Banco Bbva Argentina SA (BBAR) 2006 Q3 法說會逐字稿

Good day everyone, welcome to the Banco Frances Third Quarter Fiscal Year 2006 Earnings Conference Call. As a reminder, today's call is being recorded. At this time I'd like to introduce Marcelo Canestri, Chief Financial Officer, [Enrique Bartilome], Head of Planning Department, [Cecelia Akuna] with Investor Relations.

I will now turn the call over to your host, Miss Adriana Arbelbide, Investor Relations Officer. Please go ahead ma'am.

Good afternoon, everybody. Let me stress that some of the statements made during this conference call may be forward looking statements within the meaning of Safe Harbor provisions found in section 27A of the Securities Act of 1933 and the US federal securities law. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Additional information concerning these factors is contained in Banco Frances annual report on the form 20F filed with the US Securities and Exchange Commission.

As customary, we will begin with a brief summary of the most important points of this third quarter fiscal year 2006, and will then be open to questions. Let's begin with the macroeconomic environment. Argentine economy maintains strong. Economic activity appears to have accelerated in the third quarter, with industrial activity rebounding in September as business paced up production.

Inflation, measured by CPI, averaged a single 0.7% increase per month in the third quarter, accumulating 7.1% in the first nine months of the year, well below the 8.9% hit recorded in the same period of previous fiscal year. On the fiscal front, the family fiscal surplus rose to 6.5 billion pesos during the September quarter, with increasing collections due to the exceptional performance of social security taxes while primary expenditures seem to have stabilized.

And for the financial system, private deposits including new peso and dollar dominated funds, maintained a positive trend, growing by 4.7% equivalent to 5.2 billion pesos as compared to the quarter ended on June 2006, led by larger funds and time deposits. On the other hand, public sector deposits grew by 6.6%, equivalent to 2.6 billion pesos during the last three months period.

Let me highlight that, by the end of September, this [top of] international reserves reached the same level of December 2005, previous to the international monetary fund of our in debt cancellations. As for the bank, I would like to remark, La Banco Frances is the first bank among private banks in terms of deposits. With a network of 232 branches, complimented by alternative channels, the bank serves the three segments of the market and have [in told] a strong business dynamic.

So for this year, set strategy was started in a 46% private sector loan growth, consolidating the positive trend of the last quarter and [so painting] the financial system performance with sustained -- which sustained an expansion of 29% in the same period. The bank was able to comply in only nine months, the growth target for the year 2006, while it remained a leading position in terms of private sector deposits.

I've mentioned in our press release, actions were not only limited to the core business. The bank also concentrated in further developing the transactional business and improving the [taxes] and liability structure. And for this latter, Banco Frances sold public -- certain public [inaudible] and registered provisions that would allow the bank to complete in the future the process of mark to market valuations of public sector bonds issued by the federal government. Going into the quarter's earnings, during this first -- third quarter, total earnings amounted to 46.1 million pesos, compared to a gain of 27.6 million pesos [posted] a year ago.

Increases in the core business, jointly with an [upper bid] management of public sector assets, were the main drivers of certain improvements in the bank's performance. Although bottom line continues to show the effects of the crisis, mainly charges related to the [multi-station] of the loss derived from the payment of legal injunctions, return on equity increased from a 7.1% level, in the first nine months of year 2005, to a 9.5% during the same period of the present fiscal year. Furthermore, should we exclude the effect of legal injunctions, return on equity would reach over 30%.

Now, lets turn our attention to the business itself. A higher level of activity [lead to] significant expansion in the private sector loan. Third quarter figures continue to show a solid performance in lending activity. The important increase in the loan portfolio was mainly driven by loans granted to corporations including middle market companies and to the consumer segment. [Regional] portfolio's kept improving on the back of a more aggressive marketing strategy. Personal loans grew at a 9 -- at an 18.3% rate during the quarter, and credit card financing increased 2.3% during the same period.

[Inaudible] corporate loan portfolio was led by advances and other loans, included foreign [rate] transactions. And let me also highlight, the strong increase in car financing portfolio, carried out through PCR and global subsidiaries. Currently the bank's strategy aspires to grow the private business. We have implemented commercial actions in that direction, and we've begun to see the outcome of those actions.

With respect to total exposure to the public sector, the bank further decreased the assets through the sale of guaranteed loans carried out during the September quarter. The bank's long-term public sector portfolio totaled 3.8 billion by the end of this third quarter fiscal year 2006, but is almost 1.9 billion pesos lower than the September 2005 balance. Even on considering total [exposure] that this including investment in bills issued by the central bank, which is many temporary liquidity allocations, the portfolio reduced by almost 1 billion pesos in this last 12 months.

As for liabilities, the strategy was focused on improving the funding mix with a larger participation of retail deposits, which provides stability and the cheapest funding costs. These resulted in an expansions of our retail market share of 30 basis points. Total deposits of the bank grew 5.2% as compared to the previous quarter, reaching a 10.1% market share in private sector deposits in September 2006. Growth as compared to the previous quarter was mainly attained in pesos and dollar denominated time deposits, which showed a [17.5%] and a 21.4% expansion, while CER adjusted funds maintained its decreasing trends with a 17.1% drop.

On the other hand, foreign currency denominated funds showed an accumulated 55.3% growth in the last 12 months period. Amounted to $573 million as of September 30, 2006. Now lets move on to fee income. This steady growth in transactional business continued in the third quarter, and fee income increased 7.2% as compared to the figure posted in the previous quarter.

Efforts in the transactional business resulted in a sustained increase in all of the different fee related products, mainly driven by a higher activity level. In this sense, it should be mentioned growth in foreign trade activity, as well as the outstanding performance in the sale of credit cards, where the bank was a part of its complimentary channels was able to duplicate the number of cards sold. Furthermore, its important to note that income from foreign exchange purchase and sales, is not accounted for in income from services but in this financial [income].

As of September 30 , 2006, such income amounted to approximately 20.2 million pesos. [Inaudible] to administrative expenses; higher expenses as compared to the previous quarter is mainly related to an attachment in the [bonus] provisioning accounted for during this third quarter, due to a higher profitability level. As of September 30, 2006, the bank had 3,590 employees and a network of 232 consumer branches complimented by alternative channels.

And let me highlight that after the process of contraction of our network in response to the price and to the decrease of business, such trends turn around due to the more -- higher activity level. The decreasing personnel is mainly explained by [inaudible] subsidiary completed by the sale appraisal and subsidiary completed this last July. However, should we exclude such effects the number of employees could increase showing the strong commitment towards a further developing in our business commercial efforts.

As for asset quality, Banco Frances maintains its leadership in the market with a strong asset quality standard. Non-performing ratio rated 1.1% by the end of this third quarter, with a 178 coverage. And let me conclude, we're enforcing our main challenge for the future; that is growth in the core business in order to attain a sustainable profitability. In this sense, private sector lending expansion is still to be our priority and Banco Frances is aware of this.

Thank you very much, and we are now ready to answer your questions.

Thank you, very much.

[OPERATOR INSTRUCTIONS]

And our first question will come from [Jorge Parker].

Hi. Good afternoon. Yes, my question is basically where do you see the bank's loan portfolio at the end of the year, considering that your full year target was achieved in nine months? Thank you.

[OPERATOR INSTRUCTIONS]

Yes, hello. Well yes, it is true that in only nine months we were able to achieve our budget for the whole year, and regarding this -- well this will depend on what happens with the economy, but I would say that [inaudible] that we should maintain this last quarter with respect to loan growth. But this -- we surpass most [inaudible] we will surpass the budget for 2006.

[OPERATOR INSTRUCTIONS]

And there are no further questions at this time.

Well, thank you everybody for participating. And in case you should have any other questions you can call us in our offices. Thank you.

And that does conclude the conference for today. We thank you for your participation. Have a great day.