Banco Bbva Argentina SA (BBAR) 2012 Q3 法說會逐字稿

Good day, everyone, and welcome to the BBVA Frances Reports Consolidated Third Quarter Earnings for Fiscal Year 2012 Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to [Ms. Paula Bennati]. Please, go ahead, ma'am.

Thank you very much. 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 [portion] found in Section 79-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 expected in the forward-looking statements. Additional information concerning these factors is contained in the BBVA Frances annual report on the Form 20-F for the fiscal year 2011 filed with the US Securities and Exchange Commission.

As usual, we will start the conference with a brief summary of the most important topics of the third quarter of 2012, and then we'll be open to questions.

I would like to begin with a brief review of the macroeconomic environment. In the third quarter of 2012, economic activity showed signs of recovery. The monthly estimator of economic activity increased 0.2% in (inaudible) and 1.4% in (inaudible). Inflation as measured by the official consumer prices index of greater Buenos Aires, which is used to calculate adjustment for some sovereign bonds, increased by 2.6% in the quarter, totaling an annual rate of growth of 10%.

The primary fiscal surplus of the national public sector was ARS1,306 million during the period of July and August, decreasing 59.3% when compared with the same period of 2011. The increase in total public sector spending reached 26.5% and was slightly lower than the increase in public sector revenues of 26.9%. However, the total fiscal deficit reached ARS2,867 million because the interest payments increased by 105.6%. The item that contributed most to the fiscal spending increase was social security benefits (inaudible) social security contribution grew 30.3% year on year. [Variation was] tax collections increased by only 28.2% in the same period.

(Inaudible) the accumulated trade surplus in the third quarter 2012 reached $3,606 million, 23.1% higher than the one recorded in the third quarter of 2011.

Exchange rate closed at ARS4.6942 per dollar on September 30 of 2012, increasing 3.73% in comparison with the previous quarter. As a result, the stock of international reserves of the central bank decreased $1,337 million, reaching $55,010 million at the end of September. During the quarter, the central bank bought $574 million, a decrease of $3,785 million, which were bought during the second quarter due to the seasonal effect of the (inaudible).

The (inaudible) interest rate of private banks increased 179 basis points in the third quarter of 2012, averaging 13.8% compared to the 12% average on second quarter of the same year.

Private sector loans in pesos rose 9.9% during the third quarter, while private sector deposits in pesos increased 5% and decreased 34% in (inaudible).

Now let's turn into the bank's performance.

During the third quarter of 2012, BBVA Frances maintained net income of ARS417.4 million, recording earnings total ARS365.1 million, an increase of 25.2% compared to the same quarter of 2011. Net fiscal income maintained (inaudible), showing a significant growth during the third quarter of 2012 as compared to the same quarter of the previous year and as compared to the previous quarter. Net income from intermediation with the private sector and implementing the spreads explained the growth of 60.9% compared to the same quarter of 2011. When compared to the previous quarter, it has grown 6.8%, showing a slow deterioration in spread, mainly due to an increase in passive interest rate.

On the other hand, income from securities and short-term investments includes the nonrecurring income originated by variation from public securities. The price variation of such portfolio totaled a gain of ARS65.1 million during the quarter, whereas, in the previous quarter, it registered a gain of ARS7.5 million, while, during the third quarter of 2011, it showed a loss of ARS190.5 million.

Net income from services maintained a softened pace of growth, increasing 22.1% and 8.4% compared to the same quarter of 2011 and on the second quarter of 2012, respectively.

Administrative expenses increased 35.3% during the last 12 months and 7% in the third quarter.

Personnel expenses increased 35.4% (inaudible), mainly due to the salary increase agreements with the labor union and the sum of ARS1,560 granted only once into equal installments during July and August of 2012. It's important to mention that there was an increase in staff during this same period.

General expenses increased 35.2%, mainly due to the greater investment in advertising and promotions, which was due to commercial (inaudible) from personal loans and credit cards, coupled with the sponsorship agreements signed with the two major Argentine (inaudible). Likewise, the increase in the rates of safety and hygiene costs increased in the tax charges.

Additionally, the service charges increased, together with charges directly related to the high activity level.

As of September 30, 2012, the bank and its subsidiaries have 5,170 employees. The branch office network totals 270 offices, including 243 consumer branch offices and 27 branch offices specialized in the middle market segment. Corporate banking includes seven business unit groups (inaudible). Complementing its distribution network, the bank has ten in-company branches and two point of sale outlets, 650 ATMs, and 698 [safety] deposit boxes.

In regards to activity level, the private sector loan portfolio totaled ARS25,566 million, increasing 23.4% in the last 12 months and 7.7% in the last quarter. Consumer financing showed an important expansion, growing 35.4% in (inaudible), driven by all lines, credit cards, personal (inaudible), whereas small and medium-sized companies segment registered an increase of 34% in loans denominated in pesos, while dollar terms decreased 40%. The rise was based on the increase in financial loans, leasing, and discounted notes, which offset the decrease in loans to financial and private operations.

The corporate segment showed a similar situation, maintaining the portfolio in the same level of the last 12 months as a consequence of this increase in financial loans and other events, which offset the drop in loans to finance for inside operations.

In terms of asset quality ratios, BBVA Frances continued leading the Argentine financial system. As of September 30, 2012, the bank's nonperforming ratios reached 0.71%, with a coverage level of 263%. Public sector and national treasury assets represent 5% of the bank's total assets.

Total exposure to central banks, bills and notes net of holdings linked to reverse repo transactions represents 6.6% of the bank's total assets. Exposure to public sector and national treasury maintained a similar level as the previous quarter. However, compared to the same quarter of 2011, it decreased 10.6%, mainly due to the sale of part of the portfolio and repayment.

Deposits reached ARS31,063.4 million, increasing 9.2% in (inaudible) terms. In the last 12 months, [sight] accounts, as well as time deposits, registered a growth, increasing 0.8% and 10.4%, respectively. Deposits denominated in pesos increased 25.3% in the last 12 months and 5.2% in the last quarter, while deposits denominated in foreign currency fell 47.5% and 8.9% compared to the same periods, respectively.

BBVA Frances maintains adequate level of liquidity and solvency. As of September 30 of 2012, liquid assets, cash, and debts from (inaudible) Argentine central banks via some notes represents 31.4% of the bank's total (inaudible). The bank's capital ratio reached 18.1% of weight risk assets with an excess of capital over the central bank minimum regulatory requirement of ARS1,683.5 million.

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

(Operator Instructions). [Federico Ray], Raymond James.

Please, could you comment on your expectations in terms of spreads and in terms of funding cost in the future? Thanks.

Yes. In terms of spreads, we expect to slow a little bit by the end of this year and perhaps a little drop again in next year but just a little bit. I think it's going to maintain in the same levels that we are now.

Well, the same is going to happen in (inaudible) cost of funds. We expect a little deterioration but just not so much.

Okay. So you believe that you will see a rise in the funding cost and stable lending rates, and this would lead to lower margins. Right?

No. In fact, we expect the funding cost to remain mainly in the similar levels as now. And that's why the spread's not going to have much movement from the numbers that we have today.

Okay.

(Operator Instructions). (Inaudible), Dow Jones.

My question's related to a decision that the central bank made earlier in the year to require some banks to increase lending at certain rates. I just wanted to know what your experience has been with this. Could you go into detail a little bit about whether this has been positive for the bank or negative or neutral and what your thoughts are on it? Thank you.

Yes. Of course. Well, now I can say that we are comfortable with our portfolio. We think that we are going to achieve the requirements on time. And, yes, the bank is working very hard to achieve it, and it's going to have very good numbers.

Thank you.

(Operator Instructions). [Luiz Guzman], Santander.

I have, first, one general question regarding loan growth guidance for next year. I know it's very early. But, if you have preliminary guidance, what do you expect to grow -- in line with inflation of delivering real growth?

And a second question is about capital. I would like to know if the capital ratio that you guys are giving in the press release, 18.1% for this quarter -- does it include already the operating risk and the market risk? I understand that there's some gradual process to adapt this to new risks. And I just would like to know what would be the impact. I know it has to be something small, but I would appreciate if you could give some color on this. Thank you.

First of all, with regard to the first question, the growth in the loan portfolio we expect to grow nearly something 5% in next year.

Then, in the second question, you were asking about new the requirements from the central bank. It's something very new, but we think they are going to be lower than now. (Technical difficulties) for us.

Okay. But the number that you guys have right now, the 18.1%, does not include a market and operating risk. Is that correct?

Yes. It does include already. But, anyway, it's going to be lower next year.

Okay. Thank you very much.

(Operator Instructions).And there appear to be no further questions at this time. So, at this time, I'd like to turn the conference back over to Paula for any additional concluding remarks.

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

Ladies and gentlemen, that does conclude today's presentation. We do thank everyone for your participation.