Banco Bbva Argentina SA (BBAR) 2010 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the BBVA Banco Frances First Quarter 2010 Earnings Results Conference Call. Today's call is being recorded.

I would now like to turn the conference over to Cecilia Acuna. Please go ahead.

Good morning, everybody. Let me stress that some of the statements made during this conference call may be forward-looking statements within the meaning of the Safe Harbor provisions found in Section 27-A of the Securities Act of 1933 and the US Federal Securities laws. 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 BBVA Banco Frances' annual report on Form 20-F for fiscal year 2009, filed through the US Securities and Exchange Commission. As customary, we will make a brief summary of the most important topics for the first quarter of fiscal year 2010, and then we'll be open to questions.

Let's begin with the macroeconomic environment. In the first two months of the year, economic activity maintained a considerable rate of recovery. The monthly estimator of the common economic activity showed a growth in the first two months of the year of 2.1% compared to the previous quarter in a seasonally adjusted period. A high level of consumption and an increase in investments were the drivers of the recovery. The primary (inaudible) of the national public sector was ARS3.5 billion, a decrease of 22.9% compared to the first quarter of 2009. Despite a positive performance of fiscal resources, primary spending accelerated with an increase of 33.8% in annual trends in the first quarter of 2010.

The Central Bank intervention in the foreign exchange was a net purchase of ARS1.2 billion during the quarter. The exchange rates according to the Central Bank closed at ARS3.87 per US dollar, increase of 2.1% during the quarter. The international reserve stock reached $47.6 billion, shown as a small decrease of $500 million during the quarter. The regular rate at private banks was 9.4% at the end of the quarter. This slight downward trend during the quarter was due to increasing financial system liquidity and the recovery of the positive intervention from the Central Bank in the foreign exchange market.

Total deposits in the financial system increased 4.1% on average in the first quarter of 2010, while private sector deposits rose 2.9%. Private sector loans showed an increase of 3.1% during the first quarter, reflecting an improvement compared to the first quarter of 2009.

Going to the bank's performance, during the first quarter of 2010, the bank's net income reached ARS169.7 million, increasing 85.9% compared to the same quarter of 2009, and 8.6% compared to recurring debt in the first quarter of 2009. Meanwhile, net interest income grew 25.8% and 3.5% compared to the same recurring revenue in the first quarter of 2009 and the fourth quarter of 2009 respectively. This increase is based on an improvement in the private sector financial margin due to high net income, which is consequence of the steady growth of the loan portfolio, mainly in the most dynamic sector, together with the lower total spend, resulting in an improvement in the private sector.

As in the Argentine financial markets as a whole, the private sector loan portfolio registered a slight growth in the first three months of the year. Meanwhile, in annual sales, growth reached 8.2%. In the past 12 months, companies' finances showed a higher growth with an increase of 12% with an increase in consumer loss (inaudible) was 6.6% in the same period.

Regarding asset quality, BBVA Banco Frances remains a leading bank in the financial system. As of March 31st, 2010, the number formula ratio reached 1.04% with the coveted level of 292.3%. Proven rate management is one of the key factors that allows the bank to maintain excellent rates of loan ratios.

In terms of liabilities during the first quarter of the year, the bank's total deposits increased by 1.2%. Balances in certain accounts showed their strongest growth, reaching 56.1% of total responses as of March 31st, 2010.

BBVA Banco Frances maintained adequate levels of liquidity and solvency. At the end of the first quarter 2010, liquid assets, cash and deal from banks, the Central Bank instrument represented 44.3% of bank deposits. On the other side, the capital ratio reached 19.6% of the wide scale rates assets, increasing 30.2% in the last 12 months.

Now, let's move onto the P&L. Net financial income improvement is based on the private sector financial monitoring growth due to higher income consequence of the increase in the loan portfolio, mainly in the most dynamic sectors. Together, with the lower cost of funds resulted in an improvement in the fund transfer. This improvement was partially offset by lower income from repo operations with the Central Bank.

Meanwhile, income from public and private securities in the first quarter of 2010 decreased 36.5% compared to the previous quarter. The cost increases in public bonds valuations were not generated during this quarter.

Regarding provisions from loan losses, it remained at a similar level to the previous quarter and there were no significant changes in the loan portfolio blend. During the first quarter of 2010, net income from services grew 21.5% and 7.9% compared to the first quarter of 2009 and the fourth quarter of 2009 respectively due to higher revenues related to credit card bank accounts and insurance operations and higher fees related to foreign trade in the business segment.

Continental detailed spendings increased 22.2% during the first quarter of 2010 compared to the same quarter of 2009 and 6.1% from the previous quarter respectively, driven by increases in personal expenses, and to a lesser extent, in general expenses. The raise in personal expenses for the first quarter of 2010 is explained by the rate increase of 23.5%, coming from the 2010 labor agreement signed in March of this year (inaudible) 2010. The increase in general expenses is due to higher charges in electricity telecommunications, taxes on organization and development expenses, and amortizations related to a higher level of activity and investment on safety within the enterprises.

And finally, income tax charge decreased in the first quarter of 2010 compared to the previous quarter due to lower tax gains. On the other hand, important growth of the income tax charge from the first quarter of 2009 is mainly explained by the tax losses that the bank had during that quarter of productivity levels.

The private sector portfolio totaled ARS10.4 billion at March 31st, 2010, showing a minor increase compared with the previous quarter, an 8.2% growth compared with the same quarter last year. During the first three months of the year, the consumer portfolio has grown, bolstered by an increase in personal loans, credit cards and car loans, whereas mortgages showed a minor reduction. On the other hand, finances to large corporations registered a not significant decrease, personal expense by a rise in low to middle and small size companies. Such increase was driven by the discussed document and also loss of finance and foreign rates operations.

Private sector loan performance reflected a significant increase of 8.2% compared to the same quarter of 2009 due to growth in finances to that free segment. Once again, credit cards, personal loans and car loans, less expansion in the recent segment while advances is starting now another loss with the same in the middle market and corporate sector.

Regarding the public sector debt during the first quarter of 2010 maintained a similar level than in the previous quarter. However, in the last 12 months, total debt grew 27%, mainly due to the recovery in the public asset valuation registered during this period.

In terms of liability, total deposits raised ARS18.5 million at March 31st, 2010, increasing by 1.2% during the quarter while decreasing 4.1% compared with the first quarter of 2009. It is important to highlight that current account balances include treasury deposits, which explained a decrease resistant to the -- during the last 12 months.

Consequently, excluding (inaudible) funds, deposits grew 1.4% during the first quarter and 7.2% in the last 12 months. Likewise, we have considered (inaudible) current accounts increased 24% during the last 12 months representing 56.1% of total deposits at the end of March 31st, 2010. On the other hand, signed deposits fell 1.8% and 3.9% compared with the previous quarter and with the same quarter a year ago respectively.

Total shareholders equity of the bank totaled ARS3 billion at the end of the first quarter 2010, whereas the excess of capital over the Central Bank requirement was ARS1.1 billion. The capital ratio raised 19.6% of risk weighted assets at March 31st, 2010, increasing 13.2 percent during the last 12 months.

Finally, in an (inaudible) and a special shareholders meeting held on April 30th, 2010, the shareholders approved (inaudible) dividends totaling ARS480 million of referendum of the Central Bank (inaudible). However, as of the date of this (inaudible) Central Bank authorization.

Thank you very much. We are now ready to answer your questions.

Thank you.

(Operator Instructions.)

And we'll go first to Tito Labarta at Deutsche Bank.

Hi, good morning, Cecilia. I just had a couple of questions just in terms of if you could give us some guidance in terms of your expectations for loan growth for the full year and kind of what segments would be driving that growth. And then, a second question in terms of your provision charges - do you expect the level we saw this quarter to continue to be the recurring level going forward, or could there be any improvements in asset quality? I know it's already pretty solid NPL ratios - just want to get a sense of provision charges going forward. Thanks.

Good morning, Tito. I am Daniel.

Hey, Daniel.

Regarding the loan growth, we maintain the same forecast. With respect to loan growth of 12% -- sorry -- 20% for the year for the bank. And regarding the -- oh, sorry -- the -- regarding the segment, we saw more growth in the middle market segment in the first three months, and as a consequence of, we reduced the interest rate and we launched a new line of long term financing. So, we are very active in that segment. So, we would expect more growth in that segment and in the conception segment because of the conditions of the country and the conditions of the financial system.

As far NPL, we don't see -- we will see a drop in NPL ratio. We're going to see a degradation. And provisions -- we think that the level of provision in the rest of the year will be the same as in the first quarter. We're already a little -- slightly increased because of more growth or -- yes, more growth in (inaudible).

Okay, great. Thanks. That's very helpful.

You're welcome.

And we'll go next to Ricky Sperber at Citi.

Yes, good morning, everyone. I had two questions. First is what is your outlook for operating expense growth, both personnel and administrative expenses growth for the year? And the second one is going back to asset quality. Given the level of NPLs that you guys are having, why did you feel the need to increase the coverage ratio further this quarter? I think you're still a little bit lower than the level that you -- it was pre-crisis, but still at 290 is pretty high. So, I was wondering why you feel the need to increase the coverage.

Good morning, Ricky. Well, regarding expenses, we are expecting an increase of 20% for this year, more in the personal expenses. As you know, the labor union -- the agreement with the labor union was higher than 20%. And we are trying to control the general expenses and trying to then increase the rest 20%. And so, the mix will be 20% -- respectively 20% growth in an adjusted specific growth.

Regarding asset quality, the current ratio increase is a consequence of our policy -- our provision policy. We are provisioning 2 and 2.5% for new loans in the retail segment. That is the reason that we are increasing the coverage ratio.

And for the future, we think that that coverage ratio will be in the same level or with a slight decrease. We don't think -- we don't see the coverage ratio much higher than this number.

Okay, thank you.

You're welcome.

(Operator Instructions.)

And we'll go next to Federico Rey at Raymond James.

I only have two questions. The first one is regarding the loan growth - if you can provide us a guidance for the rest of the year. And the second one is regarding the intermission spreads. What's your view going forward in terms of lending rates and funding rates? Thank you.

Good morning, Federico. Well, regarding loan growth, as we mentioned, we expect to have 20% of increase for this year, in the million market, more than 20% because we are more active in this segment and in the retail segment, too, because we are -- our strategy is more aggressive in the last months. As we -- as you know, we made an alliance with (inaudible) company to buy (inaudible) with accounts and we are very active in the retail segment. So, we are expecting a loan growth more around 20% in that segment and in the middle market segment, too, and obviously, in corporate segment, less increase or less growth.

Regarding spreads, we are expecting a compression. We are reducing the interest rate, the loan interest rates. That's one reason that we are increasing our loans in the middle market. And so, we will expect a compression in the rest of the year. But, as you mentioned, there was a reduce in the cost of fund in the first quarter of 2010, so we didn't see that compression in the first quarter. But, we are expecting a compression for the rest of the year.

Thank you very much.

You're welcome.

(Operator Instructions.)

And at this time, there are no further questions. I'll turn the conference back over to management for any closing remarks.

Well, thanks again for showing up. Should you have any further questions, don't hesitate to contact us. Bye.

And that does conclude today's conference. Again, thank you for your participation.