Banco de Credito e Inversiones

SGO:BCI

Earnings Call Analysis

Bci Strengthens Amidst Turbulence

Despite a year of global uncertainty and high inflation, Bci closed with a solid $778 million profit, reflecting effective cost control and slightly growing expenses. Loan share in Chilean banking increased to 19.7%, and total assets including City National Bank surged to $90.4 billion, up from $32.8 billion. Bci ramped up capital by $700 million for growth and Basel III compliance. MACH reached 3.9 million customers, and significant strides were made in diversifying revenue streams. Investment in technology over the past five years approximated $540 million, enhancing efficiency and reducing customer impact. Bci Peru targets $3 billion in corporate loans by 2026, with a planned $24 million technology investment.

2023 Performance amidst Global Challenges

In the landscape of 2023 marked by political conflict, economic slowdown, and a dramatic shift in interest rates due to soaring inflation, Bci successfully navigated through these turbulences. Remarkably, they achieved a net profit of $778 million and led the Chilean banking sector with approximately 19.7% market share in total loans - a 50 basis point improvement from the previous year. The bank's operational efficiency played a critical role, with expenses growing a marginal 0.8%, significantly trailing inflation rates.

Strategic Growth and International Expansion

The bank's strategic maneuvers extended beyond just coping with harsh economic tides. A calculated $700 million capital increase was orchestrated to bolster their domestic and international strides, aligning with the upcoming Basel III regulations. Marrying digital innovation with banking, Bci's digital platform MACH hit 3.9 million customers, signifying their dominance in the sector. Moreover, the bank's international footprint is now firmly planted, with City National Bank boasting a capital exceeding $2.3 billion and assets over $26 billion, equating to 30% of Bci's total assets.

Embracing Digital Transformation and Data Analytics

Bci is transforming its physical channels to match the evolving digital ecosystem, banking on three strategic objectives that pivot around customer experience, digitalization, and future-ready banking models. They have made data analytics (D&A) a cornerstone of their operations and are connecting their Wealth Management across Chile, the U.S.A., and Peru to form a unified investment platform.

Investing in Technology and Culture

A transformation from a traditional bank to a hybrid digital-physical entity was made possible by continuous investment in technology, process automation, and cybersecurity. This change was also mirrored in their cultural fabric, elevating their commitment to sustainability and financial inclusion through initiatives like Valor Pyme, which supports 260,000 SMEs collaboratively.

Forward-Looking Statements for 2024

Looking ahead, Bci projects an exciting 2024 with key projections including high single-digit loan growth and a flat net interest margin (NIM). Operating expenses are anticipated to increase lesser than inflation - a reflection of their efficient productivity plans. Meanwhile, City National Bank is expected to mirror this positive outlook with loan and NIM growth. Collectively, these initiatives have set a forecast of 5% to 8% growth in consolidated net income for 2024, supporting the strength in their capital ratios bolstered by a recent $500 million private AT1 placement.

Earnings Call Transcript 2023-Q4

[Andrés Atala S., executive]

Good morning, and welcome to our year-end conference call for 2023. I'm Andres Atala, Head of Investor Relations, and I'm here with Jose Luis Ibaibarriaga, our Corporate CFO; Mr. Sergio Lehmann, our Chief Economist; and Juan Enrique Pino, here on my left, Head of credit Risk at Bci. We are also joined remotely by Jorge Gonzalez, CEO of City National Bank; and CFO, Mr. Jose Marina, from Miami.

As usual, we will have a Q&A session at the end of the presentation. When we get to this part, please, we kindly ask you to raise your hand to ask your questions.

To start, I would like to share a message from our CEO, Mr. Eugenio Von Chrismar, with all of us.

[Eugenio Von Chrismar Carvajal, executive]

Good morning. Thank you, everyone, for joining our annual conference call. We will present our 2023 results and discuss the progress and challenges of our strategy.

2023 was a year full of uncertainty, political conflict and slower economic growth, given the unprecedented increase in interest rates as we deal with high-inflation loans. However, we are very satisfied that we successfully faced these headwinds. We remain true to our strategy, which was centered around relationship banking, diversification and scalability supported by our robust technological and digital capabilities. And of course, thanks to the strength of our teams, culture and values.

We closed the year with a profit of over $778 million, in line with the estimation provided in our last conference call. I'd like to highlight our operational productivity and efficiency, which allowed us to contain expenses and grow slightly by 0.8%, well below inflation. We maintained first place in the Chilean banking industry with a share of about 19.7% in total loans and around 14.7% without considering City National Bank, implying a growth of 50 basis points compared to the previous year.

As for the investment abroad, City National Bank exceeds $2.3 billion in capital in 2023 with a CET1 of 13%, an asset over $26 billion, representing 30% of Bci total assets.

We have reached a significant site in Florida, the second largest bank based in these states for this reason to face the challenges and take advantage of the opportunities that the coming years will bring. We are strengthening our strategy with the advice of Mackenzie, focusing on sustainable, diversified and profitable growth.

As you know, the financial industry in the U.S. experienced a significant crisis of confidence at the beginning of the year, impacting liquidity and higher funding costs. City National Bank successfully navigated this time [indiscernible] solvencies, liquidity and proximity to our clients.

Related to Bci Peru, at the end of its first year of operation reached a loan portfolio equivalent to $1 billion. Our international platform now has over $35 billion in assets outside of Chile, representing 35% of Bci consolidated assets. In the last 7 years, our total assets, including City National Bank have increased from $32.8 billion to $90.4 billion, making us the 8th largest bank in Latin America.

In line with above, in 2023, we completed a capital increase of $700 million to support our local and international growth strategy and ensure a smooth transition to Basel III.

As for our digital ecosystem, I want to highlight that in MACH, we've reached 3.9 million customers, making us the financial platform with the highest number of users in the banking. More than 790,000 users already have [indiscernible] accounts. During 2023, we decidedly advance in the development of BciPlus, whose goal is to have the best loyalty system in the country for business and individuals.

In just the program's first 7 months, associated businesses has multiplied their sales on average by 10. After acquiring the strategy, we continue to work with our partner, Global Payment to strengthen Bci Pagos. We're working and incorporate new products and services to serve all customer segments and become a relevant player in the industry, achieving a significant market share.

In retail area, we continue to work on new client capture by leveraging our new onboarding capabilities, D&A and digital channels. We plan to grow significantly in loans in affluent segments, be more focused on those where we will achieve greater engagement through investment, insurance and payment products. This will allow us to increase our commission. At the same time, we implemented the new distribution and service model, allowing us to provide customers with all the digital capabilities. We have been developing in the recent year, offering a digital-first service model, focusing on resolution, simplicity and closeness to our customers.

Therefore, we are transforming the experience in our physical channel by implementing new branch experience which transform physical space, roles and processes within our office. In line with this, last December, we announced the unification of the digital ecosystem and retail banking areas under retail ecosystem with 3 objectives.

First, to integrate new and traditional business into a winning value proposition for individuals and SMEs. Second, to unify the customer vision with a consequent acceleration of decision making and value delivery and third, to give consistency to the customer spend across Bci Group products.

Another strategic pillar for us is data, knowledge and the potential of D&A, which is already a reality in the current business. In this context, the D&A area will become part of the management committee reporting to the CEO.

In Wealth Management, the challenge is to grow significantly in assets under management by 2023 across all the segments, delivering the best customer experience and leverage, the development of the best investment platform in Latin America, connecting Chile, the U.S.A. and Peru.

In wholesale banking, we aim to continue promoting companies' sustainability and maintaining leadership in business volume with the service model of the relationship banker with 360 degrees and a long-term vision. We want to continue leading our clients' everyday banking through significant investment in developing the 360 Connect platform, which grow our finance, recognized as the best digital bank for businesses. Also, we want to support our corporate clients in their internalization plans in Peru and Miami, doubling our financing for Chilean companies in 1 year.

For our international platform, we have an ambition plan. In Bci Peru, we aim to reach $3 billion in corporate loans by 2026 with an estimated return of equity between 12% and 13%. For Bci Miami, our challenge is to increase customer engagement and efficiently execute the technological transformation plan, which will require an investment of $24 million over the next 3 years.

As we scale our balance sheet size and advancing our internalization, we work an investment around $540 million in the last 5 years to transform the bank. We have evolved from a traditional analog bank to a physical digital bank. We have profoundly transformed our business model, analogical capabilities and [indiscernible]. We envision that technology, data and digitalization will play a fundamental role in our physical digital omnichannel strategy.

To deliver a consistent and seamless experience at all touchpoints, leveraging the intensive use of cloud services and data analytics, we transform our technological architecture will now allow us to capture the benefit of process automization, robotic implementation and [indiscernible] security programs where we have had a permanent and sustained investment, enable us to analyze, prevent and detect potential cybercrime. Today, we have a modular and [indiscernible] system architecture, with reasonable components throughout the corporation, improving the speed and delivery of solution to our customers.

This investment enabled us to be more efficient in software development processes, supported by artificial intelligence improving the development cycle times by 4. At the same time, we have enhanced capabilities to save work, the stability and resilience of platform, network and system, reducing customer impact by more than 12x and preparing Bci to manage an exponential increase in transactions and meet customer expectations.

All this transformation has been supported by the profound cultural changes. We have remained true to our [indiscernible] and the purpose of [indiscernible] to make a difference in the life of our customers, employees and the community. This is playing why Bci is recognized as a bank that puts people at the core of its decisions, elevating our commitment to sustainability to the highest level of the corporation, promoting a strategy focuses such as environmental care, financial enable, sustainable investment and the construction of an inclusive and equitable succession, driving financial and data empowerment.

I would like to emphasize that we have a dedicated team of banker and specialists focused on sustainability. We are a leader in the local market in sustainable financing with a stock of $1 billion. As a net zero banking alliance member, our bank aims to achieve zero greenhouse gas emissions. In line with our financial inclusion strategy. We have strengthened our Valor Pyme platform, Chile's largest open and collaborated community. Today, they are already 260,000 SMEs operating in it. We have significant partnerships with leading companies such as Microsoft, [indiscernible] of the main SMEs networking in Chile.

I would also like to highlight the several recognitions we have received in sustainability, customer experience innovation. And those associated with [indiscernible] way we work according to the [indiscernible] and Merco [indiscernible] ranking, the bank has the best corporate reputation and is the most responsible company in the country.

I want to finish by highlighting our substantial investment in transforming the bank to incorporate data capabilities and new talents, representing about 25% of our employee base. We have enhanced better competence such as collaboration, empowerment and innovation in more diverse and flexible work environment. This aim to boost our technological capabilities, putting us in an excellent position to accelerate our growth while always maintaining the sense and culture that have characterized us in our more than 85 years of history.

Thank you again to all of you for your presence, and now I will pass the call to the team who will continue with the presentation.

[Unknown Executive]

Thank you, Eugenio. Good morning, everyone, and thank you for participating in this conference call, in which we will discuss our 2023 financial results, some of the progress we have made on our strategy and the coming challenges, as Eugenio already mentioned.

I would like to start this presentation by sharing some key highlights of our performance and the main figures of our consolidated operation as of fourth quarter 2023. As you can see in this slide, Bci's operating revenue decreased 6.6% year-over-year due to lower financial margins and fees caused by lower inflation and increase in interest rates.

Regarding our international operations, it is important to mention that last year, we were experienced increased funding cost from the United States due to the higher interest rate on deposits which have impacted City National Bank's net interest margin and Jose will address this further in his presentation.

Regarding provision expenses, the increase is mainly due to an increase in the delinquency rate on the retail financial industry. This has affected both Bci Local operations as well as Bci Financial Services.

Consolidated operating expenses increased only 0.8%, in line with our efficiency and productivity plan as mentioned by Eugenio. Finally, the higher tax rate was mainly due to the valuation of the investment in City National Bank of Florida and the monetary correction associated with changes in CPI.

In summary, we believe these 4 points are not have a structural effect on the bank's soundness. Overall, we have a strong performance last year.

Moving to our local loan portfolio, the 4.7% year-on-year increase was mainly driven by commercial and mortgage loans as you can see on this slide. Regarding commercial loans, we have slightly increased 7.1% volume of loan, highlighting our pricing strategy and increasing market share in this segment. Also, this quarter, we continue with great traction in 360 Connect, which is reflected in increasing levels of online credits.

The consumer loan portfolio decreased by 10.4% year-over-year, mainly because of a drop in loans and installments due to higher interest rates and market conditions.

To continue this presentation, we will be addressing key metric of MACH, the corner store of our digital ecosystem. Currently, our platform has nearly 4 million users with nearly 1 million monthly active users where more than half of them have heavy users, meaning that they make more than 6 transactions per month.

Last year, we launched several new products with new -- with the new checking account being the most relevant, reaching near 400,000 users by the end of the year and providing our clients the opportunity to ask for a physical debit card that is accepted in all businesses.

In addition, Cuenta Futuro, our saving account reached more than 170,000 users. All of this contributes to a [indiscernible] increase in total balance. Over the past 12 months, more than 570,000 clients have successfully completed transactions using P2M, showcasing the platform's efficacy. Additionally, around 49,000 clients are actually utilizing the MACH buy now, pay later credit line. This particular product has undergone meticulous refinement and we have successfully identified the right model segment and offer to ensure profitability.

As you can see in the left side chart of our local net interest margin, for 2023 was 3.93%. The NIM experienced a year-on-year decrease of 55 basis points, primarily attributed to the reduction in inflation levels. The exceptionally high margin observed in 2022 was driven by macro conditions, considering mainly inflation, which is now returning to more normalized levels.

Regarding net fees, the 5.8% decrease is mainly due to the higher fees paid mainly to a credit card transaction margin. That was driven by our digital transformation and financial services expansion objective to position us in innovation and digital banking, building the largest digital banking ecosystem in Chile, merging basis of Bci, MACH and [indiscernible].

Our local operating decrease by 0.6% year-over-year, which is below the inflation rate. Likewise, the accumulated efficiency ratio increased from 49.41% to 50.57%. Although the accumulated expenses climbed slightly, the variation is mainly explained by a lower gross operating margin. The later was hit by a drop in the net interest and indexation margin and the lower net fee margin. As we look forward, we expect efficiency for our operations to trend towards [ 45 ] by 2026 driven by lower growth of our operating expenses and increased transactional revenues.

On this slide, you can see how the recent capital increase position as with a regulatory capital level well above the regulatory requirement and our internal targets. As you are all aware, Basel III is currently under implementation, and capital requirements shall be faced in gradually to apply with a necessary capital ratio by 2025, including additional capital buffers for Pilar 1, systemic risk, conservation and countercyclical buffers.

As you can see in this slide, CET1 was 11.08% in this quarter and was steadily increased in recent quarter stemming from bank's profitability and the recent capital increase.

In this slide, we can see the performance of the entirely of a local loan portfolio. On one side, we are happy to report that there is a stable growth in asset volume, while the nonperforming loans ratio seems to be stabilizing at a level similar to the pre-pandemic level and below the industry level average. And with the stock of loan provisions, including voluntary revision that is significantly stronger than pre-pandemic levels.

As for commercial loans, they remain one of the volume drivers, while the ratio of nonperforming loans shows signs of stabilization at the pre-pandemic level, in line with the overall industry trend. It's worth mentioning that this quarter, we released voluntary provision amounting to CLP 50 billion in the commercial portfolio as our contracyclical model combined with expert analysis indicated that the latest risk that justifies the constitution of the additional provision in this portfolio was not manifested and is not anticipated to be manifested.

The recent -- the residential mortgages portfolio has maintained its resilience in the current scenario with volumes stabilize at current levels given lower demand for new loans. As you can see in this slide, we have seen an increase in nonperforming loan ratio in line with the current economic scenario. Borrowers are facing pressure on their financial burdens explained by higher inflation, higher rates on other financial products and increase the unemployment rate or decrease income due to deterioration in the labor market, increasing delinquency indicators. These conditions have also reduced the demand for new loans as well as the [ liability ] under our lending policies, slowing down new loan placements in this portfolio.

When looking at our portfolio, there is an increase in the level of nonperforming loans that already exceed the pre-pandemic period, explained by customer-facing greater difficulties in making payments. However, Bci remains with no performance loan ratios below the average for the local banking system and with a growth of nonperforming loan rate that is already being contained.

We maintain great confidence in the high quality of the mortgages loan portfolio given our solid loan-to-value ratios, conservative credit policies and the strong cultural inclination of families to own their homes and stay current on their residential debts.

The consumer loan portfolio has started to regain traction in volume growth and stabilization and a slightly decrease in nonperforming loans ratios which slightly exceeds the pre-pandemic level due to higher inflation rate, higher unemployment rates and in general, economic deceleration, impacting volumes due to lower demand along with more conservative loan criteria.

As we forecasted, a few quarters ago, trade performance indicators have rapidly moved toward pre-pandemic levels and beyond with delinquency ratio and most risk indicators have begun to stabilize at the current levels over past 3 to 6 months.

Now I will leave you with Jorge Gonzalez, City National Bank CEO. As well as Jose Marina, the bank's CFO.

[Jorge Gonzalez, executive]

Thank you, Jose. Good morning, everyone. My name is Jorge Gonzalez, and I'm the Vice Chair and CEO of City National Bank. And I'm also accompanied here this morning by Jose Marina, our CFO. I'm excited to review this morning to discover our performance for last year, notwithstanding the challenges experienced in the banking industry during the year. I am pleased to inform you that we have strong results in the quarter, especially in those metrics that are a greater focus today.

First of all, deposit capture has been increasingly challenging among banks as interest rates have risen at a historic paced magnitude, resulting in deposit contraction within the industry. Despite overall outflows in the system, our client deposits remained stable at 23%, whereas the banking industry experienced positive interest of 2% during the year, even when including broker deposits.

We maintained approximately $11 billion of available liquidity covering 137% or uninsured and uncollateralized deposits. Our uninsured uncollateralized deposits represent only 37% of our total deposits, improving from 51% at the end of 2022. We're continuing to enhance our already strong capital profile with $738 million exit capital in our CET1 ratio after the application of unrealized AFS and HTM losses to capital. We maintained the investment portfolio with minimal credit risk that provides significant annual cash flow and has lowered its duration of 4.5 years. And our CRE portfolio continues to perform well with a weighted average loan-to-value of 50% in one of the best markets in the United States.

These results reflect the reputation in the Marketplace, which has been built over 77 years, our relationship-centric model focusing on diverse business segmentation and a strong culture fostered among our employees.

Now I'm going to turn it over to Jose Marina, our CFO, who is going to review in more detail our fourth quarter and full year results with you. Jose?

[Jose Marina, executive]

Thank you, Jorge, and good morning, everyone. The U.S. banking system has changed rapidly, facing a shrinking deposit base, significant migration of non-interest-bearing deposits to higher-yielding products and increasing betas on cost of funds. Moreover, the industry events in the first half of 2023 resulted in the positive -- migrated from midsize and community banks to major banks. Despite this, our client deposits increased $92 million quarter-over-quarter and overall remained stable compared to 2022 year-end levels.

Our total deposits, including brokered, increased by $788 million or 4% year-over-year, as you can see on the left-hand side of the slide. You can also see that our noninterest-bearing deposits declined by about $1.9 billion in 2023 and represent 23% of our total deposits. This rebalancing of deposits has adversely impacted our NIM and is a common theme across the industry given increasing rates.

On the right-hand side of the slide, you can see that the banking industry as a whole saw deposits contract by $304 billion or 2% in 2023. These industry figures include broker deposits. Overall, our client deposits remain stable in 2023 despite turmoil in the industry and historic rate increases.

This slide shows that our assets grew by $910 million or 3% in 2023. Our loan-to-deposit ratio remained low at about 83%. We remain very well capitalized as evidenced by our total risk-based capital ratio and Tier 1 leverage ratio, which were 14.7% and 9.9% as of December 31, respectively. You can also see that our capital ratios increased quarter-over-quarter as a result of the $100 million capital contribution that we received in November.

Additionally, the unrealized losses in the investment portfolio has decreased with the OCI improving year-over-year by $6 million, $7 million after tax. On the right-hand side of the slide, you can see that our core loans, excluding PPP, grew by $952 million or 6% in 2023. Our loan production in the year focused on high-quality transactions with strong spreads and solid deposit relationships. Nonowner-occupied CRE represents 48% of the total loan portfolio. We will discuss the composition of our loan portfolio and dive into the CRE portfolio in the upcoming slides.

Our strong credit culture and lower risk appetite continue to result in excellent asset quality. The NPL ratio, for instance, remained low at 46 basis points of total loans, 27 basis points lower as compared to the prior quarter. Past dues were also minimal, representing 32 basis points of loans.

On this slide, we segregated as commercial real estate portfolio by property type. Overall, our CRE portfolio has a conservative weighted average LTV of 50% and is supported by a strong debt service coverage ratio of 1.8x. It is also very well diversified across segments. Additionally, our disciplined and comprehensive credit process has historically resulted in exceptional asset quality, as evidenced by the minimal nonaccruals in our CRE portfolio of only 0.3%.

I would also like to emphasize again the strength of our marketplace within Florida being the fastest-growing state since the pandemic. The bottom of this slide specifically demonstrated by the CRE office market in Florida is in a much better position versus the rest of the country. Out of the top 10 office markets with the strongest 12-month rent growth, 7 are situated in Florida with Miami ranked #1, Palm Beach ranked #3 and Fort Lauderdale coming in fourth as well as Tampa at #5.

Conversely, largest -- the largest markets outside of Florida, such as San Francisco, Los Angeles, New York, et cetera, ranked towards the bottom of the top 80 office markets in terms of rental rate growth.

Moving to our income statement, operating income for the year was $592 million. This represents an 18% reduction year-over-year. Our net income after tax was $164 million, which is 40% lower. The main driver is NIM compression given the order rate increases leading to positive pricing and start by ratio of noninteresting-bearing deposits to interest-bearing deposits.

Additionally, there were some nonrecurring items as we will explain shortly.

This slide details the nonrecurring items affecting our fourth quarter results. During the quarter, we incurred a $20 million onetime expense related to an FDIC special assessment to replenish FDIC insurance fund following the impact of losses to the fund from the 3 significant back failures that took place during the first half of 2023. We also incurred an additional $15 million of loan loss provisions during the quarter related to increased perceived risk in the Moody's ACL model primarily related to the office sector as well as proactive provisioning on specific non-CRE-related loans.

Finally, we realized a $5 million loss on the sale of $100 million of corporate bonds as part of a balance sheet strategy to enhance net interest market. Normalizing for these items, our net interest income for the quarter would be in line with the prior quarter.

On the left-hand side of this slide, we present the evolution of our net interest margin and are coordinates since the beginning of the current rate cycle. On the right-hand side of the slide, we have a quarterly average effective Fed funds rate versus our cost of funds. The current rate cycle is historic given the velocity and magnitude of the rate increases. This have led to significant deposit repricing and sizable DDA migration to interest-bearing deposits resulting in overall net compression within the U.S. banking system.

However, you can assure our NIM remained unchanged effectively quarter-over-quarter. This is a sign of stabilization heading into 2024 as assets continue to reprice following the higher velocity of deposit pricing after the bank failures earlier this year.

We continue to protect our net interest margin against rate staying higher for longer in the current rate environment, while positioning our balance sheet to benefit from the anticipated rate increases in 2024.

Now I will pass it back to Jorge who will discuss some of the actions we took during 2023 and also address our 2024 priorities.

[Jorge Gonzalez, executive]

Thanks, Jose. I want to conclude by mentioning several strategies implemented in '23. In aggregate, the current environment and discussing the priorities for this coming year.

First, we implemented a minimal price compression for all commercial loans beginning -- at the beginning of the year, and we're being very highly selective in our credit risk and pricing process. We're also focusing on opportunities with a relevant deposit component. And we're also including the possible covenants prepayments, penalties and [indiscernible] on the majority of our commercial lending.

Next, we have also executed $3.75 billion of pay fixed rate interest rates throughout '23, which generated $32 million in additional net interest income for the year. These thoughts are focused on the shorter to medium end of the curve to protect interest rates staying higher for longer while also preserving our ability to expand our NIM once rates start declining based on a more liability-sensitive balance sheet position.

At the end of the '23, we executed a sale of $108 million of corporate bonds at a slight loss, replacing them with floating rate securities increasing NIM by 2 basis points. The strategy aims to enhance our profitability and our balance sheet positioning moving forward.

Deposits are at the core of our relationship banking approach and we have several deposit-gathering strategy in place which have been really viable to navigate current vital environment. I should also mention that in '23, we optimized our staffing model by 8%, eliminating about 85 positions in September, which represents about $12 million in annual savings. These eliminations were in specific areas of low strategic focus, and we know that it's been a common place for the banking both nationally and locally given current conditions.

Lastly, we're limiting transactional lending and focusing on residential lending efforts on secondary market business to enhance our fee income.

As we finished some of the market headwinds in '23, we continued to deliver significant results. We have fortified our strong liquidity and capital positions, our commercial real estate portfolio is well diversified below low values and strong debt service coverage ratios. And finally, although we experienced NIM compression, our efficiency ratio was better than our peers and we're well-positioned for declining interest rates.

Our position as the largest pure-play floater bank located in one of the best markets in the country, positions us well for success in '24 and beyond. As demonstrated earlier, the economic initiatives to Florida continue to be strong. We believe that we have the best talent in the marketplace, complemented with robust digital capabilities. We have a proven track record of organic growth and we have also successfully integrated banks that we've acquired.

As we look forward to '24, we will stay focused on 6 key strategic pillars. First of all, we'll continue to focus deposit growth as we strive to become the best deposit-gathering bank in the state. Next, we will continue to deploy strategies designed to enhance our NIM, continue to attract top talent, will be a continuous FX effort in '24 to make sure that we continue the momentum of our deposit gathering capabilities and support our geographic expansion in Florida and beyond.

Next, diversifying the loan book by originating more commercial and investment loans will continue to be a significant priority for the institution. We will also continue to build a higher efficiency and scalability of our platform. To ensure we continue capitalizing our unique positioning in marketplace, we've embarked on a 5-year strategic planning process with the assistance of a respected consulting firm. We've assembled a plan that will enable our continued success over the long haul as the organization continues to mature. The plan is simply a recalibration of our strategic direction in order to ensure we maximize the opportunities in the market given the evolving economic Florida landscape.

I look forward to discussing the plan with you in the future as we continue to implement the majority of the initiatives that have already been out. On that note, I'm going to go ahead and pass it back to Bci again for final comments and we thank you all for participating with us this morning.

[Unknown Executive]

To conclude, I would like to summarize our 2024 guidelines for Bci's key figures, taking into account the macro variable forecasted by our Chief Economist, Sergio Lehmann. As the factor of slide, local loan growth is expected to be in the high single digits, primarily driven by the commercial and consumer segments. Net interest margin is projected to remain relatively flat, factoring the lower inflation, partially offset by reduced funding costs. Our forecast indicates that operating expenses for this year will be growing below inflation, underscoring our continued emphasis on our productivity and efficiency plan.

Regarding City National Bank, as Jorge said, we predict that loans should grow in the high single digit while NIM should increase the expectation forecasted in interest rate and, therefore, lower cost of funds. Considering this scenario, we focus our consolidated net income to increase between 5% to 8% year over year in 2024.

I cannot finish without telling you that yesterday, we finished a roadshow, and we closed the first private AT1 of Chile for $500 million. The final close will be done in Thursday of next week and a very good interest rate, and we are really proud to say that with that, we will continue strengthening our capital ratios. With that, thank you very much for participating. And now we can go to the Q&A session.

[Andrés Atala S., executive]

Thank you, [ Jose Luis, ] and thank you all for the presentation. We have the first question from Ernesto Gabilondo from Bank of America. Ernesto, are you there?

[Ernesto María Gabilondo Márquez, analyst]

Question is on the NIM. You already provided some details. Can you elaborate a little bit more what should we expect for the NIM consolidated level this year? And for the case of the new Chile given that the [indiscernible] we have to pay the credit line to the Central Bank. How should we think about the NIM evolving throughout the year? How should we think before paying in the first half? And how should we [indiscernible] in the second half?

And then my second question will be on asset quality, just wondering how you're seeing your credit appetite for the second half of the year when we start seeing lower rates and consumers no longer having this excess of liquidity. So how do you [indiscernible] according to consumer loan activity would be translated into a faster pace?

And then my last question is on our recent debt issuance. [indiscernible] provides some details on the cost or the transaction, was the objectives [indiscernible] even in the future and how should we think about the registration of [indiscernible] on the P&L or in the balance sheet.

[José Ibaibarriaga Martínez, executive]

Ernesto, thank you for your question. The first one in NIM. As we mentioned, we are projected in a relatively stable NIM for this year. And as you mentioned, yes, we have several impacts that are going in different ways. We are going to have lower inflation. We are going to pay the [ FC ] line to the Central Bank, which will impact us from a negative way. And at the same time, we are seeing a positive NIM impact as the Central Bank is decreasing the interest rate and the cost of funds is going to increase.

The same thing we are expected by the middle of this year, in City National Bank, which will expect that the repricing between assets and liabilities will -- which are NIM forward. Overall, if you put all these things in the balance, we are expecting and projecting a NIM that is relatively flat. And I think that you mentioned how it's going to be seen between the first and the second half of the year. Obviously, as we enter the year with a negative inflation, that will pressure the NIM higher in the first semester, and we are expecting NIM increasing in the second semester of this year.

According to your second question of asset quality, if you want me to give you the vision in Chile, we are going to be growing between 6% to 7% in the loan portfolio, pushing in the commercial and in the consumer side. If you want to talk about quality, of that, Juan Enrique is here and can give us more color.

In respect of City National Bank, Jorge already mentioned what are the target that is in the mid-high, around 8% to 9%. And again, if you want more detail, Jorge or Jose can give us more details. But let me finish with the third question, and I pass to you if you want more detail about quality or more information in the City National Bank.

Regarding the AT1 objective of this really successful allocation that we did yesterday. And I say allocation because formally, this will be settled on Thursday of next week. We have a significant participant. I cannot give details. This is a legal issue, but we have a significant detail. The book was over demand, big times. The interest rate was excellent in 8.75%. And the objective is that as we are implementing Basel II-III, there are some capital that count as capital that will not count in the full implementation of Basel III. And at the same time, going through this instrument, this is a perpetual bonus that count as capital. And obviously, it's the way to maximize the capital ratio as this -- the cost of the AT1 is lower than the cost of capital of the bank. So it's a very interested way to maximize our ratability and our profitability. So Ernesto, I think that I did a short answer to the third -- to your 3 questions. Do you want us to go deeper in any one of the 3 ones?

[Ernesto María Gabilondo Márquez, analyst]

[indiscernible] asset quality [indiscernible] starting to get more credit appetite involved in wholesale, especially in the consumer loan activity.

[José Ibaibarriaga Martínez, executive]

Juan Enrique, can you address that, please?

[Juan Enrique Visinteiner, executive]

Sure. So as Jose Luis was mentioning, we're prepared to grow significantly both wholesale and consumer exposures. Our guidance in terms of cost of credit is going to be around 1.15% for the year in our local books. The wholesale portfolio, you have seen has behaved very stable. The consumer portfolio has evidence all the impact of the pandemia and then the excess liquidity and the contraction of the economy. But you have seen that in the last 6 months, we have not only reached stabilization but have moved ratios -- delinquency ratios back, and we expect that, that trend is going to continue. Of course, there are forces such as growth in unemployment rate. But on the other side, there's a decrease in inflation rate. And to our experience, inflation rate was the one that hit the portfolio mostly. So we continue optimistic but chances to start regrowing our consumer portfolio with credit indicators that should continue behaving better than the ones that we have already have seen in the last 6 months. So a risk appetite on those 2 segments, wholesale and consumer remains high in wholesale and has reopened in consumer.

[Andrés Atala S., executive]

Thank you, Ernesto. The next question is coming from Tito Labarta from Goldman Sachs.

[Daer Labarta, analyst]

A couple of questions also, if I can. First on the guidance, you mentioned, I guess, mid-single digits or mid- to high single-digit earnings growth for next year. Just to understand sort of how you get to that number, right? You had stable NIM, loans growing high single digits and excessive loan below inflation, but I guess, more will depend on the cost of risk a little bit. It was 0.8% in 2023. I think Enrique just mentioned, maybe you go to 1.15 locally. I'm not sure what you expect for the U.S. But historically, your cost of risk has been closer to 1%. So that could eat a little bit into the earnings growth.

I guess, then would also depend on what type of tax rate, right? The tax rate has been sort of below historical levels as well in high teens last year. Do you expect the tax rate to remain there? Or does that normalize back to the 20-plus percent level? Just to try to reconcile some of the guidance you've given with the bottom-line guidance.

And then my second question, just to follow up on the AT1 issuance from yesterday. Surprised a little bit just because you had recently done the capital increase of $700 million as well. Just do you expect to have to do any more capital increases in the coming years, just to understand the outlook for that? Or do you think this is the last one?

[José Ibaibarriaga Martínez, executive]

The average ratio of appetite of growth, Tito, in Chile in the middle, single digit of around 6% to 7% is basically driven by the commercial side, who has been leading and we have been earning market share in a couple of -- the last couple of years, as you are aware of. And in the consumer side, we took the decision in the last 2 years to slow down the growth basically because we found that the commercial and the country conditions were not very good. We believe that both all the improvement that the country is doing this year and the consumer, as Sergio can mention, is starting to get traction and with that, we believe that we are going to start recovering traction too in the consumer side. Those are going to be the 2 drivers of the loan portfolio growth in Chile.

We are expecting a GDP growth of around 1.8% with an inflation of 3%, you're right to around 5%. So basically, what we are saying is that we are going to be aligned with the country growth in nominal terms. And in terms of City National Bank, Jorge, you can answer Jose, but basically, I think that the main driver there is how -- Jose, can you answer it better?

[Jose Marina, executive]

Sure. So in terms of our expectations this year for loan growth, we're looking in the high single digits. We think there's a significant opportunity here in our local market given the strength in the economy. And as Jorge indicated, we're also focused on placing focus in C&I lending as well and bringing new C&I relationships to the bank as we continue to diversify our loan portfolio.

[Jorge Gonzalez, executive]

We're going to be adding additional staffing to the markets north of South Florida for our Palm beach, Orlando and Tampa. So we expect that those new additions and talent will also be accretive to our loan growth as well. But obviously, we're keeping an eye on economy and being very disciplined in how we deploy capital over the foreseeable future as things continue to be somewhat uncertain.

[Jose Marina, executive]

And within that, I'll also address the results of this continued growth and some of the repricing that we expect on the balance sheet, we do expect to see some NIM expansion in 2024. You saw during the presentation that our NIM was effectively flat between the Q3 and Q4. So that compression has leveled off. In fact, if you look at just the fourth quarter month-by-month, our lowest monthly NIM was October, and we saw roughly about 8 basis points of increase in earnings between October and December as we saw month-over-month increases in NIM in November and December. So obviously, the U.S. banking system with the events earlier this year, a lot of liabilities reprice immediately and the asset [indiscernible] an opportunity to continue to reprice it. And so we do see NIM continuing to improve, and we do expect to have slightly higher NIM in '24 as compared to 2023.

And we are very well positioned also for declining rates. We have placed, as Jorge indicated, about $3.7 billion of swaps in -- on the books during '23 that all focused on the shorter end of the curve in order to preserve our ability to expand our margin once rates start to decline.

[Daer Labarta, analyst]

Sorry to interrupt. I just want to clarify. I'm not sure if my question was clear. I was asking more about the net income guidance. I'm just trying to reconcile the net income guidance with sort of the other lines that you've given, right? I understand sort of loan growth, high single digits, NIM flat in Chile, going up in Florida. But I guess to get to the 5% to 8% sort of net income growth, the cost of risk, Enrique, you mentioned 1.15. I think that's just Chile. So I'm not sure of the U.S. But if the cost of risk normalizes to historical levels around 1%, could be difficult to get to that 5% to 8% increase in net income, unless I'm missing something.

And then the tax rate could also be a variable, right? So maybe if you could give some color on the expected tax rate.

[José Ibaibarriaga Martínez, executive]

There are 2 things that you didn't mention, Tito, in your requisition, there is expenses and expenses are going to grow slightly over 0% and below inflation. So we are talking about between 0% to 3% and that increasing margin as we mentioned, of around loan portfolio 6% to 7%, you have a significant impact. And the other thing that is happening is that last year, we did have impacts on the tax effect, basically for 2 reasons. One was the exchange rate and the investment in City National Bank has huge impact in the tax arena of around $45 billion. And the other thing was the decrease in inflation was affecting us in a marginal way, and we are not expecting it for this year.

So if you take in consideration, what is maintaining our cost structure in real time, flat until decreasing the expenses on the tax, you will arrive there. I'm more than happy to go with you with a model, Tito, outside this meeting to share with you as always, has been. So more than glad to continue with that conversation.

And regarding AT1, Tito, this is the way Basel III is implemented. As you understand, Basel III has different risk, different implementation and basically, all of us has to have an internal goal that, in our case, is 11%. And the way you create that 11% allowed you to generate this 81. And that is why the authorities was actively developing the regulatory issues in order to give the possibility to different banks to do it. Our expectation is that all banks are going to go through the AT1 structure. Otherwise, they are going to have to use just capital, which is more expensive.

So everything was in our plan. As you know, we have to deliver on a yearly basis to the CMF where it's our view and our plan. And it was always planned to have 1.5% of our capital ratios through AT1. With this $500 million, we're right to [ $136 ] million. So we are really close to our internal goal. So nothing that is surprised. It was always planned when we did the model for capital, it was planned when we did the capital increase, and now we are really proud to be the first private bank in Chile to issue this AT1 outside and hopefully open the window for other institutions in Chile to go in this direction.

[Daer Labarta, analyst]

Okay. No, that's very helpful. Just one last clarification. Just on the tax rate. I think you mentioned you expect now the tax rate to be stable around this 16%, 17% that we saw in 2023. That's more or less what we should expect in '24.

[José Ibaibarriaga Martínez, executive]

See -- yes. Is -- the tax rate is going to be between 16% to 20%. That is our target.

[Andrés Atala S., executive]

Moving forward, the next question is from Eric Ito from Bradesco.

[Eric Ito, analyst]

I have 2 questions as well. The first one, I think Jose Luis mentioned during the presentation that you guys expect the efficiency ratio to reach around 45% by 2026. So I just wanted to get your sense on what you guys are expecting for 2024, what's implying in the guidance? And with that question as well, what's the implied fee income growth for this year?

And then my second question is I guess in the previous guidance, as you guys mentioned, you had the mid- to long-term ROE of 14% to 15%. Just want to get your view if that is the -- that will continue and what should be the timeline for that ROE to reach 14% to 16%?

[José Ibaibarriaga Martínez, executive]

I think the 3 topics that you mentioned directly connected one with the other. The return on equity forecast that we're expecting for 2026 is 14%. In order to do that, we have to arrive to a 45% ratio -- efficiency ratio. And in order to do that, we need to grow the margin in around 6% to 8% year-over-year and maintain the expenses flat. That is the plan.

In 2023, we did it. We maintained the expenses almost flat. It grew 0.8% on a nominal basis. And what happened is that last year, inflation dropped dramatically. And at the same time, as you hear Jorge and Jose, we did have a completely unusual situation in the financial system in U.S. starting with the Silicon Valley Bank. So we have a track plan that we have been delivering, except for this, and that is why I started saying that we have some impact that was not in the fundamental of the bank, was a onetime effect and we believe that we have a really strong balance sheet and profit and loss that we are going to allow us to achieve the goals that basically we always have done in the past, and we don't see why we are not going to do it in the future. So we are confident to that, but all the things are altogether, Eric, and all related, and we are working in all of them.

[Eric Ito, analyst]

That's perfect. Just one follow-up here. Just to get your color on 2024 expectations for fee income and the efficiency ratio?

[José Ibaibarriaga Martínez, executive]

Do we give that, Andres? We are going to be -- in the efficiency ratio, we are going to be in the 48% range. And in the fee income, we are -- the expectation is that we are going to grow 15%. 15% that could look higher. We have a strategic plan to recover what we have lost in the last couple of years. And it's related to the consumer loan portfolio, where we took the decision to decrease our appetite to grow there. And obviously, that loan portfolio come with insurance and all other commissions. And the other thing, the construction of the payment ecosystem, we have just finished during 2023. And we are starting to see traction, as I mentioned in several data that I gave you during the presentation. So fees are going to come back, seems high, but you have to see from where we start. And we start in a lower level than what was a usual fee commission.

[Operator]

Next question is coming from Nicolas Riva from Bank of America.

[Nicolas Riva, analyst]

So I have 2 questions. The first one is kind of a follow-up on what Tito asked before. The fact that you raised $700 million of equity fourth quarter last year. Now you did this [ $81 million ] for another $500 million. The question was where you would perhaps need to raise additional capital this year or next year. And the way I'm thinking about it is you are guiding this year for an ROE of about [ 13% ] which has been the ROE last year as well. Long-term ROE guidance is about 14%. Assuming you pay a dividend payout of 30% the minimum, that gets you to your equity base growing roughly between 9% and 10% a year. And your guidance for loan growth is 7% to 9%. So it appears to me you are not generating much capital organically during the year. Do you agree with that or not?

And then my second question about the AT1 issue. For the coupon, I wanted to ask you about the coupon cancellation. That's triggered by what I call the distributable items not been enough to make the coupon payment on the AT1. My question is, if you report a net loss in a year, if that would trigger the cancellation of the coupon payment on the new bond? Or if you have a reserve created for the coupon payment and if you discuss in that case, the amount of that reserve created for the coupon payment?

[José Ibaibarriaga Martínez, executive]

Yes. I will try to reanswer the capital issue. In Basel III, there are some items that today count as capital that are going to be deducted. That is around $500 million and is related to the untangible assets. When we create the goal of achieving Basel III, we -- in the law was the possibility to use AT1 to arrive to that goal. What do we start doing 18 months ago was working with the instrument that was not available in the Chile market in order to arrive to the 11% goal that we have. So it was planned. When we did the capital increase, we always knew that -- well, we always have in the plan to issue the AT1 of around 1.5% in order to deliver all our internal goals. So it's not that this is something new. This is something that we have been working with the authority 18 years ago -- 18 months ago since they started with the Basel III implementation.

So when you make your math how we are going to grow in capital, you have to take in consideration to, some capital are going to decrease. 2023 was 15%, 2022 was 15% of that asset, so 30% at December 31, 2023, the direction of 2024 will be 65% and 2025 will be 100%. So that is why this is something that you have to put all together and match it. I don't know if that is clear because it's important to you all guys to know that this 81 is a really good story. It was completely planned. It was communicated to the authorities and is an excellent way to maximize our capital.

Regarding the coupon payment, this AT1 do not have a discretionary payment of coupons. This is completely -- we don't have the right to use it discretionary. We have to pay coupon unless we enter to a very specific situation, either if we have less than 3% of return on asset, as a risk waiver asset or 2% of net assets. We have a lot of specific issues, but to arrive there is a very -- No, I will start again the answer, I'm getting complicated.

Nicolas, this is a bond that do not have a discretionary way of payment. The money to pay this bonds are in equity. This year, in 2023, we are going to create a reserve that was explicitly to the CMF and all the investors that at least the net income of 2023 is going to go to that reserve. That is basically around 3 or 4 years of this interest coupon and what it will happen if the shareholders meeting approved is that 100% of the reserve of net income of 2023 will go there. So we will have reserves for payment this coupon for almost 10 years.

What if you have a loss in one semester, as you said, we are going to have the money in the reserve. So there is no issue unless something completely unexpected can happen in order to achieve that. And we went through all the details with all the investors in the last 3 days. Nicolas, I can send you all the roadshow presentation where it goes in detail, how and when things happen, but it seems that the market really, really appreciated the instrument and the Bci risk because the book was over-subscribed big times. And I don't know why, but I cannot say because it's a legal issue here...

[Nicolas Riva, analyst]

Sorry to interrupt. But to summarize, even if you report a net loss in 2024, the money to make the coupon payment is going to come from this reserve, which is going to have all your net profits from 2023 net of the minimum 30% dividend payment, so it's going to have over $500 million in this reserve which is more than 10 years of coupon payments for the AT1...

[José Ibaibarriaga Martínez, executive]

What I did say, Nico, is that is what we will do. Having said that, the guarantee that we did to the CMF and to the investors that was that at least 20% of the net income will go to the reserve, at least. The most probably thing that will happen if the shareholder meeting approval, we will go with 100% of the remaining 70% after paying a dividend.

If anyone wants to see anything about AT1 bond, more than glad to share with you, even though it's public.

[Andrés Atala S., executive]

Next one, Daniel Mora from Credicorp Capital.

[Daniel Mora, analyst]

A couple of questions quite fast. The first one is regarding ROE. I would like to understand what will be the ROE in Chile, stand-alone and also at CNB in 2024 and 2025 to reach that long-term target between 14% and 16%, if you can come with those figures.

And the second one is related to the deterioration of commercial real estate in the United States. Even though at CNB, you show that risk metrics have been performing quite well. I would like to understand if we observed an increase in provision expenses related to that topic, if you feel comfortable with the coverage, you feel comfortable with the performance. We understand that Florida has totally different performance compared to the overall state of the economy in the United States.

[José Ibaibarriaga Martínez, executive]

More than glad, Daniel. The ROE in Chile for this year will be around 14%, and the U.S. will be around 11% in the range, Daniel, because you understand that the exchange rate [indiscernible] these numbers. But roughly, it will be 14% and 11%. Jose, can you give more color about the quality of the CRE, I think that you did it, but give more information, please.

[Jose Marina, executive]

At least I'll start and turn it over to [indiscernible]. All indicators as of right now, for the state of Florida continue to outperform the rest of the country given the migration of population, the investment in capital and the continuous visibility of the entire Florida market and really South Florida, we're really not seeing any indicators of any asset following stress in our asset classes within CRE, which as we have said on many calls before, we've always taken a very disciplined approach relative to diversification and how we deploy capital relative to asset class geographies, sponsors, you name them. We understand this is a business that has to be well-disciplined relative to how you allocate and when you allocate.

A very small percentage of our real estate portfolio is outside the state of Florida. I believe it's only about 16% or 17%. And even a percentage of real estate that's outside the state of Florida, the sectors that are most right now, causing most of the anxiety and most of the headlines, which is office, only 1.2% of our OpEx exposure is outside state of Florida. So even the OpEx exposure is outside state of Florida is broken down probably 25 or 30 different geographies with not a heavy concentration in any one of those. So again, from a macro standpoint, the economic dynamics and metrics for the state of Florida and CRE continue to perform well. Vacancies are stable. Our rents are either flat or growing and it continues to be a lot of investment activity across all asset classes in our footprint. Not sure if Gary or Hugo if you want to add anything to that.

[Hugo Loynaz, executive]

No, I will just add that -- hello, my name is Hugo Loynaz, Chief Credit Officer for City National. So we do an intense focus on CRE on an annual basis. We review the portfolio continuously for performance and really the trends have been very stable and actually performing very well, especially as Jorge mentioned, as you relate to other markets. So the fact that we are in Florida-based bank with clients that are based here in Florida with properties that are well stabilized. And we're benefiting from the migration that's coming from other parts of the country, I think we're positioned very well.

[Unknown Executive]

Yes. The only thing that -- again, I'm Gary Fitzgerald, I run the real estate banking team for City National Bank. I think as Jorge pointed out, I think a really important point is that 84% of our collateral assets are in Florida, we've talked about Florida outperforming in the market. The office sector tends to get the most attention. Our office portfolio is concentrated in the higher quality [ A&D C plus, AD plus ] and in Miami-Dade County, our exposure is 49% of our total -- office assets are in Miami-Dade, 68% in South Florida, markets that continue to have positive absorption and steady occupancies and stable rents. So at this point in time, we're not really seeing any indications of issues in the portfolio.

[Jose Marina, executive]

And even the small -- very small percentage of office space outside of Florida, which I said [ 1.2%, ] 6% or 7% of that is medical office space, which has consistently outperformed the more corporate capital office space across most geographies and certainly in Florida as well. So just another little side out on that.

[Andrés Atala S., executive]

Thank you, Daniel. The last one is coming from Neha Agarwala from HSBC.

[Neha Agarwala, analyst]

Just a very quick one, and I believe you touched upon it previously. In the Chilean business, any concerns about asset quality especially in the SME space, are you seeing any worsening or in the mortgages? Any comments there quickly?

[Unknown Executive]

Yes, Neha, the SME segment, as you know, was seriously impacted by the pandemia and then by the economic crisis following the excess liquidity. That was very strongly supported by the government with several programs that, as you know, included significant guarantees that allowed banks to extend new credit and to extend the tenure of existing credit. So that facilitated their navigation through this crisis. Regardless of that, of course, they continue showing a deterioration and that deterioration in terms of NPL and all credit metrics has achieved levels that are slightly above the pre-pandemia ones. And similarly to the mortgage loan portfolio are the 2 portfolios that have not yet reached stabilization and have not yet begun moving downwards.

But in terms of cost of credit, that's very strongly protected by real guarantees, but more importantly, by government guarantees that have been in place and operating very efficiently. So yes, it has been a sector that has been impacted. We continue selectively growing there, and the government support has been extraordinary.

[Neha Agarwala, analyst]

Anything on the mortgage book?

[Unknown Executive]

Yes, the mortgage portfolio, well, as you know, we have probably one of the best great indicators of the industry, regardless of that, those indicators are showing an increase in delinquency. We believe we have 3 or 4 more months until we reach stabilization and start moving them back. The reason for that portfolio to not have reacted more rapidly on the benign side is that to help borrowers get back into on-time payment, you needed an interest rate environment that was helpful. And you know that with the high inflation and the high-interest rates over the last 12 months, it was not the best moment for helping borrowers to restructure the loan facilities.

Now it's the time for that to happen. So what we did was to help them with the consumer side of their loans. And probably now it's a good time to help them with the restructuring of the long-term loans, the multi-portfolio loans. Anyway, they're highly secured, is a very strong portfolio. We see very -- with a lot of optimism. And when demand comes back, we're sure that we're going to be back on track on growing that portfolio.

[Neha Agarwala, analyst]

Super helpful. And would love to have that presentation on the AT1, if you can share that would be very interesting. Thank you so much for your comments.

[Andrés Atala S., executive]

Sure. Thank you. I just want to say thank you to all right here to the teams to -- also to the people from CNB Miami. And of course, thank you all for being here in this conference call. So have a nice day, and I don't know if you want to close with some words.

[José Ibaibarriaga Martínez, executive]

Thank you very much. I'm more than happy to share with you the AT1 roadshow. It was extremely well received by the market, and we are really proud to be the first bank in Chile to issue this instrument and open the opportunity to other banks to be able to issues in the future.

[Andrés Atala S., executive]

All right. Thank you very much. Bye.