Banco Latinoamericano de Comercio Exterior, S. A.
Q2 2013 Earnings Call Transcript

Published: 19 Jul 2013

[Operator:]

Hello, everyone, and welcome to the Bladex Second Quarter 2013 Conference Call on today, the 19th of July 2013. This call is being recorded and is for investors and analysts only. If you're a member of the media, you're invited to listen only. Bladex has prepared a PowerPoint presentation to accompany their discussion. It is available through the webcast and on the bank's corporate website at www.bladex.com. Joining us today are Mr. Rubens Amaral, Chief Executive Officer of Bladex; and Mr. Christopher Schech, Chief Financial Officer. Their comments will be based on the earnings release, which was issued yesterday. A copy of the long version is available on the corporate website. Any comments made by the executive officers today may include forward-looking statements. These are defined by the Private Securities Litigation Reform Act of 1995. They are based on information and data that is currently available. However, the actual performance may differ due to various factors, which are cited in the Safe Harbor statement in the press release. And with that, I am pleased to turn over the call to Mr. Rubens Amaral for his presentation.

[Rubens V. Amaral:]

Thank you, Kay. Good morning to everyone, and thanks for taking the time to attend call today. My comments will cover the Slides #3 and 4 in the presentation we have made available to you for this call. In my initial remarks last quarter, I mentioned that we were positive above the prospects for 2013, although the results for the first quarter, as I'm sure you remember, came in slightly lower than I would have liked. Today, I am confident about the results for the year as our region continues to show resilience in spite of the recent volatility in financial markets and reduced prospects for world growth. The results for the second quarter came in stronger, with an increase of 33% over last quarter, as we continue to reach new record levels of disbursements, $4 billion this quarter. Our net interest margin, NIM, continues to expand, as we have been successful in deploying more medium-term transactions and have managed to reduce our overall cost of funds. In addition, we continue to build on our syndications platform, with 4 deals closed so far this year and with a promising pipeline of new deals for the second half of the year. Christopher will provide more color about the fee income later on. Now there is soft economic outlook, the scenario is indicating a further slowdown in growth. As commodity prices continue to fall, domestic demand shows signals of contraction, and China's prospects are not as bright as they have been in the recent past. On the other hand, there's still plenty of liquidity in the financial markets, but the destination of these funds is shifting towards the U.S. dollar and the U.S.A. that the Federal Reserve Bank signals the possibility of tapering its fiscal stimulus program. In this regard, we do expect a more challenging economic environment in the second half of the year. Nevertheless, we have built a strong pipeline of new deals, which will definitely contribute to our continued efforts to grow our medium-term portfolio. Our clients, corporates and financial institutions alike, continued to seek opportunities to improve their liability management by lengthening their maturities. Although the level of activity in the syndicated loan market was so not robust in the first half of the year, we believe that as liquidity is reduced in fixed income markets, our clients will consider to tap the loan syndication market. In terms of the countries, we're following carefully what's happening in Brazil and Mexico for instance as the region's 2 most important economies go through an internal process of adjustment. Mexico is poised to benefit more as growth in the U.S. is gaining esteem and the government is pursuing an aggressive agenda on much-needed reforms. Brazil, on the other hand, is struggling with the lack of investments in infrastructure, fighting to keep inflation under control and more recently, has been shaken by social unrest. We have conducted a review of our credit portfolio in Brazil to identify potential problems, but we do not anticipate any negative effect as our portfolio's credit quality remains strong. Against this backdrop of a more challenging environment, Bladex, as you know, is well-positioned to benefit as the situation plays to our strength of knowing the region very well, having the risk guidelines and appetite to underwrite risk in this region and also having a solid funding structure, which combined will enable the bank to continue to support its clients and most likely, at increased margins. Therefore, our focus will continue to be on the improvement of NIM and the generation of fee income from our syndications business and the letters of credit as well, which is picking up in a nice way. I am pleased definitely this time with the results of the second quarter. And as I stated previously, I remain optimistic about our performance in the second quarter. I will now turn to Christopher to guide you through our presentation. Thank you for your attention today. Christopher, please.

[Christopher Schech:]

Thank you, Rubens. Hello and good morning, everyone. Thank you for joining us on the call and the webcast today. In discussing our second quarter results, I will focus on the main aspects that have impacted our results, and I will base myself off the presentation that we have uploaded to our website, together with the earnings release, which is being webcast as we are speaking. So let's start with a quick recap on Page 5 of this presentation of the key financial highlights and drivers for the quarter, which closed with net income to Bladex's shareholders of $21.7 million compared to $16.3 million in the previous quarter and compared to $23.2 million in the second quarter of 2012. The bank's net interest income grew quarter-on-quarter and year-on-year by $3.4 million or 13% to $29.4 million, as the result of increased interest income from higher average loan balances and lower interest expense, mainly brought about by the decision to prepay medium-term debt obligations, which were in the last remaining year of tenor. We will talk more about this in a few minutes as we provide more detail to this and some of the following points. Noninterest income more than doubled to $10.5 million this quarter compared to $4 million in the first quarter of 2013 and compared to $15.9 million in the second quarter of 2012, with higher commission income from our letters of credit business that saw increased levels of activity and from 3 successfully completed syndication transactions this quarter. Here, I should point out the fact that last year's quarterly results were significantly impacted by nearly $6 million in gains from the sale of our previous corporate offices here in Panama. Also, last year, at this point, we had been net sellers of bonds realizing substantial gains on sale as we reduced our security holdings. This quarter 2013, we were net buyers of bonds with a moderate increase in our portfolio holdings. Also, included in other income are the results from our remaining investments in the investment funds, which had better performance this quarter compared to the previous quarter and compared to the quarter from a year ago. The provision for our loan loss line for both on-book and off-book contingency exposures reflected the growth of our Commercial portfolio in good quality exposures, with $2.5 million in added generic reserves. The credit quality of our portfolio remained solid this quarter, with 0 nonperforming loan balances. Operating expenses show headline growth of 6% quarter-on-quarter and year-on-year. As we will show later, this increase is mainly driven by performance-related accruals for variable compensation in the bank, as well as the performance fees charged by the investment funds on the basis of their improved results. Net interest margin is trending up, as Rubens already mentioned, and so are net interest spreads, even more so when you consider that some isolated interest expense items that have had an impact this and the previous quarters will not be a factor going forward. The efficiency ratio is moving in the right direction, and ROE is back in the double digits. So this briefly summarizes our performance on continuing operations. The numbers regarding discontinued operations, which relate to the former Bladex Asset Management Unit, are not very meaningful. As discussed in our last call, we have finalized the sale of the unit, and activities related to the discontinued operations have ceased in the second quarter. Going forward, we will show discontinued operations in our reporting only for prior period comparison purposes. So let's look into this quarter's result in a bit more detail, moving to the next slide, Page 6, which shows the year-on-year and quarter-on-quarter evolution of net income. These net income was -- highlight the main drivers that have impacted our results. We also depict what we label core net income, which excludes nonrecurring items, excludes also non-controllable expenses and the results from investments in the investment funds. With that, we aim to convey how core profitability, and with that, the quality of our net earnings, has evolved over these periods. And we think that this evolution is going in the right direction, thanks to the efforts we have been making to strengthen our core business. The next page, Page 7, focuses on one of the key elements of our core business, net interest income and net interest margin. Both metrics suffered somewhat in previous quarters from the strategic move we had made last year to strengthen our funding base by going into longer tenor debt, and which increased our average funding cost quite significantly. At the same time, lending margins remained stable with limited opportunities to get price, as Latin America was flooded with liquidity or to increase the medium-tenor lending book. In the first 2 quarters of 2013, however, liquidity still remains in the region, but Bladex has had better traction in originating medium-term loans. At the same time, we have pruned our funding portfolio to lower average funding cost without changing the profile of remaining debt maturities. I will spend some more time on this topic in a later slide, but this page already shows the progress we are making in terms of extracting more value from our core business. Net interest margin is expanding as expected, and when you consider that some of the elements that have depressed net interest income and net interest margin this quarter, primarily amortizations accounted for as interest expense, when you consider that they will no longer be effective going forward, you should expect that NIM expansion to further strengthen in the second half of the year. On Page 8, we show the evolution of our funding sources over the comparison periods. By last year, the primary focus of our funding activity was on strengthening our medium-term funding capacity and stability. This year, we have been working on optimizing our funding structure without compromising its stability. Our deposit base reached new highs in the second quarter, and we reactivated our long serving EMTN program, this time with the purpose of targeting private placement in short and medium tenors that have allowed us to diversify away from traditional bilateral funding sources. And this has also led to record levels of unutilized available funding lines. We also decided to prepay $600 million of medium-term debt, which had been placed in previous years and which were nearing their maturities with remaining tenors of a year or less. We replaced these obligations with new funding that match these remaining tenors at considerably lower cost. The prepayments obliged us, of course, to accelerate the amortization of commission expenses related to these loans, with the onetime effect of increasing interest expense this quarter by $2.6 million. But even with that, the prepayments have had a net positive effect on average funding costs and overall interest expense this quarter. This positive effect on average cost of funds will continue and will strengthen in the coming quarters on a steady-state basis. Cost of funds will also benefit from the absence of amortization expense relating to freestanding financial instruments, the last remnants of which will roll off this month of July. The columns of the graph in this page, Page 8, represent the original tenor structure of our debt, and some may read from this that we have moved away from our strategy of creating and maintaining a stable, dependable funding base. Yes, we did prepay medium-term debt and replaced it with cheaper short-term debt, as mentioned earlier, but the profile of maturities of our existing debt, what we call remaining tenor, has not changed at all. We still have significant medium-term funding capacity on our book considering the tenor mix of our lending book. And this quarter, we have seen the need to take on only small amounts of new medium-term debt to our private placement program. That said, if the pace of origination of medium-term loans continues at the same or higher levels, we will likely make the determination to tap debt capital markets sometime later in the year. Moving to Page 9, we show the evolution of revenues, expenses and the efficiency ratio, which is now trending in the intended direction, reaching 36% this quarter on the basis of rising revenues, achieved with a stable controllable expense base. By controllable expenses, we mean recurring cost of doing business that we are targeting through a number of activities in order to achieve a year-on-year reduction, from in-sourcing certain activities to outsourcing others, from not replacing natural turnover in our workforce to redesigning processes in order to eliminate waste. Non-controllable expenses have to do with performance-related expenses, which has the performance fees from better results in the investment funds or the amortization of variable compensation grants from prior years, as well as the quarterly accruals for the 2013 bonus pool, which reflect our year-to-date performance against our performance target. The actual payout out of this bonus pool is, of course, subject for the sole and final determination by our Board of Directors once full year results are accounted for and evaluated. Next page, Page 10, is to highlight the low-gearing and comfortable capitalization which has always characterized our institution. And while we continue to extract more value from our available resources, we do not contemplate any need to compromise our conservative capital and liquidity management approach. The next few slides center on the dynamic in our Commercial division, the backbone of our business, starting on Page 11, with a chart showing the growth of our loan origination activities, as disbursements reached $4 billion this quarter, up nearly $500 million or 13% from the first quarter of 2013 and up over 50% from the second quarter of last year. We largely maintained our tenor mix of disbursements quarter-on-quarter even as market rate movement towards the end of the quarter channeled more demand into the shorter tenors. Per Rubens's earlier comments, the economic outlook may not be as bright as it was at the beginning of the year. Nevertheless, we believe that market conditions will continue to provide opportunities of growth for Bladex in the second half of the year. We move on to Page 12, where we can see the impact that our origination activities in both disbursements and the unfunded contingency business have had on our Commercial portfolio balances, which solidified their expansion trend with growth of 7% quarter-on-quarter and 18% year-on-year. True to our Pan-Latin American vision and reach, we continue to have a well-diversified presence in countries and industry sectors across the entire region, responding to positive growth momentum in some markets while adjusting our mix of exposures in others. On Page 13, we turn our discussion to commission and fee income. Most of our commission income is still earned in our letters of credit business, which have seen increased demand in the second quarter 2013, partly from seasonal effects in countries that are the traditional drivers of that business, as well as from a more diversified client base. On the syndication and debt intermediation side of our fee business, we continue to build on our deal track record, successfully completing a total of 4 deals so far this year, more than the total number of deals for the entire year 2012. These deals have so far been smaller sized transactions, and so our fee income growth has been modest quarter-on-quarter. However, on the basis of a growing deal pipeline and increased market recognition, we remain confident in achieving our full year fee income target. Page 14 is about our noncore income from our asset management activities, primarily the investment in the investment funds formerly owned by Bladex and which are now under new ownership following the sale earlier in the quarter. The fund performance improved over the previous quarter, netting us a $2 million contribution net of funding expenses and third-party interest. Even after the sale of our asset management activities, accounting rules require us to continue to consolidate the feeder fund as long as our interest in the fund remains greater than 50%. Our participation in the feeder fund was 56% at the end of the second quarter, down from 99% in the previous quarter, which was prior to the consummation of the sale. With continued good performance of the fund and greater inflows of third-party monies, we expect to continue to see dilution of our interest in the feeder fund, which will eventually allow us to reconsolidate, and hopefully, that will be very soon. On the subject of total shareholder return on Page 15, we just like to reiterate our commitment of aiming to reward our shareholders with the creation of value. Our Board of Directors, just the other day, authorized a quarterly dividend payment of $0.30 a share. And with that, I'd like to hand it over back to Rubens, as Page 16 sums up our conclusions. Thank you very much.

[Rubens V. Amaral:]

Thank you, Chris. So ladies and gentlemen, in conclusion, in a market environment, which is going through some turbulence, Bladex is well-positioned to grow in the short and medium term -- tenors. We have remained focused in maintaining good credit quality, a key characteristic of the way we manage this organization, but we continue to work to keep the NIM expansion, as demonstrated in this quarter. As you heard from Christopher, we're placing a very important eye on the generation of fee income from our contingency book and our syndications activity. Last but not least, we have remained focused to improve our efficiency ratio so we can keep the downward trend in our expenses. That's why I mentioned before, I remain optimistic about the results and our performance in the second half of this year. We are now ready for the session -- Q&A session, I'm sorry. So Katy, please.

[Operator:]

[Operator Instructions] Our first question comes from Tito Labarta from Deutsche Bank.

[Tito Labarta:]

My question -- just looking at the growth in your loan portfolio this quarter, we saw like some strong growth in Argentina, also Brazil was kind of strong. Meanwhile, in Mexico and Peru, we saw loans fall. I'm just trying to get a sense of what you're seeing in those countries, or anything specific that kind of lead -- or drove your loan growth this quarter?

[Rubens V. Amaral:]

Thank, Tito. I -- do you mean the -- your question, I got I think the gist of it, and because the connection was not that good, but I understand that you're questioning about the portfolio in Argentina and Peru mainly. And basically, in Argentina, we continue to do what we have mentioned before as the business of supporting the confirmation of letters of credit that will allow Argentina to continue to import oil as they needed to continue in that trend. Peru, it's a very active market. We are seeing a good pipeline of deals there. Although, more recently, the projections for growth in Peru have been adjusted down, still it's well above the average of the region. So Peru will be growing this year. Instead of 6.1% that they did last year, they will grow 5.4%, which is not negligible at all by the standards of Latin America. So we expect to see our portfolio growing in Peru. And the movements you might have seen in different countries eventually were caused by some prepayments we have had in our portfolio, which we don't expect to be the case in the second half of the year, as we see spreads in interest rates going up a bit. I don't know if I answered your question.

[Operator:]

[Operator Instructions] Our next question comes from Frank DiLorenzo from Singular Research.

[Frank Charles DiLorenzo:]

Just a follow-up to the last call, could you also provide us a little detail on what you're seeing on the ground in Brazil and Mexico?

[Rubens V. Amaral:]

Okay. Well, I think, as I alluded to in my initial remarks, Frank, Mexico and Brazil, the 2 most important economies of the region, definitely we're keeping an eye in what's going on there. Mexico, although you saw a reduction in our balances this quarter, in fact, we had a very good solid pipeline of transactions that we expect to be closing this first 2 weeks of the month of July, which will put Mexico also in an important position in our portfolio. As we see more business opportunities in Mexico, with the actions taken by the central bank and by the government in pursuing these reforms. And of course, as we know, Mexico is still very dependent on the U.S., and the U.S. doing better, Mexico definitely will do better. But one thing that we're seeing different now this time in Mexico is that Mexico is looking to Latin America in a more strong way. So we see more Mexican companies seeking to invest in Latin America and other Latin American companies seeking to invest in Mexico. So we think we are well-positioned to capture this new flow of business between Mexico and the rest of Latin America. In terms of Brazil, definitely -- I'm Brazilian by the way, so I have a vested interest in knowing what's going on in my country. And for the first time and just an [indiscernible] comment, I was there on this -- when these manifestations started, and I was impressed to see even in my hometown people going to the streets and demanding more transparency from the politicians, demanding more understanding about how the money is being spent in Brazil. So I think this is a legitimate type of movement that's happening in the country and then eventually, will lead to elections in next year, as you know, Brazil will go through. And eventually, we're going to get -- the people getting different type of politicians that will help the country to go through the reforms that Brazil needs to implement. In terms of economy overall, Brazil is not growing as well as the rest of the region. Although it's growing more than last year, but we still see the businesses in a wait-and-see mode. So a lot of our clients that had investment plans for this year postponing these investments for next year, and what they are looking at now or looking for is to improve their maturity profile of their liabilities. So in that sense for us, of course, it is a good opportunity -- business opportunity for us to offer our syndication service and bring these clients to investors in Latin America. So overall, Mexico, we're not bullish, but we remain optimistic about what's going on in Mexico, and we'll see a growth in our portfolio. Brazil, we'll be much more selective. And as I mentioned in my initial remarks, we are following carefully what's going on there to identify any possible effects in our portfolio. But so far, we remain comfortable.

[Frank Charles DiLorenzo:]

Okay. Just a real quick follow-up. I think you had mentioned that your overall forecast for economic growth in the region is approximately 3%. Is that a figure that -- maybe it's too early, but for 2014, is that a figure that you think is sustainable going into 2014, that 3%?

[Rubens V. Amaral:]

Yes, in our projections that we discussed recently with the board looking to 2014, we expect the growth to be over 3% in 2014. I would say it's going to be between 3% and 3.5%. But we expect to be slightly higher than the 3% we have seen this year.

[Operator:]

[Operator Instructions] Our next question comes from David Ross from Chevy Chase Trust.

[David Ross:]

I have 3 questions for you. What could we expect in terms of the future funding cost declines and kind of what the amortization effect is going forward? Second question, regarding your leverage ratio, how much higher are you comfortable taking it? And the third question, in terms of your fee income target, can you provide some color as to what you're expecting that to be in either dollar or percentage of revenue terms?

[Christopher Schech:]

David, this is Christopher. Allow me to take the first question, and I'll have Rubens answer the last set of questions that you have. In regards to the interest expense, we isolated in our press release and in the webcast material the effects of the acceleration of commission expense that we had to accelerate this second quarter because we prepaid some loans, and that amounted to $2.6 million this quarter. Of course, that is an interest expense that will not repeat in subsequent months and quarters. And so NIM -- so it definitely benefits from that alone. And then we had another element that we've been carrying on our shoulders for a series of quarters now, which was the amortization of standalone financial instruments that we started in the third quarter of last year and we're just finalizing now this year. We said a year ago or almost a year ago that this was going to be an amortization totaling around $8 million. We said we would amortize $5 million of that in 2012 and the rest this year, and we're done basically. And so this quarter, we showed, I think, $0.7 million of interest expense coming from these amortizations. And as I mentioned in my comments, those instruments are finally rolling off our balance sheet this month, and there's only a couple of -- $10,000 or $20,000 of amortization that's been recorded so far this month, and that will be the end of it. And so with that, we have an interest expense, which is inflated in the second quarter by more than $3 million. And so, if you deduct that, you should get a better idea as to what our true trend of average funding cost is going to be for the remainder of the year. Of course, we're watching very carefully debt capital markets. If we need more medium-term funding, we certainly will not hesitate to go out again and make an issuance. But it is already clear to us that it won't be in the size like we did last year when we placed more than $700 million in medium-term debt. We don't foresee a requirement of that size this year. And we also will make that decision depending on how well we're doing in terms of deploying or originating medium-term loans.

[Rubens V. Amaral:]

Yes, I think, Dave, in terms of the question about the leverage ratio, you see, it -- that goes hand-in-hand with our Q1 capital, we were around 16%. We have always said that we like to work around 15% of Tier 1, give or take, so this is according to Basel I still. Basel II, we have indicated in the past that eventually and when we implement Basel III that would cost 2 additional percentage points in our Tier 1. So we will continue to feel very comfortable in that regard. So leverage ratio should -- shouldn't increase much more than what it is right now. I would say 9, 9.5x max. That's where we've planned to be. And what we want to do and we have stated before is we want to continue to grow the level of our business, but not necessarily increase our balance sheet. That's why we have a discussed in the previous call, implemented what we call an active credit portfolio management so we can continue to grow, but we can really keep in our books what makes sense for us to keep in our books around this 9.5x leverage in our Tier 1 ratio that is around 14%, 15% Basel I standards. And there's fee -- the fee income target, we have this year a target of achieving at least $5 million coming from the syndication business. We are moving in that direction in an important way. And we have a target of having at least in terms of our budget, of course, $12 million in fees coming from the letter of credit business. So that will get us very close to almost 50% coverage ratio when you compare the fee income to our operating expenses. So we are pursuing to increase the fee income so we can continue to improve this coverage ratio within the bank.

[Operator:]

[Operator Instructions] Our next question comes from Saul Martinez from JPMorgan.

[Saul Martinez:]

Just a follow-up on -- Rubens, on your comment to the -- in your response to the last question, I should say, what it means for your dividend policy. You mentioned that you don't have much more room to increase your leverage ratios, does that have any implications in terms of how you may figure dividend policy going forward? And I ask that because you're going your loan book mid-teen range, your ROEs are moving up, but they're still not much above 10% and you're paying 50% payout on core earnings, which would imply that you would be increasing your leverage ratios. So just kind of surprised that you feel that there's not much more room to increase leverage from here. So just kind of walk me through the math a little bit in terms of how what you said might or might not impact your dividend policy going forward, or if I'm misunderstanding what you said earlier.

[Rubens V. Amaral:]

Thanks, Saul, for your question, and I'll try to clarify. I didn't mean to say that there is no room for more leverage. I just said that Bladex has always been a very conservative bank when it comes down to managing its Tier 1 ratio because this is also critical for the type of bank that we are in keeping with the ratings that we have. And we are working with the rating agencies in diversifying our revenue stream so we can really also get some upgrades. So that is to the point that we look very carefully in terms of how far down we want to get with that Tier 1 ratio, and that has a definite impact on our leverage ratio. But I mentioned that it doesn't mean that we do not want to increase our business. We want to increase our business, but not necessarily to book everything in our books. So that's why we're investing in an important way on our distribution platform so we can continue to grow our business, but we adjust the growth of our portfolio through this overall guidelines. Having said that, Bladex has been a bank that consistently has paid dividends, and you have asked me before and we have had so many questions before about dividend policy and the policy of the bank is to pay dividends. We work around this 50% guideline, and we expect to continue to do so as we expect that our fee income from both the active credit portfolio management and our syndications business will continue to grow in an important way, and together the conservative growth of our portfolio will enable us to continue to pay dividends around these guidelines.

[Saul Martinez:]

Do you still see 50%? Because I'm kind of struggling with the math because we have seen the regulatory capital stream from very high levels, but if you're -- given your current ROE and given -- I mean, obviously you can adjust your growth, but given the growth of your portfolio and expected growth in risk weighted assets, it would seem to me that 50% capital ratio -- 50% payout ratio would be consistent even if you expand your ROEs with additional capital stream.

[Christopher Schech:]

Saul, let me try it. I'll take a stab at answering that question. It's true, of course, that the futures -- project forwards current growth rates of our book of business and which up to this point, what we have originated, everything has been booked in our books, and it's to create larger scale. We always said over the last several years that we felt we didn't have enough scale. We wanted to get to scale. Well now, we're starting to see and prepare ourselves for a new Bladex, if you want to call it that, that is arguably at scale once we achieve a solid and sustainable core ROE of 12% in our core business and has a path towards achieving the 15% that we've always talked about in the medium run. And so that means that while we don't want to sacrifice our origination capacity, which as you saw in this first half of the year has been quite good, and I think going forward, we will make more of an effort to only retain on our books what is compatible with our risk appetite, with our need to maintain a sustainable return that satisfies shareholders. And the rest, we would start placing in the secondary market, either by doing it in the primary markets inviting others to participate in the syndications that we arrange and/or selling our originating into the secondary markets. Of course, there is not a huge need to do that at this point in time, but going forward, we do see the need to establish ourselves and with the distribution platform that Rubens talked about, and we are making great strides in establishing that capability. So going forward, you should not just assume that our growth rate will be 15%. Our origination growth that may be that as a function of the dynamics in the region, but our portfolio growth -- on-book portfolio growth should be a subset of that, not necessarily the same level of our origination growth. And with that, we believe that our capacity to continue to pay attractive dividends will not be damaged.

[Rubens V. Amaral:]

And also, the 50% remainder in our capital that we don't distribute, in our view, would be enough to help us to continue to grow in an important way in terms of what we expect to be our exposure in the books. So I think it's a good combination. But what we're trying to be is more efficient in the generation of revenues as well. So it's a combination. I don't know, Saul, if it's -- we're answering your question the way you expect it.

[Saul Martinez:]

No, I think that it's become a bit clear.

[Operator:]

[Operator Instructions] At this time, we have no questions in the queue. Mr. Amaral, I'll turn it back over to you for closing remarks.

[Rubens V. Amaral:]

Thank you very much, Katy. Thank you, everyone. This conference for us is always an interesting moment of sharing with you the results. This quarter, we are happy with the results. And as you heard from Christopher in the reviewing of the numbers, we feel very confident we're going to have a stronger third quarter as well, and that's what we're here for. We're working to continue to deliver in what we're committed with you, our shareholders, to increase your returns. Thank you very much. We wish you a happy weekend.

[Operator:]

Thank you, ladies and gentlemen. This now concludes today's conference. You may now disconnect.