Indeed, saving of USD 4 billion were achieved in the credit risk-weighted asset in the transition to Basel III. And in operational risk and internal loss multiples, ILM was also certified saving around $500 million there.

On top of that, you asked me what are our target. Our target is to be in -- over 10%, specifically 10.03%. We finished in 9.99%. Our estimation is that on January, we are going to be over 10%, and we believe that we are going to be over 10% during the rest of the year. And the coming years in order to achieve 100% of the implementation in Basel III, we are estimated that we are well positioned. And our estimations are that we are not going to need any capital increase in the near future. That is okay, Daniel, or you need more details?

[Daniel Mora, analyst]

I wasn't able to unmute myself. Yes, it is perfectly clear.

[Andrés Atala S., executive]

Next question is from Felipe Navarro.

[Felipe Navarro Donetch, analyst]

Could you provide targets for the main figures of MACH for this year? I mean client growth, merchant, et cetera. And the same question about Bci Pagos. What should we expect for this year?

[José Ibaibarriaga Martínez, executive]

Thank you. Felipe, the target for MACH for this year is we are growing at a rate of around 3,000 customers a day. We have a target to finish with 3.5 million customers, which we are increasing the use of them.

And regarding Bci Pagos, we are estimating, as Eugenio said, to have 20% market share in a couple of years. We are not giving specific guidelines of MACH more than that.

[Andrés Atala S., executive]

That we've shown in the presentation.

[José Ibaibarriaga Martínez, executive]

That we show in the presentation, Felipe.

[Andrés Atala S., executive]

Felipe, are you still with us?

[Felipe Navarro Donetch, analyst]

Yes. Sorry. Yes. Perfect.

[Andrés Atala S., executive]

The last one is from [ Sebastian Ramirez ].

[Unknown Analyst]

Mine would be a little bit more strategic regarding to your operations in U.S. You have shown a very interesting path in improved profitability and increasing that branch. So it will be interesting to see for you guys what is the end game here. If we move to 2025 onwards, what should we expect for that branch to grow? And as you pointed out a few minutes ago in regards of capital needs, how much space within the balance you think you have in order to further consolidate the [indiscernible] market?

[José Ibaibarriaga Martínez, executive]

Jorge, maybe you can give some snapshot of the strategic view as City National Bank, and then I address the overall strategy of Bci and how much we can grow according to the capital. That is the question.

[Jose Marina, executive]

José Luis, Jorge stepped out, but I'll take the -- I'll go ahead and respond.

[José Ibaibarriaga Martínez, executive]

Thank you, Jose.

[Jose Marina, executive]

Great. So City National Bank, we view ourselves as a private commercial bank focused on banking commercial clients. We have a robust private client group as well, focused on high net worth individuals and professionals, including law firms. So we have a separate division devoted to that within our private client group. And then we also target the owners and executives of the companies that we target. So we are always looking to cross-sell our clients and deepen their relationship. And we are operating in 1 of the best markets in the United States here in Florida, experiencing a robust economic growth, population growth. Every day, we read about new companies that are relocating from the Northeast or from the West Coast to Florida.

So we're going to be focused on capturing that business, continuing to cross-sell our existing clients and then expanding our -- investing in some of the markets that we're in such as Palm Beach County, Orlando and Tampa. We're in those markets, but we have a tremendous opportunity to gain significant market share in those markets that are also benefiting from this migration of population and businesses to the state of Florida.

So if you look at our historical growth rate, I think when Bci acquired City National Bank -- City National back in 2015 when that transaction closed, we're about $5 billion in assets. And today, we're just short of $22 billion. So we've grown about $17 billion over that 6-year period. So as we head into 2025 and beyond, obviously, we see the ability to continue that growth trajectory, not quite at that 18% loan growth that we had in 2021, but I would say in the high single-digit range as we head into 2022 and beyond and continue to be a -- really the bank of choice here in Florida. Even though we're not the largest bank headquartered in Florida, we have the most deposits of any bank headquartered in Florida. So we -- I think we're in the right market. We have the right strategy, and we're going to continue executing on our plan.

[José Ibaibarriaga Martínez, executive]

Thank you, Jose. And Sebastian, when we decide the strategy on open ourselves to some revenue diversification and we increase our bid in the U.S. by acquiring City National Bank and the TotalBank and Executive Bank. And then you have seen all the results that we have achieved, thanks to the clear strategy in U.S., plus an excellent executive team that has created an execution that is outstanding.

Today, we have around 30% of our assets in the U.S. and 35% of our profit, if you take into consideration voluntary provision or not. And the answer to your question is the following. We are seeing that in Chile, the economy is growing at a lower pace in the last couple of years. The potential growth in Chile for the next year is around 2% to 2.5%. And on top of that, we have some uncertainty that Sergio mentioned about constitutions, some reforms, tax, pension reforms, that creates some uncertainty. And obviously, that create some impact on investment. So expectation for growth for Chile in the future is between 2%, 2.5%, et cetera, et cetera. So we are estimating that the way that we can continue growing at the pace that we have done is increasing our investments in U.S.

As I told you, our return on equity is in the range of 14% to 15%. If we achieve that, we will have space to grow in the 7% to 8% annually. And if you believe that Chile is going to grow between 2% to 2.5%, we have more space to grow in U.S.

So as I mentioned early in this presentation, we are expecting a single middle growth in Chile. We are expecting a high single growth in the U.S. So overall, we can achieve the strategic plan that we have for Chile and for the U.S. with the capital that we have today and the capital that we are aggregating year-over-year with this capitalization strategy that we have had in the past.

[Andrés Atala S., executive]

So we don't have more questions. So thank you very much. I don't know -- final wrap-up.

[José Ibaibarriaga Martínez, executive]

Thank you very much for the presentation. We take additional time, but we are pleased to answer all your questions. Any additional questions that you may have, the Investor Relations team is always open. Remember that this presentation, the script and video will be in our website in order -- if you want to see it. And any additional questions, please feel free to do it. So have a nice day, and thank you very much for participating in this conference call.

[Andrés Atala S., executive]

Thank you very much to all of you.