Banco Bbva Argentina SA (BBAR) 2011 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the BBVA Frances Reports Consolidated Third Quarter Earnings for Fiscal Year 2011 conference call. Today's call is being recorded. I now would like to turn the meeting over to Ms. Cecilia Acuna. Please go ahead.

Thank you. Good afternoon, everybody. First of all, 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 under U.S. 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 BBVA Banco Frances' annual report on Form 20-F for the fiscal year 2010, filed to the U.S. Securities and Exchange Commission.

As customary, we will make a brief summary of the most important topics of the third quarter of fiscal year 2011, and then we'll be open to questions.

Let's begin with the macroeconomic environment. The Argentine economy decelerated its pace of growth during July and August. On average, the monthly estimator of economic activity decreased 0.2%, compared to the second quarter of the year. Inflation, as measured by the Greater Buenos Aires Consumer Price Index, which is used to calculate the CER adjustment for some sovereign assets, increased 2.5% in the last three months, 9.9% in annual terms, accumulated 7.3% during the first nine of 2011.

The primary fiscal surplus of the national public sector was ARS1.3 billion during the third quarter, a decrease of 79% compared to the previous quarter. Total public sector revenues grew 6.4%, while fiscal expenditures increased at the rate of 11.4% in the same period.

The accumulated trade balance ended with a surplus of $2.4 billion at the end of September, 40.6% lower than the second quarter, and 19.1% below the balance obtained in the same quarter of 2010.

The central bank intervention in the foreign exchange market resulted in saves of $2.1 billion in the same quarter, compared to the (technical difficulty) the previous ones, when the monetary authorities purchased $397 million. The exchange rate closed at [4.2045] per U.S. dollar by the end of September, increasing 2.3% compared to June.

The stock of international reserves fell $3.1 billion during the quarter, totaling at $48.6 billion at the end of September. The Badler rate at private banks averaged 13.06% in September, an increase of 178 basis points compared to the average of June.

Total deposits in the financial system increased 6.4%, on average, with respect to the second quarter, while private sector deposits rose 7.6% in the same period. In terms of loans, private sector loans showed a high increase of 13.1% during the period, reflecting an increasing degrees of growth compared to the performance during the second quarter.

Now, going to the Bank's performance. BBVA Frances [recovering] net income reached ARS291.7 million at the end of the third quarter of 2011. While including the adjustment in the public bonds valuation, which are at mark to market, such net income was ARS114.7 million.

Net financial income generated by the [intermidation] with the private sector maintained its [award] credit, reflecting the significant expansion in the loan portfolio. The total portfolio totaled ARS20.7 billion, as of September 30, 2011, in line with this significant growth in consumption and capital investment. The add-on expansion was ARS7.6 billion whereas, in the last three months, was ARS2.4 billion.

BBVA Frances continues being the leader in the financial system in terms of asset quality. As of September 30, 2011, the Bank's asset quality ratio, non-performing loans over total loans, was [about 14.4%], while its coverage ratio provision of non-performing loans reached 456.9%.

The Bank's total deposits reached ARS28.5 billion, an increase of 31.2% and 8.9%, compared to the third quarter of 2010 and to the previous quarter, respectively.

BBVA Frances returned to the capital markets, placing deferred issuance of negotiable obligations under the $500 million [program] [and to fund its business goals]. The total amount issued exceeded ARS185 million, the largest transaction for an Argentine bank in local currency and one of the most significant [cashier of] type of issuer.

The Bank maintained adequate levels of liquidity and solvency. As of September 30, 2011, liquid assets, cash and due from banks, plus central bank instruments, represented 32.5% of the Bank's deposits. The capital ratio reached [15.5%] of weighted-risk assets, with an excess of capital over the central bank requirements of ARS1.1 billion.

In September 2011, 516,544 ordinary shares were issued as part as the merger with Consolidar Comercializadora. On October 6, 2011, the BBVA Group entered into an agreement with [RLA] Argentina, Sociedad Anonima, to sell its [held] in Consolidar Aseguradora de Riesgos del Trabajo, 12.5% of which corresponds to BBVA's [fair share].

Now, let's move on to the P&L. The significant expansion in the private sector loan portfolio is reflected in higher interest income. There is an increase in net financial income of [61.8%] in the last 12 months whereas, in the last quarter, growth was 21.3%.

Regarding the results on public and private securities, the Bank has [the occasion] to mark to market its total [private] bonds portfolio. Consequently, income from securities includes the non-recurring income originated by valuation in the portfolio.

That results total losses of ARS190.5 million and ARS16.7 million in the [first] and second quarters of 2011, respectively, whereas the quarter ended of September 30, 2010, included [an amount of] ARS347.1 million.

Net income from services increased 41%, compared to the third quarter of 2010, and 13.3%, compared to the second quarter. There was significant growth in net income from services -- 37.4% during the last 12 months -- driven mainly by increased consumption of credit cards, by growth in fees generated from insurance sales, along with those from PSA finance, which grew 55% during the analyzed period.

On the other hand, services [charge] expenses grew mainly due to the increase in promotions related to [lampus product]. Compared to the previous quarter, net income from service continues the positive trend, led mainly by the higher level of business activity.

The administrative expenses did not register a significant variation compared to the third quarter of 2010, mainly due to a decrease of 12.6% in personnel expenses, consequence of the charge related to the early retirement plan, registered in such period. That was partially offset by growth in general expenses.

Compared with the previous quarter, administrative expenses grew 6.4%, including a 7.1% increase in personnel expenses resulting from [starter] salary increases, whereas growth in general expenses was 5.5%, mainly due to higher charges related directly to the activity level and the price adjustments related to [our strategic] costs.

As of September 30, 2011, the Bank and its subsidiaries had [532] employees. The branch-office network totaled 268 offices, including 240 consumer branch offices and 28 branch offices specializing in the middle-market segment. Corporate banking includes seven business units, grouped by industry. In [complementing its] distribution network, the Bank has 14 [in-Company] branches, 2 points of sale, 650 ATMs, and 694 with deposit boxes.

As regards to the activity level, the private sector loan portfolio totaled ARS20.7 billion, as of September 30. In line with the important pace of growth in consumption and capital investment, the add-on expansion was 57.7% whereas, in the last three months, grew 12.7%.

All the segments were carving out solid performance during the last 12 months. Middle-market segment portfolio grew 68%. The retail segment increased 54%. And, the corporate segment increased 47%.

As for the public sector debt, exposure to the public sector national treasury decreased compared to the previous quarter, mainly due to a lower valuation and sale of bonds. As of September 30, public sector national treasury assets represented 6.3% of the Bank's total assets. Total exposure to the central bank's bills and note [makes it difficult to reverse because of action], representing 5.2% of the total bank assets.

Total deposits reached ARS28.5 billion, an increase of 31.2% and 9.9%, compared to the third quarter of 2010 and to the previous quarter, respectively. The Bank's total shareholders' equity reached ARS3.4 billion, representing an excess of ARS1.1 billion over the central bank capital requirement. On the same day, the capital ratio reached 16.5% of assets adjusted to risk.

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

Thank you. We'll now take questions on the telephone line. (Operator Instructions). Our first question is from Federico Rey from Raymond James. Please go ahead.

Good afternoon. Thank you for the call. My question is regarding margins. I would like to understand [considering] the structure of your assets and liabilities and the [re-pricing] of this line. How to be the impact in terms of the market going forward based on the increase in the interest rates? [I mean, the question in final rates]. Thank you.

First of all, you know that we have 57% of our deposits in sight accounts. First of all. So, the increase in the interest rate in the liability side has not a big impact in our [structure]. And, as you know, we are increasing the asset-side interest rate, too. So, we expect an increase in the net interest margin.

OK. Thank you.

Thank you. (Operator Instructions). Our next question is from Jorge Chirino from Morgan Stanley. Please go ahead.

Just one question regarding the tax rate this quarter. It was also very high compared with the previous quarter, with the exception of the second quarter. I just want to have a sense of what happened and what to think going forward in terms of the tax rate. Thank you.

Well, nothing special happened in the income tax. I think it could be something related with public bonds, but I'd have to check it.

OK. Thank you.

Thank you. There are no further questions. At this time, I would like to turn the meeting back over to you, Ms. Acuna.

Well, thanks again for joining us. And, if you have any further questions, please contact us in our offices.

Thank you. The conference call has now ended. Please disconnect your lines. Thank you for your participation.