Banco Bbva Argentina SA (BBAR) 2010 Q3 法說會逐字稿

Good morning, ladies and gentlemen and welcome to the BBVA Banco Frances reports consolidated third quarter earnings for fiscal year 2010 conference call. Today's call is being recorded. I would now like to turn the call over to Ms. Cecilia Acuna. Please go ahead, ma'am.

Thank you. Good morning, everybody. Let me stress that some 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 under 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 (technical difficulty). Sorry. Additional information concerning these factors is contained in BBVA Banco Frances annual report on form 20-F for the fiscal year 2009 filed to the US Securities and Exchange Commission.

As customary, we will make a brief summary of the most important topics of the third quarter of fiscal year 2010, and then we'll be open to questions.

Let's begin with the macroeconomic environment. The high level of consumption and an increase in investment continued to boost the economic activity. The monthly estimator of economic activity grew 8.3% compared to the same quarter of the previous year.

During the first quarter of 2010, fiscal revenue increased 37% compared to the same quarter a year ago. The recovery was aided by the improvement in economic activity and the contribution of the export tax following the (inaudible) recorded. While VAT and income tax grew below average in the same period.

The primary fiscal surplus of the national public sector was ARS9.8 billion, an increase of 544% compared to the third quarter of 2009. The improvement was due to the positive performance of tax collections and other fiscal resources. (Inaudible) received from Central Bank. While primary spending grew 34.5% in annual terms during the third quarter of 2010.

The Central Bank intervention in the foreign exchange market was a net purchase of $3.6 billion during the quarter. The exchange rate, according to the Central Bank, closed at ARS3.96 per US dollar, an increase of 0.7% compared to June 30, 2010.

The international reserves stock reached US$51 billion, increasing US$1.9 billion during the third quarter. The Badlar rate at private banks was 10.12% at the end of the quarter and remained stable during the period.

Total deposits in the financial system increased 6.7% on average in the third quarter of 2010, while private sector deposits grew by 8.4%. Private sector loans show an increase of 8.1% during the third quarter. In BBVA Banco Frances, increase was 12.7%, growing its market share in such period.

Going to the Bank's performance, BBVA Banco Frances' net income totaled ARS437.3 million at the end of the third quarter of 2010, accumulated ARS800 million in the first nine months of the year. This income includes no recurring gains generated by the increasing by ratios of public loans.

International income continued the up trends in terms of recovery earnings. On one hand, due to the sustained growth of the intermediation with the private sector was an important expansion of the loan portfolio and to the earnings generated by public bonds.

Private sector loan portfolio grew 12.7% during the last three months whereas in (inaudible) the increase reached 31%. (Inaudible) portfolio exceeds this ARS13 billion. Finances to companies as well as those to consumers show significant growth in the last 12 months.

BBVA Banco Frances continues to show the best ratios of product quality in the Argentine financial system. As of September 30, 2010, the non-performing ratios decreased to 0.6% with a coverage level of 432.5%.

In terms of liabilities, during the third quarter of 2010, the bank's total deposits increased 7.9%, growth to place in sight accounts, as well as in time deposits.

BBVA Banco Frances maintained very good levels of liquidity and solvency. As of September 30th, 2010, liquid assets, cash and deals from banks, plus Central Bank instruments represented 38.5% of the bank deposits. The capital ratio reached 19.3% of weighted risk assets as -- and the excess of our required capital exceeded ARS1.4 billion at September 30, 2010.

Now, let's move onto the P&L. Net financial income, without taking into account the (inaudible) impact originated by the increase in public bonds valuations, totaled ARS487.4 million, a 12.5% increase compared to the previous quarter. That increased rate 14.4% compared to the recovering financial income of the third quarter of 2009.

The significant development of the private financial margins consequence of the [foreign] intermediation volume, mainly reflected in the retail and media market segments, together with the low cost of funds resulted in an increase of the private net financial income of 13.5% during the quarter and 32.9% in comparison with the same quarter of 2009. Such earnings added to the income generated by the public loan portfolio producing significant growth of the financial margins.

Meanwhile, income from public and private securities showed some growth due the extraordinary increase in the valuation the end of third quarter 2010. Both the trading account of (inaudible) portfolio made a significant contribution to these results.

Regarding provisions for loan losses, it increased during the third quarter of 2010 as a result of significant growth in the loan portfolio, both in the retail segment and in the small and medium sized company segment.

During the third quarter of 2010, net income from services totaled ARS275.9 million, an increase of 10.7% compared to the previous year quarter, and 12.4% during the last 12 months.

A higher volume of activity generated higher fees in the quarter, especially for deposit services, credit card, and insurance. Furthermore, we have decreased our expenses for promotions associated with cards, with (inaudible) [consequence]. And interest expenses grew 43.1% during the last 12 months, meanwhile the valuation compared with the previous quarter reached 25.8%. This valuation occurred mainly in personnel expenses. (Inaudible) from the voluntary retirement plan were accounted for during the quarter.

The increase in general expenses during the quarter was caused by higher advertising and promotion expenses, partially offset by fewer taxes. A consequence the payment of cost dividends made the previous quarter, we represented higher bank (inaudible) tax.

As for the activity level, the private sector loan portfolio totaled ARS13 billion at September 30, 2010. During the third quarter, all segments of the markets recorded (inaudible) functions of the loan portfolio. The near market segments showed the greatest increase. Its portfolio is funded 21.9%, mainly produced by the growth of financial notes, leasing, and (inaudible) of purchase notes.

On the other hand, the retail segment increased 9.3%. Personal loans, credit card, and car loans maintained the upward trend of the most recent quarter.

Finally, the corporate segment portfolio increased 10.5%, mostly originated on advances and other financial loans.

Regarding the public sector debt, it maintained similar levels than in recent periods. However, the [second] increasing these valuations resulted in the rise of 20.4% during this quarter.

It is relevant to note that the relative weight of public assets is diminishing as a consequence of the increase in other assets, mainly the growth of loans to the private sector. In terms of liabilities, total deposits amounted to ARS21.6 billion, increasing 7.9% compared to the (inaudible) at previous quarters, and 20.5% in the last 12 months.

It is important to highlight that current account balances include transitory deposits. Consequently, excluding such transitory deposits current and saving accounts grew 28.1% in the last 12 months, representing 56.4% of the total recurring deposits a the end of September 30, 2010.

Time deposits increased 6.9% and 9.6% compared with the previous quarter and with the third quarter of 2009 respectively. Total shareholder equity of the bank reached ARS3.3 billion as of September 30, 2010, whereas the excess of capital over the Central Bank requirements was ARS1.4 billion. The capital ratio reached 19.3% of risk-weighted assets at September 30, 2010.

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

(Operator instructions) And we'll go first to Tito Labarta with Deutsche Bank.

Hi, Cecilia, how are you? Just a couple of questions. Just first on the valuations of the public sector bonds. I know you had the non-recurring gains this quarter. But just want to get a sense, is this just a one-time thing now? Because I know you also had some gains last year. Could there be more gains going forward? If you could maybe just give a little more color on their revaluation and anything we might be able to expect going forward.

And then just a second question. You also had about ARS32 million related to some recoveries of fiscal contingencies. In the past these have been more provisions. So you just want to get a sense, is this also like a one-time thing? Could you see more recoveries going forward? If you could just give us some more color on how we can expect that line to be going forward. Thank you.

Hello? Hello?

Yes.

Sorry. I didn't answer the question because we have trouble with the line. Could you repeat?

Sure. So the first question was regarding the public sector bonds and the revaluation. I just want to get a sense of if there could be any more one-time gains related to this going forward or was this just -- is this the last time we see this? Or just maybe get a sense of how we can expect this going forward.

And then the second question was in terms of these recoveries of fiscal contingencies of around ARS32 million. In the past these have been mostly provisions in this line, so you just want to get a sense of that also. Was that a one-time thing or we can expect some more recoveries going forward? If we could get some more color on that. Thanks.

Okay. For regarding the public bonds portfolio, we don't expect so high non-recurring gains in the next quarter. And regarding the fiscal contingencies recurring, we don't expect new in the next quarter. It was only this one.

Okay, so then -- so just to follow, so then the -- you mentioned you don't expect such high recurring gains from the public sector bonds. Does that mean that there could be some more, they're just not going to be as high? Like how much could they be? And I know it may be difficult to predict, but just want to get a sense if there could be like the extent of how much of these gains could be recurring, if any.

We're seeing that through the second quarter.

Okay, so more in line with what we saw in 2Q.

Yes.

Okay. Great. Thanks, Cecilia.

You're welcome.

We will take our next question from Ricky Sperber with Citi.

Hi, Cecilia. How are you?

Hello, Ricky. How are you?

Hi. I have two questions. One is in terms of expenses, we saw the percent of expenses increased a lot in the quarter and they're up 50% year-over-year. Some of it must be due to this voluntary retirement plan. How much of it was due to the voluntary retirement plan? And what should we expect in terms of expenses going forward?

And then the second question is kind of a follow-up on a previous question on the bonds -- on the bond gains. How do you decide what part of it is non-recurring? Does it have to do anything with changing valuation method? Or is just that you decide that a certain level of gains are considered recurring and then the rest are considered non-recurring?

Ricky, it was -- first regarding the bonds gains, we considered recurring gains. The bonds -- the non-recurring gain is regarding to the price of the valuation. And you have in the [press], in the pro forma charter.

Right. No, I understand that, but how do you consider -- so I know that, for example, if I look at income from securities and short-term investments was about ARS505 million. And of that, you decided that about ARS347 million are non-recurring. How do you decide how much is non-recurring? Is there a certain type of bonds that you -- bond gains that you consider non-recurring while other ones you consider recurring? What's the definition there?

Okay. The recurring gain is very simple. They go out 2020, it's adjusted by CPI plus 3.5% on average. That again, we take as recurring. The increase in the valuations of an interest rate are the Central Bank give us to value these loans because it's not market for the (inaudible), it's not recurring for us.

Okay.

Regarding the (inaudible) expenses, while we -- is something like ARS30 million this quarter.

So about ARS30 million this quarter was related to the voluntary retirement plan?

Yes, correct.

Okay, got it. Thank you.

You're welcome.

(Operator instructions) We'll go next to Federico Rey with Raymond James.

Hi, good morning. (Multiple speakers) had a question on personnel expenses. And I would like to know if we should be expecting more of this [return of plans] going forward? Thank you.

No, Federico, it was only this quarter.

Okay, please could you repeat the number of the -- in this quarter?

It's approximately ARS30 million.

Thank you.

You're welcome.

At this time, there are no further questions. I'd like to turn it back for any additional or closing remarks. Ms. Acuna, there are no further questions.

Okay, thank you. Well, thanks again for joining us and should you have any further questions, don't hesitate to contact us in our offices.

And this concludes today's conference. We thank you for your participation.

Thank you.