Banco Itau Chile

SGO:ITAUCL

Earnings Call Transcript 2019-Q3

[Operator]

Ladies and gentlemen, thank you for standing by, and welcome to the Itaú CorpBanca Third Quarter 2019 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded [Operator Instructions]

I would now like to turn the conference over to your speaker today, Claudia Labbé. Please go ahead.

[Claudia Montevecchi, executive]

Thank you. Good morning. Thank you for joining our conference call for our third quarter 2019 financial results. I would like to remind you that our remarks may include forward-looking information, and our actual results could differ materially from -- with what is discussed in this presentation. I would also like to draw your attention to the financial information included in this management discussion and analysis presentation, which is based on our managerial model that we adjust for nonrecurring events, and we apply managerial criteria to disclose our income statement. Please remind that starting first quarter 2019, we have been disclosing our income statement in the same manner as we do internally, incorporating additional P&L reclassifications, fully converging to the format presented by Itaú Unibanco. This managerial financial model reflects how we measure, analyze and discuss financial results by segregating commercial performance, financial risk management, credit risk management and cost efficiency. I believe this form of communicating our results will give you a clearer and better view of how we are -- how we fare under these different perspectives. Please refer to Pages 9 to 12 of our report for further details.

Now Mr. Gabriel Moura, Itaú CorpBanca's Chief Financial Officer, will continue with the presentation.

[Gabriel De Moura, executive]

Fantastic. Thank you, Claudia, and good morning, everyone. Thank you for joining us for this third quarter of 2019 conference call. Today, we will be going through our results for the quarter and reviewing our perspectives for the remainder of this year.

Before starting the presentation, I would like to provide you with some updates of what's currently happening in Chile. For the past few weeks, the country has experiencing social unrest, with both Pacific popular manifestations and events of vandalism in Santiago and other regions of the country. It is still too early to anticipate short- and long-term impacts of these events in the economy and the economic policy. However, it's reasonable to expect lower economic growth and inflation in the next quarter, given that business activity was reduced in the country in the last couple of weeks, and the government has announced a reversal of energy tariffs increase. During these turbulent times, we have prioritized the safety of our employees and implemented our contingency plans to remain fully operational for our clients, either through our digital platform, that played a key role during this process, or through our branches where we think it's safe to operate. Some of our branches were affected by acts of vandalism. And from our network of 193 branches, 9 of them are not operational due to the damages. We have insurance coverage that will help us to offset operational losses. And as of last Friday, there is no operational impact that will materially affect our financial state.

Now starting our presentation on Slide 2. Since our last call, we have updated our expectations for the 2019 macroeconomic outlook for both Chile and Colombia. When compared to our forecasts at the beginning of the year, we observe a material difference from our initial expectations on interest rates and GDP growth. In Chile, we are now forecasting a 1.75% interest rate for the end of the year, 170 basis points below our original expectations, and a 2.2% GDP growth. This forecast already incorporates the lower growth expectations for the fourth quarter of 2019 that we have just discussed.

In Colombia, we are also considering a 50 basis points reduction from our original figures for interest rates, and 30 basis reduction from original expectations of GDP growth, which is now 3% for 2019. It's important to highlight that despite those changes, we maintained our loan portfolio growth projections between 8% and 10% for markets in both Chile and Colombia.

Now moving to Slide 3. We show the highlights of our performance in the quarter. We ended this quarter with a CLP 42.5 billion recurring net income, which represents an 8.1% recurring return on tangible equity. If we took a look at the bank in Chile on a stand-alone basis, it represented a result of CLP 40.2 billion and a recurring return on tangible equity of 9.6%. As mentioned in our last call, we continue to pursue sustainability of our commercial performance as well as to deliver continuous cost discipline. This translates in a 2.8% loan book growth in Chile during this quarter, and a 1.5% reduction on our noninterest expenses in this quarter. We will [ enter ] in more details in the next few slides.

So moving to the Slide #4. Our loan portfolio continues to be positively affected by the dynamics we have been discussing with you over our previous calls. The consumer credit portfolio consistently outperforms the market on a 12-month period since the beginning of 2017. This has been a tent-pole in our strategy to rebalance our loan book to a better mix of consumer and commercial that would help us to close the gap in financial margin and operationally leverage our retail operation. Moreover, according to our expectations, the commercial portfolio has marginally outperformed the market in the last 12 months. You might recall from our previous calls, when we had stated that we would see a convergence in commercial growth after we have finished our credit portfolio management cycle, where we adjusted concentrations and risk policy. This is exactly the case we had predicted, and we expect commercial growth to continue to be aligned with market growth as we continue to deepen our service offering in cash management cross-sell. For the mortgage portfolio, although we continue to underperform on a 12-month period, we have finally adjusted our operational model and value proposition for this market. As a result, in the last few months, we have performed on par with the industry, and therefore we expect to converge on a 12-month window early next year.

On Slide 5, we present our financial margins with the clients. As our overall portfolio growth continues to pick up, so does our margins with clients, which grew 8.6% when compared to the same period last year, benefited by higher volumes and higher-yielding mix as retail continues to lead the expansion. This quarter we continue to see the credit expansion positively affecting our financial margins with clients. On the other hand, we observed a negative impact coming from the reduction of interest rates that affects our liability and capital margins. That explains most of the variation of the trimester. It is also worth mentioning that in this quarter we had lower level of commercial activities on the markets for derivatives and FX transactions with clients.

Moving to Slide 6. As stated in our previous calls, [indiscernible] part of our assets with our clients is denominated in the official inflation in the adjusted index, the UF. We actively manage loan positions in inflation in our banking book under the guidelines of our risk appetite and risk limits set by the Board, and the Asset and Liability Committee. This quarter, the UF increased 0.5% when compared to the second quarter of 2019, generated a lower contribution from our banking book to the overall financial margin with the market. That effect was partially offset by better results in our trading book. When comparing our financial -- our performance and financial margin with the market, it's important to consider that our treasury business model relies more on the use of available-for-sale investment classifications than the other banks in Chile, according to the financial statements released in this trimester. Moreover, we have at the end of the third quarter of 2019 an unrealized gain of CLP 42.5 billion in our balance sheet. Other banks have materially less unrealized gains in the balance sheet, as they have already recognized the positive results from mark-to-market investments at a lower-than-expected UF curve. In our treasury strategy, we prefer to have a higher carry return in our banking book in order to minimize market fluctuations.

Now going forward, let's talk about our cost of risk and credit quality. Here on Slide 7, we can see the main credit indicators in Chile. This quarter, our cost of credit amounted to CLP 40.9 billion, which came in line with our projections for both wholesale and retail segments. This amount considers CLP 22 billion of nonrecurring provisions we have constituted due to the changes in regulatory requirements for new standardized model for commercial loans. This amount was offset by a partial reversal of a credit provision for a specific client in Chile that has been evolving satisfactorily. Despite the 30 basis points increase in NPLs in consumer portfolio, overall credit quality continues to behave as expected as there is a seasonality in collections during the month of September because of the concentration of national holidays. As for our perspective for the year of 2019. We believe that we will possibly end the year above our guidance for credit on cost to average loans, which is between 0.7% and 0.8%. The social unrest that we have discussed at the beginning of our call will probably impact negatively the NPL ratio in the short term as some business individuals are adversely affected by less economic activity and acts of vandalism. As we mentioned before, it's still too early to do a complete assessment of the changes in credit risk with the information available. However, it's reasonable to expect a cost of credit higher than our original estimates. We will keep you posted as we have more information about this.

Now moving to Slide 8, we see our noninterest expense evolution. When we look over a 12-month period, our expense base grew at a rate of 1.5%, significantly below the inflation for the period. Furthermore, if we isolate depreciation and amortization that reflect all the investments we have been making in our digital platform and in scaling of our business, expenses have nominally decreased in the period. We have always had a diligent focus on efficient use of our resources, and we reiterate our belief shared on our previous calls that we still see further synergy opportunities and we continue to expect efficiency to gradually improve throughout the next quarters.

On Slide 9, we present our synergy updates. Here, also reviewed in our previous calls, we adjusted our baseline by excluding expenses consolidated from our Colombian operation, provision expenses related to credit risk and nonrecurring expenses, in line with the reclassifications we do in our MD&A report that is available to you. Lastly, we removed depreciation and amortization, as these are more related to long-term income generation. We then applied the same methodology to the financial system as a whole. Since the merger, we consistently presented an expense evolution below market average. Our adjusted expenses reduced 2.4% in the first 9 months of 2019, while the overall industry in Chile grew 2 point -- 7.2% in the same period. Cost discipline and the continued search for efficiency opportunities are part of the DNA that we are creating for this bank.

So going to Slide 10, we then can assess how this translates into an estimate of synergies we have captured since the merger. By comparing how our expenses grew in the period, we can see on the top of the chart, should that -- they would be -- have grown at the market rate, we can measure the gap and the synergies that we capture. On this basis, we calculate a total of CLP 81 billion in synergies or about $119 million.

So now moving to Slide 11, we can discuss our capital structure. In the last few months, the Chilean regulator has started to release guidelines for the implementation of Basel III framework. The regulator has released so far capital charges for systemic important banks and for operational risks. Both guidelines coincide with our estimates for the capital planning we have been discussing with you in the past couple of years. We continue to work with the regulatory entities to closely monitor the evolution of new regulations, and so far all the announcements are in line with our model and expectations. Our estimates for new regulatory environment suggests a minimum regulatory CET1 of 8% for 2024 once Basel III is fully implemented. As shown here, our current CET1 position is 7.5%. Our plan is to continue to converge in profitability as -- and have a core capital generation and retention that we -- will allow us to comply with capital requirements in the time frame that is being discussed. Moreover, we are actively searching for opportunities with our capital management group to fine-tune our capital position and reduce risk-weighted assets densities.

So on Slide 12, we can go over our operation in Colombia. Here, we can see the evolution of the recurring net income in the Colombia operation, which contributed with CLP 14.9 billion during the first 9 months of 2019 and represented 5.4% of the consolidated recurring net income in the third quarter of 2019. We continue our path of convergence for our operation in Colombia, and the evolution of results shown in the first graph are a clear indication of our trajectory. As we mentioned before, this convergence will not happen overnight, as we had to undertake important adjustments in risk management and practice as well as review business position and strategy. We continue to expect returns in Colombia to approach its cost of equity as we resume business growth starting this year and consolidating our strategy in 2020. Cost of credit remains under control within the expected range of CLP 0.015 and CLP 0.024 we have for this year. A specific case in the corporate segment continues to require additional provision that might generate some pressure in credit costs for the last trimester. The bank continued with its disciplined approach to costs, and noninterest expenses have risen 0.3% when compared to the same period last year. This is an important milestone in efficiency for the bank as we continue to invest in the digital strategy, business position and teams in order to expand our execution capabilities. Results of financial margins with the market along with less cost of credit explain an important part of the increasing profitability for the operation in Colombia in 2019. For 2020, we expect to -- our go-to-market strategy starts to change these dynamics as business in retail and wholesale start to take a larger role in this convergence. On a year-over-year basis, the wholesale business shows approximately 4% growth in the credit portfolio, while the retail business posted 4% on an aggregate basis. However, repositioning products in retail, such as mortgages, credit cards and consumer credit grew 8%, 7% and 4%, respectively. The [ subtractor ] for growth in the retail business continues to be the payroll loan portfolio that decreased 23% against the same period of last year. We expect this portfolio to stabilize in the following months, and therefore the business in Colombia won't have to deal with a negative vector in this path for growth.

So in our last slide, the 13, we can see our main key strategic drivers. So far, even considering some changes in the macroeconomic environment, we don't see reasons for changing our strategy, which continues to be based on the same drivers that we have discussed with you on the beginning of this year. First, as we have presented here, loan growth in Chile continues to pick up, supported by a consistent performance from consumer loans and convergence in commercial loans to the overall market base. These dynamics also should continue to expand the retail portfolio in the mix, which should further contribute to a higher average yield to the overall portfolio.

In terms of cost of credit, although our portfolio is still more concentrated in wholesale credit that leads us to a more noticeable exposure to credit events than our peers, our performance so far has been in line with our estimates. As for our adjusted noninterest expenses, which are adjusted for depreciation and amortization, we continue to have a diligent oversight to the use of resources and continue to aim for growth in line with the inflation in Chile, which is an important challenge when compared to the average sector inflation. And as for Colombia, we expect to present a gradual and consistent improvement over last year's, as strong business volumes growth crystallizes and -- as a main focus in our challenge.

That's pretty much the presentation I had for you today. I would gladly take any questions that you might have.

[Operator]

[Operator Instructions] Thank you. Your first question comes from the line of Jason Mollin with Scotiabank.

[Jason Mollin, analyst]

My question is related to the sensitivity of the bank's net interest income to market rates in Chile and Colombia, and on a consolidated level if you can just give us some sense of, all else equal, what a 100 basis point change in the policy rate means for Itaú CorpBanca in each of its main markets, and perhaps if you can tell us a little bit about how actively you plan to manage that.

[Gabriel De Moura, executive]

Thank you for your question, Jason. I think when we think about the bank and its sensitivity to interest rates, I think it's important to separate 2 different aspects of the business. So on the business side, it affects directly us, right? Because when we think about the current account deposits that the business have in our financial -- in our capital position, the models that we have, they remunerate the business at market rates. It's 36-month market rates that we hedge at our position. So as interest rates go down, these financial margins with liabilities will go down for the business. We are experiencing a difference from the expectations we have this year. And as we mentioned, this has affected the results for the business in wholesale and in retail. And we'll continue to do so for the next quarter. So if you think about only the business side, probably in 2020 they will have a lower margin than they have this year, something around 10% less on financial margins with the liabilities. Only talking about the spreads, not the changes in volume, right?

The flip side to this discussion is on the banking book. So the bank has a positive BV 1. So one of the aspects that I've mentioned on the financial margins with the market is that for this year, we have unrealized gain of CLP 42 billion in our banking book that we have not realized. And I think it's easy for you to do a benchmark, taking all the information that the banks put forward with the third quarter financial statements to check the mix that the banks have for the trading vis-à-vis available-for-sale exposures. We have more on the financial -- on the -- I'm sorry, on the available for sale, which means that we have not realized these changes in interest rates in the banking book. Meanwhile, other banks, I think that they have recognized most of it through trading gains. So what we expect for next year is an increase in profitability for our banking book that will somehow offset the exposure that we had on the business side. The bank as a whole has a positive -- I don't have the number here on sensitivity. I think it affects the margins, as I mentioned, I think it'll be neutral on an aggregate basis, but it will be different between what is the financial market margins with clients and what is the financial margins with the market. So one is offsetting the other somehow. I don't know if I answered your question with that.

[Jason Mollin, analyst]

No, that's helpful, Gabriel. What about -- maybe second question would be just -- you talked about and we saw the uptick in NPLs in the consumer segment. If you can talk about what's driving that increase from the NPL; it had shown some recovery in the second quarter and bounced right back to the 2% range. What's going on there? What's driving that?

[Gabriel De Moura, executive]

If you take a look at the seasonality that you have, at least in our case, for NPLs, you see that the third quarter for consumer is usually higher. And the main reason for that, it has to do with collections during September. So if you remember, in September, you have the national holidays here in Chile. And almost you have 1 week without the normal process of collection. So NPLs tend to be a little bit higher on the month of September compared to the other months, and that affects the third quarter. In terms of NPL creation and the dynamics in credit, I cannot -- I can't take a look at this trimester and say that if there is something different then we do see an uptick in terms of risk? I don't think so. I think that's a normal part of the seasonality that we expected for the business.

What I think might be different, and as I mentioned, we are still incorporating information, is all the things that happened in Chile in the past 2 weeks. I think that probably we will have an impact on the NPLs. We don't have an estimate so far. But as business we're affected, and our collection process was affected as well. We end up not doing a full collecting process over the last 2 weeks. Somehow, I think NPLs will be a little bit affected by that. I don't think it changes the expectations we had for cost of credit in consumer. I think that everything is within the expected margins and cost of credit that we expect. But I think there is a hiccup probably in the next quarter.

[Operator]

Your next question comes from the line of Jorg Friedemann with Citibank.

[Jorg Friedemann, analyst]

So I have 2 questions. The first one, just a follow-up on what you just mentioned, Gabriel, with respect to the unrealized gains. You're talking about BRL 42.5 billion. Just wondering the duration of this portfolio to assess how quickly you would be able to realize such gains. And the second question, also associated with margins, I understood that according to what you conveyed in the prior question that you believe that margin with the market should offset the pressure that we will have with margin with clients. But if on the one hand the pressure occurs for everybody because of final lower rates, on the other hand, and I think this is particularly important for Itaú CorpBanca, what the market would like to see is more commercial assertiveness of the bank. At some point, you'd started decelerating the pace of growth in retail and almost converged to the market. And it seems that you are reaccelerating again. So my question is what happens for you to still oscillate in this strategy? What you believe that you are, I know, making better and what you still can improve? And if there is something related to the digital strategy that is delaying a bit an effective reacceleration, given that I know some of your competitors are quite strong in these new initiatives?

[Gabriel De Moura, executive]

Sure. Thank you for your question, Jorg. Just to make a correction, you mentioned BRL 42.5 billion. I would love to BRL 42.5 billion, it's CLP 42.5 billion, right, of unrealized gains that we have on the bank. So yes, as I mentioned, we have -- it seems when we compare to other banks -- and this is public information, that you can do the benchmark with other banks. And I think it's especially interesting for you to do this analysis, given the cycle that we are living in interest rates in Chile. So the way that we do it, as I mentioned before, we have most of our investment positions in treasury on available-for-sale. And that takes a little bit of the volatility in results and enables us to have a better accrued-based return on our banking book and less volatility. From my understanding and the benchmark that I did with other banks in the market, some of them have a much more prominent exposure in the trading book, which means that all this lower interest rates on the treasury has already been captured on margins. In our case, we didn't capture it; we will capture over time.

Your question about the terms that we are doing this. Within our investment portfolio, the duration that we have is around 1 year. So I think it will be reasonable, all other things constant in terms of the yield curve that we have, is to have this return through the next year. That will somehow offset the impact -- the negative impact that we have from the last returns on the business. For instance, the return that we have for current account deposits. So that's the way that we manage the cycle. What will change that expectations is if yield curves are different, so if interest rates start rising again, especially on the long term of the curve, probably that will change a little bit. And what will also happen is that if we live within a period of a flat yield curve for 2, 3 years, then you start having a different discussion, meaning that all the financial margin with the market will possibly go through this next year. And you have a lower accruing on the banking book, given the curvature of the yields that you're seeing in the future. So we do not expect yield curves to be that flat going forward. If we take a look at the last month interest rate, it started risen again in Chile, something around 40 to 60 basis points on the long end of the curve, which will help us to constitute, then again, gains on the treasury given our strategy. So probably answering your question, 1 year from now, we would capture that. And we will ease the convergence that we need for the other part of the business.

You mentioned on the volumes -- everything that I'm talking about, it's only on spreads here, right? In volumes, I think that one strategy that I think we were very successful was on the asset side. So I don't quite see the way that you're putting in that we had a deceleration and we are accelerating again. In terms of strategy, we didn't change anything, but markets become more competitive or less competitive, I don't think it's a nice way of putting it. But there is changes in the market that we are able to better capture doing our strategy or not. We didn't change anything. The market goes through its cycle, and then we are able to capture more market share. I would say that on the consumer side, we've been aiming for something around 120% of the market. I think that if anything is higher than that, I mean, it's an opportunity that we would chase that gladly, but I don't think it's sustainable. I think that anything between 120% of the market share, I think it's a fair assessment on consumer. Changes on that, it's based more on the market than on our strategy. But one of the things that we still need to pursue is the strategy on current account deposits and services. I think that while we were very successful on the asset-side strategy for consumer, we are still lagging behind on the current account deposits. On the wholesale side, we've been taking market share on the current account deposits. It's where we have our larger deficiency, I would say, but still, we have to do better on retail as well. So I think that the challenge is -- when I take a look forward, is still volume-based, meaning that operationally leveraging our retail business, and as well as taking more aggressive approach in the cross-selling of services for our growth strategy. That's pretty much it. I don't know if I answered your question.

[Jorg Friedemann, analyst]

No, you did. You did. It was very clear. If you allow me, I'd just like to make a final point on capital, I was looking here in your Slide #11. And you mentioned that fully loaded Basel III is at 7.5%. Just wondering if this already considers the result of the arbitration with Helm? And what would be the pro forma number for that and for the future execution of the options in Colombia? And when you would start pursuing those strategies to maybe close the gap to the market requirements, if you could for instance start already, in 2020, working with some mechanisms to lower the minimal requirements for dividends?

[Gabriel De Moura, executive]

Sure. When we take a look at the capital position, and it's a very fair point, 7.5% represents the position that we have right now. As we mentioned before, when the acquisition of Helm is performed and we are waiting for regulatory approval, and we expected it to be performed by the end of the year, now in December. The last calculation that we had was an impact of 0.8%, 0.9%. So with the incorporation of the Helm's acquisition, this number probably will fall to something between 6.6% to 6.8%. That's the expectation that we have for the fully loaded acquisition of Helm. That was according to the expectations we had of acquiring the business in Colombia. We have a second acquisition by 2022, which is the participation of Corp Group's stake in Colombia. We will probably consume the same amount of capital, something between 0.8% and 0.9% by that. And then we meant to start our core capital generation. If we take a look at how much capital we had at the beginning of the merger and nowadays, we were able to, either from initiatives that we have within the capital management group or by the profitability of the bank, to somehow increase our position in capital in CET1 fully loaded. I mean that's continued to be our expectations. I think there is opportunities for us in capital leakage. We do not have an estimate for that, but we want to capture it. If you take a look at the position that we have for derivatives, for instance, we have a strong position in mark-to-market of assets and liabilities of derivatives in our balance sheet.

And perhaps there are opportunities for us in matching some of those positions and reducing the exposure in risk-weighted assets without an impact on profitability for us. That is one example, we are pursuing different strategies for capital leakage. And I think they have -- in our history and previous knowledge from Itaú Unibanco, I think that was an important part of the balance sheet management. And I think there is opportunities for us in here. However, I don't think it's possible for us to do all the convergence just based on capital management and leakage opportunities. I think it's vital for us to continue to increase the profitability of the bank as we grow and also to retain capital. So we do expect dividend payments to be on the lower end of the distribution. So the legal limit -- minimal limit for dividend payment in Chile is 30%. So we had expectations on that. And we have mechanisms to adjust capital throughout time. One of them is retaining dividends, for instance. And that's pretty much the capital management plan that we have so far. Of course, we will adapt as we have more information; for instance, if we are not able to convert in profitability, we have to have other discussions, but that's not the plan that we have so far.

All the things that we have discussed with the shareholders and with the Board is pursuing the plan in terms of growing the bank, profitably increasing our core capital generation and retaining capital. That's pretty much the plan that we are following so far. And the regulations that we saw so far, they are also according to the expectation. So there is no reason for us at this moment to change any plans or expectations we have for the capital convergence.

[Operator]

[Operator Instructions] Your next question comes from the line of Alonso Aramburú with BTG.

[Alonso Aramburú, analyst]

Have a couple of questions in terms of provisions. Just -- I mean, you mentioned this quarter, there was a release of provisions. Just wondering if you will do more releases before the end of the year, whether that is incorporated in your guidance of 0.7% to 0.8% cost of credit. And you also mentioned, in the case of Colombia, there's one particular case affecting your cost of credit. When should we expect to -- for the company to be finished with that provision? Is that this year? Or should that continue into next year?

[Gabriel De Moura, executive]

Sure. Your first question was about more releases. No, we do not expect any more release on provisions. I think it's important for us to take a step back on the cost of credit. If you think about the guidance that we have for [ the market ] so far, I think that we've been fulfilling pretty much every guidance that we had at the beginning of the year, with the exception of cost of credit. So we had a little bit more pressure on cost of credit. So far in the year, it's around -- between 0.8% and 0. 9%. And we were somehow impacted by changes in the regulatory environment, as we mentioned, but that they were offset by the releases that we had with all the information available. As I mentioned, I don't think that we're going to experience more releases this year, but I do think that we are more pressured in Chile for cost of credit than we originally expected.

So I think that I'm going to miss the guidance I had for 0.7% to 0.8% for something higher than that. Of course, we are incorporating all the information of the things that happened in Chile in the past few weeks within our models, and also taking a look at the exposure in some companies that might be affected by it. We don't have every information available right now, but I think it's reasonable to expect a higher cost of credit. In Colombia, there is one case that we mentioned, and probably you know that case is Ruta del Sol. There was a ruling within the courts of Colombia regarding the credit holders of Ruta del Sol. We have provisions of 65% of our credit, we have an exposure of roughly $30 million, $35 million in Ruta del Sol. So I think that we had a fair provisioning for the case, but we are elevating this, taking in consideration the ruling of the court, and we are still looking for what is the best strategy to move forward. Given that, probably I'll have the effect of the difference on the next quarter. I don't think that we are going to carry over any provisions from this case from this year to the other one, meaning that probably we will resolve everything in terms of the provisioning this year, which already also puts a little bit more pressure in our cost of credit in Colombia, that as a whole has been performing better than we expected. But we think that with this event, the quarter will be a little bit lower.

[Operator]

And there are no further questions at this time. I will turn the call back over to the presenters for closing remarks.

[Gabriel De Moura, executive]

Fantastic. Thank you so much for your time. As always, Claudia and I are available for any questions or follow-ups that you might have. And I'll see you next quarter.

[Operator]

This concludes today's conference call. You may now disconnect.