Banco Bbva Argentina SA (BBAR) 2014 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the BBVA Frances Reports First Quarter 2014 Earnings conference call. Today's call is being recorded.

And now, I'd like to turn the call over to Ms. Cecilia Acuna. Please go ahead.

Thank you. Good morning, everybody.

First of all, let me stress that some of the statements 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 contained in BBVA Frances' annual report on Form 20-F for the fiscal year 2013, filed to the US Securities and Exchange Commission.

As usual, we will start the conference with a brief summary of the most important topics of the first quarter of 2014, and then we'll be open to questions.

As of March 31, 2014, BBVA Frances has an extensive branch office network of 275 offices, including 245 consumer branches and 30 branches specializing in middle-market segment companies and institutions. Corporate banking included seven business units grouped by industry. Complementing its distribution network, the Bank has 13 [in-Company] branches and two point-of-sale outlets, 657 ATMs, and 732 quick-deposit boxes.

Now, I'd like to make a brief review of the macroeconomic environment.

The Monthly Estimator of Economic Activity has changed its base year to 2004, from the previous base year of 1993. The [new series] recorded for February shows a 1.3% growth compared to the same period of 2013, and [0% during the month]. As a consequence of the change in the methodology, it is not possible to make a comparative analysis with the previous quarter.

The Monthly Industrial Estimator decreased 1.1% during the first quarter of 2014, seasonal adapted, showing an improvement with respect to the decrease of 2% in the last quarter of 2013. In a year-over-year basis, [it's 30% accelerating] related to 5.4% decrease registered in December 2013.

Inflation, measured since January by the new official national and urban consumer price index, which is used to calculate the CER adjustment for some sovereign bonds, increased by 10% in the first quarter of 2014. The new index is national in scope and uses a base year 2013. Given this change, no historical data exists, and it is not possible to make a comparative analysis with the previous rate.

The national public sector fiscal balance showed a primary deficit of ARS4.8 billion during January/February 2014, compared to a surplus of ARS1.1 billion in the same period of 2013. Primary public sector spending increased 34.9%, and public sector revenues had a smaller increase, of 31.4%.

In the (inaudible) sector, the accumulated trade surplus in the first quarter of 2014 reached $121 million, 91.9% lower than that recorded in the same period of 2013.

In the foreign exchange market, the exchange rate, central bank reference rate, closed at ARS8 per US dollar on March 31, 2014, increasing 23.4% compared to the rate registered on December 31, 2013.

In the first quarter of the year, the stock of the international reserves of the central bank decreased by $3.6 billion, to $27 billion. During the quarter, the central bank bought $386 million in the FX market, in contrast with the previous quarter when it sold $4.9 billion.

The Badlar interest rate for private banks increased 516 basis points in the first quarter, averaging 24.5% compared to 19.3% average in the fourth quarter of 2013.

Private sector loans in pesos increased 1.4% compared to the first quarter of 2013, while private sector loans in dollars grew by 2.5%. Total deposits in pesos in the financial system increased by 3.5% during the same period, while private sector deposits in pesos increased by 4.4% and private sector deposits in dollars decreased by 3.7%.

Now, let's turning to the Bank performance.

BBVA Frances reached net income of ARS1,362 million as of March 31, 2014. Such result included a gain of ARS192 million due to the variation in the public bonds portfolio valuation.

Net financial income arising from the intermediation with the private sector grew 10.4% compared to the first quarter of 2013, and it registered a decrease of 6.3% compared with the previous quarter, mainly due to a lower volume of lending and an increase in the cost of funds, results of a change in the mix of the deposits.

Income from securities and short-term investments includes non-recurring income originated by variations in the valuation of public securities. Such results total a gain of ARS192 million during the quarter under analysis and ARS49 million at the end of March 2013, whereas the previous quarter recorded a loss of ARS66 million.

In addition, it is important to mention that the line item "CER Adjustments" also registered a significant increase as a result of the new CPI index applied since January 2014. Furthermore, the line items "Foreign [Trade] Difference" and "Other" reflected the effect of the authorization of the foreign exchange that took place during the quarter.

Net income from services increased by 33.8% compared to the first quarter of 2013 and by 9.2% compared to the previous quarter. In the annual comparison, growth was mainly due by higher consumption with credit cards, fees associated with insurance, and fees generated by the increase in the [sale] of deposit accounts. Such growth was partially offset by an increase in (inaudible) costs related to promotion associated with the LANPASS kilometers program.

In the quarter (inaudible), income from services increased 7% during the quarter due to higher fees generated by capital markets and securities activities, by insurance, and by credit cards and debit card purchases. Service charge expenses also grew 1.6% during the period.

Administrative expenses increased by 32.9% compared to the first quarter of 2014 and 22.1% compared to the previous quarter. Personnel expenses during both periods mainly reflected the [advance] of future salary increases and a higher number [of] employees.

G&A expenses grew 35.8% compared to the first quarter of 2013 and 24.3% during the quarter, as a consequence of a higher volume of activity as well as of the increasing prices and the effects of the devaluation. Expenses linked to our (inaudible) services, taxes, and advertising were [in turn] affected by the change in the conditions. In January 2014, BBVA Frances renewed its agreement with Boca Juniors, acting as a sponsor until June 2016.

As regards to the activity level, private sector loan portfolio totaled ARS36.7 billion, an increase of 22.7% compared to the first quarter of 2013, whereas it maintained a similar level than that registered at the end of December 2013.

In the last 12 months, loans to finance consumption grew 39.7%, mainly driven by higher volume on debit cards, car loans, and personal loans, whereas loans to small- and medium-sized companies increased by 24.2% due to increased placement in commercial loans, [tech], and leasing. The corporate portfolio has maintained a similar level.

During the quarter, finance to [consumption] grew 4.1%, mainly due to higher credit card financing, partially offset by a decrease in the middle-market and corporate portfolio.

It is important to mention that BBVA Frances has successfully complied with the [process established] to finance investment projects in the [productive] sector. At the end of March 2014, the accumulated portfolio reached ARS4.3 billion.

BBVA Frances has maintained the best asset quality indicators in the financial system, despite the signs of the deterioration in the ratios that took place during the quarter. At the end of March, the asset quality ratio was 0.86%, while the coverage ratio reach 235.8%.

Exposure to the public sector national Treasury decreased, compared to the first quarter of 2013 and to the previous quarter, mainly due to the sale of part of the portfolio. The Bank's portfolio of central bank bills and notes showed a significant increase, both during the period under analysis and in the last 12 months, reflecting the liquidity management policy implemented by the Bank.

At the end of March, public sector national Treasury assets represented 2.9% of the Bank's total assets. Total exposure to central bank bills and notes, net of holdings linked to reverse repo transactions, represented 7.6% of the Bank's total assets.

Regarding liabilities, total deposits reached ARS44.9 billion, increasing 28.5% in the last 12 months and [2%] during the quarter. During the year, time deposits registered a significant increase, of 41.5%, while sight accounts increased 18.3%, generating a higher cost of funds.

On February 11, 2014, the Bank issued its Series 8 and Series 9 of negotiable obligations, which was fully subscribed for a total amount of ARS258.9 million due in 18 months and ARS145.1 million due in 36 months, respectively.

BBVA Frances maintains adequate levels of liquidity and solvency. At the end of March, liquid assets represented 39.3% of the Bank's total deposits. The capital ratio reached 20.5% of weighted-risk assets, with an excess of capital of ARS3.6 billion, which represented 79.7% over the minimum regulatory requirement.

At the ordinary and special shareholders' meeting held on April 10, 2014, the shareholders approved by a majority vote the distribution of cash [dividends] totaling ARS28.8 million. The payment is subject to [the] authorization of the central bank. In addition, an optional reserve of (inaudible) dividend distributions was created, for a total amount of ARS1.6 billion.

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

(Operator Instructions) Santiago Petri, Templeton.

My question is related to how do you see the loan environment? We see that the Bank has been lending significant amounts to the central bank. So, we'd like to know if this is better now than (inaudible)?

(inaudible), but I can't listen you. Could you repeat, please?

Hello? Any better?

Yes, but I can't listen, Santiago.

Okay. Never mind. I [escape] it, and I will get back to you later. I will call you later. Thanks. Thanks a lot.

Okay.

(Operator Instructions)

It appears there are no further questions at this time.

Okay. Thanks again for joining us. If you have any further questions, please contact us in our offices. Thank you.

That does conclude our conference today. Thank you all for your participation.