Itaú Corpbanca
Q2 2021 Earnings Call Transcript

Published: 2 Aug 2021

[Operator:]

Good day. Thank you for standing by and welcome to Itau Corpbanca Q2 2021 Financial Results Conference Call and Webcast. At this time, all participants are in listen-only mode. After the speakers' presentation there will be a question-and-answer session. I would now like to hand the conference over to your speaker today, Ms. Claudia Labbé. The floor is yours.

[Claudia Labbé:]

Thank you. Good morning. Thank you for joining our conference call for our Second Quarter 2021 Financial Results. Before proceeding, let me mention that our remarks may include forward-looking information and actual performance could differ materially from that anticipated in any forward-looking comments as a result of macroeconomic conditions, market risk and other factors. 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, in which we adjust for non-recurring events, and we applied managerial criteria to disclose our income statement.

[Gabriel Moura:]

Fantastic. Thank you so much, Claudia. Good morning, everyone. Thank you for joining us for the Second Quarter 2021 Conference Call. Today we'll be going through the key points of our transformation program, as well as the highlights of our second quarter results. Starting on Slide number 3. The first point that I would like to make is that our transformation is happening now. After our thorough analysis and planning of our operations, we have launched the initiatives that are transforming to a bank that is more customer-obsessed, more agile, digitally-simple, data-driven, that takes risks and experiments and that learns on the way. This is all that is happening with the bank right now. In the following slides, I will go through what this transformation means for us. Moving Slide 4. We show that the number one reason why we're changing is that our customers are changing. During the past 18 months, our customers have become much more digital, seeking convenience in simplicity in fulfilling their needs for financial services. For instance, app logins have increased 41% in the first semester of 2021 compared to 2020. And app transfers have increased by more than 95% in the same period. No lines in dwindle but also companies have become much more digital as we've seen the 40% increase in transfers, as well as 30% increase in investment from our wholesale clients through digital channels. Moving to Slide 5. In line with this trend set by our clients, we're implementing a mobile-first strategy to provide digital alternatives for every product and transaction offer by our branches and contact center. All of these digital alternatives that also include the new WhatsApp channel that will be available during the second half of 2021 will add to personal communication channels, such as call center, remote assistant managers to deliver a digital bank echo system. This echo system as well as other aspects of our value proposition will allow us to reach a larger client base, boosting our growth.

[Operator:]

Your first question comes from the line of Sebastian Gallego from CrediCorp Capital. Your line is now open.

[Sebastián Gallego:]

Yes, thank you. Good morning, Gabriel and thank you for the presentation. I have several questions. The first one, if you could discuss on the efficiency front. You have been doing a great job in terms of OpEx control, but a big part of that has been driven by lower headcount, lower branches and lower ATMs. Can you probably discuss the outlook on this three specific topics on how you expect this going forward and how much room for OpEx reduction do you guys currently have at the bank? Second question, I wanted to ask you about asset quality. You just mentioned that on the corporate segment, there wasn't a specific client. I'm just wondering if you currently feel comfortable with a lower coverage ratio, particularly in Chile? We have seen that this dropped to 136 from a recent high, over 200 and we are pretty much at pre-COVID levels or even social unrest. So, I'm just wondering if you need or if the bank needs probably additional provisions in the upcoming quarters, maybe going into 2022 probably. And lastly, I just wanted to ask you about this strategy on loan growth. We have seen a very strong loan growth particularly on the mortgage portfolio and just maybe the timing when you see a recovery mostly focused on consumer that was a priority before the pandemic. Thank you very much.

[Gabriel Moura:]

Fantastic. Thank you for your questions, Sebastian. First, your first question was about efficiency. And, as you mentioned, I think that since the merger, we were able to capture the synergies that we set for the deal. As you can see in the slide that we show, we have grown our cost base less than our competitors. So, I'm going to take a look at the financial system as an aggregate. And taking all the synergies that were with the operation of Itau and CorpBanca. I think that there are still many levels of synergies that we can achieve on the operational level. As you mentioned, headcount is always a measure when we take a look at all the digitization process that we went forward and the program of robotization that we have that was quite strong in making sure that we are making a more efficient, all the eventual minimalities that we have in different processes. As well as taking a look at the footprint that we have for our branches as customers become more digital. I think in terms of the main impacts of forex , we will continue to see those factors. Of course, at a certain point, we need to start thinking about efficiency as a function of the efficiency ratio, right. Because we also intend to grow, the bank can be the fastest grow bank in Chile in growing, increase your cost as you increase the amount of transaction with the bank. But at the same time you increase your revenues. And that's why one of the goals that we have is to converge to the efficiency ratio average that our peers have on the short to medium term. But having said that, when we take a look at all the initiatives that were implemented successfully in Brazil, all the things that we have mapped here in Chile, we think that we have costs well under control and we will continue to work for the goal that I just mentioned. In the second point that you had, is about asset quality. I think it has to do, especially on the commercial side of the discussion, Sebastián. You tend to do provisions well before you have NPL. This is one of the characteristics of commercial loans when compared to consumer and mortgages that work more on a statistical basis, given that they are well-diversified within the portfolio. So, what happens in the credit cycle is that you front-load the provisions in commercial as you see a deterioration in ratings and as they become NPLs, you have already the provision based on your internal rating process. So, I think that we are comfortable with the level of provisions that we have with the covers that we have. You have to remember that for instance, for the cases that we have mentioned that affect the NPL. Aside from the provisions that we have, we also have guarantees, vary from real estate to other guarantees. So, in terms of the loss given the before , we are well-covered. And in terms of additional provisions, we have to take a look at the market and incorporate new information as the economy goes through the second semester, to see what we intend to do. But give all the information that we have right now, I think that we are very comfortable with the level of provisions that we have. And that's why we are revising the guidance that we have for full year cost of credit to be between 0.5% to 0.8%, which is lower than the initial guidance that we had for the beginning of the year. In terms of total coverage, I think it's also important when you compare us to the industry. Remember that the mix that we have is quite different from the industry. We are more concentrated on corporate, in large corporate loans than on SMEs in the market compared to other banks. And I think that for the credit cycle, we are well-provisioned giving the mix that we have and that's why I don't think that we are directly comparable to some of the players. Your last point was about loan growth. In here, I think that -- the way of putting it, I think that the market has grew less than the expectations we all had. The focus that we had was being very cautious around the segments that we are operating and the type of growth that we are having. That's why we have prioritized mortgages with all the guarantees and we were a little bit more cautious on consumer growth. Having said that, when you would take a look at the rankings for growth within the industry, we are the second largest growth for consumer and also for mortgages in the last 12 months. So, I think that we did a good job in there and as consumption rekindles within the market, I think it's feasible for us to continue to have a leadership position in consumer growth and resumed our processes. But then again, if you're financing consumption, you need to see consumption in the market. And I think that we are on the tipping point of the pandemic in which we will start to see higher consumption and stabilized employment, which will give us more confidence to grow more than portfolio. As I mentioned, the main strategic goal that we have is to be the bank that has the highest growth within the system. I think that we are well-positioned in the last 12 months, but there's still work to be done.

[Sebastián Gallego:]

Just, if I may, can we clarify the guidance on cost of risk. Is that at the consolidated level? Or is that just for Chile that you mentioned

[Gabriel Moura:]

That's just for Chile, what I mentioned.

[Sebastián Gallego:]

Perfect, perfect. Thank you very much.

[Gabriel Moura:]

Thank you.

[Operator:]

No questions at this time. Sir, you may continue.

[Gabriel Moura:]

Fantastic. Thank you so much for your presence here for the second quarter results. As you have seen, we have a transformation going on, we have solid results for the bank, we are part of a transformation that we are doing, and we hope to see on the third quarter with a continuous trend of the transformation that we are implementing. So, see you there. Take care.

[Operator:]

This concludes today's conference call. Thank you all for participating. You may now disconnect. Presenters, please stay connected for the post conference.

[Claudia Labbé:]

Thank you.