Feb 21, 2020
Operator
Good afternoon and welcome to the Grupo Supervielle Fourth Quarter 2019 Earnings Call. A slide presentation will accompany today's webcast, which is available in the Investors section of Grupo Supervielle's Investor Relations website www.gruposupervielle.com.
As a reminder, all participants will be in a listen-only mode. [Operator Instructions] As a reminder, today's conference is being recorded.
At this time, I would like to turn the call over to Ana Bartesaghi, Treasurer and IRO. Please go ahead.
Ana Bartesaghi
Thank you. Good afternoon everyone and thank you for joining us today.
Speaking during today's call will be Patricio Supervielle, our Chairman of the Board, who will discuss the overall macro environment and strategic initiatives; and Jorge Ramirez, our Chief Executive Officer and Vice Chairman of the Board, who will review our results for the quarter. Also joining us is Alejandra Naughton, Chief Financial Officer; and Alejandro Stengel, Chief Operating Officer of the bank.
All will be available for the Q&A session. Before we proceed, I would like to make the following safe harbor statement.
Today's call will contain forward-looking statements and I refer you to the forward-looking statements section of our earnings release and recent filings with the SEC. We assume no obligation to update or revise any forward-looking statements to reflect new or changed events or circumstances.
I would now like to turn the call over to our Chairman, Patricio Supervielle.
Patricio Supervielle
Thank you Ana. Good afternoon everyone and thank you for joining us today.
If you're following the presentation, please turn to slide 2. Starting with net financial income, which was up 45% sequentially as we benefited from lower cost of funding and price improvement in Argentine government bonds which have been reprofiled during the third quarter.
On the macro front, we really did not see much improvement during the quarter. And in this context, we are pleased with the results that we were able to deliver.
Asset quality improved in the quarter both sequentially and year-on-year with cost of risk down in both periods. This was driven by lower loan loss provisions reflecting lower bad loan formation in the Corporate and Consumer Finance segments.
We continue to face upward pressure on the cost base in the quarter primarily due to mandatory salary increases. As we have discussed in the past streamlining in our operations is a key strategic priority for us and we continue to make progress.
This improvement however was masked as we incurred some non-recurring severance and early retirement charges. Excluding these, we would have reported an improvement in the efficiency ratio even when taking into account the mandatory salary increases just -- I just mentioned.
During the quarter, we made the strategic decision to deleverage our balance sheet sharply lowering institutional funding and manage liquidity at year-end, which resulted in a 13% decline in peso deposits. Importantly, the liquidity ratio in U.S.
dollars was up 270 basis points sequentially to slightly over 60%. While this recent quarter and year has certainly not been without its challenges, we remained focused on implementing our key strategic initiatives on both the growth and cost efficiency fronts.
We dedicated considerable efforts this year to improving execution and exercising financial discipline and we are encouraged by our results for the quarter and year. Please move on the macro on slide 3.
The fourth quarter was marked by the uncertainty around the Presidential elections and the transition period, which saw tighter foreign exchange controls. Inflation and international reserves stabilized towards the end of the year with interest rates declining down to 55% at the end of December from a high of 83% at the close of August.
GDP is expected to have declined 2.6% in 2019 the second consecutive recessionary year. Please turn to slide 4 to the financial system.
The system loans to the private sector remained soft during the quarter, up 1.8% sequentially and 15% year-on-year reflecting the prevailing weak economic environment. Industry peso-denominated loans were up nearly 12% sequentially, mainly driven by a sustained pickup in credit card financing driven by the government initiatives to promote consumer consumption further support by commercial loans.
U.S. dollar loans in original currency declined 19%, driven by lower commercial loans in line with the prior quarter trend.
Supervielle total loans to the private sector grew slightly above industry levels and nearly -- at nearly 5% sequentially. Moving on to deposits on slide 5.
The system remains highly liquid and well capitalized. We encouraged that we saw stabilization in system U.S.
dollar deposits in December. The outflow in deposits that began last August stabilized by year-end, resulting in a 7% sequential drop in total private deposits.
A 13% increase in peso-denominated deposits was more than offset by a 9% sequential decline in U.S. dollar-denominated deposits measured in original currency.
In this context, our total private sector deposits declined nearly 13% sequentially. This was driven by a 13% drop in peso deposits as we decided to deleverage our balance sheet this quarter.
U.S. dollar-denominated deposits in turn fell nearly 16% sequentially.
In January industry deposits were up 6% sequentially, while our deposit base expanded 29%. I will now turn to -- over to -- the call to Jorge who will review our financial performance.
Please Jorge go ahead.
Jorge Ramirez
Thank you, Patricio. Good day everyone.
Please turn to slide 6. Total assets contracted nearly 8% quarter-on-quarter which reflects reduced U.S.
dollar deposits at the Central Bank following U.S. dollar deposit outflows together with our decision to deleverage the balance sheet in the quarter.
Accordingly the share of high-margin 7-day Leliq securities issued by the Central Bank declined this quarter to nearly 5% of total assets from 19% of total assets in the third Q, 2019. Please turn to slide 7.
Our loan portfolio increased 5% sequentially, driven mainly by an increase of nearly 14% in peso-denominated loans. By contrast U.S.
dollar-denominated loans in local currency declined 16% sequentially, reflecting the translation impact from the foreign exchange devaluation. In regional currency, U.S.
dollar-denominated loans were down 19% in the period. The corporate loan book increased 2% sequentially.
Peso-denominated corporate loans were, up 25% more than offsetting the 21% decline in U.S. dollar-denominated loans in original currency.
Overall the corporate loan book accounted for 50% of total loans compared to 52% in the prior quarter. Retail loans were up just over 10% sequentially, increasing the share of the loan book by 2 percentage points to 43% of total loans.
Growth was mainly driven by the 12 and 18 non-interest-bearing installment plans partly subsidized by the government to support consumption which continue to drive higher credit card volumes. Our cautious approach to consumer finance along with weak demand resulted in a 6% decline in loans to this segment.
Consumer Finance loans accounted for nearly 7% of total loans inline with the prior quarter and down from 10% in the fourth Q 2018. Now moving on to funding on slide 8, we operate a strong franchise with core retail and corporate deposits up nearly 9% sequentially.
Total deposit however was down nearly 13% in the period. This was mainly due to a 15% decline in peso deposits as we undertook a deleveraging of our balance sheet, sharply lowering institutional funding and manage liquidity at year-end.
Consequently the peso loan-to-deposit ratio increased to 107.6% from 92.2% in the third quarter. In turn U.S.
dollar deposits down nearly 16% with a liquidity ratio in U.S. dollars, up 270 basis points sequentially to slightly over 60%.
The U.S. dollar loan-to-deposit ratio declined 380 basis points to 92.1%.
Importantly, the pro forma liquidity coverage ratio increased to 150.3% at year-end from 141.7% at the close of the third Q 2019. Now on to the P&L on slide 9.
We delivered improved performance during the quarter reporting a 45% sequential increase in net financial income reaching AR$7.7 billion. This is mainly driven by lower cost of funding following the decrease in market interest rates, while interest on loans benefited from lagged repricing.
In addition, we recorded a AR$1.1 billion gain from price improvements in a holding of Argentine government short-term peso and U.S. dollar notes that have been reprofiling in August 2019.
As you recall, this has a negative impact on financial results in the third quarter. As a result, total net interest margin increased to 28.6%, while comparable NIM excluding the gain from price improvements on reprofiled government debt stood at 24.5%, still reflecting a 40 basis point sequential increase when compared with adjusted NIM.
Moving on to the P&L on slide 10. Net service fees remained flat sequentially.
Growth in net credit card fees was offset by lower revenues from the asset management business as well as weaker loan-related fees as we continue to operate in a recessionary environment. Income from insurance activities was up sequentially in the low single-digits as gross written premiums increased 2%, while claims contracted 8%.
Please move to page 11 turning to asset quality. Asset quality improved in the quarter both sequentially and year-on-year with cost of risk down 320 basis points sequentially and 60 basis points annually to 6.4%.
This was driven by lower loan loss provisions. Importantly, loan loss provisions declined nearly 32% sequentially to AR$1.4 billion reflecting lower bad loan formation in the Corporate and Consumer Finance segments.
The total NPL ratio was up 50 basis points sequentially to 7.4%. This was mainly due to a 100% collateralized commercial loan to a company in the sugar cane sector that became delinquent in the quarter, which drove the corporate loans NPL ratio up 150 basis points to 8.7%.
Overall, corporate loans were impacted by weak activity levels and high interest rates prevailing throughout the year. Depressed consumption in the current weak economic environment continues to impact the retail loans resulting in a slight sequential increase of 10 basis points in Retail segment NPLs reaching 4.1%.
The 90-day delinquency ratios however declined sequentially by 10 basis points to 2.5% and was well below the NPL ratio reflecting the large share of payroll and pension customers who continue to perform better with us than with the rest of the system. By contrast, consumer finance NPLs continued to show consistent improvement down 310 basis points, sequentially to 17.2%.
We continue to increase the level of collateralization of our loan portfolio to 58% of total loans at year-end, up from 65% at the end of September and 20% at the end of June of last year. Even higher collateralization levels we closed the year with coverage at 83%.
Note the current level of provisioning and coverage compared to the levels required an implementation of IFRS9 rule of Central Bank effective January 2020. We expect to foreclose and divest those collaterals in the upcoming quarters and continue to closely monitor our asset quality in this sustained digital environment.
Turning to the next page. As you can see on slide 12.
Asset quality at our consumer finance lending business improved throughout the year reflecting tighter credit scoring standards and improved collection practices we implemented early 2018. Consumer Finance NPL creation was down for the fourth consecutive quarter well below the peak levels experienced in second Q 2018 and below fourth Q 2018 levels.
Let me also note that NPL creation in the quarter reached the lowest level of the last 10 quarters. Cost of risk for the Consumer Finance segment was down 170 basis points sequentially to 12.8%.
We are pleased with the improvement we have been able to deliver in this line of business every quarter throughout 2019. Moving on to expenses on slide 13.
Our revenues for the quarter were up nearly 31% year-on-year. Total expenses increased over 32% reflecting a onetime AR$785 million total charge in connection with severance and early retirement expenses.
This led -- the duration of the efficiency ratio will reach 71.3% in the quarter. Excluding this non-recurring charge personnel expenses were driven by nearly 13% sequentially, reflecting mandated salary increases in the quarter and total expenses would have increased close to 15%.
Comparable efficiency ratio would have been 61.8% improving both Q-on-Q and year-on-year, despite mandatory salary increase and inflationary environment. We continue to implement the plan that will allow us to drive scale efficiencies, as loan growth resumes.
Moving on to a bottom line on slide 14. We delivered improved profitability with a return on equity of 28.4%, improving from 6.2% in the prior quarter and results were impacted by the Argentine debt re-profiling.
We also achieved a year-on-year improvement in return on equity from – up from 17.1% in 4Q 2018. Pre-tax income reached AR$1 billion a significant improvement from the AR$117 million, pre-tax loss in the prior quarter supported by higher net financial income and lower loan loss provisions this quarter.
This as I said, was partially offset by AR$785 million in non-recurring charges. Attributable net income for the quarter, which includes a AR$438 million benefit from recognizing inflation adjustment in income tax provision almost credible sequentially to AR$1.5 billion from AR$301 million in the 3Q 2019.
For the full year, attributable net income increased 66% to AR$4.3 billion, up from AR$2.6 billion in 2018. Return on equity increased 600 basis points year-over-year to 22.6%, while return on average assets increased 50 basis points to 2.7%.
Please turn to capitalization on slide 15. Tier 1 capital ratio was 11.4% in 4Q 2019 compared to 11.8% in the prior quarter.
Capitalization would have been 12.1% in the quarter 76 basis points higher than the reported ratio, when adjusting for inflation as per rule IFRS 29, which is effective January 1, 2020. Capital creation and dividends contributed with a 60 basis points increase in Tier 1.
This was slightly offset by the increase in risk-weighted assets, which includes the impact of the currency devaluation. A total of AR$645 million remain on the holding company for future capital injections.
At year-end, the bank's consolidated financial position showed the solvency level with an integrated capital of AR$15 billion exceeding total capital requirements by AR$4.4 billion. Before turning the call to Patricio for his final remarks and strategic view, let me comment on several measures introduced by the Central Bank last night.
First a 55% interest rate cap on credit card loans was imposed. Second, the amount of reduced on minimum cash reserve requirements for entities participating in Ahora 12 government credit card financing program was increased to 35% of the volumes financed under this program, up from 20% with a cap of 4% on pesos liabilities subject to reserve requirements, up from 1.5%.
Third, the monetary policy rate was reduced 100 basis points to 40%. For increases in retail fees and commissions will be frozen for 180 labor days except those already informed to the Central Bank.
Finally, recurring director’s of loans on third-party financial entities' accounts were banned. Our first take on the impact of these measures on our company is that they will be mostly neutral.
The reduction of minimum reserve requirements and the reduction in Leliq rates, which we expect to result in lower cost of funds is anticipated to mitigate the above-mentioned cap. Regarding fees most of our planned increases for the first half of the year already announced and informed to the Central Bank.
We will continue assessing full impact in the upcoming days. We're fully confident on the strength and potential of our franchise and we continue to adjust to changing and volatile market conditions to ensure it continues to get stronger.
In closing, I wish to thank all of our employees for the hard work over the past year. Now, let me turn the call to Patricio Supervielle, who will cover on our big picture macro views for 2020 as well as provide some color on our strategic initiatives.
Patricio Supervielle
Thank you, Jorge. Now please turn to slide 16.
From a macro level, while some of the concerns that arose after the primary elections have eased following the Presidential inauguration on December 10. There is still one large outstanding item, which is the government debt restructuring.
Until this is resolved, we can expect ongoing overhang of the potential for an improving macro environment. This in turn, keeps pressuring loan demand, even though interest rates are declining.
We are starting to see an improvement in inflation when compared with the prior month. This provides room for the Central bank to further reduce interest rates.
Jorge has just discussed our initial views on the recent Central Bank measures, which we expect will be mostly neutral for our company. On the strategic front, we are pursuing focused initiative to transform our company into a modern leading edge cost-efficient player and position our business to serve consumers' evolving needs and aspirations.
And while we run into some external headwinds last year, we remained focused on executing our strategy to grow our brand and improve operating performance. Key to these are the items shown in the third box on this slide.
We have made significant progress on digital transformation. Increasingly, customers want and expect to engage with us anytime from anywhere.
Our digital strategy is aimed at answering that demand. We have a three-pronged approach.
First, transformation of core businesses, banking, consumer finance and insurance to drive customer experience, agility and efficiencies. For example, we recently launched a groundbreaking senior citizens app, which addresses their transactional needs and also launched 100% digital onboarding platform for new customer acquisition.
Second, we are developing digital attackers to broaden access to financial services. This includes InvertirOnline an online broker and a new digital brand to be launched in the coming months, which we will refocus our strategy in the consumer finance business and allow acquisition of multi-segment clients with full digital financial services.
And third, developing an ecosystem by building traffic from financial services into new spaces, enhancing and deepening customer engagement. We continue to strengthen the franchise and improve the customer experience.
We are working hard to give customers new ways to connect with us. This includes an online chatbot in consumer finance with over 20,000 conversation monthly and our enhanced mobile app for our Walmart partnership customers.
Additionally, we are consistently adding new products and services which increased our value proposition to customers. A few to mention include, insurance products for entrepreneurs and small businesses; online FX purchases within InvertirOnline, which has enabled us to almost triple our customer base for this subsidiary; and the refocusing and rescanning of the car sales platform deautos.com, which we acquired last June.
These are just a few examples of the initiatives that will enable us to grow our customer base, as well as drive cross-selling opportunities. Importantly, throughout the year, we will continue to redesign processes with two goals.
First, making life simpler for our clients and enhancing customer experience and satisfaction; second, extending processes automation to achieve greater efficiency. Lastly as we work to further strengthen our business, we are confident that we are taking the appropriate steps today to position the company for long-term success.
This concludes our prepared remarks. Operator, now please open the call for questions.
Operator
At this time, we will be conducting a question-and-answer session. [Operator Instructions] The first question is from Gabriel Nobrega, Citi.
Please proceed with your question.
Gabriel Nobrega
Good afternoon, everyone, and thank you for the opportunity to ask questions. My first question, it's actually on the level of activity.
We've already seen some banks talking about loan growth maybe being even above inflation. If you consider this to be around 45% for the end the year, while we have also seen the contrary and other banks saying that it could be maybe 5% to 10% below inflation.
So here I would just like to pick your brains to understand, what do you believe is needed for us to see a pickup in loan demand, be it in the corporate side or on the retail side? And I'll ask a second question afterwards.
Thank you.
Jorge Ramirez
Good morning, Gabriel. As we mentioned in the presentation we believe that -- and I think Patricio just mentioned that in his closing remarks I think that the biggest pending issue we have on the economic front is the renegotiation of the sovereign debt.
And that has in our view a big potential -- very big impact on expectations and is in many aspects creating a wait-and-see type of attitude by many other players in the market. So, if I have to point one thing I would say that that is one of the most important things that needs to get resolved or clarified before we can see an improvement in the macroeconomic scenario.
Gabriel Nobrega
All right. That's very clear.
And as for my second question thank you for talking about and going through your new initiatives mainly on the digital fronts. I understand that Fintechs are starting to emerge in Argentina as well.
So, here I would just like to maybe understand when should you be collecting synergies from investing in this? And if you believe that maybe OpEx could be pressured over the year even though we still have a high inflation and you have to do adjustments to the salaries.
Do you believe that that maybe OpEx could be even above inflation because you will be investing in these initiatives? And you maybe believe that you will already be able to collect positive tailwinds from these new initiatives in to 2020 or do you believe this is something for maybe 2021?
Thank you.
Jorge Ramirez
I'll take an initial response and then and have Alejandro Stengel, COO of the Bank to answer part of these questions as well. In terms of your question regarding OpEx, we're expecting OpEx more or less in line with inflation essentially because of the impact of the devaluation on general and administrative expenses.
In salaries, we believe they will be slightly or marginally below inflation. As -- at least those were the initial indications that the government has been giving in terms of what to expect on salaries.
And we are working on these digital transformation and several initiatives in different companies of the group. And as you probably know every time you work on these digital, the first work tend to be not easily recognizable until they reach a hockey stick turning point and they start showing above water level.
We believe that 2020 will be depending on the first half of the year mostly a part of that transition. And we -- depending again on the macro, we might see some of these bring increased growth by the second half of the year and I don't know Alejandro if you would like to expand on some of that?
Alejandro Stengel
No, I think Jorge is quite right that basically we are focused now on production of NVPs on a series of funds and I think that as we move in our priorities to adoption in the second semester, we will start seeing some of the synergies you were asking about.
Gabriel Nobrega
All right. That's very clear.
Thank you.
Operator
Our next question is from Ernesto Gabilondo, Bank of America. Please proceed with your question.
Ernesto Gabilondo
Hi good morning, Patricio, Jorge, Alejandra, Ana. Thanks for the opportunity to ask questions.
I have three questions. The first one is a follow-up in your loan growth expectations.
Do you see loan growth below industry's levels due to the strategy of reducing the exposure in consumer finance? And then what do you think could be the downside rates for your loan growth expectations?
Is it -- will it be contracting a potential default in the Argentine's debt? Any color on this will be appreciated.
Then my second question is on hyperinflation accounting. I think you will be reporting this next quarter.
So, have you estimating how was your 2019 ROE including hyperinflation accounting? And then a final question and this is a difficult question for you Patricio.
We have seen banks such as Banco Macro willing to evaluate M&A opportunities. I remember that you have mentioned in the past that you would like to be in the long-term in the Argentine banking industry.
So, just wondering do you continue to feel the same way? And can we discard Supervielle to be for sale, or do you think it could make sense at a reasonable price?
Thank you.
Jorge Ramirez
Morning, Ernesto. Regarding your question on loan growth, we are -- I mean we still believe that is very difficult to project full year growth in terms of percentages because of a -- still lots of moving pieces and part in the macroeconomic front.
And as I said earlier, the debt restructuring is still an overhang on potential growth and potential recovery of the economy. Therefore, the way we were setting our goals for this year is we're going to grow loans in line or up to 5% above or around 5% above what the market grows.
And even though we've been decreasing our -- the exposure in consumer finance that was essentially under a scenario, in which lending to this segment of the population because of the very high levels of interest rates and because of the people who risked this for a year was not an attractive risk return proposition. However, we have streamlined the company, seasonally reducing bad loans and bad loan portfolio and already the NPL ratio is showing substantial improvement, which means that our NPL portfolio is reducing faster than our overall credit loan portfolio.
And depending on where the and when the recovery starts, we expect that these might be a line of business that in the year might recover or be one of the first ones to recover. Clearly lower interest rates favor this activity substantially because the amount of money you can lend to a person for the -- with the same salary is substantially higher with lower interest rates than with higher interest rates.
So that has a big impact in terms of potential growth in this business. And then in terms of downside, I think that -- I mean, again this is Argentina.
So you have to be open to potential surprises. I think that a lengthening of the economic -- pardon me -- of the renegotiation of the sovereign debt that drags on for too long that might be a downside for potential growth.
Thinking in terms of let's say worst-case scenario, Argentina going into default. It's still an open question whether that will have a dramatic impact on the loan growth for our loan portfolio.
Because if you remember our growth story between 2001 and 2002 and 2015 Argentina was in default and we were able to multiply by 25 times of market share. So we were able to grow our loan portfolio substantially despite of the default.
So it's not necessarily 100% correlated. Clearly a successful negotiation and friendly negotiation that will renew Argentina to go back to the market sooner or rather later, it's definitely a much more reliable scenario than the one of the default.
But again the downside might not be as directly correlated to reforms as in paper beforehand might seem to be the case okay? Regarding inflationary accounting, I will address the question to Alejandra.
Alejandra Naughton
Hello, Ernesto. Yes as you mentioned, inflation accounting methodology will be -- is being applied actually from January 2020.
But we have some numbers regarding the financial period closed in December 2019. In that case, the shareholders equity will have amounted to another ARS12 billion to ARS24 billion, 10% above the one recently released.
And the return on equity would have been close to a number of minus 7% to 8%.
Patricio Supervielle
Yes. I will go now for the question you make me.
This is Patricio. First of all, I am a strongly believer that all the initiatives that we are taking in terms of transformation of the business and the quality of our franchise will give -- will have -- will give fruit and will -- basically will achieve what -- or enhance a much better relative valuation vis-à-vis other peers in the next 24 to 36 months.
So I believe that some of the things that may be affected us in the last two years. We've been working hard and we continue to work hard particularly on digital transformation and that will bear fruit in the next 24 to 36 months.
And this will help us recover much better relative valuation vis-à-vis banks -- other banks. On the other side, I personally -- as a shareholder, I am fully committed to continuing the business -- in the banking business because I love this business.
And I think that I -- my -- I think I can contribute to let's say to the growth of our financial business. And so I will be -- I will continue to be committed in -- as a shareholder.
And -- but having said that at the same time, I am also a believer in consolidation. I believe in consolidation not only organic consolidation but also inorganic consolidation.
So I will be always be open to opportunities of consolidation and if this means better value for all the shareholders basically. So I think this is my answer to your question.
I hope I have answered my -- your question.
Ernesto Gabilondo
Very good, helpful. Thank you, Patricio.
Thank you, Jorge, Alejandra.
Operator
[Operator Instructions] Our next question is from Yuri Fernandes, JPMorgan. Please proceed with your question.
Yuri Fernandes
Hi, Jorge, Patricio, Alejandra. Thank you for the opportunity here.
Another follow-up on guidance, regarding ROEs again I know it's challenging yesterday the Central Bank measures, they may add some additional uncertainty here. But what should we expect for ROEs for the year of 2020?
Do you think you will be able to deliver like ROEs positive in real terms or should we continue to see ROEs on the negative side on real terms? That's my first question.
My second question is regarding margins looking ahead. This quarter was good on securities, but looking to loans you had a good improvement on cost of funding.
But my point is this is really sustainable. Looking to the drop in deposits, especially in local currency, my question is if the bank at some point may need to increase the cost of funding pressuring margins to attract more deposits.
So basically how are you seeing the competition for liabilities in Argentina? Like how could Supervielle attract more deposits?
Thank you.
Jorge Ramirez
Yuri regarding your question of ROE, nominal ROE for the year we expect it to be below inflation. And how that will turn out at the end of the day in terms of ROE adjusted by inflation depends on several issues.
So we don't know yet in terms of how that will turn out to be. Regarding your second question about margins, we expect margins to remain pretty consistent to what we saw in the fourth Q, essentially because remember that we always had and -- we always had loans in our loan portfolio with high margins because we were mostly concentrated on personal loans rather than credit cards or other lower margin line.
We do not believe that funding and competition for funding in Argentina will be an issue. Certainly not in 2020, the tight foreign exchange controls explains one part of that.
The second part of that is remember that considering our customer base, our customer base was very hardly hit by the recessionary environment and by the sharp increase in public utility tariffs in the past couple of years. So as inflation goes down and some of the mitigating measures that this government has introduced will enable, we believe our customer base to have higher disposable income.
That higher total income means balance in accounts, especially savings accounts should tend to grow at a faster pace than they were growing in real terms in the last couple of years. So we do not expect to see sustained pressure on the funding side and definitely not an increase for the country.
We're expecting a lowering in our cost of funding as interest -- as the Central Bank continues to lower interest rates. And therefore margins to remain more or less at the same levels we saw on the fourth Q.
Yuri Fernandes
So just to see, if I got the message regarding margins, we may see some decrease in margins but because Leliqs are coming down because interest rates are coming down and you have like some repricing. It may be not related to higher cost of funding or something like this, it should be more a repricing and a decrease on securities portfolio than anything else?
Jorge Ramirez
Yes. I mean remember one thing is we -- I think you have been very clear in mind.
But we're a bank with a fairly different business model than some of our public list -- publicly listed peers. So we have a lower share of credit card businesses and lower share of corporate businesses with low margins.
Our competitors were able to replace low-margin loans with high-margin Leliqs. In our case what we replace were high-margin personal loans with Leliqs.
So we believe that we will be able to compensate and defend the margin by translating cost of funds to -- on the deposit side. And second as I explained in an earlier question as interest rates come down, we are able to lend more money to the same customer base, so that should drive some increase in consumer loans both at the bank and at the consumer finance division and therefore those should replace the margins we might be losing whereas as interest rates come down the margins we would be losing from the Leliqs.
Yuri Fernandes
Jorge, thank you very much.
Jorge Ramirez
Okay.
Operator
We have reached the end of the question-and-answer session. And I will now turn the call back over to Ana Bartesaghi for closing remarks.
.
Ana Bartesaghi
Thank you for joining us today. We appreciate your interest in our company.
We look forward to meeting more of you over the coming months and providing financial and business updates next quarter. In the interim we remain available to answer any questions that you may have.
Thank you and enjoy the rest of your day.
Operator
This concludes today's conference. You may disconnect your lines at this time.
Thank you for your participation.