Banco Bbva Argentina SA (BBAR) 2012 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the BBVA Frances Reports Consolidated first quarter earnings for Fiscal Year 2012 conference call. Today's call is being recorded. I would now like to turn the conference over to Ms. Cecilia Acuna. Please go ahead, ma'am.

Thank you. Good morning, 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 and the 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 Frances' annual report on Form 20-F for the fiscal year 2011 filed with the U.S. Securities and Exchange Commission.

As customary, we will start the conference with a brief summary of the most important topics of the first quarter for fiscal year 2012 and then, we'll be open to questions.

Let's begin with the macroeconomic environment. The Argentine economy showed signs of deceleration in the first quarter of 2012 as the monthly estimator of economic increased 5.4% during the first two months of the year in annual terms, down from 7.3% in the first quarter of 2011.

Inflation, as measured by the official consumer price index for greater Buenos Aires, which is used to calculate the CER index, increased by 2.5% in the first quarter of 2012, slightly above the 2.2% growth of the previous quarter.

Primary fiscal surplus of the national public sector was ARS2.2 billion, decreasing 55% compared to the second quarter of 2011. This is a relation of the fiscal policies, is a result of a 29.7% increase of total public revenues in the first quarter of 2012, while fiscal expenditures increased at the higher rate of 34.4% in the same period. And shows why this, our capital expenditures, contributed most to the increase in fiscal spending during the first quarter, while transfers to private sector showed less dynamic behavior, increasing only 17.9% during the last quarter.

Regarding the revenues, only social security contributions showed an overall average increase, while income tax growth was 29.5%.

The accumulated trade surplus in the first quarter of 2012 reached ARS2.9 billion, 89.2% higher than the balance recorded in the first quarter of 2011. This positive performance is a result of total export growth of 8.2% was total input that we made at this level similar to the previous quarter.

The exchange rate, central bank reference rate, closed up ARS4.3780 per year (inaudible) on March 30, 2012, increasing 1.7% compared to the rate (inaudible) on December 30, 2011.

In the first quarter of the year, the central bank's stock of international reserves increased by $915 million to $47.291 billion. The (inaudible) interest rates for private banks fell in the first quarter of 2012, averaging 14.4% in the quarter as a result of the recovering liquidity condition of the financial system.

Private sector loans denominating pesos rose 4.7%, while total reported denominating pesos grew in the financial (inaudible) increased by 7%. And private sector reported grew 8.5% in the same period. The reported denomination in dollars in contrast decreased by 2.5% in the quarter, showing a negative build rate, but is especially better than the full rate of [16.5%] of the last portion of 2011.

Going to the Bank's performance. BBVA Frances (inaudible) earnings of ARS440.5 million during the first quarter of 2012. Such earnings include no recovery in the [south], mainly due to the variations in the public [core] valuations and higher income tax rate. Net recovery results totaled ARS295.1 million, growing 14.2% compared to the same quarter 2011.

During the quarter, the following non-recurring results took place. A loss of ARS20.9 million, consequent of the variations in public bond valuations. A gain of ARS36.6 million from the sale of the bank's stake in the building located in the (inaudible) Street. A gain on ARS2.7 million from the sale of Consolidar [ART] and an increasing (inaudible) in terms of (inaudible), mainly due to the increasing the fiscal valuation of Regular 2020 and the impact generated by the extent of (inaudible) within our '14 portfolio. As well as the tax impact felt by the sale of the building at Consolidar AFT.

Bank financial [link] and resulted during the relation with the private sector increased this 10.8% in the first quarter of 2012, supporting the sustained growth of net interest margin.

As of March 24, 2012, the private sector loan portfolio totaled ARS23.2 billion, growing 41.6% from first to second quarter of the previous years, mainly due to growth in the middle-market loan portfolio and increasing the consumer financing. And generally, the bank signed agreements with the two most important (inaudible). The (inaudible) exporters are following the strategy of focusing on the retail segment.

In terms of asset quality, BBVA Frances continues to lead the others by financial system, showing a non-performing low ratio of 0.68% and a recovery ratio of 352.1%. Total deposits grew 23.2% in annualized terms, totaling ARS29.7 billion as of March 31, 2012.

So generally BBVA Frances placed a second (inaudible) of its phase of negotiable obligations with a steep high level of demand and a load expansion of the issued amount from the initial (inaudible) ARS425 million to ARS148.9 million. The (inaudible) high levels of liquidity and solvency, as well was (inaudible) currently with assets, which result in 35.8% of the bank's total deposits.

The capital ratio reached 16.3% of the weighted risk assets, with an excess of capital of the Argentine central bank minimal requirements of ARS1.6 billion.

On January 27th, the central bank increased capital requirements for financial institutions operating in Argentina, a consequence of (inaudible) will not excuse dividends for the previous 2011 and at a shareholder's in March an optional result for simple distributions was created.

On February 9th, the post of director of BBVA Banco Frances and Inversora Otar (inaudible). BBVA Frances will absorb all assets, liabilities and shareholders' equity of Inversora Otar, effective as of (technical difficulty) 2012. Inversora Otar will be restored with our (inaudible) by selling the share representing its capital. The shareholders of both companies have reached an agreement and the shareholders (inaudible). This merger is subject to the prior authorization of the central bank Argentine National Security Commission and to (inaudible) of corporations.

Now, let's move onto the P&L. A significant expansion in the volume of loans and the improvement of the (inaudible) solid growth of net financial income originating in the intermediation with the private sector. We grew 15.8% from (inaudible) the previous quarter. Main financial income result improved the non-recurring income originated by variations in the valuation of public securities. As a result, total losses of ARS20.9 million and ARS88.9 million in the first quarter of 2012 and 2011 respectively. (Inaudible) reported ending on December showed a gain of ARS231.1 million.

Net income from services grew from [the 7.3%] and 3.8% compared to the third quarter of the previous year and to the first quarter of 2012 respectively. The increase in the last 12 months was driven by higher consumption with (inaudible), higher fees from originated deposits and insurance sale (inaudible).

Service charge expenses grew mainly due to the increasing promotions related to (inaudible). Compared to the previous quarter, net income from services did not show a significant variation. (Inaudible) purchases with credit and debit cards decreased because the previous quarter reflected seasonal shopping behavior to increase on our holiday. (Inaudible) expenses decreased as a result of lower costs in promotion.

Administrative expenses increased 29.4% during the last 12 months and 5.5% in the first quarter of 2012. Personnel expenses grew 28.6% in the last 12 months, mainly due to the wage increase agreement with the labor unions for the year 2011. And increased 10.4% during the first quarter of 2012, mainly due to the provision recorded for the agreement with the labor union for this year.

General expenses increased 30.5% in the last 12 months, due to higher tax charges and (inaudible) related to the higher (inaudible) levels. When compared to the last quarter, it remained at a similar level.

As of March 31, 2012, the Bank and its subsidiaries have 5,025 employees, showing an 8.6% increase in the last two months. The branch office network totaled 268 offices, including 240 consumer branches and 28 branch offices specializing in the middle-market segment. Corporate banking includes 7 business units, grouped by industry. Complementing its distribution network, the Bank has 14 in-Company branches and 2 point-of-sale outlets, 654 ATMs, and 695 quick deposit boxes.

Other income totaled a gain of ARS42.5 million, mainly due to the sale of the Bank's stake in the building of (inaudible) in the financial (inaudible). Income from equity investments set forth net income for related companies that are not (inaudible). To the first quarter a gain of ARS11.2 million was reported.

Total (inaudible) the sale of Consolidar ART and BBVA Frances' stake in Grupo (inaudible).

As we are to the activity level, the private sector loan portfolio totaled ARS23.2 billion, growing 41.6 in the last 12 months and 1.4 in the last quarter. The (inaudible) growth of consumption and capital investments were debated for the outstanding performance of the (inaudible) segment. The (inaudible) was the main driver of (inaudible) insurance, increasing 43.3%, mainly due to the (inaudible) loss of finance for interest operations and leasing. While the weaker portfolio grew 41.3%, both by the growth in personal loans, credit cards and (inaudible) loan. Finally, financing to large corporations increased 36.6%.

As for the (inaudible) public sector debt, public data for the national treasury decreased 4.1% compared to the same quarter of 2011, mainly due to the sale of part of the portfolio and lower valuation. As of March 31, 2012, public sector national treasury assets represented 5.1% of the Bank's total assets. Total exposure to the central bank bills and notes, net of holdings linked to reverse repo transactions, represented 8.1% of the Bank's total assets.

Total deposits reached ARS29.7 million at the end of March, an increase of 23.4% and 1.6% compared to the same quarter of 2011 and to the previous quarter respectively.

The Bank's total shareholders' equity totaled ARS4.1 billion, while the excess of central bank meeting the capital requirements was ARS1.6 billion. At the same day, the capital ratio reached 16.3% of assets adjusted to risk.

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

(Operator Instructions) Federico Rey, Raymond James.

I have a question. What is loan growth in the quarter? We saw in this first quarter a [material] deceleration in the quarter-on-quarter growth. If I'm not wrong, you're increasing the [parts] of the loan portfolio was along 1.5% quarter-on-quarter, which was below the sector average growth rate of between 4% and 5% for this quarter. I would like to understand if this is the result of a less active or aggressive or (inaudible) policy in the Bank? Or if you are foreseeing the lower demand for your clients? Thank you.

First of all, (inaudible) the increase in the quarter was not very higher. That actually maintained the same level. But, it's important to mention that the retail portfolio and the middle market continue for an important increase this quarter.

What's your estimate for 2012 please?

23%, 25%. We maintain the same (inaudible) for the year.

Okay, 23%, 25%, right?

Yes.

Santiago Petri, Templeton.

Basically I would like to know what you are thinking about the developments in the market? How these foreign exchange restrictions are impacting your activity? Are you seeing or foreseeing higher liquidity into your buying? I mean what are your plans? Can you remind us the loan growth they are expecting for 2012? And essentially, how do you see asset quality developing from here now that the economy is slowing down? Basically is to have a general picture of your view on the current market situation and what might happen in 2012. Thanks.

First of all, regarding the restriction in the foreign market. Yes, we have higher liquidity in this month, so we are expecting to maintain and continue with this same rate.

In terms of loan growth, as we mentioned, we expand to increase 25%, 26%, 25% for this year. And obviously we are seeing the asset quality ratio is a little deterioration, but we are expecting that in the last month.

So essentially, I mean the level of provisions for this year could be the similar pace that we have seen in first quarter of '12? Or it's going to be more or less?

Well, we expect a little lower than this level.

Okay. And basically the ROE of the Bank, is this sustainable? The one that you have achieved in first quarter of '12?

23%?

Yes.

We expect something like 23% for this year and we (inaudible).

Okay, thanks a lot.

At this time there are no questions in the queue. (Operator Instructions) Ms. Acuna, there are no further questions in the queue at this time.

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

And that does conclude today's teleconference. We thank you all for your participation.