Fideicomiso Irrevocable F/2061 FHipo (FHIPO14) Earnings Call Transcript
April 29, 2024
Earnings Call Speaker Segments
My name is Andrea, and I will be your conference operator. [Operator Instructions]. This is FHipo's First Quarter 2024 Conference Call. [Operator Instructions] FHipo released its earnings report on Friday, April 26, after the market close. If you did not receive the report, please contact FHipo's IR department directly, and they will e-mail it to you. Please note that this call is for investors and analysts only. Questions from the media will not be taken nor should the call be reported on. Any forward-looking statements made during the conference call are based on information that is currently available. Please refer to the disclaimer in the earnings release for guidance on this matter. We are joined today by Daniel Braatz, Chief Executive Officer; Ignacio Gutiérrez, Chief Financial Officer; and Jesús Gómez, Chief Operating Officer. I would now like to turn the call over to Daniel Braatz. Daniel, please go ahead.
Good morning to everyone, and thank you for joining us today. I'm pleased to announce FHipo's first quarter 2024 results. I would like to start by addressing FHipo's performance and achievement during the quarter. If we move into the first slide of our presentation, you will see that during the first quarter of 2024, FHipo maintained its position in the Mexican mortgage industry by adhering to a consistent portfolio diversification strategy similar to that of previous quarters. Despite challenges steaming from a challenging macroeconomic environment, we achieved strong quarterly results, prioritizing profitability. Our conservative approach has enabled us to uphold a robust position. Furthermore, our deleveraging strategy combined with portfolio origination through Digital Mortgage Platforms contributed to maintaining our financial stability. Now as shown in this slide, I would like to highlight the following achievements for the quarter. We remain committed to delivering value to our shareholders. FHipo reported a net income of MXN 142 million, which is 40% higher than the first quarter of the previous year. The net income per CBFI reached MXN 0.38, with an estimated distribution for the first quarter of MXN 0.36 per CBFI. This distribution represents an annualized return per CBFI of 9.9% based on the previous quarter average price per stock. In the first quarter of 2024, our financial margin stood at 49.1%, in line with the financial margin reported in the first quarter of last year. And our return on equity was 6%, demonstrating our ability to continue generating strong results despite challenging conditions. We are confident that our focus on financial discipline and risk management strategies will enable us to maintain our results for the upcoming quarters. We have implemented a successful deleveraging strategy in the past quarters, leading to a decrease in our leverage ratio from 62x or 0.62x in the first Q of 2023 to 0.51x as of the first quarter of 2024, that is times debt to equity. This was achieved by the overall reduction of balance sheet financing from MXN 6.82 billion to MXN 4.8 billion. The company's financial structure remains stable and well balanced, reflecting a consistent and prudent financial strategy that prioritize long-term stability. In addition to our financial stability, FHipo had a significant growth in the mortgage origination through Digital Mortgage Platforms, with a consistent increase in the balance sheet of such portfolio, ending with a substantial 79.8% growth from the first Q of last year to the first Q of 2024. This indicates a strong market demand for such products, and demonstrate the effectiveness of FHipo's strategy in enhancing its digital capabilities seeking to increase the percentage of the Digital Mortgage origination in the upcoming periods. Now I will hand the call over to our COO, Jesús Gómez, who will discuss the portfolio breakdown.
Thank you, Daniel. Good morning, everyone, and thank you for joining us today. I would like to continue on Slide 6 to discuss the breakdown of our mortgage portfolio for the first quarter of 2024. As of March 31, 2024, FHipo's consolidated portfolio comprised 71,548 loans for MXN 22.6 billion. This represents a decrease of 11.7% and 7.2%, respectively, compared to the first quarter of 2023. The portfolio contraction is mainly explained by the natural amortization of the portfolio. Our loss come from our partnerships with several origination programs such as Infonavit Total, Infonavit Más Crédito, Fovissste and the Digital Mortgage Platforms. The average loan-to-value payment-to-income ratios remained without significant changes compared to the ratios reported in the first quarter of 2023, ending the quarter with a loan-to-value at origination of 78.1% and a payment to income of 24.4%. As of the first quarter of 2024, our performing portfolio continues to be in line with the company's expectations as it stood at 92.9% on a consolidated basis. Considering portfolio balance at origination, the NPL ratio as of the first quarter of 2024 was 5.1%. Our portfolio has even more diversified than in previous quarters, as the Digital Mortgage Platforms portfolio continues to increase, and it now represents 11.9% of our total consolidated portfolio. This growth underscores the commitment to long-term financing and innovation in origination, allowing us to adapt and evolve in a competitive market. The breakdown of our portfolio is as follows: Infonavit Total, MXN 6.6 billion; Infonavit Más Crédito, MXN 10.9 billion; Fovissste, MXN 2.4 billion; and the Digital Mortgage platforms, MXN 2.7 billion. Moving on to Slide 7. We can see that FHipo's portfolio continues to be geographically diversified across all 32 Mexican states. The State of Mexico and Nuevo Leon represent the largest portion of our portfolio, accounting for 12.4% and 11.4%, respectively. In terms of our partnerships and origination programs, our portfolio is broken down as follows: Infonavit Más Crédito program represented a bit less than half of our portfolio, standing at 48.4% of the total; Infonavit Total Pesos program represented 16.4% of the total portfolio; the Infonavit Total VSM, with minimum wage index loans, reached 12.6%; and the Fovissste portfolio accounted for 10.7% of the total; and finally, the Digital Mortgage Platforms portfolio accounted for 11.9%. As always, we continue to monitor the performance of our portfolio, particularly in the current high interest rate environment. I will now hand the call over to our CFO, Ignacio Gutiérrez, to discuss FHipo's financial results.
Thank you, Jesús, and again, good morning, everyone. I will continue the presentation by going through our very diversified sources of funding. Our funding structure continues to be well diversified, including securitization, short-term unsecured bonds and revolving warehousing facilities. The diversification of our sources of funding is crucial for financial stability and resilience in a challenging economic environment. At the end of the first quarter of 2024, our consolidated debt-to-equity ratio decreased to 1.5x, down from 1.7x in the first quarter of 2023, and our on-balance debt-to-equity ratio to 0.5x, down from 0.6x reported in the first quarter of 2023, as a result mainly of partial or total amortizations of all balanced financing structures. This reflects our ability to adapt to current conditions with a conservative leverage strategy and the optimization of our sources of funding, as we remain focused on financial and disciplined risk management to achieve sustainable growth for the company. If we move to Slide 12, in here, we will go through the asset quality of our portfolio, our NPLs and our allowance for loan losses. We maintained a solid allowance for loan losses, with our consolidated expected loss coverage standing at 1.43x, and our consolidated NPL coverage ratio standing at 0.72x. Moreover, as Jesús mentioned, our consolidated NPL ratio stood at 5.1% considering portfolio balance at origination, and at 7.1% considering current portfolio balance. FHipo risk management practices are proactive, with a focus on maintaining asset quality in the loan portfolio. If we move to Slide 15, and here, we will go through our financial results for the quarter. Total interest income amounted to MXN 326.8 million, a 7.1% decrease compared to the MXN 351.6 million reported in the first quarter of 2023. This decrease was mainly due to a smaller portfolio balance as a result of the natural amortization of the portfolio. The interest expense for the quarter was MXN 166.3 million, representing a 5.5% decrease compared to the MXN 175.8 million reported in the first quarter of 2023, mainly due to debt amortizations in our warehousing facilities, as we mentioned. With this, the financial margin for the quarter stood at MXN 160.5 million, representing 49.1% of the total interest income, in line with the 50% reported in the first quarter of 2023. The allowance for loan losses for the quarter was MXN 15.4 million, which showed a decrease when compared to the amount reported in the first quarter of 2023. This figure reflects the performance of the portfolio during the quarter and the collection efforts done by the primary services. The valuation of receivable benefits in securitization transactions, driven by the equity residuals of our securitization transactions, generated an income of MXN 82.6 million, representing a 28% increase compared to the figure reported in the first quarter of 2023. The administrative expenses for the quarter were of MXN 93 million, and other income generated in the quarter was of MXN 10.4 million, resulting in a net income for the first quarter of 2024 of MXN 142.9 million, which showed an increase of 37.3% when compared to the first quarter of 2023. Considering the outstanding CBFIs as of the date of this report, the net income per CBFI or earnings per share for the quarter stood at MXN 0.38, and the net income per CBFI subject to our current distribution policy stood at MXN 0.361. With this, I will now hand the call back to our CEO, Daniel Braatz, for some closing remarks before the Q&A session.
Thank you, Ignacio. I extend my gratitude to our shareholders, for your unwavering support and trust in FHipo's management. As we move forward in 2024, we are confident that the company stands poised to seize the opportunities that lie ahead. Our robust business model, coupled with financial discipline and approach, position us to expand our portfolio while enhancing profitability. Despite the potential hurdles posed by challenging macroeconomic and political landscapes, we remain committed to continue growing our portfolio by selectively identifying origination opportunities that are accretive to our business. We are determined in our pursuit of delivering strong results and enduring value to our shareholders. I would now like to hand the call back over to operator and start the Q&A session.
[Operator Instructions] Our first question comes from the line of Martín Lara. [Operator Instructions]
Hello. Can you hear me?
Yes, we can hear you, Martín.
Perfect. Martín Lara from Miranda Global Research. Congratulations for these results. I have various questions. The first one is how do you see the performance of the consolidated portfolio by the end of the current year, taking into account the significant growth in Digital Platforms? And the second one is, could you please talk a little bit about M&A activity? You mentioned in the press release that you could acquire some assets.
Perfect, Martín. Yes, on your first question, as you saw, we keep originating through our Digital Platforms and a strong balance sheet. We expect to originate this year, similar to what you've seen. It's a trend of growth on a quarter-per-quarter basis. I would tell you that the performance of that portfolio is even better than the performance of past portfolios that we have originated in the past. Having said that, as you know also, the type of borrower that we are targeting is a borrower with a better quality in terms of income and also a better quality in terms of the asset warrantying or mortgages. So we expect performance of portfolio to keep strong. And also, we're going to be allocating capital towards that type of assets. That brings me to your second question in regards of activity going forward for potential acquisitions. What we mean in that statement is acquisitions for upcoming portfolios. We're working with other digital platforms at the moment that potentially could provide us with new assets in terms of mortgage portfolios, and we are going to be acquiring those as we do on a time to time on a quarter-per-quarter basis with the current originators that we work with.
Okay. And I have another question. Could you please explain the 27% increase in total expenses? And how do you see this indicator going forward?
Yes. That increase is just based on -- when you compare first quarter of 2023 with first quarter of 2024, that doesn't mean that the increase on expenses is going to be in that amount for the whole year. I would recommend to look at our increase in expenses on an accumulated basis. What is happening in this quarter is that there is seasonality in terms of certain premiums for insurance that we're paying and other expenses that need to be covered in the first Q of the year. But that doesn't mean that we are increasing the overall expense for the whole year. Mainly the effect is that, that I mentioned, there were certain insurance premiums that we needed to cover in the first Q that weren't covered in the last year in the same months.
We will now pause for any further questions. We would like to take this moment to thank you for joining FHipo's First Quarter 2024 Results Conference Call. We have not received any further questions at this point, so that concludes our question-and-answer session. Thank you. I would now like to hand the call back over to Daniel Braatz for some closing remarks.
Thank you all for joining us today. Please don't hesitate to reach out to us if you have any more questions or concerns. We appreciate your interest in FHipo, and look forward to speaking with you soon. Thank you.
That concludes today's call. You may now disconnect.
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