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Ita? CorpBanca (ITCB)
Q4 2019 Earnings Call
Mar 2, 2020, 9:00 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 Fourth Quarter 2019 Financial Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Claudia Labbe, Head of Investor Relations. Thank you. Please go ahead.

Claudia Labbe -- Head, Investor Relations

Thank you. Good morning. Thank you for joining our conference call for our fourth quarter 2019 financial results. Before proceeding, 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 nonrecurring events and we apply managerial criteria to disclose our income statement.

Please remind that starting in the first quarter 2019, we have been disclosing our income statement in the same manner as we do internally, incorporating additional P&L reclassification, fully converging to the format presented by Itau Unibanco. 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 these different perspectives. Please refer to Pages 9 to 12 of our report for further details.

With me here today in this conference call in Santiago is Mr. Gabriel Moura, our new Chief Executive Officer. As shown on Slide 3. Mr. Moura was appointed by the Board of Directors on January 9, commenced in January 30, 2020. As you all might know Mr. Moura served as the CFO of Itau Corpbanca for almost 4 years. He has a long track record at Itau Unibanco. He joined the group in 2000 and became a partner in 2017. He has more than 33 years of experience in investment management, risk management, finance and M&A. Mr. Moura held the position of Chief in [Technical Issues]. Mr. Moura holds an MBA from the Wharton School at the University of Pennsylvania.

Now, let's continue with the presentation. First, Mr. Moura will [Technical Issues]

Gabriel Amado de Moura -- Chief Executive Officer

-- and welcome to Itau CorpBanca's fourth quarter and 2019 earnings conference call. As you are about to see, we have broken down this presentation in four different parts; our strategic initiatives, highlights of the fourth quarter and 2019 results, as well as our forecast for 2020.

So, let's move on and start on Slide Number 5. Here we present some key performance indicators from our four strategic initiatives. As you may recall, when we translated our strategy into action, we have set customer centricity as the main piece, supported by four fundamental levers: Digital transformation, people efficiency and growth. We understand that these initiatives are the road map for value generation and ROE convergency. Although they are long-term focus, we have been experiencing a sustainable result so far.

Net Promoter Score or NPS have improved across our operation, and this reflects directly into our client acquisition in retention, as we are operating more bank accounts while reducing bank account closures. As for efficiency in 2019, for the fourth year since the merger, we consistently presented a satisfactory expense evolution.

Our adjusted non-interest expense ex-depreciation and amortization decreased 0.9% in the year. Almost 5 percentage points below the overall industry in Chile. The important message here is that cost discipline and the search for [Technical Issues] our clients and our branch managers through remote and digital communication channels, such as telephone, email, apps, webchat and our internet banking from 80 PM to 7:00 PM. This framework provides a more agile response to our client's requests in a more cost-efficient efficiency structure that enables us to significantly grow our client base with a lower marginal cost.

Finally, our employee satisfaction levels have improved in 2019, as we evolve in implementing new ways for working the bank, giving our teams more flexibility and agility in the way that they work. These results are just a tip of the iceberg and we believe that we are just in the beginning of this journey.

So, if we move to Slide Number 6, we can discuss a little bit [Technical Issues] a new journey. In 2018, we put in place required capabilities and new working methodologies. While in 2019, we have entered on the second stage, escalating the agility to generate greater synergies among our agile squads and implementing best practices focused on customer centricity.

We have also implemented a robotic automatization, targeting on digitalization and efficiency of most relevant processes on several areas of the bank, such as delivery, mortgages and checking accounts. With the use of analytics, we have developed productive models with artificial intelligence and client clusters based on geo localization and behavior, to offer timely and customized products and service to our clients.

We have also made progress in cyber security, strengthening our technology infrastructure and implementing platforms that protect digital channels based on clients biometric behavior. According to the behavior of a consumer, we have also adapted our branch network with digital solutions to facilitate the operations and customer service.

As we continue to invest in IT to build a digital bank, we see an increase in transactions through our digital channels with a significant percentage, over 80% of online sales in consumer loans and the relevant percentage of our clients adopting those alternatives.

On the next Slide, let's move to Page 7. it's not by accident that we placed this slide also within our strategic initiative section. Responsible banking is in the core of what we do. We believe that having good governance, taking care of the environment and being positively engaged with the society in general and the communities, where our part is essential.

Let me highlight it. In 2019, we received several recognitions. We increased our Dow Jones Sustainability Indices scores, ranking for the first time for the MILA Pacific Alliance Index. And for the fourth consecutive year, remaining part of the Chilean Index. Our asset management was recognized as the leader in responsible investments. Corporate governance and sustainability research. We have also moved forward on transparency and communication in reported and institutional investors opinion.

On climate change, we have voluntary commitments with government and regulators to define general principles regarding the management of risks and opportunities associated with climate change and decision-making. But that's not enough, we will continue to look forward, creating positive impact in the same way as Itau Unibanco is doing.

On Slide Number 9, we will now move to the second part of the presentation, with the fourth quarter highlights. After a more normalized second and third quarters, we saw fourth quarter which came below our expectations, mostly affected by high cost of credit, mainly related to specific cases of the wholesale portfolio, and too the effects of the social unrest events in Chile during the quarter.

We ended this quarter with a CLP17.9 billion recurring net income, which represents a 3.4% recurring return on tangible equity. If you took the Bank in Chile on a stand-alone basis, it represented a result of CLP21.7 billion, and a return on tangible equity of 5.4%.

As mentioned in previous calls, in 2019, we pursued sustainability of commercial performance, as well as to deliver continuous cost discipline. Nevertheless, due to the social unrest in Chile in the fourth quarter, activity with client was lower than the trends shown in previous quarter. And still, consumer and commercial loans maintained solid annual growth rates.

And financial margin with clients showed a positive trend, growing 9.2%. In addition, higher inflation in the quarter positively impacted results for both our banking book and trading portfolios and decreased our effective tax rate. We will venture more in details in the next few slides.

And now, talking about 2019 full year results, let's move to Slide Number 11. On this slide, we share some of the main highlights for the year 2019. We reached a consolidated return on tangible equity of 7.6% on the back of a net income increase -- decrease of 26.1% year-on-year. In Chile, we posted a return of 8.9% with a net income decreasing 27.4%. This performance was mainly driven by corporate credit events, both in Chile and Colombia, in regulatory and internal credit risk model implementation with a 33% negative impact on our cost of credit. Regarding the latter, remember that in July, we had CLP22 billion of nonrecurring provisions that we had to constitute the changes in regulatory requirements for new standardized model for commercial loans. This amount was offset by the partial reversion of a credit provision for a specific client in Chile. That has been evolving satisfactorily so far.

In addition, in this quarter, we have also implemented a new internal credit models for consumer and mortgage in Chile. On the other hand, despite the lower activity in the last quarter, we had an 8.7% increase in credit in Chile, a better mix of products that help us to offset the decrease in weighted average spread, boosting the financial margin with clients.

Lastly, by no means less relevant, we managed to keep our managerial noninterest expenses at bay, posting a growth of only 1.9% in Chile, which is below inflation.

On Slide Number 12, we can see how the macroeconomic indicators evolved in 2019 and how they compare with the expectations we have set. As you might recall, on the third quarter, we updated our expectations for 2019 macroeconomic outlook for both Chile and Colombia. When compared to our forecast at the beginning of the year, we observed material differences from our initial expectations of interest rates and GDP growth.

In Chile, as the fourth quarter of 2019 was dominated by social unrest that led to disruption of business operations, damage to the infrastructure and deterioration of private segments and elevated uncertainty, it increased the volatility of our domestic macroeconomic scenario.

For the full year of 2019, activity is expected to increase only by 1.2%, compared to the 3.2% initial forecast, and then 4.8% -- 4% we had in 2018. The overall macroeconomic conditions and the still low inflation allow for no further cost cuts in the interest rate, which maintained at 1.75% compared to our initial forecast of 3.5%.

Colombia faced its own version of process action in the fourth quarter of 2019, but it was mostly peaceful and not as disruptive and more persistent as in other countries in the region. Meanwhile, activity in the quarter remained upbeat, 3.4% year-over-year in the fourth quarter of 2019 and 3.3% in 2019 compared to the same 3.3% forecasted that we have. With private consumption leading the charge, a healthy credit growth offsets low confidence. Inflation closed at 3.8% last year, up from our 3.4% forecast.

On the right chart, we can see how we fare in this scenario compared to the main performance metrics and objectives we have shared with you at the beginning of last year. Overall, we came in line or better in every metric, but cost of credit, which ended above our expectations. We kept a good pace on the evolution of retail business in the country, as we'll see in more detail further ahead. Because of the continuous focus on managing and looking for opportunities for improving our efficiency, managerial noninterest rate expenses expanded only 1.9% in the year, well below the CPI and much lower than the industry average, as we have mentioned before.

On the other hand, we missed our guidance on cost of credit due to credit events in Chile. In Colombia, we delivered results for the year above 2018 Colombian pesos on the back of lower cost of credit and higher financial margins with the market, as well as financial margins with capital.

If we move to Slide 13, we show that the Chilean portfolio expanded on every single line of the business; 9.9% in consumer, 9.3% on mortgages and 9% on commercial. The consumer credit portfolio consistently outperformed the market on a 12-month period since mid-2017. This has been a 10-point strategy to rebalance our loan book to a better mix of consumer and commercial that would help us to close the gap in financial margin and operationally leverage our retail operation.

Moreover, according to our expectations, the commercial portfolio has converged to the market. You might recall from our previous calls, when we have stated that we would see a convergence in commercial growth after we have finished our credit portfolio management cycle, where we adjusted concentrations and risk policy. This is exactly the case we have predicted, and we expect commercial growth to continue aligned with market growth, as we continue to deepen our service offerings and cash management for selling.

For the mortgage portfolio, as we have finally adjusted our operational model and value proposition for this market in the last few months, we have performed on par with the industry. As a result, we have reduced the gap with the market and we expect to converge on a 12-month window next year.

Now, moving to Slide 14, we see how our portfolio mix shift under these dynamics. Because of stronger growth in our consumer portfolio, our mix keeps gradually moving toward great balance between wholesale and retail. We ended 2019 with a 7.2% market share in consumer loans, 29 basis points higher than at the start of the year and 107 basis for the overall retail portfolio compared to what we had 2 years ago.

Although we have a very competitive retail market in Chile, we have a strong focus on expanding our position through disciplined execution of our strategy for this segment.

On Slide 15, we present our financial margin with clients. As our overall portfolio continues to grow, so does our margin with clients, which grew 5.9% in 2019, benefit from higher volumes in a higher-yielding mix as retail continues to lead expansion. 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 offset, maintaining stable NIMs at 3% during 2019.

Moving to Page 16. As stated in our previous call, a relevant part of our assets with our clients is then nominated in the official inflation-adjusted index, the U.S., which we -- where we actively manage long positions in inflation in our banking book under the guidelines of risk appetite and risk limit set by the board and the asset liability committee. As we expect a high inflation for the quarter, we prepare our banking book.

So, as the U.S. increased 0.9% when compared to the third quarter, we generated a higher contribution from our banking book and trading to the overall financial margin with the market.

Now, moving forward, let's talk about risk in credit cost. Here on Slide 17, we can see our main credit risk indicators in Chile. This quarter, our cost of credit amounted to CLP110 billion, resulting in a 117% increase when compared to the same quarter of 2018. This amount is significantly impacted by provisions we have constituted for a specific client in Chile and, in fact, due to the implementation of new provisioning models for consumers and more mortgage loans, and also higher provision level for wholesale and retail clients related to the social unrest rest events in Chile.

As we mentioned before in our last call, the social unrest has negatively impacted the NPL ratios in the short term, as some business individuals were adversely affected by less economic activity and acts of vandalism. In addition, NPL for commercial loans were impacted by single corporate clients that, at the same time, has impacted provisions for the trimester. Despite what we see some pressure on consumer NPLS, we expect NPLs normalizing at 2.2% for the next quarter.

If we move to Slide 18, we can now see our noninterest expense evolution. When we look over a 12-month period, our expense base grew at the rate of 1.9%, significantly below the inflation for the period. Furthermore, if we isolate depreciation and amortization that reflects all the investments we have made in our digital platform and scaling up our business, expenses have normally decreased in the period.

We have always believed on a diligent focus and efficient use of our resources, and we've reiterated our beliefs shared by our previous conference calls, that we still see further synergy opportunities and continue to expect efficiency to gradually improve throughout the next quarter.

Now, moving to Slide 19, 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 regulator has released, so far, capital charges for systemic important banks and for operational risks. Both guidelines sync with our estimates for the capital planning that 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 model and with our expectations.

Our estimates for the new regulatory environment suggests a minimum of CET1 of 8% by 2024, once Basel III is fully implemented. As shown here, our current CET1 position is 7%. Our plan is to continue to converge profitability in half of core capital generation and retention that will allow us to comply with capital requirements in the time frame that is being discussed. Moreover, we are actively searching for opportunities with our capital management group to fine-tune our capital position and reduce risk-weighted assets.

If we go to Slide Number 20, we can discuss a little bit of our operation in Colombia, where our bank continues to move forward at sustainable performance in the long term. In 2019, the bank consolidated its value offer for retail bank and continues advancing this digital agenda, which has allowed for a footprint optimization in the quarter.

If we move to Slide Number 21, we can see the evolution of the net income of the Colombian operation. In 2019, the net income for Colombia increased 11 times, reaching CLP115 billion, CLP1 billion in 2019. These results benefited from lower cost of credit and higher financial margin with the market, as well as revenues from the sale of non-core assets.

We will continue our path of convergence for operations in Colombia. As we mentioned before, this convergence will not happen overnight, as we had to undertake important adjustments in risk management, in practice, as well as review business position and strategy. We continue to expect results in Colombia to approach this cost of equity as we resume business growth starting this year and consolidating our strategy in 2020.

Cost of credit remains under control with the higher end of the expected range of 1.5% to 2% we had for this year. A specific case in the corporate segment requiring additional provision, generated some pressure in credit costs in last quarter. Despite of that, cost of credit decreased 14% during 2019. Noninterest expenses have risen 5.5% in constant currency when compared to last year on the back of high personnel and administrative expenses during the fourth quarter.

Administrative expenses increased mainly due to softer development, security and extraordinary expenses due to branches closure on the back of the footprint optimization. Results on financial margins with the market along with cost of credit, explains an important part of the increase in profitability for the operation in Colombia.

For 2020, we expect that our go-to-market strategy starts to change the dynamic of the business in retail and wholesale, and we start to take a larger role into this convergence.

If we can go to Slide Number 23. We present our expectations for the macroeconomic scenario for this year. For the Chilean market, we expect 1.2% GDP expansion, with the loan market growing between 4% and 6%, inflation at about 3.3%, and interest rates should decrease an additional 50 basis points from to-date and close the year at 1.25%. Similarly, in Colombia, we are expecting a more stable year with a 3.1% GDP growth. We expect our loan book expansion between 8% and 10%, inflation slightly decreasing to 3.3% and interest rates stable at 4.25%.

On Slide 24, we present our guidance for 2020. Starting with the credit portfolio, we expect our growth to be between 4% and 6% in Chile, while maintaining a stronger growth in retail portfolio in a similar pace in commercial loans to the overall market. These dynamics should continue to expand the retail portion of our portfolio to the mix, which should further provide a higher average yield to our overall portfolio.

Our cost of credit should post a better performance than in 2019, between 1% and 1.2%, which is still not our normalized level due to expected higher retail cost of credit. As for our noninterest expenses, we will continue to have a diligent oversight of the use of our resources, aiming to grow between 3.5% and 4.5%, which is an important challenge when compared to the average sector inflation.

Lastly, we expect our results from Colombia to continue on track, presenting a gradual and consistent improvement over the last years, as stronger business volume growth crystallizes as a main focus and challenge.

On Slide 25, we can see our main key strategic drivers for our agenda in 2020. So far, even considering the challenges in the macroeconomic environment, we do not see reasons for changes in our strategy. We continue to be based on the same drivers that we have discussed with you on the beginning of last year. We have defined our strategic fronts in order to add consistency and quality of our results in the years to come. Our entire efforts on these fronts, they are the hallmark of good corporate governance and sustainability practices.

I can point out that the main agenda will be based on client centricity, designing processes and services, at the same time, developing a service culture here in Chile.

On digital transformation, we need to accelerate our digital process by continuously increasing the productivity of our technology area and disseminating a digital mentality across the entire bank. To obtain greater efficiency while improving user experience and consumer satisfaction, on people management, we enhanced our incentive models and assessment tools to consider the new dynamics of our cooperating and working, making them more effective in evaluating better individual achievements in multifunctional teams.

With this, we conclude our presentation here today. And I would gladly take any questions you might have.

Questions and Answers:


[Operator Instructions]. Our first question comes from the line of Jason Mollin, Scotiabank. Your line is open.

Jason Mollin -- Scotiabank -- Analyst

Hi, Gabriel. Congratulations on the CEO position. First, maybe you can give us an update on what's going on with the management structure, if -- I presume, as you've stated in the past that you're looking to find a new CFO, and if you plan to make any other management changes? And my second question is on the outlook for profitability. In 2019, you reported or the bank reported a return on tangible equity of 8.9% in Chile and 4.6% in Colombia. And there are lots of moving parts with provisions and specific corporate clients and margin with the market. Maybe if you can talk about these levels of returns, if this is a core kind of level or, let's say, sustainable level or if this is -- if this reflects the underlying operations, or you think that provisions were kind of a one-off because of these corporate cases, etc.? How should we think of the return on tangible equity going forward? Thank you.

Gabriel Amado de Moura -- Chief Executive Officer

Sure. Thank you so much for your question, Jason. As for the management structure, talking about the CFO position; yes, it's something that we have been discussing with the Board. The idea is, yes, should bring a new CFO on board. If you remember, the transaction agreement between parts, there are two positions that are indicated by Itau Unibanco as the controlling shareholders; one of them is the CEO, the second one is the CFO. So, I've been discussing with Itau Unibanco of the possibilities that we have and the idea is to announce something in the coming weeks.

The management structure as a whole, I think, not differently from what we did in the past. The idea is to simplify the bank. So, we are taking a look at the structures that we have, different areas, aiming for synergies, aiming to simplify and align everyone with the priorities that we have discussed, which is customer centricity and also the digital front.

I don't think it's different from the things that we have been doing since 2016. I don't think there is a change in direction here. It's just moving with the same agenda.

As for returns, I wouldn't characterize 2019 as a year that we have core results for the bank. As you saw, we always discuss cost of credit for the bank being between 0.7%, 0.9% with an average between around 0.8%. That's still our opinion, taking a look at the long-term, but I think that we had two main events during the year, as we have discussed. Remember that one of the things that we have always talked to you guys about is that how concentrated the portfolio we have on corporates. And since 2016, we have been doing adjustments to that portfolio. We talked about this prior, that we have the reduced exposure at something around $3 billion in some credits, aligning the portfolio to our risk appetite. But having said that, because of the concentration, we are more exposed to some events then what I see in other banks in the market. And I think that was the case for both the portfolios of Chile and Colombia, where we've had credit event that impacted the results of the year.

The second effect, I think that's more -- this is a non-systematic part that I have just discussed. I think there is a more systematic part. When you take a look at the whole industry, everything that happened on October here in Chile was also uncharacteristic in terms of NPLs and its effects on provisions. Furthermore, we have been implementing new risk models, taking a look at the experience of both banks and also the expected loss that we see and the implementation of those models generated a one-off impact in 2019.

So, when I take a look at results for the businesses, in corporate and in retail, I think the agenda is moving along. I think in expenses, the agenda is moving along, but we didn't expect to have this cost of credit. So, I don't see a change in terms of the potential that we see for our target return, but if you take a look at the numbers that we have for 2019 and the expected cost of credit that we have defined on our guidance here, they are higher than our long-term average that we see for the future.

So, yes, I think that the returns are affected both in 2019 and 2020 according to our future expectations. But I don't see, based on the assets that we have, based on the teams that we have, based on the capabilities that we have, a reason to change the results that we have in longer-term that we mentioned to you, which is something between 16% and 18%. And we still have that as a goal. I think that we have the capability to convergence. Of course, the scenario that we have now, it's a little bit anticyclical, which makes the convergence a little bit harder, but it isn't enough to change directions.

Jason Mollin -- Scotiabank -- Analyst

That's very helpful. Maybe just a little bit of color on these corporate cases, and what is the outlook for these specific cases? Are they in default? Are they -- you just needed more provisions? Is there a high chance of recovery, etc.? And would we expect given what's happened since the start of this year, obviously, their expectations for pressure on exports, given some concerns on the growth outlook for China and the world, should we expect more corporate cases going into this year? Is that part of that higher cost of risk expectation?

Gabriel Amado de Moura -- Chief Executive Officer

No, I think that -- let's separate the discussion in Q4 this year and starting from your last question. For this year, I think that the major part of the outlook is based on retail and small and medium companies. So, if you take a look at what happened to the NPLs at the end of the year, they went up. And I think that it's a new normal for this year. I don't think that we will see NPLs coming down. Based on all the information that we have now, I think that they might be able to stay stable for this year. Of course, it really depends if you're going to have other social events that impact the economic activity. But based on the expectations we have right now, I think it's a new normal in terms of NPLs. I think it should drop as we pass along all the social unrest, but I think that we have short-term impacts that will lead to a higher cost of credit.

On the corporate front, I do not see yet an impact based on economic activity. On the portfolio that we had, the impacts we saw were more based on things that were in the past. There are no new concessions of credit that had impact that's from the old portfolio that were more on the energy sector.

And remember, since 2015, there was a repricing energy in Chile that affected some of the companies in here. Then, again, I think it's a new normal for energy prices. And I think that companies are putting that on their projections. I think that the levels of provisions that we have, we always front-load them. And if you remember the other case that we have discussed in past, we tend to do everything in terms of the provisions as we see. And if things got better, we don't have a problem of revising our provisions and reversing them. But we -- because we work in expected loss, I think that we tend to front-load and make sure that we absorb all the current information in our models.

So, I feel very, very comfortable with the level of provisions that we have for those cases. I think that we are very well provisioned for the cases that we have. But then again, we are sensible to be a more concentrated portfolio through credit advance. Based on all the information that we have right now, incorporating all the macro trends in the discussions that we have in the credit committee within our models for the companies, we do not foresee any kind of impact. But that's a risk that we are always open to.


Our next question comes from the line of Sebastian Gallego of CrediCorp Capital. Your line is open.

Sebastian Gallego -- Credicorp Capital -- Analyst

Hi, good morning. Thanks for the presentation, Gabriel. I have three questions, actually. The first one on capital. You mentioned and you introduced the calculations and the fully loaded Basel III standards. Just want to have a follow-up on that. And the actual question is, what are the options that Itau CorpBanca has in order to improve capital ratios? You mentioned some liability management, but I just want to have more color on that front.

Second question comes from competition, and particularly focused on the consumer segment. In Chile, you have been very successful, as you mentioned, in growing above the market. But given current conditions and given the outlook for loan growth this year in Chile, how do you plan to grow within this segment? And if you actually can or expect higher growth compared to the market?

And finally, on liquidity ratios, particularly on the net stable funding ratio in Colombia. When we look at your figures, Itau CorpBanca stands around 89%. There is new regulation in Colombia for the net stable funding ratio going toward 100%. What's your strategy to comply with those standards going forward? Thank you.

Gabriel Amado de Moura -- Chief Executive Officer

Sure. Thank you for your question, Sebastian. Let me take -- your first question was around capital and the options that we have in order to manage the cycle. One of the things -- all the estimates that we have so far for capital deductions, they came in line with the models that we have been discussing in the last few years.

When I take a look moving forward, we are now in the process of discussing with the regulators the part of risk-weighted assets, the issue, the proposed regulation around risk-weighted assets. And I think in that front, there are many opportunities for us. For instance, in terms of contingent credits that we have in our portfolio, we have a large portfolio of contingent credit. And I don't think that the main reason that we manage those portfolios in the past was based on capital. It was based on provisions, based on limits that we wanted for clients. So, it was, in my opinion, always a product set outside because there was no cost in managing and recognizing contingent credit and limits for clients.

I think here, there is an opportunity to maximize our capital returns on contingent and we have been discussing this with credit. We have been discussing this with clients. And I think there is an opportunity here.

The second one is derivatives. When I take a look at the portfolio that we have in derivatives, the amount of assets that we have, the net asset that I have in assets of liability is low. But when I take a look at only on the asset side, it's a little bit higher. And there are opportunities for us to move into the stock market for some of those derivatives that create an important impact on risk-weighted assets.

Remember, that through the regulations, if you have that on the stock market for, especially, for swaps and forwards here in Chile, the risk-weighted assets charge is less than 3%, coming from 100% that we have for commercial.

So, there's two examples that we have on risk-weighted assets, but I think there are many opportunities. What we saw in Itau Unibanco's history of implementation of their capital model throughout the last few years is that there are always opportunities in the way that they manage products in taking a look at capital, especially because if you take a look at what were the incentives for the industry in the past were mainly based on two things: profitability and the impact that has on provisions.

I don't think that for the whole banking system in Chile, our incentives were well aligned in terms of capital management. With the new regulations and all the impacts that it has, I think the decision is a little bit different.

So, I can tell you from discussions that we have here on the credit committee and also on the capital committee, I think there are many opportunities for us to do a better job in terms of risk-weighted assets.

I don't think that it's enough to do all this fine-tuning and coming up with 100 basis points with capital. I don't think it's -- if that's the only solution, I think it works in tandem with all the things that we need to do with profitability.

In consumer growth, as you mentioned, I think it's still possible. I think with the value proposition that we have, the digitalization process that we have for consumer, enable us to grow more than the market. In terms of the credit cycle that we are leaving, I think that does, and from what I see the whole banking system is being more restrictive on credit, as you can see on the guidance that we have for credit growth is much lower. So, we are being cautious in terms of credit growth.

We have adjusted our models, we have adjusted our point of entry. I think that we can still grow more than the market, but we are being very cautious not to grow it at any cost.

If you take a look at what happened with us since 2017, we were able to grow our portfolio with a very stable NPL creation. So, I think that the models that we have for taking new clients with the proposals that we have, I think that we did a very good, and we didn't sacrifice credit risk for growth, and we will not do so for this year. So, we are risk aware, but I think that we have a strong value proposition that enable us to grow.

On liquidity side, I think that we have been improving LCR and NSFR for both Chile and Colombia. When I take a look at the numbers and compare us to the median of the industry and the information that we have for the LCR, I think that we have a much better information. For the NSFR, I think it's more an adopter, the information that we have for the market. But I think that we are in line with the other banks. But I think that based on the deposit profile that we have, I think it's more costly for us to converge to a higher NSFR than a bank that has a more strong retail base.

Having said that, one of the main possibilities of raising NSFR is through long-term versus short term. If you take a look at the yield curves and because the yield curves are fairly flat compared to other periods, going to longer term, it doesn't mean necessarily higher impact in terms of costs compared to a yield curve that is more positive.

So, I think that we are able to convert 100% in Colombia without major impact in terms of our cost of funding, given the yield curve and the credit spread that we now have in Colombia. I don't think that it's a concern for us.

Sebastian Gallego -- Credicorp Capital -- Analyst

All right. Thank you very much.


Our next question comes from the line of Carlos Gomez, HSBC, Europe. Your line is open.

Carlos Gomez-Lopez -- HSBC Securities -- Analyst

Hello, good morning. I wanted to know if you could comment on the expectations for the upcoming referendum and the consequent drafting of a new constitution. Do you see that it's a bit variable for your projections for the year? And do -- will you change your policy in accordance to the result of that referendum? Thank you.

Gabriel Amado de Moura -- Chief Executive Officer

Sure. No, I think that the scenario that we have -- the referendum is one part of the discussion, right, in terms of how -- if it's going to be a new constitution, and how we will conform the asset player constitutor, how they are going to vote on a new constitution. I think that brings uncertainty in terms of the things that they might change. I don't think that this uncertainty ends this year, because if you go through the thought process of doing a new constitution, if you elect new officials to do it, then it starts the discussion of what the new constitution is going to be like?

And I don't think that this discussion ends in this year. I think it goes through 2021. In our projections, we incorporate the uncertainty of this scenario, right? Of course, especially in a place like Chile that is heavily on long-term investments. When you bring uncertainty to this discussion, you somehow reduce the appetite for long-term investments. And that's why if you take a look at the projections that we have for growth and for credit growth, they're much more timid than what we saw in the last few years, especially on what was the long-term average for Chile.

So, the scenario that we have already incorporates all the uncertainty toward this process. We are very constructive on this, I think that it's -- as discussions goes along, we will incorporate new information in our projections. But given so far, we are incorporating the unknown, meaning that we are pricing uncertainty on this.

Carlos Gomez-Lopez -- HSBC Securities -- Analyst

Thank you very much.


There are no further questions at this time.

Gabriel Amado de Moura -- Chief Executive Officer

Fantastic. Thank you so much for your questions. As always, we are always available for you, if you have any comments, questions for me or for Claudia. And we see you on the next conference call.


[Operator Closing Remarks]

Duration: 51 minutes

Call participants:

Claudia Labbe -- Head, Investor Relations

Gabriel Amado de Moura -- Chief Executive Officer

Jason Mollin -- Scotiabank -- Analyst

Sebastian Gallego -- Credicorp Capital -- Analyst

Carlos Gomez-Lopez -- HSBC Securities -- Analyst

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