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Itaú CorpBanca (ITCB) Q1 2020 Earnings Call Transcript



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Itaú CorpBanca (NYSE:ITCB)
Q1 2020 Earnings Call
May 4, 2020, 11:00 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Ladies and gentlemen, thank you for standing by and welcome to the Itau Corpbanca First Quarter 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like now like to hand the conference over to your speaker today, Claudia Labbe, Investor Relations. Thank you. Please go ahead ma’am.

Claudia LabbeHead of Investor Relations

Good morning. Thank you for joining our conference call for our first quarter 2020 financial results. Before proceeding any further, let me mention that our remarks may include forward-looking information and our actual results could differ materially from what is discussed in this presentation. I would also like to draw your attention to the financial information included in this management discussion and analysis presentation, which is based on our managerial model that we adjust for non-recurring events and we apply managerial criteria to disclose our income statement. This managerial financial model reflects how we measure, analyze, and discuss financial results by segregating commercial performance, financial risk management, credit risk management, and cost efficiency. We believe this form of communicating our results will give you a clearer and better view of how we fare under this different perspective. Please refer to Pages 9 to 12 on our report for further details.

Now let’s continue with the presentation. First, Mr. Moura will comment on 2020 first quarter results. Afterwards, we will be available for a question-and-answer session. It is now my pleasure to turn the call over to Gabriel.

Gabriel Amado de MouraChief Executive Officer

Thank you, Claudia. Good morning everyone and welcome to Itau Corpbanca first quarter 2020 earnings conference call. As you are about to see, we have broken down this presentation in three parts: an update on our COVID-19 pandemic presentation that we held three weeks ago; first quarter 2020’s results; and our view on how to manage the bank during this challenging period.

So moving straight to Slide number 3. As we shown on Slide 3, the restrictions implemented on movement and social contact translate into significant economic impacts and changes the dynamic of the expected Chilean economic growth. At this point, it is too early to estimate precisely those impacts. Nevertheless, we present possible economic scenarios for 2020 and the following years. Our current base scenario is a 1.9% contraction in GDP in 2020 followed by a sharp recovery in 2021. However, short-term signals are showing a lower GDP than our base case scenario. However, current scenario translates into expectations of a 0.5% interest rate in 2020 and 3% inflation in the period. Nevertheless, we acknowledge the possibility of a more severe scenario that could reach to 5% GDP contraction in 2020 and a 6% inflation.

On Slide 4, we show, Colombia, where the virus will likely result in the undoing of much of the economic recovery seen in recent years as the government ordered a 1.5 month lockdown period starting from March 25. We expect the economy to contract by at least 1.55% [Phonetic] this year while inflation in the quarter remained near the upper bound of the tolerance range around the Central Bank’s 3% target at 3.8%. The shock to domestic demand would more than offset upside inflationary pressures derived from supply shocks. As a result, the Central Bank responded to the crisis by implementing a policy rate of 50 basis points cut to 3.75%, the first rate move in nearly two years. The General Manager of the Central Bank also signaling that the policy rate will be lowered by as much as necessary during this crisis. We see the rate reaching 2.75%.

If we can move please to the slide number 5. Now entering in an update us some of our initiatives. Regarding our branch operation, on Slide 5, we provide some details on how it evolved. As I have mentioned on my previous presentation on COVID-19, we are closely monitoring how our clients are using our physical services and analyzing the necessity of adjusting the availability of our branch network. Even though initially we were operating with a reduced capacity at all times, we had 100% presence in the country. Since today, the availability of our branch network has returned almost to normal with 95% of our branches open for our clients. At the same time, we continue to experience an important increase in our digital channels usage as presented on Slide 6.

The total number of logins to our website and app channels increased by 41% for individuals in the last 12 months. At the same time, our corporate clients usage of these channels increased by 57%. During March, we have provided a 99.5% availability of our digital channels to our clients. This level of availability means that our clients were able to use the main functionalities of our web and app without any faults. This summarizes the work we have been doing to fulfill our clients’ expectations to be able to operate whenever they need. The current situation also has generated a shift in some of our clients that were not used to operate digitally. We believe that this behavior could remain in time and could bring benefits in the long run.

To give you an example, on Slide 7, we present some data on usage increase in different types of products through our digital channels. During this this past month, we saw a relevant increase in transactions, payments, and time deposits for both individuals and companies. We also experienced an 87% increase in loans originated in digital channels for our corporate clients. In the meantime, our individual clients increased their credit card limits by 30% taking advantage of our pre-approved credit offer also through digital channels.

As we continue to increase digital communication with clients, on Slide 8, we bring you an update on the launching of our live streaming series Vision de Lideres that most of you might recall as one of the forthcoming [Phonetic] initiatives mentioned three weeks ago. In the streaming series, we have been hosting users from the most important sectors of the economy, which have shared their view on the evolution of the disease and its impact on the economy. During times like this, we believe that it is extremely important to be present, even if digitally, to provide our clients the security that we continue to be 100% available for that.

On Slide 9, we provide an update on how we were able to set up remote working for most of our central administration employees. So far, 30% of our employees are currently in home office helping us to reduce the density in our administrative buildings and branches by decreasing 85% the average circulation on those buildings. As far as the remote infrastructure, we have deployed 2,500 laptops and made available new technology tools such as of Office 365 and Microsoft Teams to improve the remote productivity of our people. It’s fair to say that our operational capacity is preserved and our infrastructure can support operations in a remote environment while our corporate security level is maintained.

So if we can move to Slide 10, we show the latest government initiatives to continue to support the economy and helping companies to access funding during the crisis. In this context, since March 2020, the CMF has issued several regulations guarantee greater flexibility of the financial system as the postponement of the implementation of BASEL III requirements for one year and maintaining the current general regulatory framework for banks’ capital requirements until December 2021. The Central Bank on the other hand has launched two liquidity facilities for banks at a preferential interest rate. The total amount banks can borrow under these facilities correspond to 3% of the loan book and up to 15% if loans are directed toward SMEs. Recently, the Minister of Finance has issued a government guaranteed 48-month credit lines to SMEs to protect economic activity as well.

On Slide 11, we show the results of the first tender of this COVID-19 [Phonetic] credit line. For total demand of $2.9 billion, Itau demand was the second largest with almost 20%. This credit line enables us to support our clients, continue to finance companies and individuals during this crisis.

On Slide 12, we show an update on some of the initiatives we have previously mentioned to help our clients to navigate through this moment of crisis. These initiatives represent our effort to seek the best solution to serve our clients in the best way possible. Our Credit Deferral Campaign is designed to offer financial support for our clients in different segments. On consumer and commercial loans, we offered the possibility to defer the next three installments for non-overdue contracts with a preferential rate. This initiative has moved from 30% acceptance rate to 48%. We also provided alternative for clients that present similar conditions to defer installments in mortgage loans and to choose a zero minimum payment in their credit card in April. On mortgages, the client acceptance rate has increased from 15% to 35%.

As shown on Slide 13, we continue to move forward to be part of the solution. In this context, Itau Corpbanca supported Chilean female entrepreneurs with $41,000 to make masks for staff working with vulnerable children. Additionally, we donated $1.8 [Phonetic] million to the initiative from the Fundacion Las Rosas to fight against the COVID-19 pandemic and tripled the donation from our employees for the Teleton, totaling $810,000. In Colombia, we financed part of the emergency hospital for patients with COVID-19.

On Slide 15, we now move to the second part of the presentation with the first quarter results. On this slide, we share some of the main highlights for the first quarter 2020. We reached a consolidated return on tangible equity of 6.8% on the back of a net income decrease of 1.1% year-over-year. In Chile, we posted a return of 8.4% with net income stable and lower tangible equity after 100% dividend payout in March. Net income performance was mainly driven by negative economic impact of the COVID-19 pandemic on our cost of credit particularly in Chile. On the other hand, higher activity in Chile in the last 12 months, a 12.2% increase and a better weighted average spread on the loan portfolio that help us to offset the increase of the growth of the average portfolio boosting the financial margin for the clients in Chile. Lastly, we continue to keep our managerial non-interest rates at bay, posting a decrease of 1.9% in the last 12 months in Chile.

Moving to Slide 16, we show that the Chilean portfolio expanded at an increased pace on mortgages and commercial. Despite a lower growth rate, consumer credit portfolio continued to outperform the market on a 12-month period since mid-2017. As you know, this has been a temple [Phonetic] in our strategy to rebalance our loan book to better mix of consumer and commercial that would help us to close a gap in financial margin and operationally leverage our retail operation. Moreover, according to our expectations, commercial growth to continue to be aligned with the market as we continue to deepen our service offerings and cash management cross-sell. For the mortgage portfolio, as we manage to adjust our operational model and value proposition for this market in the second half of 2019 [Phonetic], in the last few months, we have outperformed the market.

On Slide 17, we present our financial margins with clients. As our overall portfolio continues to grow, so does our margin with clients, which grew 4.3% when compared to the same period of last year. On the other hand, we observed a negative impact coming from the reduction of interest rates that affects our liability and capital margins that we have managed to partially offset as we see a decrease in NIMs is less sharp than the monetary policy interest rate cut. The negative variation of this trimester when compared to the fourth trimester of 2019 is explained by the sale of the student loan portfolio last quarter and the decrease in our consumer portfolios impacting the loan portfolio mix this quarter.

Moving on to Page 18, as we stated in our previous calls, a relevant part of our assets with our clients is denominated in a official inflation-linked index, the UF. We actively manage loan position and inflation in our banking book under the guidelines of a risk appetite and risk limit set by the Board and the Asset Liability Committee. As for the U.S. increased 1% when compared to the fourth quarter of 2019, the contribution for our banking book partially offset the negative impact for a higher market volatility in our treasury operations, particularly driven by the decrease in interest rates. This decrease led to an increase in mark-to-market derivatives, which in turn translated to higher credit value adjustments, since a significant part of the increase in CVA is due to a single case, we believe this is a temporary difference that could revert during 2020. Overall, our financial margin with the market decreased 8.9% compared to the previous trimester.

Now going forward let’s talk about our cost of credit and credit quality. Here on Slide 19, we can see our main credit risk indicators in Chile. This quarter, our cost of credit amounted to CLP55.6 billion business resulting in a 52% increase when compared to the same period of 2019. This amount is impacted the negative economic effects of the COVID-19 pandemic as well as for the effects that we had for the social unrest at the last trimester. As we have mentioned in previous calls, the social unrest has negatively impacted the NPL ratios in the short-term as some business individuals were diversely affected by less economic activity and acts of vandalism in the fourth quarter of 2019. In addition, current economic scenario has put some pressure on consumer NPLs, which have increased 2.5% in the first quarter of 2020. Despite this increase, as we are deep in our analysis on clients cash flow, we expect NPLs stabilizing next quarters. In addition, NPLs of commercial loans was impacted by a single corporate client in the fourth quarter that at the same time led to a decrease in our coverage ratio.

Now moving to Slide 20, we see our non-interest expense evolution. When we look over a 12 month period, our expense base decreased at a rate of 6.7%. Furthermore, if we isolate depreciation and amortization that reflects all the investments we have been making in our digital platform and its scaling up our businesses, expenses have additionally decreased in the period due to the reversal of provisions of bonuses related to last year. Lower expenses with frauds, marketing, and less operational volume due to the economic impact of the COVID-19 pandemic. We always have a diligent focus on the efficient use of our resources and we reiterate our belief shared on previous conference calls that we still see further synergy opportunities and continue to expect efficiency to gradually improve throughout the next quarters.

Now moving to Slide 21, we can discuss our capital structure. In the last few months, the Chilean regulator has started to release guidelines for the implementation of the BASEL III framework. The CMF has released so far capital charges for systemic important banks, for operational risks, capital reductions, the specific buffer sizes and changes in credit risk-weighted assets. These guidelines coincide with our estimates for the capital planning we have been discussing with you in the past couple of years. We continue to work with regulatory entities to closely monitor the evolution of the new regulation and so far, all the announcements are in line with our models and expectations. Among the measures recently announced by the CMF, the implementation of BASEL III requirements related to capital reductions and risk-weighted assets have been postponed for one year and therefore maintaining the current general regulatory framework for banks capital requirements until December 2021.

Our estimates for new regulatory environment suggests a minimum regulatory CET1 of 8% for 2025 once BASEL III is fully implemented. As shown here, our current CET1 estimate position is 6.4%. The decrease in this ratio when compared to our previous release of 7.7% was driven by the decrease in equity due to the dividend payment, higher than our provision for dividends as well as an increase in risk-weighted assets as effects of the decrease in trade exposure, risk derivatives, and the depreciation of the Chilean peso relative to the US dollar in the quarter. Our plan is to continue to convert in profitability and have a core capital generation and retention that allow us to comply with capital requirements in the time frame that is being discussed. Moreover, we are actively searching for opportunities of our capital management to fine tune our capital position and reduce risk-weighted asset expenses [Phonetic].

Now moving to Slide 22, we can discuss our liquidity. Our LCR and NSFR are well above our internal limits. Our LCR is currently at 125%, higher than our internal limit of 100% set by our Board of Directors and also well above the regulatory minimum of 70%, which has been in freeze [Phonetic] at this level by the CMF instead of moving up to 80% this year. Our NSFR has increased to 95%, above our internal minimal of 90% and as you know, the CMF does not currently establish a limit for NSFR. In Colombia, we also have comfortable liquidity ratios with very similar levels of LCR and NSFR. As we can all see in this slide, total deposits had a record year in terms of growth, increasing 13% when compared to the previous quarter and 36% compared to the same period of 2019. In all of our client segments, we have experienced a strong growth both in checking account balances and time deposits.

If you can please move to Slide number 23. Here we can see the evolution of the net income of the Colombia operation. In the first quarter, net income for Colombia increased COP55 billion compared to the previous quarter. This result benefited from lower cost of credit and higher financial margins as well as lower non-interest expenses. We will continue our path of convergence to our operation in Colombia. As we mentioned before, this convergence will not happen overnight as we have to undertake important risk adjustments in practice as well as review our business position and strategy.

Furthermore, the impacts that we have been seeing in the economy and because of the COVID pandemic, probably we’re going to see a more volatile year than what we have seen in the past few years for Colombia. Cost of credit remains under control at 1.7% due to lower provision for assets receiving year [Phonetic] of payment. Non-interest expenses are almost flat when compared to the same period last year on the back of lower personnel and administrative expenses. Administrative expenses decreased due to softer development, security, and extraordinary expenses due to branches closures occurred in the fourth quarter 2019 on the back of a footprint optimization.

If you can go to Slide number 25, as you might wonder, our guidance for 2020 is under review since the COVID-19 pandemic added a new source of uncertainty to global economic activity. From a macroeconomic point of view, the impact of COVID-19 in Chile is still uncertain. As we have discussed, our estimates indicated that COVID-19 resulted in a decline of 1.9% in Chilean GDP in 2020 from our prior estimate of an increase of 1.2%. However, it’s worth noting that there is a considerable degree of uncertainty around GDP growth forecast for this year, which stems from uncertainty of the duration of the lockdown and isolation measures and the pace of recovery in the second half of 2020.

It is reasonable to believe that the longer the duration of the isolation measures, the slower [Phonetic] the recovery will be in the second half of this year since the consequences of the financial conditions of corporate and households tend to be more intense delaying the normalization. Economic stagnation, contraction, and increase of unemployment levels may also affect the cost of risk that we have and also results with higher NPLs given the deteriorated financial conditions of our clients and therefore higher provisions for loan losses and low net income. On the other hand, we believe that in terms of expenses, we have further work to do and we expect to get back to you with an updated guidance in our next conference call.

On Slide 26, we present our milestone for this challenged year. As we have discussed, we have organized our operations and prepared our bank for the crisis. At the same time, we have executed a transition plan to continue to be fully accessible in a remote way to continue to provide solutions requested by our clients, especially during this period. Also supporting to protect our teams at the same time, we reinforced our organization values and culture. Lastly, we have maintained an operational and technological conditions to keep the bank running strong, safe, and sound. In doing this, we support the society and we built the bank that we want for the future. With this, we’ll conclude the presentation I had for you today and I would gladly take any questions that you might have.

Questions and Answers:


[Operator Instructions] Your first question comes from the line of Jason Mollin with Deutsche Bank. Your line is open.

Jason MollinScotiabank — Analyst

Hi, this is Jason Mollin with Scotiabank in fact. Gabriel, thank you for the presentation and following up as well, the presentation you gave us on COVID, you mentioned here multiple measures and campaigns taken by the government sector, Itau Corpbanca. At this point, can you talk about how Itau Corpbanca has differentiated itself versus peers in Chile as well as in Colombia. What are some of the things that you believe that Itau Corpbanca is doing better than peers and some of the things it could improve [Phonetic].

Gabriel Amado de MouraChief Executive Officer

Thank you for your question, Jason. I think that it has been a challenging moment for all the banking industry. I’m glad to say Jason that in this moment, it was very important for all the banks to act together in terms of their actions. So what I think is more important here is that I saw all the banks moving in terms of having facility for the clients, adapting the cash flows for their clients at this moment, doing donations to recognize that we all need to be part of the solution.

So one thing that I’m very glad is that most of the things that we did all the banks worked in the same direction, and I think and I cannot stress this enough, I don’t think that this is the moment to generate comparative advantages in terms of some of those criterias that we have discussed right now because I think that everyone needs to be part of the solution here.

What are the things that I believe that we did very well during this? I think that we were very fast. I think that we have adapted our operations quite quickly to the demand and have a strong deployment of remote capabilities. We were available for our clients with all the footprint for our branches whenever we had demand for it and also through the digital. We were able to put on the campaigns for deferral of credits I think faster and more digitally than the other banks. I saw some of the discussions on the banks where the clients needed to go the branch or have some physical process to go through and I think that we were among the first ones with a full digital offering for that. If you take a look at the adoptance rate that we have, I think it was kind of reflects that.

On the other things that we did is, I believe that the value that we have for our customers, you can divide it in mainly three main pillars: one is transactional with all the products that we have for liquidity of our clients, for investment management, for risk. So I think that on a transaction basis, we have several products. The second pillar, that we have, I think is in terms of advisory meaning that working with clients to understand their needs and to fulfill the projects that they have, but I think that also we have at the third pillar that we were not exercising that without the availability of distribution channels that we now have which is information.

So we have been working with Brazil in initiatives that they have, which is called Vision of Leaders and we have adapted that to Chile. If you take a look at YouTube, the kind of views that we have for the content that we are producing are quite relevant. When you compare to the other banks, I think that we became a major player in streaming information here in Chile, exploring new content, exploring new distribution channels.

I think in that case, we are opening new doors to become a more digital bank, not only for the first and two [Phonetic] pillars, which is transactions and also advisory, but how we can give better information giving everyone that we know, given that we are across different sectors. So we brought the CEO from ENAP, which is the major oil company of Chile to talk a little bit of the market, doctors — we brought several different people ex-central bank governors, ex-Ministers of Finance to give lectures, to give talks to our clients and open to everyone in generating content. So I think what we did, and I’m very proud of, is that every investment that we undertook in the last few years gave us capability to play more digitally at this moment and I think that we are fulfilling in this role. So I feel proud of what we could accomplish on digital front.

Jason MollinScotiabank — Analyst

Very helpful, thank you. Appreciate the color.


Your next question comes from the line of Sebastian Gallego with Credicorp Capital. Your line is open.

Sebastian GallegoCredicorp Capital — Analyst

Hi, good morning everyone and thanks, Gabriel for the presentation. I have actually some questions. The first one related to loan growth. I know obviously guidance is under revision, but just wanted to get a sense on how do you expect loan growth to evolve considering the initiatives given by the government precisely your strategy has been focused on consumer, but most of the initiatives coming from the government are associated to corporate or SME segment. So how do you see that impacting your loan mix and how do you expect the system as a whole to absorb all those new loans.

Second question maybe if you can clarify on the acceptance rate on the credit deferral campaign. I just wanted to get a confirmation if the 48% client acceptance rate on the consumer and commercial loans means that half — pretty much half of the clients have received some type of benefit at this point and lastly if you could talk about the forces that may move the client margins in Chile this year and how do you probably roughly estimate that in which direction might go in terms of margins. Thank you, Gabriel.

Gabriel Amado de MouraChief Executive Officer

Sure, thank you so much for your question, Sebastian. Your first question was about loan growth and as you mentioned, I think it’s quite challenging to do projections of GDP and loan growth based on that data that we now have. We have a very large matrix in which we plot different scenarios for GDP growth based on what the dates that we, as an economy, starts to operate normally and we have some milestones for that.

So because we don’t still have completely clear what is the date that we are getting out of the situation, it’s hard for us to do any projections for the future. What we know is that as we go through time, it becomes increasingly difficult to see of a virtual cycle for the short-term. Nevertheless, as you mentioned, I think that the mix will change in the economy. I think that you do see more need for leverage on commercial, on companies and the reason for that, as I mentioned before, I think that we are going to see good businesses with good competitive advantages, good clients that have a good financial structure, but with liquidity issues because they are not sound.

So for those clients, of course, they need to increase their leverage for a period of time that naturally will converge through time. Of course, and not differently from what we saw during the social unrest in Chile, you’re going to have the type 2 situation, which is businesses that are not that competitive, that are not with a sound financial structure having more serious issues that leverage on the stand-alone basis doesn’t solve the problem.

So I think that what we’ve been doing is taking a look at sectors, taking a look at companies case-by-case to understand what are the situations. I think that because of that, you’re going to see commercial more active than consumer credit, especially because consumer credit is at most of the cases related to the acquisition of something, the consumption of some service, and as you see consumption going down, it’s natural that you are going to see less credit.

On the other hand, because you are talking about working capital for the second group for companies, that’s why I think that you’re going to see higher growth. I think that’s a little bit of the numbers that we have seen on the past month or so. So commercial growing more consumer.

I think for the market as a whole, we’ll have that trend. I don’t think that we are going to be that different. I think it’s for us to maintain any strategy at this moment and try to force some growth on consumer for the market that that there is right now, I think it would bring an adverse selection process for us and will concern [Phonetic] margins. So at the end of the day, the changes in mix that we need to do, they are aiming at better return. So we cannot blindly focus on the same things that we are focusing before without adapting ourselves to the market we now have. We still think that it’s very important for us to change mix, but we know how to adapt to risk conditions and to the market to do it in a sustainable way.

The second point that you mentioned was acceptance rates and yes, we have the acceptance rates for about 48% of the clients that have non-overdue installments in credit for mortgages and also for consumer loans. You have to remember that and we took a look at it, clients that are postponing the credit, not necessarily are clients that are in need for liquidity or in need or they have bad credit positions.

I can give you an example on the mortgage offer that we did when we take a look at the risk profile of the clients that are taking this offer, they are quite good and the reason for that is based on the interest rates that we are offering and we do not discriminate client risk according to interest rates for this specific offering. We have seen clients seeing this as an essential opportunity for them to have a lower interest rates for some period.

That’s why I would not be very extreme in saying that clients that are postponing the credit right now are really clients in need and clients that will bring some more cost of credit in the future. I don’t think that the 48% is an indication of cost of credit, but it is indeed important to observe that we are leaving a period in which cost of credit tends to be higher, but I will not establish a direct link between this acceptance rate and also cost of credit.

The third one you asked about margins and I think that in terms of — let’s separate margins like we do in three different parts. So for margin with clients, they have three different vertices. The first one is from credits and in credits, I think that we are seeing stable margins. The cost of funding has dropped significantly for some of the products that we have seen especially for short-term credits. Our short-term cost of credit — you take a look at deposits rate, deposit rates are paying 5 basis points, 3 basis points for 30 days.

So in that sense, the cost of funding went down, but also a large part of it was benefit for our clients. So I do not expect larger financial margins for credit, but I also do not expect a compression of margins aside from the discussion we had, which was for lines of credit, the regulations changed in Chile. So we see lower volume that affected the mix, but aside from this, I do not expect pressure from it.

The two other vertices I think there is some pressure, which is the financial margins with liabilities and the financial margin with our capital. Both of them are directly affected by lower interest rates. In both cases, we are hedged on a longer-term. We have durations for three years for our current account deposits and for our capital. So we are not experiencing the effects of the lower TPM right now, but we are hedged for some period of time. So we can maintain that, but as low as interest rates go down, so does our margin with clients.

So in that sense, I think that the pressure that you have in margins are basically from the free float that you have. In that sense, our disadvantage compared to other banks become minimal. So at zero percent interest rates, the difference of having current account deposits or not becomes very minimal, but what happens is not that I’m increasing my returns on that, the other banks I think that we have all suffer more on their margins than we do. So I think that’s on margins. I don’t know if I answered all your questions.

Sebastian GallegoCredicorp Capital — Analyst

Yeah. Thank you very much, Gabriel.

Gabriel Amado de MouraChief Executive Officer



[Operator Instructions] Your next question comes from Jorg Friedemann with Citibank. Your line is open.

Jorg FriedemannCitibank — Analyst

Thank you very much. Can you hear me well?

Gabriel Amado de MouraChief Executive Officer


Jorg FriedemannCitibank — Analyst

Perfect, I appreciate. Hi, Gabriel. Thank you very much for the presentation. I have two questions. The first one, we know that Itau in Brazil moved already to fully expected loss even though the regulators do not require that. We also know that the regulators in Chile, do not [Technical Issues] expected loss. So my question is whether your bank should align with the standards of the headquarters or should, you know, follow only the regulators recommendations in Chile and in case you do align with the headquarters, if there are any changes that we might expect in terms of cost of risk and coverage because of that. So this is the first question.

And the second question, looking into your presentation, you mentioned already the fully adjusted CET1 taking into consideration the upcoming changes in the future. Just wondering if the 6.4% already incorporate the acquisition of the additional stake that you’re going to do in 2022 from your partner or not. In the case it does not, what would be the further adjustment number for CET1? Thank you very much.

Gabriel Amado de MouraChief Executive Officer

Hi Jorg, thank you for your questions. The first one of expected loss, remember that here in Chile and also as we consolidated Colombia, we always work with an expected loss model. So we have our internal models for consumer, for commercial, so everything that we do is an expected model with probability of default and loss given default estimations that are either provided by the CMF in terms of the different ratings that — the scale of ratings that they use that they have an implied probability of default and loss given default or by our group models for consumer for instance.

So we have already — we always operated on expected loss model. Of course, during this period — I’m sorry the CMF is also giving more flexibility in terms of how do you apply some of the models regarding current NPLs because there are two parts of this, the coverage that you have to have for some — for NPLs and also how do you see special renegotiation of some cases.

What we are doing is that for accounting terms, we will be following the guidance of the CMF, but we will be constituting additional provisions to adapt for the difference between our internal models in expected loss and any flexibilization that the CMF might have. I think that this is important because I think it’s very important to take into consideration the moment that we have, the impact that we have without generating tails [Phonetic] in terms of future loss.

So the way that we’re going to manage this is we’re going to continue to do the expected model as if there was not any flexibilization for the crisis. I think that’s the more prudent way. We might see some more impacts and not different from the discussions that we had so far, but I rather do this way than come up with better numbers and create a tail for the future.

Your second question was about CET1. Yes it’s fully adjusted for everything — for every regulations that it’s now in place, but it does not contain the impact from a future acquisition of Colombia as the accounting practice and we did this in Helm in other acquisitions and it’s the same thing that Brazil does. We only account for transactions after they have been approved for the regulators. We have all the disclaimers on the financial statements, but we only incorporate them on the books after we have an approval.

The expected impact for capital for the acquisition in 2022 is not different from what we saw in Helm. I think it’s quite similar something around 0.7%, 0.9% impact from the acquisition, but it also does not contain any capital generation that we might have for the next few years. So I think both things should balance out. Nevertheless, if we are talking now about capital convergence, of course, this scenario impacts us in terms of our ability to converge to the levels of capital that we expect. We still maintain our plan to do the convergence — of course with our core capital generation, but of course, we need to incorporate in a scenario in which we might not be able to fully converge given the timings and how this crisis prolongs throughout time. In that sense, Itau Unibanco has already stated that its prepared to capitalize Itau Corpbanca if and when it is needed.

Jorg FriedemannCitibank — Analyst

Oh, that’s perfect. Both answers were very clear. Thank you very much, Gabriel.

Gabriel Amado de MouraChief Executive Officer

Thank you so much.


There are no further questions at this time, I will turn the call back over to the presenters.

Gabriel Amado de MouraChief Executive Officer

Fantastic, thank you so much. I think with this, we conclude our conference call and we see you next quarter. As always, Claudia and I are always available for you or follow-ups that you might have. I’ll see you next quarter.


[Operator Closing Remarks]

Duration: 51 minutes

Call participants:

Claudia LabbeHead of Investor Relations

Gabriel Amado de MouraChief Executive Officer

Jason MollinScotiabank — Analyst

Sebastian GallegoCredicorp Capital — Analyst

Jorg FriedemannCitibank — Analyst

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Bad Credit

What is a Credit Builder Loan and Where Do I Get One?



Your credit score plays an important role in your financial life. If you have good credit you can qualify for loans and borrow money at lower interest rates. If you don’t have a credit score or have poor credit, it can be hard to get loans and you’ll be forced to pay higher rates when you do qualify.

Building credit can be like a chicken and egg problem. If you have no credit or bad credit, you’ll have trouble getting a loan. At the same time, you need to get a loan so you have an opportunity to build credit.


What Is a Credit Builder Loan?

A credit builder loan is a special type of loan designed to help people who have poor or no credit improve their credit score.

In many ways, credit builder loans are less like loans and more like forced savings plans. When you get a credit builder loan, the lender places the money in a bank account that you can’t access. You then start receiving a monthly bill for the loan. As you make those payments, the lender reports that information to the credit bureaus, helping you build up a payment history. This improves your credit score.

Once you finish the payment plan, the lender will release the bank account to you and stop sending bills.

In the end, you’ll wind up with slightly less money than you paid overall, due to fees and interest charges. For example, let’s say you get a credit builder loan for $1,000, the lender may make you make a monthly payment of $90 each month for a year. After the year ends, you’ll get the $1,000 from the lender, but may pay $1,080 overall.

Why Get a Credit Builder Loan?

The main reason to get a credit builder loan is right in the name: They help you build your credit. If you don’t have any credit history or if you’ve damaged your credit by missing payments, it’s much easier to qualify for a credit builder loan than a traditional loan from a lender.

The companies offering credit builder loans take on almost no risk because they don’t give you the money until you’ve finished paying the loan, so they’re willing to approve people who have severely damaged credit.

Credit builder loans will help you build your credit history if you make your monthly payments, but you do have to pay fees and interest to do so. There are other ways to build credit that don’t require paying any money. For example, if you get a fee-free credit card and pay your balance in full each month, you’ll build credit without paying any interest or fees.

This makes credit builder loans best for people who have tried and failed to qualify for other loans and credit cards.

There is also some value in the forced savings provided by credit builder loans, but the interest and fees eat away at that savings. If saving is your goal, it’s best to use a different strategy to help you save, but if you want to save and build credit at the same time, a credit builder loan might be worth using.

Where to Find Credit Builder Loans?

There are many companies that offer credit builder loans. Each lender offers different loan terms, fees, and interest rates.

One of the top credit builder loan providers is Self. The company offers credit builder loans with payment plans as low as $25 per month, making it easy for almost anyone to afford a credit builder loan.

With Self, you can also qualify for a Visa credit card after you’ve made at least 3 payments on your credit builder loan and made $100 of progress toward paying off the loan. You can set your own credit limit, up toward the total amount of progress you’ve made on the loan.

The card doesn’t have any additional upfront costs and can help you gain experience with using a credit card. It can also help you build your credit by giving you another account to make payments on, providing you with more opportunities to build a good payment history.

Visit Self or read the full Self Review

What to Look for?

When you’re looking for credit builder loans, there are a few factors to consider.

The first thing to think about is the monthly payment. The point of a credit builder loan is to show the credit bureaus that you can make regular payments on your debts, which will help build your credit score. If a lender’s minimum payment is more than you can afford each month, you won’t be able to build your credit with that lender’s credit builder loan.

It’s also important to think about the cost of the loan. Credit builder loans often come with stiff fees and you also have to pay interest on the money you’ve borrowed, even if you don’t get access to it until you pay the loan off.

The fewer fees and the less interest you have to pay, the better. You should look very carefully at each lender’s fee structure to choose the best deal.

Finally, take some time to see how easy it is to qualify. While credit builder loans are targeted at people with bad credit, some lenders will still check your credit history and might deny your application.

If you have very bad credit, you might want to look for a lender that advertises credit builder loans with no credit check.

Alternatives to a Credit Builder Loan

Credit builder loans can be a good way to build credit for some people, but they come with interest charges and fees. There are other ways you can build credit worth considering. Some of them won’t cost any money, which may make them a better choice than a credit builder loan.

Secured Credit Cards

A secured credit card is a special type of credit card that is much easier to qualify for than a typical card.

With a secured card, you have to provide a security deposit when you open the account. The credit limit of your card will usually be equal to the deposit you provide. For example, if you want a $200 credit limit, you’ll have to give the card issuer $200 as collateral.

Because you give the lender cash to secure the card, it’s much easier to qualify for a secured credit card. The lender assumes almost no risk. Once you get the card, it works like any other credit card. You can use it to spend up to your credit limit and you’ll get a bill each month. If you pay the bill on time, you can build credit.

Many secured cards charge high interest rates and have hefty fees, but there are some fee-free options available. One great secured card is the Discover it Secured Credit Card, which has no annual fee and offers cash back rewards.

Become an Authorized User

Most credit card issuers let cardholders add other people as authorized users on their accounts. Authorized users get their own cards and can use them to spend money just like the main cardholder.

Some issuers will report account information to the credit reports of both the main cardholder and any authorized users. If you know someone that is willing to make you an authorized user on their credit card account, this may help you build your credit so you can qualify for a card of your own.

Not every issuer will report information to authorized users’ credit reports. It’s also worth keeping in mind that if you become an authorized user on a card and the cardholder stops making payments or racks up a huge balance, that will show up on your report as well, damaging your credit further. That can make this strategy risky.

Personal Loans with a Cosigner

Personal loans are highly flexible loans that you can use for almost any reason. If you need to borrow money, you can try to find someone who is willing to cosign on the loan. Having a cosigner can make it easier to qualify, even if you have poor credit, giving you a chance to build your credit score.

When someone cosigns on a loan, they’re promising to take responsibility for your debt if you stop making payments. Lenders will look at both your credit and your cosigner’s credit when you apply, so having a cosigner with strong credit can help you get the loan or reduce the interest rate of the loan.

Keep in mind that your cosigner is putting themselves at risk by cosigning on a loan. It’s even more important that you make your payments every month. If you don’t, your cosigner will have to pick up the slack.

Personal Loans without a Cosigner

Even if you have poor credit, you may be able to qualify for a personal loan designed for people that don’t have strong credit. Just keep in mind that you’ll have to pay higher fees and interest rates to compensate for your poor credit score.

If you’re looking for a personal loan and have poor credit, shopping around for the best deal becomes even more important. You can use a loan comparison site, like Fiona, to get quotes from multiple lenders so you can find the cheapest loan.

Related: Best Emergency Loans for Bad Credit

What Is the Difference Between a Credit-Builder Loan and a Personal Loan?

A personal loan is a type of loan that you can get for almost any reason, such as consolidating debts, starting a home improvement project, paying an unexpected bill, or even going on vacation. They’re offered by many lenders and banks.

A credit builder loan is less a loan and more a forced saving plan. When you get a credit builder loan, the lender doesn’t actually give you any money. Instead, it places the amount you’re borrowing in an account you can’t access. Once you finish paying the loan, the lender releases the money in that account to you.

Credit builder loans tend to be much easier to qualify for than personal loans because the lender doesn’t have to take on much risk. They’re mostly used by people who want to build or rebuild their credit score.

On the other hand, personal loans are less popular for building credit and more useful for providing funding when borrowers need cash to cover an expense.

Related: Best Prepaid Credit Cards That Build Credit

Pros and Cons of a Credit Builder Loan

Before applying for a credit builder loan, consider these pros and cons.


  • Easy to qualify for
  • Helps you build savings
  • Payments are usually small
  • Helps you build payment history


  • Not really a loan
  • Fees and interest rates can be high
  • There are cheaper alternatives to build credit


These are some of the most frequently asked questions about credit builder loans.

Like most loans, it is possible to repay a credit builder loan ahead of schedule, but there are a few downsides to consider. One is that many lenders add an early repayment fee to their loans, so you’ll have to pay that fee if you want to get out of the credit builder loan. The other is that repaying the loan early somewhat defeats the purpose. Each monthly payment you make toward the loan helps you build your credit. If you pay the loan off early, you’ll make fewer monthly payments, which means less improvement in your credit.

Missing a payment on a credit builder loan is like missing a payment on any loan. You’ll likely owe a late fee and it will damage your credit. This is one of the reasons it’s important to make sure you can afford the monthly payment before signing up for a credit builder loan. If you can’t make your payments, the loan will wind up damaging your credit instead of helping it.

Final Thoughts

Credit builder loans can be a good way to build or rebuild your credit, but they’re not your only option. They often involve paying fees and interest, so you should search around for the best deal or look for cheaper (or free) alternatives, such as secured credit cards.

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How to lower your credit card interest rate and save money



Why pay high interest on your credit cards when you can simply bargain a lower rate? These tips can help you save big money on your bill.

CHARLOTTE, N.C. — A lot of people have struggled to pay their bills during the COVID-19 pandemic and many have turned to credit cards so they can kick the can down the road. Now the time has come to pay it down and some of the bills are eye-popping. 

Did you know you can bargain that interest rate down and save quite a bit of money?

You could ask for a lower rate, but according to a new study, you can bargain down 10 percentage points. So, if your interest rate is 24%, it could mean paying 14% instead. That’s still high but it’s a lot better than 24% interest. 

These numbers are staggering and can be a bit overwhelming. Americans have an average credit card balance of $5,300, totaling $807 billion across 506 million credit card accounts. Why are these numbers important? Because they want to keep you spending, which means you have leverage to bargain.

“It is absolutely possible to negotiate your rate down. In fact, your chances of doing so are better than you think they are. Close to 80% surveyed said they did just that,” Matt Schultz, an industry expert with LendingTree, said. “You can save serious money, especially if your balance is bigger.”

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You have to try, and you have to keep trying, even if the lender says no. Take it higher to a manager and keep pushing. Drops of 10% are possible and that could save you hundreds, or maybe even thousands, of dollars. 

RELATED: VERIFY: Can your stimulus check be seized by banks or private debt collectors?

“So, a lot of people have bad credit, some are thankful to have it at all. Is it possible for them too? Yes, absolutely it’s possible,” Schultz said. “Credit card companies are willing to talk with you because they want to keep your business. It benefits them to lower your rate to keep their card in your wallet.”

Paying down debt is liberating. Less debt is more buying power but you must advocate for yourself. If you don’t, the card companies are just as happy to take your money at the higher rate. 

LendingTree offers these suggestions if you plan to ask for a lower rate: 

How to ask for a lower APR

Before you make the call, come armed with ammunition in the form of other offers you’ve seen at a site like or that you may have received in your snail mail. Take that offer and use it to frame the conversation: 

“I’ve been a good customer of yours for a long time and I like my card. However, the APR is 25% and I’ve just been offered one with a 19% APR. Would you be able to match it?” 

As survey data shows, they’ll likely be willing to work with you, at least to some degree.

RELATED: ‘ I was very grateful’ | WCNC Charlotte breaks through red tape to help woman get money she was owed

How to ask for a waived annual fee

Before you make the call, think about what you will accept. If you ask for a fee to be waived altogether and they only offer to reduce it, is that good enough? What if they offer you extra rewards points or miles or make some other counteroffer instead of a reduced fee? And perhaps most important, what if they say no? 

As with many negotiations, you have more leverage if you’re willing to walk away, so that could be an option. However, you shouldn’t make that threat unless you’re willing to follow through with it, and you shouldn’t follow through with it unless you’ve thought about what that would mean for your credit.

How to ask for a waived late fee

Just pick up the phone and be polite. If you’re a long-time customer with good credit and this is your first offense, the odds are in your favor. In fact, some card issuers will even waive a first late fee as a matter of policy. If you’ve been late multiple times in the recent past, however, your chances probably aren’t as good. Even so, it never hurts to ask.

How to ask for a higher credit limit

Start with a number in mind based on your current limit. The average increase reported in our survey was about $1,500, but your situation will vary. If your current limit is $500, a $1,500 bump might be asking too much. However, if your current limit is $5,000, that request might be just fine. 

Think about why you’re asking for the increase — for some extra spending power or to help your credit score — and then decide what to ask for. Just remember that it’s always better to start a negotiation by asking for a little too much. That way, when you negotiate, you can give a little bit and still get what you want.

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Bad Credit

Can A Moving Loan Help Your Relocation? Find Out Here – Forbes Advisor



Editorial Note: Forbes may earn a commission on sales made from partner links on this page, but that doesn’t affect our editors’ opinions or evaluations.

Whether you’re relocating to another city or state, moving can be expensive. You might need money to pay for a moving van or movers, new furniture or your security deposit. If you don’t have money on hand to cover those expenses, a moving loan can help you fill in the gap.

Before you take out a relocation loan, learn what they are and how to compare your options to understand if it’s a good choice for your situation.

What Is a Moving Loan?

A moving loan—also referred to as a relocation loan—is an unsecured personal loan you can use to help cover your moving expenses. Unsecured loans don’t require you to use a personal asset to secure the loan. Because the loan is unsecured, lenders base your eligibility on factors like your credit score, income and debt-to-income (DTI) ratio. Like with other types of personal loans, you’ll have to repay your loan through fixed monthly installments.

When Should You Get a Moving Loan?

Although the answer varies based on your financial circumstances, it may make sense to get a moving loan if you can secure a good interest rate and can afford to repay the loan as promised. However, if you believe it might be hard for you to repay the loan, then it’s probably a good idea to avoid taking one out. Falling behind on payments can damage your credit score, making it harder for you to qualify for future loans.

How to Get a Moving Loan

  1. Search for lenders: To find lenders that offer relocation loans, search for the best personal loans online. A good place to start might be a lender comparison website. While there, carefully review the terms, minimum credit score requirements, fees and annual percentage range (APR) range of each lender. In addition, you can check with your local bank or credit union to see if it offers personal loans for moving.
  2. Prequalify with multiple lenders: Once you narrow down your list of the best lenders, prequalify with each one of them (if available). This allows you to see what terms and APR you might receive if approved. Make sure the lender does a soft credit check to protect your credit score from any pitfalls.
  3. Determine the amount you need to borrow: Estimate your moving or relocation expenses to see how large of a loan you need to take out. Different lenders have different minimum loan amounts. Also, some states have rules about the minimum amount you can borrow, which may affect the size of your loan.
  4. Apply for your moving loan: After you select the lender that matches your needs, complete the application process. Prepare to provide the lender with personal information, such as your income, date of birth and Social Security number (SSN). Some lenders will require you to provide W2’s, pay stubs or bank statements to confirm your income.
  5. Wait for the lender to make a loan decision: After you apply, wait for the lender to review your application. Some lenders might approve you within seconds, while others may take longer. If a lender denies your loan, ask them for an explanation. Applying with a co-borrower or co-signer, improving your credit score, reviewing your credit report for errors or requesting a smaller amount may improve your chances of approval.
  6. Sign the loan agreement and receive funds: Once approved, the lender will send you a loan agreement to sign. After you sign the agreement, the lender will most likely deposit your funds directly into your account. The time of funding varies for different lenders—some lenders can issue the funds the same day while others may take a week or longer.
  7. Repay your loan: Finally, repay your loan as promised. Making late payments or defaulting on the loan can damage your credit score. Setting up autopay is one way to ensure you’ll never miss a payment.

Pros of Moving Loans

  • Quick access to funds: If your loan application is approved, some lenders may deposit your funds into your bank account the same day or within a week.
  • Flexible loan terms: Some lenders allow you to take out personal loans for moving with loan terms as short as 12 months and as long as 84 months. A long-term loan may have a lower minimum monthly payment, which might better suit your budget. However, the downside is that you’ll pay more in interest over the life of the loan.
  • Lower interest rates than credit cards: The average interest rates for personal loans are usually lower than those for credit cards. If you have a good credit score (at least 670) and a stable income, you may be able to secure a good interest rate—an interest rate that’s lower than the national average.
  • No collateral required: Since loans for moving typically require no collateral—an asset that secures the loan—you won’t have to worry about a lender taking your asset (at least without a court’s permission).

Cons of Moving Loans

  • Fees: Some lenders charge origination fees between 1% and 8%—these fees can be a huge drawback since the lender usually subtracts them from your loan amount. Other common personal loan fees include application fees, returned check fees, late payment fees and prepayment fees.
  • Potentially high interest rates: If you have less-than-stellar credit or minimal credit history, your lender may charge you high interest rates. Some lenders have APRs above 30%.
  • Missed payments can damage your credit score: If you miss a payment or default on the loan, it can damage your credit score. This will make it more difficult for you to qualify for future loans.

Moving Loan Alternatives

If you want to avoid the potential cons of a relocation loan, consider these alternative options to help cover your moving expenses or rent.

0% APR Credit Card

Borrowers with good to excellent credit scores (at least 670) can avoid paying interest and high fees with a 0% APR credit card. These cards come with interest-free promotion periods, which can last for up to 21 months. If you pay off your balance before the promotion period expires, you won’t have to worry about paying interest. However, providers will charge interest on unpaid balances once the introductory period ends.

Family Loan

Family loans are another way to avoid paying interest or to pay minimal interest when it comes to your relocation expenses. With this option, you can also avoid the formal loan application process. The loan agreement between you and the family member should spell out the terms and conditions of the loan. Repay the loan as promised to avoid causing damage to your relationship.

Payday Alternative Loan

If you can’t qualify for a relocation loan or have trouble finding moving loans for bad credit, consider using a payday alternative loan. Some federal credit unions offer these loans, which are designed to help you avoid the high-interest charges of payday loans. You can borrow up to $2,000; loan terms range from one to 12 months and the maximum interest rate is 28%. To use this option, you must be a member of a federal credit union or be eligible for membership.


Instead of using a personal loan for moving, it might be better to use your savings, if possible. If you know how much it will cost, then create an automatic savings plan to cover most or all of your relocation expenses.

Relocation Package

If you’re moving for a new job, ask your new employer if it will cover some of your relocation expenses. Some employers offer this to employees as an incentive to accept the job offer. Even if the employer doesn’t offer this, you can ask for a relocation bonus or try negotiating a higher salary.

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