Aug 1, 2010
Executives
Raimundo Monge – Corporate Director of Strategic and Financial Planning
Analysts
Saul Martínez – JP Morgan Claudia Benavente – Banchile Brazil Tito Labarta – Deutsche Bank Fabio Zagatti – Barclays Capital
Operator
Good day, ladies and gentlemen, and welcome to the Q2 2010 Banco Santander-Chile earnings conference call. My name is Veronica and I will be your coordinator for today.
At this time, all participants are in listen-only mode. We will be conducting a question-and-answer session towards the end of today’s conference.
(Operator instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today, Mr.
Raimundo Monge, Corporate Director of Strategy. Please proceed.
Raimundo Monge
Thank you very much. Good morning, ladies and gentlemen.
Welcome to Banco Santander-Chile’s second quarter 2010 results conference call. I am Raimundo Monge, Director of Corporate Strategic Planning, and I am joined today by Robert Moreno, Manager of Investor Relations.
Thank you for attending today’s conference call in which we will discuss recent developments of the Chilean economy as well as our performance in the second quarter. Afterwards, we will be happy to answer your questions.
The Chilean economy showed positive trends in the second quarter. The effect of the earthquake had been lower than expected and the rest of the economy has been rebounding.
Our expectations for GDP’s growth for this year have increased to 4.9% and to 6.2% in 2011. The growth of GDP has been led by internal demand, which is expected to grow 12.2% this year with a 31.6% rise in total investments and a 6.8% growth in internal consumption.
The salary pool, defined as the average wage times the number of people employed, which is key indicator for retail activities and asset quality issues, is expected to grow around 6.5% both this and the next year in real terms, led by better-than-expected trends in unemployment and to a lesser extent wages. Finally, inflation is normalizing after a deflation recorded in 2009 and we expect it to be around 3.7% in 2010 while the short term Banco Central reference rate should stand at around 3% by the end of this year.
During the quarter, Moody’s upgraded Chile’s sovereign rating from A1 to AA3. We believe this reflects the country’s solid fundamentals due to prudent macroeconomic policies and the positive outlook we foresee, once the impact due to the recession of 2009 and the earthquake are full absorbed.
Yesterday, for example, a US$1.5 billion sovereign bond was issued at the lowest spread ever confirming Chile’s solid position. This positive macro picture should benefit both loan demand and asset quality in 2010 and 2011.
As seen on slide in page six of the webcast loan growth is highly correlated with GDP growth. If the historical pattern follows we expect loan growth for the financial system to be around 14%, growing around 14% on nominal terms each year, the same levels being in 2003 at the beginning of the last expansive of the financial system.
As of June, nominal loans are growing at around 10%. Page seven.
Now, we will review the results the bank obtained in the second quarter ’10 and our strategy objective for the coming year. In the second quarter of this year, net income attributable to shareholders totaled Ch$138,823 million, which represents Ch$0.74 per share and US$1.41 per ADR.
These results represent an increase of 29.3% compared to second Q09 and 16.6% compared to the first Q of the year. The acceleration of growth in our main business lines combined with a better environment and the normalization of inflation level has resulted in solid recurring earnings growth in the quarter.
Gross income, net of provision and cost, a proxy for recurring earnings jumped 33.3% year on year and 8.1% Q on Q. As a result, in the first half 2010, net income attributable to shareholders totaled Ch$257,927 million, an increased 40.1% compared the first half of ’09.
Gross income, net of provisions and cost increased 23.6% year-over-year, led by a 14.1% rise in net interest revenue and a 32.5% decrease in provision expense. The bank’s return on equity continues to show a positive trend.
In the second quarter, the ROE reached 33.8%, accumulating a return of 31.2% in the first half of the year among the highest for any bank in Chile and Latin America. At the same time, Santander-Chile has one of the widest margins between return on equity and cost of capital in the emerging markets, which we consider among the key performance metrics to follow.
These solid results were achieved while maintaining high capitalization ratios. As of June, 2010, the banks’ BIS ratio reached 14.1% with core capital standing at a healthy 10.3% of risk weighted assets, one of the highest among Chile’s largest banks.
This strong capital base should permit us to support high loan growth in retails segments, which is a key point of our strategy going forward. The positive outlook for the Chilean economy and the bank’s solid and consistent performance has lead to a rise in the bank’s foreign currency deposit rating on behalf of Moody’s.
The bank’s rating has been consistently increased in the last two years, which is notable, considering many problems affecting other banks – banking markets around the globe. Santander Chile has been for several years the highest rated company in Latin America and now ranks relative high among the world’s banking sector.
As a consequence, we have been able to access in convenient term the international bond market in order to maintain strong liquidity levels and so minimize the risk, rate risk, the interest rate risk by adequately funding the longer duration portion of the loan book with funding of similar characteristics. For these reasons, bonds have increased 13% QonQ and 23.8% Year-on-year.
In April 2010, the bank issued a $500 million, three-year floating rate senior note with an all-in cost equivalent to Chile sovereign risk plus zero basis point. As I stated, we are increasingly optimistic about the outlook for the Chilean economy and the growth prospect of the banking sector.
Taking into consideration the bank’s strong starting point and positioning within the market, we have been adjusting our strategy since the end of 2009 to take advantage of this growing environment. Accordingly, the bank’s activity has been and will be focused on four main strategic objectives to fuel our future growth and profitability.
The first objective is to achieve high retail growth and to continue expanding banking penetration levels in Chile. This should help us to maintain our net interest margins and boost our net income.
Our second strategic objective is to increase fee income by expanding product use and cross-selling. These will be done by investing in our IT systems to further improve our leading client relationship processes.
We believe there is still plenty of room not only for increasing the total client base where alliances will be providing most of our new clients, but also getting current clients to use more intensively their products. The third strategic objective is to consolidate the improvements to our credit risk management system made during the downturn in 2009.
These will help us to support a healthy expansion of our growth in loan volumes to riskier retail segment. Our last strategic goal is to continue an effective efficiency management.
We are planning to expand our capacity during the next three years and the bank expects to invest $376 million in increasing our alternative channels and branch network to fuel growth and improving systems and processes. Part of this investment will be “funded” with productivity gains and lowering both the cost of bringing new clients through alliances and reducing our delivery and professional cost, relying more on our low cost new channels such as Internet, phone banking, mobile banking, and ATM.
In the second quarter of ’10 and in line with our first strategic objective, total loans increased 3.8% QonQ with high yielding retail loans growing 3.9% in the same period. The bank’s market share increased in various products, especially in consumer banking where we saw an increase of 100 basis points since the beginning of the year.
In the quarter, the bank also improved its funding mix. Total deposits increased 6.1% QonQ.
This was lead by a 7.2% QonQ and 35.2% year-on-year increase in demand deposits. Clients also began to increase their saving in time deposits as interest rates and inflation began to rise.
The ratio of loans to deposits also improved to 99.8% as of June 2010 compared to 104.3% as of March 2010. The bank’s net interest margin reached 6.1% in the quarter, improving 30 basis point compared to first Q’10 and 10 basis points compared to second Q ’09.
The better loan and funding mix coupled with high inflation in the quarter also resulted in the 5.8% QonQ and 7.1% year-on-year increase in net interest income. Going forward, we expect the central bank to continue rising rates, which should increase funding cost and produce margin compression.
This should be partially or totally compensated by the combined effect of A, higher revenues from the investment of the bank’s money in interest-bearing funds, mostly demand deposits and equity, which represents 36.4% of our average interest earning assets as of June 2010. B, higher inflation, which is what has been triggering the interest rate hike and C, an improved loan and funding mix.
In line with our second strategic objective, cross-selling is also improving. The bank’s checking account base grew at an annualized rate of 7.4% in the first half.
Credit card also are expanding at an annualized rate of 14.2% in the quarter as the bank increasingly relies on its alliances with key corporate partners as an efficient way to gain access to a large number of potential clients. In the second Q of ’10, the bank signed a co-branding agreement with Chilectra, Chile’s largest electricity distributor.
These new cards, specially designed for the small businesses and individual allow its holders to save money on the electricity bills when used. These agreements along with the bank’s other accord allow to us to access more than seven million potential new clients.
Currently, the bank has three million customers. As a result, the amount of clients (inaudible) among our middle to high income client has increased 10.7% on an annualized basis in the first half while in Santander Banefe, our unit aimed at mass consumer lending, the client cross-sell has increased 28.2% in the same period.
However, only around 20% of our current customers fulfilling our cross-selling standard, representing a relevant growth (inaudible) for the future. The rising cross-selling and product usage continue to drive fee income, which increased 3.2% year-on-year and 4.5% QonQ.
Fee from asset management increased 28% year-on-year as more clients invest in equity funds that have more profitability – stable. A similar trend was seen in brokerage related fee.
Fees from insurance brokerage increased 89.9% year-on-year. The bank’s success in selling insurance online coupled with an increased premium on behalf insurance underwriter has driven insurance brokerage fees, which grew – fee from securities brokerage grew 18.8% year on year.
This fees has been driven by the bank’s new Internet platform from both upgrading and a greater demand for investing in the local market. In line with our third strategy goal, during the quarter, the bank continued consolidating the improvements in credit risk management and collection procedures that was started in 2008 and 2009.
These, combined with a much solid operational environment resulted in the bank provision expense decreasing 20.3% QonQ and 41.7% year-on-year. Asset quality has been improving especially among individuals.
The non-performing loan ratio of consumer loans decreased from 3.08% as of March 2010 to 2.99% as of June 2010. Since beginning in the second Q of ’09, consumer non-performing loans have consistently declined as the economy has improved and also as a result of the bank’s effort in improving its follow-up and recovery procedures.
The earthquake also had a lower effect than expected on asset quality of consumer loans. Improvement in asset quality among individuals was partially offset by a rise in risk in other segments mainly due to the earthquake.
Non-performing loans, total non-performing loans increased 7.9% QonQ. This was mainly due to an expiration in May 2010 of a temporary regulation applicable during March and April 2010 that allow banks to report non-performing loans as performing to the extent such loans were performing the day of the earthquake.
And the bank determined that the borrower miss payments due to this event. Operating expenses into the second Q of ’10 increased 13.5% QonQ and 13.3% year on year.
This was due in part to impairment charges on fixed assets directly related to the earthquake. Excluding impairment charge, the bank cost increased 9.9 QonQ and 9.8 year-on-year.
The year-on-year rising cost was mainly due to our rise in personnel expenses directly related to an increase in commercial activity and the higher levels of inflation. As seen in this presentation, the bank’s commercial activity has been growing at an accelerated pace and as a result variable incentives to commercial teams have increased.
These should, of course, be compensated in future quarters with stronger core revenue growth. Headcount did not vary significantly in the quarter.
The efficiency ratio reached 35.2% in second Q ’10. Adjusting for earthquake related charges and income, the efficiency ratio reached 34.4% in the second Q of ’10.
In summary, second quarter ‘010 results were positive in line with our strategic objective and the positive evolution of the economy. Our higher client margin, increased market share in retail lending, the improvement in cross-selling and product use, conservative asset quality policy and solid efficiency give us a sustainable competitive advantage in the local market.
As a result, the bank consistently delivers solid returns and better financial ratios compared to our main competitors. Going forward, we believe the Chilean market offers strong growth potential and we are increasingly optimistic about the bank’s outlook.
At this time, we will gladly answer any questions you might have.
Operator
(Operator instructions) And your first question comes from the line of Saul Martínez from JP Morgan. Please proceed.
Saul Martínez – JP Morgan
Hi, good morning, guys, and congratulations on the results again. But, I guess more of a big picture question.
And I would like for you guys to comment on the sustainability – the profitability that you’ve been generating in the first half. Your ROEs have been in the neighborhood of 30% and it seems like the macro environment is very positive, loan returning, inflation is helping the margin.
Asset quality and provisioning is fairly low right now, (inaudible) percent of average loan. Can you just – I mean is there any reason why you shouldn’t be able to sustain this type of ROE, which is in the high 20%, 30% range, which, obviously from a global standpoint, as you pointed on your presentation is very, very high.
And I am just wondering if you could just comment as you look out over the next year to kind of how you see your profitability evolution, I guess on a more normalized basis.
Raimundo Monge
Okay, first of all about the macro picture, we believe that still we are in the recovery stage of this cycle in terms of overall macro activity and in terms also of the sentiment of people and the growth of the industry. As you see in the chart that was included in the webcast, in the previous cycle we saw growth of 23%, 24% and this cycle we expect to grow this year expected [ph] to expand 14%, but currently we are growing at 10% on a year-on-year basis.
So we think that we haven’t seen all of the macro recovery. That’s element number one.
But element number two, and given that we mentioned the fundamental, at the end it’s related with client activity. As in any business, we rely on our customers and therefore what you have to start looking more closely today is clients and how they are growing, how they are using your product and that’s why we think we are optimistic because we have a relatively large client base, but as we comment in the presentation, it’s still relatively untouched.
According to our cross-selling standards, which are related with use more than having the product – you can have many products, but if you don’t use it – use it. So, in terms of actual use of product, only 20% of our clients we feel with this standard.
So, therefore, we need to do internal homework to allure our clients and to offer incentives for them to use and be preferring our products compared to other competitors that we have, many of them are very good. So, the – going forward, at the end fundamental of any business is how your clients are coming and as we have seen we have increased the growth of the number of clients where we think we have another source of opportunities.
One is to – alluring your current clients to use more heavily your products. The second is to attract new clients in a cost-effective way.
And that’s why as we pointed in the presentation, we think that a branch-intensive and an account officer intensive model probably is not suitable for maintaining growth and attracting new clients, and therefore we are reliant on alliances, alliances with LAN, the largest – among the largest airlines in Latin America, with the largest newspaper, with movie start, with Chilectra as we pointed in the presentation, which is a very cost effective way to bring new clients and from then went to cross-sell it and to increase the usage. And those new clients will be benefitted a better growth outlook and a better employment outlook that we are foreseeing.
The new government, among the campaign promises that brought is to increase the number of people actually employed by around 15% in the next four years, which is a big chunk, and secondly to manage to grow the economy at around 6% real rate, which is a level that probably will be seen in the second half and throughout 2011. So, the combination of a growing economy plus internal homework on our client base and plus bringing clients in a very cost-effective way through alliances make us believe that we can support ROEs in the upper 20s going forward.
If inflation normalizes further, we will have extra support, but at the end the medium term growth of any company is linked with client and client activity. And that is where we have put in most of our efforts.
Saul Martínez – JP Morgan
Great. Thank you for that.
And just one followup question, where do we stand on the provisioning rules for commercial credit that I think were delayed until 2011? I think initially they were expected to put into place in July?
Where do we stand on that and do we have any sense of what that might mean for your provisioning rules?
Raimundo Monge
Yes. The decision took by the superintendency is to delay any decision until the early 2011.
The only thing that they are requesting banks is to have kind of a counter cyclical policy of 0.5 of all corporate positions. So, we will have to – as all banks, we’ll have to have a minimum 0.5% provision levels for all the corporate book, which in our case will mean a minor one-time adjustment because we have lower than that.
And going forward we think that well, given that the government is fully involved in jumpstart or promoting SMEs, which are of course more risk and therefore the ones that provisions are more required, probably there will be a provision scheme [ph] that take into consideration the macro outlook, which is much more optimistic and therefore provisions, which should be less demanding. And secondly, the fact that the higher the provisions standard you set, the smaller the chances that the new SME companies can tap the market.
So, it will be something in – remember that in this downturn Chile banking sector went very well and secondly that most of the deterioration was on the consumer side and on the corporate side, not even in the SMEs we see very little deterioration. So, we expect the superintendency taking into consideration those elements will bring sensible regulation.
We don’t foresee unpleasant surprises.
Saul Martínez – JP Morgan
And then – thank you – and the minor one-time adjustment. Do you – can you give us a sense of when and how much is that?
Raimundo Monge
It will be reflected throughout 2Q, but it won't be meaningful. As a general, we are expecting total provisions to go down simply that this will put the drop in a lower amount, but we expect the provisions to follow a relatively healthy pattern that we have been following in the last three quarters.
Saul Martínez – JP Morgan
Great. Thank you very much.
Raimundo Monge
We still believe that provisions have space to go lower. This will be partial reversal, but we don’t expect provisions to jump because of this element.
And they will be recognized throughout the second half.
Saul Martínez – JP Morgan
Do you think provisions as a percentage of average loans have room to fall in the second half, so–?
Raimundo Monge
I would say that to some extent, yes, because the – for example, in terms of absolute provision levels, we are still much higher than say pre-crisis levels that we saw in 2007, both in absolute terms and gross provisions and as a proportion of loans. And the fact that we think we have better knowledge about the asset quality issues especially in the low end, which – most of the deterioration usually happen and the fact that we will be growing in a probably in a different way in many aspects make us believe that there is still room for improving and the other thing is that remember is that asset quality usually lag the recovery of the economy, especially in the corporate side, usually have a lag of two, three, four quarters, because companies that were struggling to survive even though the macro picture is better, start getting in more difficulties because the income recovery is not quick enough to allow them to recover.
So, usually, when you see better macro picture, retail activities start benefitting very quickly because of better job outlook, better salaries, but corporate tends to lag a little bit. So, you have some room there to – and that’s why, for example, in the first Q and the second Q, we have seen levels of provisioning in corporates are low – higher than what we saw, for example, in many quarters of 2009.
It’s not that the macro picture is improving. It’s simply that we see a lag until they start recovering.
Saul Martínez – JP Morgan
Great. Thank you very much for that.
Operator
(Operator instructions) And your next question comes from the line of Claudia Benavente from Banchile Brazil. Please proceed.
Claudia Benavente – Banchile Brazil
Hi, I would like to know how do you expect your (inaudible) to grow in this year and next year in an individual level?
Raimundo Monge
I beg your pardon; I didn’t understand the first part of the question.
Claudia Benavente – Banchile Brazil
How do you expect your loans are going to perform and when are – going to be a like a rate for – in an individual level for consumer mortgage and commercial loans for this year and next year?
Raimundo Monge
Okay, well, we expect the, as we pointed in the presentation, the overall growth of the system to be around 14% by the end of the year and a little bit high 16%, 17% next year. Among them, consumer lending and after some period of time mortgage lending should be abating and also as you need to abating.
And what should be dragging the overall growth should be corporate lending. In our case, we don’t have specific targets for loan growth because our loan growth is a result of achieving the targets in terms of profitability.
So, growth in our case is a consequence of the implementation of the strategy and not the other way round. That’s why having targets, we don’t have specific targets for loan growth because again, when the conditions are sound as we have seen it in the first half, for example, consumer lending, we can accelerate very rapidly and that’s why we have been gaining market share.
We have been gaining also market share in the corporate side simply because the returns are correct. But if we see price margin compressions going forward, well, we tend to change the speed.
So, but to make a long story short, we expect the system – consumer lending to be growing this year approaching 15%, 16% by the end of the year, probably a little bit high next year. In our case, growing a little faster than the system as a whole.
In mortgage, it’s more an open issue because prices have been too low according to our capital requirement return we don’t see in our space. We are only growing in mortgages in those clients that because of other products are profitable, but not because the mortgage itself if profitable.
And in corporate side, probably stronger than the market in SME, growing above 15% or 16%. And then in corporate, it’s an open question because sometimes prices are too low and – compared to give up business in that.
And remember that in our corporate business, around 60% of our revenues come from non-lending activities. So, lending is only again a consequence of the implementation of the strategy of having higher profitability with corporate clients.
Claudia Benavente – Banchile Brazil
And do you see nominal rates in terms–?
Raimundo Monge
Yes. All our figures are nominal.
Claudia Benavente – Banchile Brazil
Okay. Thank you very much.
Operator
Your next question comes from Tito Labarta from Deutsche Bank. Please proceed.
Tito Labarta – Deutsche Bank
Hi, good morning, Raimundo. A couple of questions, first, just a followup on the provision question from before.
I just want to get a sense of you said it could come down a bit further. I just want to get since how much more they can come down and I guess also in terms of asset quality, are all the issues from the earthquake already done with.
So you don’t think there will be anymore impact from that and how more could asset quality then improve from current levels? And then a second question, just in the quarter you had some – the sale of some branches.
So, I just want to get a sense is that just a one-time thing, do you think there will be anymore sale of branches and any other gains as you come from that? Thanks.
Raimundo Monge
Okay. Well, in terms of asset quality, again, we think that we are in the early stages of the recovery of this cycle and therefore we see room for further improvements in terms of lower provisioning level and lower asset quality indictors.
There will some lag, as I mentioned in the corporate but on the retail part, which is for us where we are putting more effort to grow. We have seen very healthy news and we are relatively optimistic.
How long you can get, it will be a – there are effects on side or the other. Because the whole portfolio to some extent or the older positions will be improving as compared to say last year, but of course we plan and we have been doing that in the first half.
We are growing much rapidly in consumer lending, credit cards, and SME lending, which, of course, have more risk. But they are much more than compensated by higher spreads.
And that’s why we kind of – our strategy, our goal is to have a high enough risk adjusted margins going forward and to try to – we are targeting to maintain risk-adjusted margins at a level such that are accretive in terms of capital consumption and profitability. So, again, you cannot see the two sides of the story separate.
It is better to– we try to look them combined. In terms of sale of branches, this is something that we do – we have done it opportunistically.
Simply, it’s not our core and it’s not something that we have in mind to follow on the future, but sometimes you are approached by real estate funds, et cetera. Given that we have very low risk, because what we do – what we have with these branches a sale but – a lease and sale but you sell it and then you rent it from them.
So you are generating kind of a (inaudible) that for us is cheaper than to allocate capital. Remember that when you have a return on capital approaching 30%, well every penny counts and you have to be very, very efficient and that’s why – but it’s not something that we have in mind simply that sometimes you are approached by a fund that needs real estate assets and branches are very attractive.
They are good commercial property and if you rent it to Santander-Chile, your risk is very low. So, but it’s something not of our core and it’s simply something that happens every once in a while.
Tito Labarta – Deutsche Bank
Okay, great, thanks, Raimundo. And if I can just followup, you mentioned that your margin, if you look at risk adjusted margins, but you mentioned earlier with higher rates coming up that could lead to pressure, but it is also, as inflation picks up, that gets benefit, so, in a kind of net-net basis, do you think the net interest margin will decline from current levels given the higher rates or do you think there could be some expansion in margin as inflation picks up, what do you think the net impact would be?
Raimundo Monge
No, I would say that going forward margins probably are peaking at what we should expect. Remember that when the overall picture start improving and when clients realize that their risk in this is much lower than say 12 months ago, they start demanding lower spread and the competition forces spreads to come down because if you are not lending at that level somebody else would probably do.
So, there is a trade-off, which we have to be very careful in handling. There is lowering spreads when you see – loan demand.
And therefore at the end what you are trying is to maximize the growth of a client and net interest income by slashing prices selectively and expanding loans. So, we are – again, we are not targeting margins by themselves.
We are trying to target growth, healthy growth on the net interest income coming from client activity.
Tito Labarta – Deutsche Bank
Okay, great. So – but net, do you think this is kind of like a peak annual policy, a bitter pressure going on just from competition and higher rates?
Raimundo Monge
That’s right.
Tito Labarta – Deutsche Bank
Great. Thank you.
Operator
Your next question comes from the line of Fabio Zagatti from Barclays Capital. Please proceed.
Fabio Zagatti – Barclays Capital
Hi, good morning, Raimundo, Robert, following up on the question related to the macro picture competitive environment and sustainability of profits, are you concerned with competitors in Chile, how they are gearing up in the search for yields may be from those institutions that are now more focused on corporate segments and they need be pooling efforts in expanding their consumer credit books, so that they keep on sustaining the high ROE’s and may be if you could give us some color also on the possibly competitive position of the retailers in Chile? Thanks.
Raimundo Monge
Yes. Well, of course, the Chilean competitive environment is highly competitive.
And I would say that one of the few advantages of being to some extent having a dominant position in many markets is that to some extent you can chose the fight [ph] you want to concentrate on and as we have mentioned, we are concentrating today mostly on expanding banking penetration and increasing product use on our client in the retail part. And on the corporate side, mostly on non-lending activities, advisory services, cash management, and the like.
So, that means that, for example, on the corporate side, the lending business is only a consequence of trying to grab other more profitable chunks of the business. So, in order to fulfill that focus, you have to take care what competitors are doing, but as we have tried to give the sense in the presentation, we have a lot of internal home work to do first, and the fact that you have an expanding economy, an expanding financial market allows you to not touch prices to call it someway, but to focus on features of your product to allure your clients.
And that’s why in the retail, alliances have been very powerful as a source of alluring clients. Today, if you use a co-branded credit card, you can get rebates in your phone bill, in your electricity bill, you can have exclusive promotions with El Mercurio, which is the largest newspaper in Chile.
So, I think that people value and have nothing to do with prices or fees you can charge. So, we’ll – although competition is expected to increase, we think that given the market is bringing new opportunities, we can maintain relatively high profitable levels and at the same time growth, simply that the obvious thing that is to slash prices to increase your market share is something that we have not done and probably won't be doing in the coming years, especially because the market is expanding and we are taking a number of actions to expand the size of the market, especially among the second 20%, 25% of the working population and the second 3000, 5000 companies on the corporate side, which are the companies that should benefit by the effort brought by the government to increase the productivity and technology and innovation within those mid-size companies.
So, once we have fully tapped that opportunity probably it’s the time to start looking, okay, what’s next? But we think we have enough home work to do with our current clients and with that opening pockets in the market in the next two or three years.
Fabio Zagatti – Barclays Capital
Clearly understood. Thanks, Raimundo.
Operator
There are no further questions. I will now hand it back to Mr.
Raimundo Monge for closing remarks.
Raimundo Monge
Okay, well, thank you all very much for taking the time to participate in today’s call. We look forward to speaking with you again soon.
Have a good day.
Operator
Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the presentation.
You may now disconnect. Have a great day.