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Credicorp Ltd (BAP) Q4 2020 Earnings Call Transcript

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BAP earnings call for the period ending December 31, 2020.

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Credicorp Ltd (BAP 1.05%)
Q4 2020 Earnings Call
Feb 9, 2021, 9:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, everyone. I would like to welcome you all to the Credicorp Limited Fourth Quarter 2020 Conference Call. We now have all of our speakers in conference. [Operator Instructions]

With us today is Mr. Walter Bayly, Chief Executive Officer; Mr. Gianfranco Ferrari, Deputy Chief Executive Officer; Mr Alvaro Correa, Deputy Chief Executive Officer; Mr. Reynaldo Llosa, Chief Risk Officer; Mr. Cesar Rios, Chief Financial Officer and Ms. Milagros Ciguenas, Investor Relations Officer.

And now, it is my pleasure to turn the conference over to Credicorp's Chief Financial Officer, Mr. Cesar Rios. Mr. Rios, you may now begin.

Cesar Rios -- Chief Financial Officer

Thank you. Good morning and welcome to Creditcorp's conference call on our revenue results for the fourth quarter of 2020. Since our previous conference call, economic reactivation in Peru has continued at a very unexpected pace. In seasonally adjusted terms, GDP in the last quarter of 2020 is stands around 3% below the pre-pandemic levels.

Our estimates suggest GDP decline around 11.3% in 2020 due to the COVID-19 pandemic, which is better than initially forecast. The job market has also continued to recover as indicated by data on payrolls, managed through the banking sector. The external sector has also provided favorably, as copper prices have reached levels not seen in almost eight years. We expect the GDP to rebound between and 8% and 10% in 2021, a definite by high copper prices, capital inflows to emerging markets and expansive monetary or fiscal policies in the local front.

Next slide please. Two significant factors are driving uncertainty in the core economics, first, the sanitary situation generated by COVID-19 has deteriorated in developed and emerging countries over the last few weeks. The Peru's data on excess mortality reflects this reality. The government has established restriction measures based on the severity of COVID-19 indicators, which include a high, very high, and extremely brisk levels. On January 28, the government ordered due for lockdown from January 31st to February 14th in regions that registered extreme risk levels of COVID-19 indicators, including Ucayali and Lima.

The effect of these restrictions will slow down the recovery in the government and service sectors, that core sectors including mining, fishing, manufacturing and construction will continue to produce. Downside risk to our current GDP growth forecast of 8% to 10% might revise if the sanitary situation deteriorates further, and more restrictive lockdown are dated. However, vaccine doses will arrive in Peru in February and the vaccination process will be begin immediately.

Second, Peru will hold general elections from April 11, 2021. The latest survey show candidate George Forsyth, leading both as preferences between team of total vote, followed by Keiko Fujimori, Julio Guzman, Veronika

Mendoza and Yhony Lescano. who are neck and neck for second place as on the date of the poll. It is still early to predict outcomes. The political landscape continues to be marked by uncertainty that we play out in coming months. It is important to note that according to the latest surveys 25% of voters are undecided. Who tend leave their vote blanks or will initiate ballots. The second round of presidential election is said to be held on June 6, 2021, all are relevant is in countries in which Credicorp operates includes a law passed Bolivia in January 2021, which leaves eligible borrowers the option of a six month grace period. This facility is in addition to the loan deferrals in implemented in 2020, which led to both interest reversals and zero interest rate impairment charge in December 2020.

We are closely monitoring the impact of these measures in our business and BCP Bolivia. In Chile, elections will be held on April 11 to elect the members of the constitutional assembly, regional governors, Mayors and Councilmen. General elections have set for November 2021.

Next slide please. The Peruvian financial system has evolved favorably hand in hand with economic recovery in the last quarter of 2020. According to that across the Central Bank, loan growth in December stood at 12.3% year-over-year at a constant exchange rate, the highest growth rate since 2013 under by the effects of Reactiva loss, if we include the stakes of Reactiva loans, total loans -- sorry if we exclude the effects of Reactiva loans total loans declined 4.6% year-over-year.

Importantly, there are signals of recovery in loan originations in the retail segment, which includes consumer and mortgage loans. In this context, they will boosted one of the highest loan growth rates in the region in 2020. From 2021, we expect total financial system loans in Peru to grow around 3% as the effect of Reactiva loans starts to receive and is short of loans we cover.

Lastly, we would like to comment for recent events on the economic policy and regulatory fronts in Peru. The Central Bank recently announced monetary measures to expand loan-term credit. This [Technical Issues]

Operator

Excuse me everyone and please remain on the line as we reconnect with our speaker. You are now rejoining the main conference.

Cesar Rios -- Chief Financial Officer

On line but they I'm not sure if you see. At the end December 2020 -- at December 2020, Congress passed a law interest for interest rate ceiling. These ceilings will be set by the Central Bank, which will also set limits on charges for certain fees in the financial system. On February 2nd, the executive branch of certain law announced its intention to take the matter of the constitutional court if Congress insists on passing the measures to the systems. Additionally, the Minister of Finance has approved by decrease that enables us to not -- the National Superintendency of Tax Administration to gain access to client deposits information if balances exceed PEN30,800. Lastly on January 28, 2021, the government announced the COVID-19 government guarantees program, directed to individual, SMEs, which will be extended until March 21, 2021.

As explained in our last call, under this initiative banks can also reduce interest rate on reprogramming facilities in exchange for additional government loss for very specific segments of clients. We will continue to close monitor these developments to evaluate impact on Credicorps operations. Next Slide please. Economic reactivation describable is evident at Credicorp and market by a significant uptake in the use of digital channels. Demand for financial goals in individual segments continue to reactivate. Some problems such as Mortgages and bancassurance registered a significant in the fourth quarter of 2020. Digital sales in particular accelerated this quarter and on a full year basis grew 72% in 2020. This expansion took place in the context of growth in the adoption of digital channels due to immobilization measures and social distances. Bancassurance and advance of wages are the products that reported the highest growth in sales this quarter costing expansion above 400% with respect to general estimates.

Analyzing the full year transactional trends we found, first, average monthly number of transactions grew 51.5% led by VISA transactions, we grew 91.5%. Secondly, digital transactions have contributed to 77.7% of total transaction this quarter, the largest increase in shares of transaction was registered by Yape, which represents 19% of total transaction this quarter compared to 5% in the first quarter this year. This expansion was driven by our new product Yape Cards, which allows BCP and non-BCP clients to execute transactions. This new product generated more than 1 million new Yape accounts in 2020 and banked almost 400,000 people during exchange.

Next slide please. Now I will comment on the highlights of Credicorp's performance in the fourth quarter and the full year 2020. Results show a quarterly recovery in line with economic reactivation. A summary of results shows in a year-over-year analysis, the loan portfolio grew more than 19% in quarter-end balances, driven mainly by loans on the government relief programs. After isolating the effect of these programs, Credicorp's structured loan portfolio failed 2.2% in quarter-end balances.

On a quarterly basis, net interest income registered a contraction of 4.3% due to the impact of non-recurring events and zero-interest rate loan repairment charge in Bolivia in particular. If we isolate non-recurring events, adjusted net income fell minus 0.8%. On a full year basis, adjusted net interest income contracted 1%. This evolution was fueled by lower interest rate and a less profitable asset mix, which was partially offset by the reduction in interest expenses generated by a lower cost funding structure.

In this context, full-year of structural NIM situated 4.78%. Non-financial income was boosted this quarter by fee income, which increased 20.7% quarter-over-quarter, in line with more transactional activity and acceleration of fee waivers. In full-year results, non-financial income dropped 10% due to a decrease in transactional activity throughout the year. Full year insurance underwriting results were impacted by COVID-19 related and incurred, but not reported claims in the life business, which was partially offset by a decrease in property and casualty claims.

Provision expenses fell considerably this quarter, better economic expectations and improvements in client behavior led to a structural cost of risk of 2.44% this quarter. In full-year terms the structural cost of risk was 5.07% in 2020. In this context, Credicorp reported PEN653 million in net income this quarter, which represents a return on equity of 10.8%. On a full year basis, Credicorp generated PEN347 million. If we isolate non-recurring events, adjusted net income for 2020 situates at PEN725 million and adjusted ROE of 3.5%, but we will now explain the results of our main operating units.

Next slide please. I will begin by explaining BCP's stand-alone evolution. In 2020, the total loans portfolio in year end balances grew 18.8% driven by the Reactiva loans, while the structural loan portfolio decreased 4.1%.

Now let me explain in further detail the evolution of average daily balances which are major drivers of margins. On a quarter-over-quarter basis, loans in average daily balances grew 1.4% driven by Reactiva loans, while the structural portfolio dropped 2.5% due to a contraction in the wholesale and SME segments.

On a full year basis, total loan growth in average daily balances of 17.1% was mainly driven by the Reactiva program, which provided loans primarily to the middle market, SME-Business, and SME-Pyme segments. If we exclude the Reactiva program, BCP's structural loan portfolio in average daily balances grew 4.1% in 2020, mainly driven by corporate banking, mortgages, and consumer loans, which expanded 7.5%, 7.2% and 13.1%, respectively.

BCP's funding structure has improved to active liability management and by the increase of savings and demand deposits. On a full year basis, total deposits grew 30% led by low-cost deposits. In 2020, BCP materially reduced its funding cost. It has been able to repay more expensive sources of funding such as due to bank, Repos and Senior bonds and has seized opportunities in the context of low interest rates to implement and timely liability management strategy.

Next slide please. Regarding payment behavior under the reprogram portfolio in retail banking at BCP, in the fourth quarter, retail clients registered an improvement in the payment behavior, hand in hand with economic reactivation. On-time payments on the structure retail loans reached 96% at the end of December, improving from 94% in September. By the end of the year only 20% of the retail portfolio has cure in the programming facilities compared to 23% in September.

Finally, our high uncertainty portfolio, which is comprised of loans that are within grace period or those that have overdue installment currency represents 9% of the structural loan compared to 18% last quarter. In this portfolio, at the end of the fourth quarter of 2020 only 3% of the structural loans were still within grace period and 6% were overdue.

Next slide please. Now let me explain the evolution of cost of risk and asset quality indicators. On a quarter-over-quarter basis, the decrease in provision expenses is attributable to an improvement in macroeconomic expectations and updates in the probability of default of the specific segments based on latest assessments of transactional and payment behavior.

On a full-year basis, provision expenses growth was mainly concentrated in the individual segments, specifically consumer. In addition, higher wholesale banking provision expenses were driven by the evolution of specific clients in the Airline, Tourism, Transportation and Energy sector, which have been highly impacted in the COVID-19 context. In this scenario, the structural cost of risk situated at 2.73% for the quarter and 4.74% for the full year. As anticipated in our last call, figures for asset quality show deterioration quarter-over-quarter, particularly in structural loans in the individual segment given that credit card and consumer grace periods have expired.

This was partially offset by a rebooting of write-offs, which initiated in September after LDS mandated to freeze the counting of days of delinquency expired. We expect further deterioration to the first half of 2020, particularly in the SME segment as grace periods in this segment will expire. In the aforementioned context, the NPL coverage ratio situated up 145.1%. Finally, this accumulated provisions represent 7.92% of the total structural portfolio.

Next slide please. Going on to BCP results, net interest income continue to follow an upward trend and rose 5.9% quarter-over-quarter. In full year figures, net interest income declined 2.4%, impacted by non-recurring events through the year. If we exclude non-recurring events, the full year adjusted net income analysis shows, first, a decreasing adjusted interest income of 4.2% due to a drop in market rates and a charge in the asset mix, which was partially offset by active investment portfolio management. Second, adjusted interest expenses fell to 18.2% due to a drop in interest rate, and funding structural improvement. In this context, adjusted net interest income rose 0.8% in 2020.

In terms of NIM, the full year contraction of 87 basis points, was attributable to the aforementioned, the reagents, and to the dilution effects of Reactiva lone, which generate negligible NIM. Risk adjusted NIM situated at 2.28% this quarter, and 1.03% in 2020. Regarding non-financial income, in terms of the quarterly evolution, core items grew 13.2% unencumbered economic reactivation. This was the first full quarter, free of the exceptions and as a result, fee income expanded 12%. Additionally, alongside an uptick in transactions gained, and NIM based transactions grew 18.1%.

On a full year basis, non-financial income fell 11%, mainly driven by fee income and gains on FX transactions, which constructed 12.1% and 11%, respectively, due to a decrease in transactional activity over the year.

Next slide please. BCP's efficiency ratio improved year-over-year, after cost control measures were implemented in 2020, including reduced non-essential expenses on variable compensation. In full year terms, although operating income contracted 5.4%, BCP's adjusted efficiency ratio remained stable of 14.9%. This evolution was a result of our airports to speed up the process to implement BCP's transformation strategy, which focused on improving the client experience and efficiency levels.

The table in this slide shows our progress and the rising volume efficiency drivers to move forward on our journey to optimize our cost-income ratio. First, we accelerated our IT investment to append digitalization, the share of digital transaction grew 16 percentage points, also sold 55% of our clients at digital, and we are able to close -- and we were able to close 20 branches this year.

Next slide please. With regard to microfinance, let me explain the dynamics of Mibanco's loan portfolio on funding base. In 2020, the total loan portfolio and year-end balances grew 20.5%, while the structural loan portfolio decreased 6%. The structural portfolio construction is explained by the severe impact of the pandemic in the micro businesses segment, and the fact that liquidity thus provided by clients to the government programs.

Now let me explain through the details the evolution of average daily balances, which are major drivers of margins. on a quarter-over-quarter basis, loans average daily balances grew 9.4%, driven by government programs launch, while this the portfolio grew 1.4%. On a full year basis, total loan portfolio grew 13.4% in average daily balances, driven by government programs, while structural loan portfolio grew 1%.

With the onset of economic reactivation during the second semester of 2020 for the initial level for Mibanco's structural portfolio, is starting to recovering segment that are still within our risk appetite. Regarding the evolution of funding at Mibanco, demand and saving deposits grew 37% year-over-year, which allowed us to reduce the share of more expensive funding sources in total funding. All these factors led to a structural funding cost to fall from 4.2% in 2019 to 3.3% in 2020.

Next slide please. Client payments at Mibancos continue to follow our upward trend, and the high uncertainty portfolio has shrunk considerably. Mibanco's client payment performance produced a substantial improvement and there was a drop in request for new reprogramming facilities as grace periods expired in a context of economic reactivation. All over overdue payments remained stable this quarter. Analyzing the structural portfolio reprogramming figures we note, first, on-recurring up-to-date loans increased this quarter to represent 49% of the structural loans at the end of December.

Second, the overdue portfolio has slightly increased this quarter as planning facilities start and reached 6% for the structural loans. Finally, the high uncertainty portfolio, which is comprised of loans that are within grace period or those that have a overdues, currently represent 24% of the structural loans compared to 43% last quarter. In this portfolio, at the end of the fourth quarter of 2020, 18% of the structure loans were still within grace period. The majority of these periods will end by June 2021 and the remainder by the end in 2021.

Next slide please. Regarding asset quality indicators, provision expenses decreased quarter-over-quarter due to adjustments in our credit risk model after better than expected trends in client behavior were registered in a context of economic reactivation. This improvement was partially offset by the increase in delinquency as grace periods expire. This evolution coupled with expansion of the structural loan portfolio, let the structural cost of risk situate at 4.7% this quarter.

In returns, this structural cost of risk situated at 10.6% in 2020. In terms of portfolio quality, the structural NPL ratio rose to 10.2% in 2020. Delinquency showed an uptick as grace period expire and some clients were unable to make payments. The increase in NPL's was partially accumulated by a reboot of charge-offs, in this context, Mibanco's NPL coverage ratio increased to 117% in 2020.

Next slide please. Now let's look at Mibanco's results. Net interest income fell 6.4% quarter-over-quarter after being hit by accrual interest reversal and grace period expiring as some clients registered delinquency. In full year figures, net interest income declined 18.4% impacted by, first, a contraction in the structural portfolio, and the influence of the government program launched.

The context of lower interest rate and the interest rate figures are due to increase in delinquency situations. In terms of NIM, the full year contraction of 400 basis points was attributable to the aforementioned variations of what partially offset by an improvement in the funding structure. In this context, we suggested a NIM situated at 3.2% in 2020. Regarding efficiency, full-year operating expenses decreased 6.3% due to cost control initiatives including a reduction in headcount, non-core expenses, variable compensation among others.

Although, non-financial income reflected an uptick in bank assurance fees for quality assurance to our current portfolio, operating income drop at a faster pace than operating expenses, leading efficiency to deteriorate.

Next slide please. Now I will comment on the results of the Insurance business. On full-year basis, net income decreased due to growth in provisions related to excess mortality for COVID-19. This was partially offset by lower claims in the P&C business. The decrease in claims in the P&C business was attributable to a drop in cases, mainly in the cost line and personal line, after movement were restricted to stay contagion. Life net premiums increased through the alliance channel, and due to an increase in sales in the bank assurance channel.

An analysis of the evolution of provisions this quarter indicates that there was a decrease in, but not reported provisions in the life insurance business after few of COVID-19 related cases were reported. On a year-over-year basis, however claims increased 59.8%[Phonetic] mainly due to the impact of COVID-19. In a quarterly basis, corporate health insurance and medical services, registered an increase in net income. This evolution is explained by lower claims at the corporate health insurance business and higher demand for medical services.

On a full year basis, net income increased due to a drop in net claims in the corporate health insurance, which was attenuated by a decrease in the medical services income due to lower demand.

Next slide please. Regarding the pension fund business, assets under management and the fiscal level drop year-over-year due to higher withdrawals under the government mandated facilities. In the case of Prima, total funds withdrawals amounted to PEN7.5 billion, which represent 70% of the fund that we're available for withdrawal. [Indecipherable] in November could lead to traditional withdrawals in the first quarter of 2021 for approximately PEN3.4 billion. Net income increased quarter-over-quarter due to a recovery in the profitability of the reserve funds in line with market performance.

Nonetheless, it was partially offset by a decrease in income due to a decrease in affiliate contributions. On a full year basis, total fees decreased due to first, higher unemployment, which reduced the level of contribution. Second, contribution exceptions granted by the government in April, and finally a decrease in assets under management level after funds were withdraw to government mandated facilities.

Next slide please. Regarding our investment banking and wealth management businesses, total assets under management posted an increase of 34.5% over a year impacted by the exchange rate and driven by the asset management businesses in general and the subscription of the third party funds from institutional buyers in particular.

On a quarterly basis, recurring income grew 4.1%, mainly driven by asset management and corporate finance businesses. In folio terms the decrease in the earnings contribution was mainly associated to growth in recurring expenses which was internally driven by transformation in the operating model and by one-off expenses from new subsidiaries. This was partially offset by growth in recurring income mainly due to capital markets and asset management businesses. Non-recurring results also contributed in gains of 24 million in a context in which non-recurring income out weighted non-procuring expenses.

Next slide please. Now, I will summarize Credicorp's consolidated performance. An analysis of the balance sheet structure shows that Credicorp's interest earning assets increased 29% in 2020. Driven by both the loan and the investment portfolio, we increased the size and duration of investment portfolio by maintaining interest rate risk and maintaining a solid short-term liquidity. In 2020, Credicorp's own portfolio in year-end balances grew 19.1% driven by government program while the structural loan portfolio decreased 2.2%.

Now [Indecipherable] and in full-year basis. The loan portfolio grew 15.8% while the structural loan portfolio grew 4%. As explained through our lines of businesses, this assets has been financed mainly to low cost funding sources. Additionally, we executed our inaugural international bond issuance, of holding company level this year to increase our liquidity portfolio.

Next slide, please. Now, to summarize the evolution of the main risk indicator. There was a significant quarter-over-quarter drop in provision expenses, which was attributable to an improvement in expectation for 2021 and to an improvement in client statement this April. On a full year basis, work in provision expenses reflected the impact of COVID-19 which led to a structural cost of risk particularly of 5.07%.

Regarding asset quality NPL increased quarter-over-quarter as grace periods expire. Our coverage ratio increased year-over-year situated at 156.1%. It is important to note that NIM this quarter was impacted by a zero interest rate loan impairment charge of PEN148 million in a context of regulatory changes in Bolivia.

On a full-year basis, NIM contracted and situated at 4.3% due to new construction structurally, the impact of government programs and zero interest rate impairments.

Next page, please. In terms of full year efficiency, the cost-to-income ratio situated at 46.3%, deterioration was driven by lower income and non-recurring events and most of our lines of businesses. The deterioration attributed to microfinance was driven by a decrease in income from Mibanco, Peru under the consolidation of Mibanco, Columbia. Common equity Tier 1 level for both BCP and Mibanco remain above our internal target situating at 11.4% and 18.1%, respectively.

It is important to mention that the capital ratio of Mibanco increased due to capital contribution of PEN400 millions executed in December. As mentioned previously, our core equity Tier 1 ratios are calculated at the Peruvian GAAP accounting as a charge, use local net income figures.

Next slide please. Credicorp generated PEN653 million in net income this quarter, which represent a 10.8% of ROE. If we isolate non-recurring events registered this quarter adjusted net income is PEN725 million, while the adjusted ROE situated at 12%. It is important to mention that this year non-recurring events refer to impacts to income and expenses that were registered in our P&L, but are not part of our recurring business as channel. We are not expected to recur on a consistent basis going forward.

It is important to note that some variable costs such as variable compensation payments and that's withholding provisions this year due to the crisis and to a drop in income, we expect that going forward, what these variable costs will reactivate in a context of ongoing. To review our expectations, let's go on to guidance.

Next page, please. In a context with uncertainties remain our expectations for 2021 assume that the lockdown will be lesser and shorter than those imposed not last year. As one of the economies that was the hardest hit by the pandemic in 2020, we expect Peru's GDP recover in 2021 and drove between 8% and 10%.

In terms of loan origination, we expect our commercial transactions to continue on our trend to 2021. As such, we project growth between 4% and 8% in our balances. For the total portfolio, this will be driven mainly by the retained statement that BCP and alone and by new bank.

Regarding NIM we expect the interest rate to remain low in 2021 and our loan portfolio will continue to be impacted by the presence of low interest rate government loans. Accordingly, we expect NIM to situate between 3.9% and 4.4%. As macroeconomic expectations continue to improve, provision for loan losses are expected to continue following a downward trend, bringing the cost of risk levels between 1.8% and 2.3%.

We expect to recover our capacity to generate income this year and believe that 2021 will be a year of transition in terms of efficiency in this context, we expect some variable costs such as variable compensation and we call to reactivate alongside higher income. Additionally in 2021, we will continue investing in digital channels and in transforming our operating volume to boost efficiency in coming years. In this scenario, the efficiency ratio is expected to situate between 44% and 46% this year.

Finally, we expect our other ROE to reduce at lower double digit level this year, first time between 10% and 14%. With these comments, I would like to open the Q&A.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Ernesto Gabilondo with Bank of America.

Ernesto Gabilondo -- Bank of America Meryll Lynch -- Analyst

Hi. Good morning, Walter, Alvaro and Gianfranco, Reynaldo and Cesar. thanks for your presentation and for the opportunity. My first question is on the regulatory outlook. We saw the negative observation of President Vizcarra, and the government is the potential deal, a mutual raided cap, and also negative observations that the deal is beginning to materialize private pension funds.

However, we have seen that Congress is expected to continue adding pressure on both deals in the next couple of days. So what is it probability that you are seeing on these impacts and can you share with us, which percentage of your loan portfolio will give interest rates above 50%. Thank you.

Walter Bayly -- Chief Executive Officer

Ernesto, thank you for your questions. Trying to tackle some of the questions that you posed. I think, certainly we have some relief on the horizon. The law that put caps on commissions and interest rates is still going to be through our -- I will say, probably limited period of discussion. It's probably too early to have an exact assessment, but if the -- this will roll some assets to all the process and debates, probably is going to impact probably more severely the institutions that operate in the very high interest rate segments, that are the specialized institutions, and probably are going to be less severe impact in the Universal Banking institutions in the country. Nevertheless, it's going to damage the access to credit, and reduce the access to credit for a significant number of Peruvians.

Ernesto Gabilondo -- Bank of America Meryll Lynch -- Analyst

Can you tell me one...

Walter Bayly -- Chief Executive Officer

Regarding to -- sorry?

Ernesto Gabilondo -- Bank of America Meryll Lynch -- Analyst

Also if you can share with us what percentage of your loan portfolio will you need to increase above 50%...

Walter Bayly -- Chief Executive Officer

I couldn't understand the question very well.

Ernesto Gabilondo -- Bank of America Meryll Lynch -- Analyst

Yes. Can you share what is the percentage of your loan portfolio we need to increase above 50%?

Walter Bayly -- Chief Executive Officer

I don't have the -- I don't have the figure at hand. We can come back with some general guidance this quarter end. [Indecipherable]

Ernesto Gabilondo -- Bank of America Meryll Lynch -- Analyst

While the 50% question, how come -- how did you come up with a 50% first of all?

Cesar Rios -- Chief Financial Officer

Yes. So I believe that it is more percent of the loan portfolio, that you have in interest rate above 50%.

Walter Bayly -- Chief Executive Officer

So, getting back to your...

Ernesto Gabilondo -- Bank of America Meryll Lynch -- Analyst

My question is, why 50%, not 40% or 75%.

Walter Bayly -- Chief Executive Officer

I'm just thinking that maybe by -- the high interest rate in actually other regions just give you that number. But I'm trying to make the point, because unfortunately if these loans pass, what is going to happen is, it's gonna have a huge the impact on financial inclusion and actually will generate a lot of financial exclusion. And if you understand the dynamics of how the financial inclusion on the asset side working for you, that is basically very, very, tiny loans of less than $100 and at high rate, that are mostly driven by that has been obviously Mibanco and institutions like that, and those clients move forward as really -- I'm really sorry -- rates -- the amount of loans are larger and rates are smaller. And on the point you made about the 50%, regarding there is a 50% cap. The whole microfinance industry on 90% something of the microfinance industry will still be very healthy OK.

Ernesto Gabilondo -- Bank of America Meryll Lynch -- Analyst

Okay, thank you for the information on this. Then my second question is on the political front. We have seen that dynamic kind of growths are -- appears in economic procedure in recent calls. Also we saw that unfortunately the potential successor of currency of the Central Bank [Indecipherable] passed away. So this is creating uncertainty of who will be the successor. So what are the views or your thoughts from these events?

Cesar Rios -- Chief Financial Officer

Go on Walter, sorry go on.

Walter Bayly -- Chief Executive Officer

I think for only my first reaction is that we are in Peru, and it's fairly early to tell. We have several surveys, several tools, and some of them, actually Veronika Mendoza are in the top of position, depending on the pools. But I will say that is very early to tell at this point. Probably we need to have to hear the proposals to go down the road, and see how the proposals, and the much of the candidate consolidate in the next months.

Cesar Rios -- Chief Financial Officer

Yeah. just to add to that. The temperature on the collection, because It's very cold. The focus on the population. I would say it's more on the pandemic rather than on the elections. Statistically, there are like seven, and reduced now, within -- all of them within the margin above. So, at first I mentioned, it is really too soon to tell. I do believe that we will have to wait at least one more month to have more clarity on specific outcomes of the elections.

Ernesto Gabilondo -- Bank of America Meryll Lynch -- Analyst

Right. Thank you very much for your thoughts.

Operator

[Operator Instructions] Our next question comes from James Mollin with Scotiabank.

Jason Mollin -- Scotiabank -- Analyst

Hi, this is Jason Mollin. On the question of medium and longer-term asset and earnings growth versus capital optimization and dividend, Walter, you had provided some thought at the end of the third quarter call, where you spoke about the potential that shareholder returns going forward could shift more to dividends with slower earnings growth versus what's in the future versus what we've seen in the past. Have recent trends given you more conviction that this is what will drive future shareholder returns.

Walter Bayly -- Chief Executive Officer

Yes. Good morning. Jason. This is Walter. Yes, but we have to think out of the equation this year. This year is somewhat an unusual year. We are rebuilding our profitability, and we do not expect -- we haven't made a final decision of the Board, but this is not a year in which I would have people waiting for a lot of dividends. We want to rebuild a little bit our capital base. But going forward, yes. The dynamic -- the long-term dynamic is that the country will grow less, while Credicorp continues to generate around 17% return on equity, which we will be a low -- a higher rate than what our risk assets will grow. Plus we will be spending out excess capital regularly to our shareholders. That is the dynamic that I think should come back next year, not this year.

Jason Mollin -- Scotiabank -- Analyst

Thank you very much.

Walter Bayly -- Chief Executive Officer

You're welcome.

Operator

Thank you. Our next question comes from Tito Labarta with Goldman Sachs.

Tito Labarta -- Goldman Sachs -- Analyst

Hi. Good morning everyone. Thank you for the call and taking my question. My question, also I guess in longer term. Just looking at your decided for this year and eventually getting back to 16% to 17% ROE, as you mentioned, Walter, I think you saw a nice improvement in the cost of risk, but net interest margin continue to be under pressure, I mean partly due to the Reactiva loans. I think previously you've guided for maybe second half of 2022, is that how long you think it will take and is it mostly a function of getting your margin back to where it was before, and toward margins to get back to where it was before. Is it just the Reactiva loans coming off the loan book, do you need interest rate to go up back to normalized levels to get to that 17% ROE, just trying to get a sense of the drivers to be able to get back to that long-term ROE. Thank you.

Cesar Rios -- Chief Financial Officer

Probably, if we consider that the asset base growth at high single-digits, we can obtain as mentioned before, ROEs of high double-digits. This growth is going to be driven by a country that is going to grow, let's say 3 plus percent and the financial sector usually grows 1.5 times the nominal figure. In terms of margins, what we should expect is that we are going to have at least a couple of years of very low interest rate that effects our overall profitability and at the same time, we are going to come down with the relative weight of Reactiva loans that are scheduled to have 2.5 years more standing if there are not any additional changes. So we are going to have, I will say, a couple of years in which we are going to have still very low interest rates and the presence of the Reactiva loans on the book. At the same time, we expect, during this period, to have a higher proportion of retail loans in our book that carries higher margins with some more risk also. The risk will come down at segment level, pre-pandemic levels adjusted by the change in the composition, we got more retail loans than wholesale loans down the road and the fee income probably is going to grow less fiercely than the assets due to the digitalization that is going to put some pressures in fees. At the same time, we are going to start gaining efficiency, reaping the benefits of the digital transformation that we have embarked in all the companies of the group. The combination of these factors do lay down on a sustainable ROE in the high double digit as mentioned -- Walter mentioned previously. This is the basic dynamic, I don't know if you want some clarification on a specific topic.

Tito Labarta -- Goldman Sachs -- Analyst

Thank you, Cesar. That's helpful. I guess maybe just follow up on the margin side, given just the impact of Reactiva, do you know with the guidance you provided, 3.9 or 4.4, do you know what that will look like if you exclude the Reactiva loans, just trying to get a sense of the normalized margin excluding that and it sounds like you would need for interest rates to get back to maybe more normalized levels to get that margin up higher and to get that ROE up higher. Is that correct?

Cesar Rios -- Chief Financial Officer

Yes. But I am saying Reactiva most probably 80 basis points of the margin, but the slowdown is going to be progressive and the interest rate also impact because we have a very low funding base that is less valuable in relative terms now. This process, as mentioned, is going to last at least two years. When all these two factors dissipate, what we are going to have probably is higher margin driven by these factors, but no more competition. We wouldn't expect to reap the full benefits of these two factors due to the competition, but we are going to still remain profitable and with a stronger NIM than now.

Walter Bayly -- Chief Executive Officer

But let me add something, this is Walter, just to be very concrete. We do not need interest rates to go up to achieve the returns on equity that we have been accustomed to. We can achieve without an increase, a general increase in interest rates. This is a year in which we will be rebuilding our profitability and we should see the results quarter after quarter until reaching this last quarter, which will give us good results, still below, but close to sustainable levels.

Tito Labarta -- Goldman Sachs -- Analyst

Okay, that's very helpful, thank you, Walter and Cesar. And just one final question, just to confirm the 17%, I think you had previously mentioned, you could probably get there second half of 2022, is that the correct timing, how do we think about just the timing to get back there?

Walter Bayly -- Chief Executive Officer

Definitely not this year, as I said, last quarter this year we will be close to those levels, but still below.

Tito Labarta -- Goldman Sachs -- Analyst

Okay. So sometime next year. Fair. Thank you Walter.

Walter Bayly -- Chief Executive Officer

Yes.

Operator

Thank you. Our next question comes from Jorg Friedman with Citibank.

Jorg Friedman -- Citigroup -- Analyst

Thank you very much for the opportunity to make questions. Good morning, everyone. My question is regarding asset quality. If you could give us some thoughts about when do you think that NPLs will peak. We have started seeing the deterioration due to the expiration of gray spirits. But I was even more interested in reconciling this with your cost of risk guidance which is still above 2019 levels. So just wondering if you think this is a new normal or just the cumulative effects of the pandemic, and we should have some normalization in 2022 afterwards. Thank you.

Walter Bayly -- Chief Executive Officer

Yes, there are two questions. In terms of the expectations on the increase from the NPL loans, we expect them to pick as I mentioned by the end of the first semester -- by the end of the second quarter, basically because we will see all the performance on the SME and consumer markets where all the grace period expires. In terms of the projections, there is still some uncertainty in the market, that health issue is not over in Peru. We have elections. So we provide I would say quite good forecast, what we feel the range would be. That's why you have a range in between 1.8 and 2.3 because there are still some clouds in the sky and we are not sure what will happen during the next year -- during this year, especially, during the first two quarters.

Jorg Friedman -- Citigroup -- Analyst

Perfect. And if you allow me just a follow-up there, because now you have more than 10% offshore purchase following in government programs that have lower risk and those according to what I understood in the call, I still expect it to last for 2.5 years. So would it be reasonable to expect the cost of risk evolving in 2022 to levels below those observed in 2019? Thank you.

Walter Bayly -- Chief Executive Officer

I wouldn't expect them to go below what we had in 2019, probably remember there is a changing mix and more important growth in the retail markets and in the wholesale market. So we'll probably see numbers somewhere below what our guidance for 2021 has been.

Jorg Friedman -- Citigroup -- Analyst

Okay, thank you.

Operator

[Operator Instructions] Our next question comes from Geoffrey Elliott with Autonomous.

Geoffrey Elliott -- Autonomous Research -- Analyst

Hello, good morning. Thank you for taking the question. Can you help us a little bit on the net interest income. I guess you've given the guide on at interest margin but the balance sheet size has clearly been pretty volatile 2020 due to the pandemic and due to reactive of Peru. So, can you help us either on the net interest income or on the size of interest earning assets. How that's going to evolve so we can get a clear idea of what you're expecting on NII.

Walter Bayly -- Chief Executive Officer

We have been explaining the basic, the basic dynamic. Could you clarify your question please.

Geoffrey Elliott -- Autonomous Research -- Analyst

Yeah. It's also -- you've given us an outlook on net interest margin. But the balance sheet size, the interest earning asset base that you're calculating that on which has been very volatile because of the pandemic because of Reactive of Peru. So I'm trying to get a clear idea of how your expecting that to evolve, so we can get a better picture of what you're expecting on net interest income from here. I mean, maybe a better way of putting it is how do you expect net interest income to evolve off the 4Q '20 base once we've adjusted for the one-off that you had in Bolivia this quarter.

Walter Bayly -- Chief Executive Officer

The NIM this year has been affected. I am going to summarize by the reduce in interest rates that impact our liquidity and investment income. We have a managed portfolio to increase the long-term income. There was also a reduced in the mix due to Reactiva. As I mentioned previously, the factors are going to wind down and the other factor is going to be the change in the composition of the portfolio toward retail. In terms of the cost of funds, we have already made a significant liability management and the costs are not going to be reduced significantly. So the improvement is going to come from the relative less weight of the Reactiva and the higher proportion of retail loans in our book, and after some time, the increase in general interest rate in the markets, but this is going to take a while.

Geoffrey Elliott -- Autonomous Research -- Analyst

Okay, thank you.

Walter Bayly -- Chief Executive Officer

The size of the book has increased -- the size of the book has grown significantly this year due to, I will say three factors, Reactiva, Reactiva loans, a significant influence of the procedure that we have invested in liquidity and in the medium and long-term bonds, but these standing increase is not going to repeat into 2021 -- in 2021.

Geoffrey Elliott -- Autonomous Research -- Analyst

Understood. Just a follow-up on that. In 2020, you had really huge growth and deposits up 27% year-on-year. How do you think deposit balances are going to evolve in '21.

Cesar Rios -- Chief Financial Officer

They are going to come down to more historical level, close to the growth of the loans. The significant increase in the processing fees in the year 2020 was due to the liquidity provided by Reactiva and the withdrawals from the pension funds, which is one off -- a couple of one-off events. In 2021, the trend is going to be similar to the growth of loans. We probably and atleast due to additional liquidity measures provided by the Central Bank but probably not the same magnitude than in 2020.

Geoffrey Elliott -- Autonomous Research -- Analyst

Okay, that's great. That really helps. Thanks very much.

Operator

Thank you. Our next question comes from Andres Soto with Santander Bank.

Andres Soto -- Banco Santander -- Analyst

Good morning and thank you for the presentation. Maybe a follow-up on in terms of NIMs I would like to, based on your guidance, understand that you're expecting NIM for 2021 to say -- to be at the same level as your structural or total NIM before adjustments in the portfolio of 2020. So I would like to understand in terms of the new origination that you are seeing, especially in the SME portfolio, while the trends that you are seeing it has been difficult to get rates a bit closer to historical level given the potential anchoring effect of the Reactiva loans.

Cesar Rios -- Chief Financial Officer

My initial response is that no, the clients understand the difference, and the volumes was driven more by capacity to pay and meet, probably Gianfranco will give better color, but was not an anchoring effect on Reactiva, The clients understand that this is a different program.

Gianfranco Ferrari -- Deputy CEO & Head of Universal Banking

Yes. Thank you for that. Exactly. We already have a lot of evidence. The clients have asked for Reactiva, asked and got Reactiva loans during May till about August, September of last year, already warrant new loans under normal conditions. They completely understand the difference between the normal rate and market competitive rate and subsidized rates given by Reactiva. So that's not an issue for us today. Going forward, to happen and therefore a lot of conversations right now is that there are some specific sectors of the economy that have been hit very hardly. An example is tourism. So fewer program may get extended for some specific sectors. There is nothing concrete, not right now, but something like that may come in the next couple of months.

Andres Soto -- Banco Santander -- Analyst

Thank you. Gianfranco, And previously what you guys mentioned competition as another source of pressure to your margins, which specific segments, are you seeing the strongest competitive environment building base.

Gianfranco Ferrari -- Deputy CEO & Head of Universal Banking

There's a lot of competition. So let me go back. There are some segments in which -- some parts in which we are back with pre-COVID level. And those are the segments where there is very harsh competition. Strategically mortgages is very competitive now. The whole corporate the mid-sized companies and the large mid-sized companies there is no much activity and or investment where the providing or offering financial -- financing facility to end clients, and there is also very strong contribution from the top corporate and the large market mid-market companies. Competition across all of the segments of the is about among those 2 segments.

Andres Soto -- Banco Santander -- Analyst

Thank you, Gianfranco and Cesar.

Operator

Our next question comes from Alonso Garcia with Credit Suisse.

Alonso Garcia -- Credit Suisse -- Analyst

Good morning everyone, and thank you for taking my question. I would like to touch base again on the regulatory front, I mean you already provided some color on the interest rate caps. But could you please share your thoughts on the pension system reform. I mean, quite probably do you see of it being approved in Congress. Does the current government support this bill or not, the timing and also if ASPs, as we know them right now would play a role under this new model or not at all. Any color would be appreciated. Thank you.

Alvaro Correa -- Deputy CEO & Head of Insurance & Pension Funds

Okay. Hi, this is Alvaro Correa, and there -- the question is difficult to answer. There is a lot of uncertainty today. There is a -- in the new law that is been drafted as we speak and proposals from specific commission-a special commission that was created last year. That specific new regulation is a real transformation of the pension system. However, it is difficult to say that it has a strong support from all parties. There is still discussions in Congress about that, and good time -- the timeframe for that is also uncertain. Some people say it's going to come with a final decision in the next, let's say 30 to 60 days. Other people talk about leaving this to the next government, and the next Congress. That means that should be discussed in about six to eight months from now. So a lot of uncertainty. And if it goes through, it definitely -- it has an impact on [Indecipherable] for sure, because the model changes. The funds will be auctioned to -- in an international auction, and we can participate. But it's not for sure that everything will stay as it is today. I mean, sure, it's not going to stay as it is today. So a lot of uncertainty. We should have more color than that in the next call for sure. Thank you.

Alonso Garcia -- Credit Suisse -- Analyst

Thank you. And lastly on the expense side, could you please discuss regarding the allocation of opex, capex this year related to your transformation strategy? I mean by subsidiary, or your -- which specific initiatives you are currently working on? Thank you.

Cesar Rios -- Chief Financial Officer

All the companies in Credicorp, R&D, going transformation process in relative terms, or the BCP share is bigger due to the relative size and the evolution of the company. I will say in terms of transformation, probably two-thirds our opex, a little bit more than one-third is capex, and the increase from 2020 to 2021 is going to be significant, probably more than 20% -- 30%. And out of this total, BCP is going to be more than 50% of the total of the entire corporation. But I would like to emphasize that all the companies, subject to the reality of each one, are undergoing a significant process of investment and digital transformation, suited to the specific needs of the specific segment that they serve.

Alonso Garcia -- Credit Suisse -- Analyst

Understood. Thank you very much.

Operator

Thank you. Our next question comes from Piedad Alessandri with Credicorp Capital.

Piedad Alessandri -- Credicorp Capital -- Analyst

Hi, thank you very much for allowing question. I had a question regarding the other expenses. In the M&A you mentioned all the salaries, the administrative expenses. But all the expenses that it's a significant point of the increase in total expenses year-over-year, it's not detailed. If you could give us a bit more view regarding the other expenses within 2020, and its development for 2021? That would be really great.

Cesar Rios -- Chief Financial Officer

Yes. Usually in other expenses, we record a special taxes that are not income taxes, that can be contributions to several institutions, operational, fees related expenses. In the year 2020, we have significant operating expenses relating to two items. One was donations. BCP made PEN100 million donation at the beginning of the crisis. Mibanco also made a significant donation Credicorp Capital Pacifico. So this is a significant expense this year, but is not recurring expense, of course. And we also recorded in this item the expenses related to the management of direct expenses to the manner -- the COVID-19. We are talking about specifically equation to premises, measures, protective equipment. The assume of these 2 items has been significant this year, and with that, also has relative uptick in -- throughout at the end of the year, but not in the magnitude that refers to accounts that I mentioned.

Piedad Alessandri -- Credicorp Capital -- Analyst

Okay. So we could expect other...

Cesar Rios -- Chief Financial Officer

These two expenses are -- Sorry, I would like to clarify something. Down the road for 2021, we still expect to incur COVID-19 related expenses, probably for the first half-year -- part of the year, due to the lockdown, all the security measures that you need to take to protect our teams. Okay.

Operator

Thank you. Hearing no follow up, we'll move to our next question from Carlos Gomez with HSBC.

Carlos Gomez -- HSBC Securities -- Analyst

Hello, good morning. My question refers to the lessons that you have learned from the last year. Obviously it's a big shock for most companies. They say that this has been an acceleration of the change. But have you seen anything that makes you think about the structural change of the company in the future? Would you like perhaps to be more in insurance or less in insurance, more abroad or lesser abroad? Has the strategy changed in anyway as a result of the pandemic in the year 2020? And I shouldn't say this, but, can you also tell us why your tax rate was low this quarter? Thank you.

Cesar Rios -- Chief Financial Officer

First I'll answer the tax rate, and then I'll answer the strategy.

Carlos Gomez -- HSBC Securities -- Analyst

Okay.

Walter Bayly -- Chief Executive Officer

Okay. Relating to the tax rate, we calculate the tax rate based on local accounting figures, and in local accounting figures we have, I would say two significant parts. One is that we have increased for the year, the size of the investment portfolio, and we have then tax exempt securities. And particularly in the last quarter, we have also recorded significant provisions in local accounting. So the combining effect of these two factors has led to a drop in income and income tax clear.

Carlos Gomez -- HSBC Securities -- Analyst

Thank you.

Walter Bayly -- Chief Executive Officer

Carlos. Yeah. To answer the second part of your question. Actually that was my last closing comments in my remarks at the end. We have not modified our strategies, but undoubtedly we have accelerated several initiatives, as were mentioned, because of the accelerated use of digital channels. So what this means is that we will probably deteriorate our short-term efficiency ratios. But we think this is a smart thing to do for long-term results and competitiveness. We have had very extensive reviews of all our strategies with all our business units, and that has dramatically changed the plans that have been laid off, have -- and then this is just accelerated. And I think that the lesson is -- that I personally take from this is that, while you feel that choosing the right path maybe grew faster, but that's my own personal my own personal thoughts, Carlos.

Carlos Gomez -- HSBC Securities -- Analyst

Thank you very much.

Operator

Thank you. Our next question comes from Jason Mollin with Scotiabank.

Jason Mollin -- Scotiabank -- Analyst

Hi. As the second question, and maybe a follow-up of what Carlos was asking. On the earnings mix at Credicorp considering its banking, insurance, pension and investment banking, and wealth management businesses, in general terms, do you see a change in the earnings growth rate from the different segments that would alter your view of the composition of Credicorp's earnings going forward?

Walter Bayly -- Chief Executive Officer

Okay. Let me take this one, Jason, this is. Walter. We have several dynamics. I think that within Credicorp, BCP will obviously continue to be by far the largest contributor and we still have a lot of room to grow in Peru through BCP and through Mibanco. Of course, this is a year to rebuild the profitability not to grow a lot, but we think that due to the continued still low levels of penetration of the Peruvian population in the banking system, there continues to be a lot of opportunities there. So we grow more the vehicle by vehicle, I would say that the segments in which we will grow will be in the SMEs and at the low end of the consumer side. There continues to be opportunities both on the transactional side, considering our platforms, as well as on the lending side as that will continue to be the segments in which we will grow more in Peru for obvious reasons because the upper end of the consumer and all the top corporates and middle market companies are fully banked. To complement that, we have wealth management. We continue to have nice opportunities both in Peru, in Chile -- and in Colombia and we have this initiative that we have for microfinance in Colombia, which we will slowly try to see if we can capture the growth, but in summary, where will Credicorp growth in the un-banked segments of the population, which our consumers and SMEs, particularly in Peru.

Jason Mollin -- Scotiabank -- Analyst

And how does insurance fit into that outlook, Walter?

Walter Bayly -- Chief Executive Officer

That, it fits quite nicely. We are developing every day and we get better at it, at insurance product precisely for those segments of the population. We've been very successful with our oncological insurance and we think that there are more than the oncological insurance that we can take to those segments of the population, of course recognizes that in insurance, there is still a lot more room to grow, but it's much more difficult than in banking. The penetration of insurance in Peru continues to be very low even at some of the higher-end levels of the consumer population. So insurance complements quite nicely there.

Jason Mollin -- Scotiabank -- Analyst

And this pension, is the outlook for pension growth with the changes, with potential changes or reforms, is that something you think could grow slower in the new context or faster than we've been seeing the growth?

Walter Bayly -- Chief Executive Officer

I think that one of the potential out -- the potential outcome from the industry will be changed dramatically. So I would expect pensions to become a very, very small contributor to Credicorp going forward.

Jason Mollin -- Scotiabank -- Analyst

I really appreciate your views. Thank you all very much.

Walter Bayly -- Chief Executive Officer

You are welcome.

Operator

Thank you. I would now like to turn the conference back to Mr. Walter Bayly, Chief Executive Officer, for closing remarks.

Walter Bayly -- Chief Executive Officer

Thank you. We are very pleased to have led 2020 behind. It undoubtedly was a very remarkable year with Peru having been impacted by the most severe recession in our modern history. We were always very confident with the strengths of our balance sheet, which we felt was more than enough to take us through this severe downturn. This position of strength led us to try to the extent possible and with the assistance of our this group to fully acknowledge and recognize in our results the expected credit losses in the most vulnerable portions of our portfolio.

This, with the idea to leave the losses mainframe behind and focus management's attention with the task of rebuilding our profitability while accelerating our delivery of our products via digital channels. Due to conservative nature -- our conservative nature, we took the precaution of issuing $500 million in five-year bonds at the holding company level. Cash, which is still sitting on our books, we believe that this low rate environment allowed us at a minimal negative carry to have a second level of insurance, which has not been utilized.

Looking forward, there continues to be two elements of our said uncertainty after it was mentioned the second wave of contagion, which is currently taking place. We believe that as a country, we have learned lessons from the first place and given that the vaccines are already arriving, we expect the second wave to be less severe, but definitely we will know for certain in the next 30 to 60 days. The second element of our uncertainty is related to the political situation and elections. The political scenario continues to be a source of uncertainty, but we will try to navigate those waters as we have had in the past.

On the business front, this is the year, as I mentioned to rebuild our profitability. This rebuild in should happen throughout this year and we should start to see the results quarter after quarter until reaching, as I mentioned before, the last quarter two results and returns, still below, but close to sustainable levels. We have not modified our strategies but undoubtedly we have accelerated several initiatives, which probably will deteriorate somewhat our short-term efficiency ratio, but we are confident that these decisions are the smart ones, the best for long-term results and competitiveness.

Before we finish this call, I would like to announce that we will be publishing our Annual Sustainability Report prior to the end of the first quarter. During the first half of last year, to further strengthen our long-term performance and competitiveness in the markets we operate in, we launched the project to develop a strategy aimed at integrating sustainability more deeply and consistently into our business strategies as well as in our day-to-day activities. We worked for five months with a dedicated commitment of more than 30 leaders across six of our largest operating companies to identify sustainability-related risks and opportunities that could create strategic or financial value in growth while generating a positive impact in society for each of our businesses. As a result, we redefined our vision, purpose and values, which are now better aligned with our current role in society and businesses and established our 2020 and 2025 commitment to sustainability product. We introduced this plan to you in our -- we will introduce this plan to you in our upcoming 2020 sustainability report. We look forward to hearing your comments and further expanding on our program in the future.

Thank you everyone for your attention on today's call. As always, the team is available to meet and talk with you more about our performance, operating environments, and strategies. Thank you all very much.

Operator

[Operator Closing Remarks]

Duration: 80 minutes

Call participants:

Cesar Rios -- Chief Financial Officer

Walter Bayly -- Chief Executive Officer

Gianfranco Ferrari -- Deputy CEO & Head of Universal Banking

Alvaro Correa -- Deputy CEO & Head of Insurance & Pension Funds

Ernesto Gabilondo -- Bank of America Meryll Lynch -- Analyst

Jason Mollin -- Scotiabank -- Analyst

Tito Labarta -- Goldman Sachs -- Analyst

Jorg Friedman -- Citigroup -- Analyst

Geoffrey Elliott -- Autonomous Research -- Analyst

Andres Soto -- Banco Santander -- Analyst

Alonso Garcia -- Credit Suisse -- Analyst

Piedad Alessandri -- Credicorp Capital -- Analyst

Carlos Gomez -- HSBC Securities -- Analyst

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