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Operator: Good morning, and welcome to Banco del Bajio's Third Quarter 2025 Results Conference Call. My name is Leonard, and I will be your coordinator today. [Operator Instructions] Before we begin the call today, I would like to remind you that forward-looking statements made during today's conference call do not account for future economic circumstances, industry conditions, company performance and financial results. These statements are subject to a number of risks and uncertainties. Please note that this video conference is being recorded. Joining us today from BanBajio are Mr. Carlos De la Cerda, Executive Vice Chairman of the Board of Directors; Mr. Edgardo del Rincon, Chief Executive Officer; Mr. Joaquin Dominguez, Chief Financial Officer; and Mr. Rodrigo Marimon, Investor Relations Officer. They will be available to answer your questions during the Q&A session. For opening remarks and introductions, I would now like to turn the call over to Mr. Rodrigo Marimon. Mr. Marimon, you may now begin.
Rodrigo Marimon Bernales: Good morning, everyone, and welcome to Banco del Bajio's conference call to discuss our third quarter 2025 results. Today, we will review our quarterly performance and discuss the strategic evolution of our key financial trends. The industry information cited throughout this presentation is based on CNBV's data as of August, representing the most recent publicly available information. Without any further ado, let's start with the presentation. Let's start on Slide 3 with a brief look at our key financial highlights for the quarter. Our total loan portfolio expanded 5.4% year-over-year, fueled by the 7.7% growth in our company loan portfolio. This growth was supported by total deposits, which grew 13.7% year-over-year, showing a sequential growth of 4.3% in the quarter. Regarding asset quality, our nonperforming loan ratio stood at 1.97% with our coverage ratio at 1.16x. Our cost of risk stood at 109 basis points. Turning to profitability. We reported a quarterly net income of MXN 2.3 billion to an ROE of 19.7%. Our net interest margin was 5.9% and the efficiency ratio stood at 39.5%. Looking at the 9-month period in 2025, the ROE was 19.9%. The net interest margin was 6.1% and the efficiency ratio at 38.6%. Our capital position remains strong. The preliminary capitalization ratio reached 15.9%, an increase of 136 basis points from the second quarter 2025. This increase was partially the result of our decision to no longer apply our internal methodologies for portfolio reserves and capital requirements for the SME and company portfolio. This decision increased our capital ratio by 82 basis points. Moving to Slide 4. We highlight the success of our digital transformation strategy and the evolution of the number of transactions processed through BanBajio's channels. The charts on this slide illustrate the structural shift we have executed in client transactions. Today, digital channels are by far our most important transactional channel, leading to a decrease in absolute branch transactions compared to 5 years ago when they were still dominant. The chart below shows a similar evolution for the transacted amounts at these channels. We have achieved a compound growth rate of 24% in transacted amounts over the last 5 years. Within that period, volumes processed through BajioNet have increased by a multiple of 3.7x, while branch volumes grew only 1.5x. Transacted amounts through BajioNet now accounts for 82% of all transacted amounts, up significantly from 64% in the third quarter of 2020. The increase in volume and transacted value processed through our digital channels demonstrate an effective strategy that has led to higher client engagement in BanBajio. This is evident when you consider that transaction volume growth has outpaced the 6% CAGR in our active clients over the last 5 years. This evolution is a supportive driver of our sustained growth in our deposit base and the structural growth of our noninterest income. Our digital channels related income grew at a sound 18.2% CAGR over the past 5 years. Moving to Slide 5. We continue to observe good growth trends for our company and consumer loan portfolios. Company loans grew 7.7% and consumer loans 13.1% year-over-year. Overall, the total loan portfolio reached MXN 268 billion, a 5.4% increase compared to the third quarter of 2024. Our total loan growth was achieved despite the contractions observed in government, financial institutions and mortgage portfolio. It is worth mentioning that during this quarter, we have successfully continued our strategic reallocation of our portfolio, supporting higher-yielding loan classes with better margins. Simultaneously, our total deposits reached MXN 274 billion, which represents a 13.7% increase year-over-year. We will detail these growth trends in our funding structure section on Slide 8. On Slide 6, we detail the evolution of our consumer portfolio, excluding auto loans. This portfolio reached MXN 7.2 billion, with growth rising to 13.6% year-over-year compared to the third quarter of 2024. As we have emphasized in previous quarters, we view this segment of consumer loans as a strategic high-yield asset that is critical to our efforts to diversify our income generation and our overall business. We have managed to achieve this expansion with asset quality that outperformed the industry standards. As shown in the charts, this is reflected in our NPLs ratio across the board with payroll loans at 2.26%, credit cards at 2.98% and personal loans at 2.31%. Turning now to Slide 7. We will examine our asset quality trends. Our headline NPL stands at 1.97%, while the NPL adjusted ratio stood at 2.51%. Most importantly, both ratio continues to compare favorably against the industry average. As shown in the bottom right chart, our cost of risk was 109 basis points for the quarter. We expect the cost of risk will converge to more normalized levels over the next 2 to 3 quarters. Our coverage ratio remains strong at 1.16x. Furthermore, we will continue to hold MXN 681 million in additional reserves on our balance sheet, mostly created during the pandemic. In line with our decision to cease applying our internal methodology for additional reserves and to fully transition to the standard regulatory methodology, we plan to absorb these reserves over the next 9 months. Moving on to Slide 8. Our total funding reached MXN 324 billion, reporting a 10.6% increase year-over-year. Within the funding mix, our demand deposit base reported an increase of 20.5% year-over-year, and our overall client deposit base remains stable relative to the institutional funding. Within our funding structure, we have observed a trend over the last 2 years with clients that are gradually migrating to interest-bearing demand deposits away from zero-cost accounts, a shift that has gained relevance in the mix. The funding mix now comprises zero-cost demand deposits at 17%, interest-bearing demand deposits at 26%, time deposits at 41% and institutional funding at 14%. On Slide 9, we observed the evolution of interest margins. The net interest margin for the third quarter was 5.9%, a year-over-year decrease of 110 basis points. This reduction was primarily due to the sensitivity to rates, which accounted for 62 basis points of the reduction, while 48 basis points were driven by the negative impact on the asset liability mix. Our current ex-ante sensitivity to rates, considering the current mix of assets and liabilities stands at around 20.4 basis points of net interest margin per every 100 basis point change in the benchmark rate. We estimate this would represent a full year impact of around MXN 730 million on revenues and MXN 460 million on net income. You will see the performance of BanBajio's revenues on Slide 10. Please note that we are excluding nonstrategic asset sales from the third quarter and the 9-month period of 2024 to provide a clear pro forma comparison. Total adjusted revenues decreased by 2.8% compared to the third quarter of 2024, which reflects an aforementioned impact of the reduction in interest rates. Consequently, our financial margin contracted 9.0%. However, our strategy is paying off in noninterest income, which grew strongly by 50% pro forma year-over-year. Our adjusted net fees plus commission and trading income grew a robust 22.7% in the third quarter. We continue to make important progress in key fee-generating businesses. Bancassurance grew 36.9% Interexchange fees grew 5.9%. POS fees grew 13.4%, while BajioNet related fees grew 37.3%. The reported total noninterest income growth was boosted by MXN 156 million sale of our written-off portfolio in the quarter. We can see the evolution of our efficiency ratio on Slide 11. It came in at 39.5% for the third quarter of 2025. BanBajio's efficiency ratio stands strong against the industry levels. In this third quarter, expenses grew 9.6% year-over-year, consistent with a 9.1% year-over-year growth in September year-to-date and in line with our guidance. We continue to prioritize our efforts to bring down expense growth, and it is one of our priorities for this year. However, the bank continues to invest strategically in key initiatives such as branch openings and some upgrades to our infrastructure. Slide 12 presents the evolution of the profitability metrics of BanBajio. As shown in the charts, the quarterly ROE was 19.7% and the quarterly ROA stood at 2.4%. On a per share basis, the third quarter earnings per share stood at MXN 1.91, which represents an annualized earnings yield of 17.1% computed with the average stock price for the third quarter. Moving to Slide 13. The preliminary capitalization ratio as of September 2025 was 15.89% entirely composed of core equity Tier 1 capital. Around 60% of the 136 basis points increase in our capitalization ratio from the previous quarter was attributed to the aforementioned methodological adjustments applied to our portfolios, and the remaining 40% was a result of our sound earnings generation capacity. Finally, on Slide 14, we are pleased to announce that the Board of Directors has approved a proposal to the Ordinary General Shareholders Meeting for an extraordinary cash dividend payment equal to 10% of 2024 net income, which is equivalent to MXN 0.9 per share. This distribution, combined with the previous payouts throughout the year would result in a total payout ratio for 2025 of 60% of last year's net income with a proposed payment date set for December 3, 2025. The total of the 3 dividend payments will represent MXN 5.39 per share, equivalent to a dividend yield of approximately 12.2% calculated using the most recent share price. We will continue to closely monitor the evolution of the drivers for the fourth quarter, and we feel comfortable in our ability to deliver on the guidance that we have provided to the market. With this, I conclude my presentation, and we can open the call to the Q&A session.
Operator: [Operator Instructions] Our first question comes from the line of Ernesto Gabilondo.
Ernesto María Gabilondo Márquez: Ernesto Gabilondo from Bank of America. My first question will be on your net income guidance. When looking to the accumulated earnings as of the third quarter, it's around MXN 6.9 billion. If we analyze it, it's around MXN 9.2 billion and the growth is of minus 14%, which is above the company's guidance range of minus 18% to minus 20%. So just wondering if it will be reasonable to expect at least the high end of your guidance? And what will be your assumptions on that? My second question will be on your expectations for dividends. As you mentioned in your last slide, you're expecting a special dividend for December 3. and you have an ordinary dividend payout ratio of 50% this year. So just wondering how should we think about the dividend payout ratio next year? And this is especially in a context in which you will no longer have a high reserve coverage ratio. As you mentioned, you are expecting it to be trending to 103% and actually is at 116%. So just wanted to know your thoughts on the dividend payout ratio? And also, how should we think about the cost of risk during the next quarters while you are transitioning into this lower reserve coverage ratio?
Edgardo del Rincón Gutiérrez: Thank you, Ernesto, and good morning, everyone. This is Edgardo del Rincon. Several questions, Ernesto. So about net income, I agree with you. We believe we can be in the high end of the guidance that is MXN 8.8 billion, and we feel comfortable in general with all the guidance. Regarding the coverage ratio, there are only 2 banks in the Mexican financial system with additional reserves. The complexity of the regulatory rules that we need to comply with the CNBV and additional rules that are coming in the following months take us -- I mean, we decided to abandon, let's say, the methodology for additional reserves and go only to regulatory reserves. That's why based in the mix of our assets, the level of collaterals and guarantees that we have, we feel comfortable with the regulatory reserves. So we still have MXN 680 million that will be -- I mean, those will be absorbed in the following 6 to 9 months, mostly at the beginning of 2026. And regarding your last question before the dividend, about the cost of risk, we are very glad with the behavior of the cost of risk in the third quarter. Actually, it came 14 basis points better than the second quarter. But for us, the good news is that it's very concentrated in few names, very well-known clients. And a few of them is very possible that they will transition to current during the fourth quarter. So we feel that in the following several quarters, maybe 2, 3 quarters, maybe 4 quarters, we should transition in cost of risk to a more normalized level, let's say, between 0.9% and 1%. And now I pass the microphone to Carlos about the dividend.
Carlos De la Cerda Serrano: Hello, Ernesto. Hello, everybody. Regarding your question, we usually feel comfortable with a 50% payout ratio that we believe allow us to maintain a capitalization rate that we feel comfortable with between 14% and 15% capitalization rate. This year, the capitalization rate went up since the loan growth has not been as strong as we expected, the economy is -- and all the uncertainties related to the tariffs and many things, we have seen a weak demand for loans. So that and the change in methodology took our capitalization rate well above 15%. So we decided to propose to the shareholders' meeting an additional 10%, considering that in a few months, we will be evaluating the payout -- the dividend that we will be paying out for the 2025 net earnings. So that will be an important amount again. So we feel comfortable with a 50% ratio that we would have to adjust depending on how the year looks. And that's why we added a 10% additional dividend.
Ernesto María Gabilondo Márquez: Excellent. And just if may I, a last question on your ROE expectations. How do you see it in the long term under normalized rates? Where do you see the interest rates ending by the end of 2026?
Edgardo del Rincón Gutiérrez: Sure. This quarter, Ernesto, we delivered an excellent ROE of 19.7%. We believe it was a strong recovery and also confirming the bank's ability to maintain solid profitability even in a more challenging environment. As we have been mentioning in the previous quarters, our view is that the sustainable ROE remains in the high teens range. During the year, interest rates declined faster than we initially expected and also that put some pressures on margins. And at the same time, we have been experiencing a higher cost of risk than originally planned. So it is already trending down and should normalize, as I said, in the following quarters. But we really believe that the strong fee income growth, the discipline in expense control and the solid capital levels all of which support a very healthy profitability. So even in a low rate environment that we feel the trend in rates will continue to go down maybe to 6.5%, 6.25% at the end of '26, we feel confident that we can deliver high teens in ROE even under that environment.
Operator: Our next question comes from the line of Brian Flores.
Brian Flores: This is Brian Flores from Citi. I have 2 questions. My first question is on asset quality. Just wanted to understand the perspective on the coverage that is already below the 120% you guided. So is the fourth quarter expected to have some reversals or improvements? I think that would be great to know. And also wanted to -- on my second question, see how that is related to asset -- sorry, to loan growth. Because as you mentioned previously, Edgardo, loan growth is probably running well below historical rates, right? It's 5% year-over-year. I wanted to ask you maybe the same question in 2 different aspects. The first one is what is happening in mortgages? Is there some anticipation on the -- I don't know, the write-off policy changes that we could see from CNBV. Is it just demand? Is it pricing? If you could share with us what is happening in mortgages that is the portfolio that is shrinking the strongest, that would be great. And also, if you could share your expectations of loan growth for 2026, I think that will be also very, very helpful.
Edgardo del Rincón Gutiérrez: Thank you, Brian. Let me start with loan growth. As you know, came in 5.4% year-over-year. That is below previous periods, mainly because we have been very selective on where we want to grow. Corporate lending continue performing well, up around 7%. And within corporate loans, SMEs, I mean, we are having very good momentum. On the other hand, we have been intentionally reducing exposure on government loans in mortgages, but also in financial institutions segments that we either carry lower margins or higher risk. So it's a decision based in profitability. In the case of financial institutions, you know very well what has been happening in the market with several financial institutions not related with banks that have been having problems. So we are also seeing good growth in consumer loans, and that will continue in the future, mainly in credit cards, payroll and personal loans, a little bit growing 13%, a little bit more than that. Overall, as Carlos was saying, credit demand has been somewhat softer than we were expecting. And it's a reflection of what is happening in the economy, the uncertainty locally and globally and all the geopolitical factors that you know very well. So looking ahead, the fourth quarter typically is our strongest period, and we expect to meet the full guidance without any problem for this fourth quarter. For 2026, we believe it will depend in having more clarity about the economy, how it's going to perform the economy, the expectation today is a little bit more than 1%. So we will continue with economy, let's say, growing at a very slow speed. And also what is going to happen with the trade negotiations. I believe that will provide clarity and more certainty in the scenario and then we can have a more robust loan demand. Regarding asset quality that you mentioned, we have several quarters with several isolated cases. For example, in this third quarter, we have 3 particular corporate exposures that moved to Stage 3 during this quarter. As I have been saying, very well-known clients of BanBajio of many years. And we expect at least the most important one in an amount to return to performing status in the fourth quarter. So yes, we believe we will continue this normalization of the cost of risk going forward. Regarding cost of risk, I mean, I already mentioned it came at 1.09%. But we believe that during the first semester of 2026, we will get to a normalized level that we should be between 0.9% and 1%. Sorry for the long answer. I don't know if I covered everything, Brian.
Brian Flores: No, you did, Edgardo. Maybe a quick follow-up. So with the 1%, maybe the base case assumption for next year, do you think the base case for now, obviously not official, but that is very similar to loan growth for 2026, which is between 5% and 6%, I don't know, 5% to 7%, would that be, in your view, reasonable to assume? And then I don't know if you could expand a bit on mortgages, if there is some impact of the regulation, particularly the changes in write-offs that you're anticipating here also for that category of the loan book?
Edgardo del Rincón Gutiérrez: Actually, the decision in mortgages has, I mean, more time than the regulation that is changing today. So our decision is based totally in profitability, and we'd rather use the capital in other portfolios with better profitability than mortgages. That is the decision. Regarding 2026, and this is not, of course, any guidance for 2026. But we feel that we will continue with softer demand during the first months of 2026. And then as we have more clarity in what is going to happen with the trade agreement with the U.S. and locally and the performance of the economy in Mexico, then maybe at the end of the first semester, beginning of the second semester, we can have a better environment to grow.
Operator: Our next question comes from the line of Ricardo Buchpiguel.
Ricardo Buchpiguel: This is Ricardo Buchpiguel from BTG Pactual. The bank has been focusing a lot on growing more in SMEs. So I want to get a little bit more color on this portfolio. Can you comment what is the share of the SME portfolio today? And what is feasible to expect in the next 3 years? And also, what are the key difference between the SME and the large corporate lending in terms of overall risk-adjusted NIM and overall profitability? And you mentioned also for my second question, you mentioned in the call that you plan to absorb the additional reserves over the next 9 months, like helping mainly 2026. But you also mentioned that the first half year of 2026, we expect cost of risk to be between 0.9% and 1%, which is a little bit below your -- sorry, a little bit above your historical levels. So I wanted to understand if it makes sense that these additional reserves will be used to absorb -- to offset a higher NPL formation over the next following quarters.
Edgardo del Rincón Gutiérrez: Thank you, Ricardo. The SME portfolio accounts for a little bit more than MXN 70 billion, actually MXN 72 billion. So it's an important part of the portfolio. And it's a portfolio with very good profitability with a cross-sell ratio of more than 5 products and services. So it's not only loans, but also cash management, electronic banking, FX, acquiring business, et cetera. So it's very profitable and it's the part of the portfolio that is growing more. So is what we have. The second part of your question was about additional reserves. The idea is not to take the additional reserves and just pass through the P&L. The additional is to use those additional reserves gradually to cover the need of reserves that the bank is having in the following 9 months. That is the idea. So that is going to be a very gradual use of those reserves.
Ricardo Buchpiguel: Perfect. And so it makes sense for us to expect the cost of risk around like 0.9% and 1% in 2026, right?
Edgardo del Rincón Gutiérrez: That's right.
Operator: Our next question comes from the line of Eric Ito.
Eric Ito: Carlos, Edgardo, this is Eric from Bradesco BBI. My first question here is regarding OpEx. I just want to get a sense of -- I think you guys have a pipeline of [ 50 ] new branches over the next years, if I'm not wrong, you have been deploying some over the past quarters as well. So I just want to get a bit on the opportunity here to see efficiency gains improvements in 2026? Or maybe as more deployment should happen, we could see more efficiency gains in 2027. This is my first one, and then I can ask my second later.
Edgardo del Rincón Gutiérrez: Sure. Thank you, Eric. Expenses continue to perform better than planned, growing, as you saw, 9.1% year-over-year for the 9 months. The idea is to keep the expense growth below 10%. That was the original guidance. So we have maintained a very strong discipline even while we continue to expand our branch network that today we have 331 branches. During the last 12 months, we have opened 10 branches. That is -- those branches are adding close to 1% to the expense growth. So it is important. The good news is that these new branches are ramping up profitability quickly. So we feel comfortable with this investment. And the idea is to continue with this expansion between 10 to 15 branches every year. On the technology side, investment remains focused on security, cybersecurity and system stability rather than new projects. The big investment, for example, in digital banking, et cetera, was done previously. Of course, we need to continue investing in that, but the big investment is coming in cybersecurity and providing the right stability. Our priority has been to strengthen the resilience of the IT ecosystem and ensure reliable operations across the bank. Overall, expense control remains a strategic priority, and we expect to end the year below 10% growth while keeping operating efficiency under 42%, that is the guidance that we have today. That is, as you know, one of the best levels for the financial system today.
Eric Ito: Okay. Very clear. And then my second question, real quick on the written-off portfolio sale that you guys did this quarter. Just want to get a size -- I just want to get a sense of what's the size of the portfolio that you guys sold? And if this was just an opportunistic approach or maybe we could see further sales going forward?
Edgardo del Rincón Gutiérrez: Yes. It was an impact of MXN 156 billion. It was a sale of an asset as the money came not from the customer, actually come from a third party that made the acquisition of the asset -- that's why we didn't record this as a recovery that in that case, we would have a very positive impact in cost of risk. Based on the accounting rules, we -- I mean, this was an additional revenue, and that's why you saw that impact in the revenue growth. So -- but even with that, nonfinancial income, as you saw, we have a very good quarter with 50% growth. But without considering this one-timer, the growth is 27%. That is still very strong. So for us, that is very good news. We are very glad with this. And we feel that in the following quarters, we can continue at least with high teens growth in nonfinancial income. That is a very good level and much higher than the growth in active clients, that is 6% or the growth in the drivers in the loan growth portfolio, et cetera. So we are very glad with the performance this quarter in nonfinancial income, and we feel that we should continue with very good levels in the following quarters.
Operator: Our next question comes from the line of Pablo Ordonez.
Pablo Ordóñez Peniche: Congrats on results. This is Pablo Ordonez from GBM. My question is, could you comment on your funding dynamics? Deposits have been growing way faster than the loan portfolio at 13% year-over-year. In addition to this, as you mentioned in your remarks, the mix is not improving. So why taking the additional deposits and also for next year, what level of funding cost as a percentage of the interest rate would you expect? Should we expect some improvement because we have seen some deterioration in the past year? So any color here would be very helpful.
Joaquín Domínguez Cuenca: Thank you for the question. This is Joaquin Dominguez. Yes. We took these deposits because that generates marginal income for the bank. We pay a lower rate than the rate we invested those deposits. So it is still a good business for the bank and it's not -- it prepares the banks for a further growth in loans, so we can change the liquidity in investment in assets, in securities for loans. So it provides the banks good enough liquidity to be prepared for the loan expansion. And at the same time, it is a positive business.
Pablo Ordóñez Peniche: Perfect. And second question is regarding the fiscal package, Joaquin, could you comment on what should we expect? I mean, I think that the change for the IPAB fee is very straightforward. But any color that you have on the potential impact for Banco del Bajio at the P&L level and the financial impact from the changes in how the write-offs will be reduced going forward with this proposal from the [indiscernible]?
Joaquín Domínguez Cuenca: Yes. What we have calculated is that -- the impact will be an increase in 2 basis points -- 200 basis points in the effective tax rate. It means it's around 3% of the net income for the next year. In terms of the write-offs, it will have no impact in the P&L, but in the -- it will increase the deferred taxes.
Operator: Our next question comes from the line of Yuri Fernandes.
Yuri Fernandes: Yuri Fernandes from JPMorgan. I have a follow-up on asset quality and the written-off portfolio sale you had, and it was clear like the directional. What is not clear for me is that given the outlook for asset quality is a little bit more challenging, right, like several [ cases ] here and there, and I know they are like kind of one-timers, but still becoming somewhat frequent. Why not you use this case to increase your coverage, given you have like a coverage ratio guidance, you are slightly below. So just checking the box, why not increase like this quarter doing more provisions and take the opportunity of this kind of one-timer on the positive side? And then I have a follow-up on your Stage 2 and Stage 3. When we try to look to the coverage of those stages, so trying to look to the amount of allowances divided by the portfolio by stages, we have been seeing an increase on the amount of reserves for Stage 2, Stage 3. So basically, Stage 2 used to be 10%, 11% allowances to loans. Now this number is going to 15%. And the same is happening for Stage 3. So Stage 3, now you are doing some 47%, 48% allowances to loans on your Stage 3. This number used to be closer to 40%. So just checking if we are going to see this to increase like basically the amount of required provisions for stages being somewhat higher in each of those buckets.
Edgardo del Rincón Gutiérrez: Thank you, for your question. Let me go back to the pandemia. Before the pandemia, the level of reserves that we have was very close to the regulatory methodology. So the methodology coming from the CNBV. Because of the pandemia, we decided to increase the coverage ratio because we were expecting in a stress scenario, very high losses that at the end with the measures that we take together with the CNBV didn't happen, and we have been carrying for a long period, several years, those additional reserves. We have been using those reserves in the last maybe 4, 5 quarters for those isolated cases that we have been mentioning. During this period, we realized that we -- in the financial system, there are only 2 banks. One of those is a big, big bank. And BanBajio, we are the only ones with additional reserves. Since the pandemia, the CNBV has been very close to us reviewing constantly the methodology we are using and the calculations we use every month. But during that the last, let's say, 2 years, the regulation and the complexity to comply with that methodology has been harder and harder. The level of coverage ratio is based on the mix of the portfolio as we have 86% of the portfolio in corporates that is very different from the G7, for example, but they carry a lot of consumer business that normally, the level of coverage ratio of those portfolio is close to 2x. So based on that mix, you can see the coverage ratio of those big banks really high, but it's not really comparable with the portfolio we have in BanBajio. We have 86% in companies with a very high level of collaterals, and we are very active using guarantees from FIRA, from Bancomext and from Nafinsa. So because of the mix and the level of collaterals we have, the coverage ratio that we have based in regulation is very close to 1x. If you see other banks, for example, that has a lot of mortgages and auto loans, you can -- you will see that the coverage ratio is even below 1x in other cases. So we feel comfortable with that level that this is coming from the pandemia. The complexity is really high. If we don't comply with the methodology and the rules of the CNBV, we can have sanctions. So that's why we decided to abandon this methodology and have in the future, in the following months on the reserves we need based in the regulations as all the rest of the banks.
Yuri Fernandes: No, no. It's totally clear that part. My only question on that is that some portfolios, I don't know, mortgage, historically, they have much lower coverage, right, and you are reducing your mortgage portfolio. So in period by mix, maybe your coverage should be higher, right, because you're not growing in mortgage, you are decreasing. Government loans, I think it's tricky because you don't have a lot of allowances, but you also have a lot of [indiscernible]. But part of your portfolio is decreasing in products that should have like lower reserves also, right?
Edgardo del Rincón Gutiérrez: Yes. In the case of mortgages, it's not [indiscernible] reserves that are required. The decision of not growing, of course, we can cross-sell if a customer that is already with the bank ask for a mortgage, of course, we provide that mortgage that there is not a decision to grow faster the mortgage portfolio that is based on the best use of capital and profitability.
Yuri Fernandes: Great. And regarding the Stage 2 and Stage 3, like when we do reserves by loans, this increase that we observed, like should we continue to see? Or is this kind of a more quarterly specific trend?
Edgardo del Rincón Gutiérrez: Yes. We feel that we will continue improving the Stage 3 portfolio. Actually, we are expecting a few recovers during this fourth quarter. And the idea is to continue improving the performance during the following quarters. Of course, there is some mathematical -- I mean, as we have been growing a very low speed 5% this quarter, that has an impact, of course, in the NPL. But we feel that we will continue trending down in the following quarters. And we are working in recovering those Stage 3 cases. Even by a legal action, as we have a lot of collaterals, there is always a big possibility of recovering those loans.
Operator: Our next question comes from the line of Tejkiran Kannaluri Magesh.
Tejkiran Magesh: This is Tej from WhiteOak. I just want to understand with the change in methodology of capitalization that you're calculating, does the range of CET1 you're comfortable with change? Or does it remain 14% to 15%?
Edgardo del Rincón Gutiérrez: Yes. Thank you. The change that we have during this third quarter actually was in August. But that was something that we decided last year. And it's also a methodology that we used to have for several years, to make the calculation -- I mean, to calculate the reserves for SMEs and for the corporate portfolio as well as it's the same case that additional reserves. We decided that, that didn't provide the flexibility that we needed and any benefit and the complexity as well of the rules are every year is higher and higher and higher. So it was very difficult to comply with all the rules. So we decided to abandon -- it's a process that took one year with the CNBV, so we have been in that process during the last 12 months. So the last month in which we saw that change, it was a couple of months ago in August. And that has an important impact in the capital levels of 82 basis points. That's why we still saw the capitalization rate going to 15.9% together with the accumulation of earnings during the last few months.
Tejkiran Magesh: Okay. Understood. There's no 2 methodology changes. It's just one, the reserves, which also affected the capital. Understood.
Operator: Our next question comes from the line of [ Andrew Geraghty. ]
Unknown Analyst: I just wanted to double-click a bit on noninterest income and then also the NIM. On noninterest income, you guys have communicated a pretty bullish outlook for going forward of continued high teens growth, faster than the client base growth, faster than loan book growth. Can you just expand a bit on what gives you confidence in this? And is it coming specifically more from the fees and commission side? Or can trading income continue to deliver the pro forma year-over-year growth was 35%. So just a little bit more detail on the noninterest income side. And then in terms of NIM, if the benchmark rate goes to, I believe you said 6.5% is your expectation for the end of next year, considering lower rates and maybe changes in mix, what is your thought process on the direction of the NIM for 2026?
Edgardo del Rincón Gutiérrez: Thank you, Andrew. Yes, we -- what we have been doing is, as we said in previous calls, the concentration of the bank is really providing the best digital functionality to our customers. So that is working very well. You saw the metrics, but we are very glad with the compound growth that we are seeing both in transactions and also amounts transacted. That 24% growth in amounts transacted is really, really high and it is the growth of the last 5 years. So we are very glad with that. So the use of digital transactions, digital channels from our customers is really evolving very well. And that is coming with more, what I call operational dependency of the customer with the bank. You are really the bank of the customer when you have the loans, of course, but it's very important also to manage their payroll, their sales through the acquiring business, the FX, et cetera, all the different services that we can provide. So just the BajioNet fees that our customers are paying are growing 37% year-over-year. So that is a fantastic growth. But also all the transactions made through digital channels. That includes, for example, of course, transfers, but also for example, FX that is growing very well. Those -- all those transactions that are in that digital platform, the compound growth of that income is 18.2%. That is also let's say, much more than the growth we are having in active customers that is 6%. So we are very glad with that, and we feel that we can continue with a very good growth. Of course, we have a one-timer this quarter. But even without that one-timer, the growth was 27%. So having high teens, I think, is a very realistic expectation in nonfinancial income. I pass to Joaquin to talk about the NIM.
Joaquín Domínguez Cuenca: Yes. The NIM that we recorded at the end of the third quarter was 5.9%. For the next year, you can guide with the sensitivity we have provided; however, there is an important impact depending of the loan growth and the mix of the deposits. Right now, we have a strong liquidity. We have investment in securities. If we get success with the loan growth expectation, we will change those assets with lower return to the SMEs or corporate loans with higher return. So it could be an improvement in the net interest margin in case of we success with the loan growth expectation. For the next year, it's very similar what could happen. It will depend on the loan growth expansion and the mix of deposits, how big can be the change of the NIM. But if you consider the ceteris paribus structure of the balance sheet, the sensitivity we have provided could give you a good approach of the NIM for the next year.
Operator: Our next question comes from the line of Andres Soto.
Andres Soto: This is Andres Soto from Santander. Just a follow-up on NIM. Based on your comments, Joaquin, it sounds like you guys are not expecting to see NIM to go under 5.5% even if policy rate normalizes in Mexico. I would like to understand how this compares to your historical NIM and what makes you optimistic on delivering this type of NIM, which is superior to what BanBajio had in the past at similar levels of interest rates. What has changed in the story of BanBajio in terms of loan mix, funding mix or any other factors that could sustain this type of NIM?
Joaquín Domínguez Cuenca: Thank you, Andres. And what your perception is correct. If you compare the NIM when the interest rate in the past few years was pretty close to the actual level, we had -- we used to have a lower NIM. So we have improved as well the mix and assets as in deposits. So based on that and that we are expecting to maintain this improvement in the mix in assets and deposits that we will be able to maintain a higher, of course, that 5% NIM the next year with a reference rate around 6.25% for sure.
Operator: Our next question comes from the line of Neha Agarwala.
Neha Agarwala: Quick question on the trade negotiations with the U.S. What part of your loan portfolio could be directly or indirectly impacted by the upcoming trade negotiations?
Edgardo del Rincón Gutiérrez: Thank you, Neha. We have about 10% of the portfolio in customers that do exports, I mean, to different countries, to the U.S. mainly. But I believe the trade agreement has a broader impact, not only in those customers, but also in what we should expect for the economy. As you know, the transformation of Mexico in the last 30 years with -- at the beginning of the NAFTA, you compare the structure of the economy at that moment compared with today is completely different. So that has an impact not only with the base of customers that they do export, but also in the whole economy. So that's why it's so important.
Neha Agarwala: Any other part of the loan book that you would be concerned that could be maybe directly impacted by these negotiations?
Edgardo del Rincón Gutiérrez: Not really. As you know, our presence in the agro business is very important. It's very difficult to replace those products with production in the U.S. because of the weather and the geography of the U.S. So -- and it's very difficult even to replace Mexico as a supplier of those products to the U.S. economy. And the investment that we have in Mexico in manufacturers, we have a lot of investment coming from the U.S. that I believe is very difficult to move again to other geography or to go back to the U.S. that is going to take a while. So not really, we don't see -- we believe our best scenario, but really what we expect is the trade agreement will come to a good end, maybe different from the one we have today. But I believe the best scenario for these 3 countries, Canada, U.S. and Mexico is to continue together with the trade agreement. And we believe it has been very positive even for the U.S. economy as well.
Operator: We have not received any further questions at this point. So that -- I would now like to hand the call back over for some closing remarks.
Rodrigo Marimon Bernales: Thank you all very much for joining us today. We remain available to address any follow-up questions via e-mail and meeting request. We look forward to speaking to you again in January 2026 when we release our full year and fourth quarter 2025 results. Thank you very much, and have a nice day.
Operator: That concludes today's call. You may now disconnect.