Banco Bbva Argentina SA (BBAR) 2014 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the BBVA Banco Frances Reports Consolidated Second Quarter Earnings for Fiscal Year 2014 Conference Call. Today's call is being recorded. I would now like to turn the call 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 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 with the US Securities and Exchange Commission.

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

BBVA Frances continued to work, focused on three main areas, transactional banking, quality and development of digital banking. The transactional [planned solution] to the bank's business strategy is [forward] is to place BBVA Frances as a leading bank for its client. The plan involves all banking segments, retail, middle-market, and corporate and investment banking divisions, and consolidate the customer-centric vision model.

As of June 30, 2014, the bank had an extensive branch office network of 275 offices, including 245 consumer branch offices, and 30 branch offices specialized 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, 659 ATMs and 731 quick-deposit boxes.

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

As of May 2014, the monthly estimator of economic activity registered a fall of 0.2% year over year, [with an increase] of 0.5% compared to April 2014. As a result, in May grew 0.1% in April and May periods compared to the first quarter of 2014.

Regarding the industrial sector, the monthly industrial estimator fell 0.5% in April/May, compared to the first quarter of 2014, while it decreased 4.5% in comparison with the same two-month period of 2013.

In the construction sector, the (inaudible) index of construction activity increased 2.6% in April/May 2014 in comparison to the first quarter of the year, but decreased 3.6% with respect to the same two-month period of 2013.

Inflation measured since January by the new official national and new urban consumer price index, which is used to calculate the CER adjustment for [sold] sovereign bonds, increased by 4.6% in the second quarter of 2014. The new index is national in scope compared to the previously used indicator which covered the greater Buenos Aires area, and uses the year [2013] as the base year.

Given this change, no historical data exists, and it is not possible to make a comparative analysis with the previous rates.

The national public sector fiscal balance showed a primary surplus of ARS3.7 billion during April/May 2014, compared to a surplus of AR3.1 billion in the same period of 2013, which means an increase of [20.4]%.

On the other hand, primary public sector spending increased 42.2% and public sector revenues had a smaller increase of 41.6% during the same period.

In the external sector, the accumulated trade surplus reached $3.6 billion during the second quarter of 2014, 2.3% lower than that recorded in the same period of 2013. The performance of the trade balance is a result of total export of $20.9 billion, which decreased 10.9% annually, and total imports of $17.3 billion, which decreased 12.5% annually during the period.

In the FX market, the exchange rate Argentine Central Bank reference rate, closed at ARS0.13 per US dollar as of June, 2014, increasing 1.5% compared to the rate registered as of March 31, 2014 and 56.4% from the same period of the previous year.

During the second quarter of 2014, the stock of the international reserves of the Central Bank increased by $2.3 billion to $29.3 billion. During the quarter, the Central Bank purchased $4.1 billion in the FX market.

The Badlar interest rate for private banks increased 17 basis points in the second quarter of 2014, averaging 24.7% compared to a 24.5% average in the first quarter of the year.

Private sector loans in pesos increased 2.6% compared to the first quarter of 2014, while private sector loans in dollars grew by 12.2%. Total deposits in pesos in the financial system increased by 5.4% during the same period. Private sector deposits in pesos increased by 21.1%, and 5.6% in dollars.

Now, let's turn to the Bank's performance.

As of June 30, 2014, BBVA Frances total net income reached ARS399 million. Such result includes a loss of ARS95.4 million, due to variations in the public bonds portfolio valuation.

Net financial income arising from intermediations with the private sector grew 12.6% compared to the second quarter of 2013, and 10.6% compared to the previous quarter.

Income from securities and short-term investments includes non-recurring income originated by variations in the valuations of public securities. Such results totaled a loss of ARL95.4 million during the quarter ending June 30, 2014, and of ARS139.8 in the same quarter of the previous year. We had recorded a gain of ARS192.1 million during the previous quarter.

In addition, it is important to mention that the line item, CER Adjustments, also registered a significant increase in the annual comparison as a result of the new CPI Index applied since January 2014.

Furthermore, during the first quarter of 2014, the line item, Foreign Exchange Difference and Other, reflected the effect of the authorization of the foreign exchange that took place during January 2014.

As of June 30, net income from services increased by 33.9% compared to the same quarter of 2013, and by 11.7% compared to the previous quarter. In the annual comparison, growth was due to higher consumption with credit cards, fees associated with insurance, and fees generating by the increase in [the total] deposit account.

Such growth was partially offset by an increase in service charge penalty related to promotions associated with the LANPASS kilometers program.

In the quarterly comparison, income from services increased 8.4% due to higher fees generated by credit and debit card purchases, and insurance sales. Service charge expenses [did not receive devaluation] during the period.

Administrative expenses increased by 40.6% compared to the second quarter of 2013, and by 8.8% compared to the previous quarter. Personnel expenses during both periods mainly reflected the impact of the wages increases and a higher number of employees.

General expenses increased by 46.3% compared to the second quarter of the previous year, as a consequence of the higher volume of activity, as well as the increase in prices and the effect of the devaluation over agreements denominated in (inaudible), mainly those related to (inaudible) and technology.

Compared to the first quarter of 2014, general expenses grew by 7.5%, as a result of the implementation of those commercial actions with (inaudible), and which were really signed at the beginning of the year. These expenses were partially offset by lower expenses in fees due to lower activity in (inaudible), similarly lower consumption of electricity and communications were recorded.

As regards to the activity level, as of June 30, 2014, the private sector loan portfolio totaled ARS37.9 billion, registering increases of 20.3% compared to the second quarter 2015, up 3.4% to the previous quarter. In the last 12 months, loans to finance consumption grew 30.4% mainly driven by higher volumes in credit card, car loans and personal loans, whereas loans to small and medium-sized companies increased by 24.2% due to increases in placement in commercial loans and [credit card], leasing. The corporate segment portfolio grew 4.6% during the same quarter.

It is worth noting that during the first six months of 2014, the Bank has placed approximately ARS1.9 billion in credit lines for productive investments, compliant with the Central Bank regulations, therefore, accumulating a total amount of ARS5.4 billion since the second quarter of 2012.

In a quarterly comparison, both commercial loans and consumer loans, registered a slight increase of 4.5% and 2.6 respectively.

BBVA Frances has maintained the best asset quality indicators in the financial system, despite the signs of the deterioration in the ratios observed during the last months. At the end of June, the asset quality ratio was 0.97%, while the coverage ratio reached 218.19%,

Exposure to the public sector national treasury increased compared to the same quarter of 2013 and to the previous quarter, mainly due to the purchase of new bonds. The Bank's portfolio of Central Bank bills and notes showed a significant increase, both during the previous period under analysis, and in the last 12 months, reflecting the liquidity management policy implemented by the Bank.

At the end of June, public sector national treasury assets represented 3.6% of the Bank's total assets. Total exposure to Central Bank bills and notes, net of volumes linking to reverse repo transactions, represented 8.5% of the Bank's total assets.

Regarding liabilities, total deposits reached ARS48.1 billion as of June 30, 2014, increasing 30.2% in the last 12 months, and 7% during the quarter.

It is important to note that in the last 12 months total peso-denominated deposits grew 25.9%. (Inaudible) deposits increased by 29.5% and [current] accounts by 23%.

Compared to the previous quarter, total deposits grew 77%, driven by higher accounts which increased by 16.4%, while time deposits registered a decrease of 3.4%, resulting in an (inaudible) in the base of funds. Foreign accounts represented 56% of total deposits at the end of June 2014.

On July 18, 2014, the Bank issued Series 10 and 11 of its bonds, which was fully subscribed for a total amount of ARS233.8 million due in 18 months, and ARS165.9 million due in 36 months, respectively.

BBVA Frances maintains adequate levels of liquidity and solvency. As of June 30, 2014, liquid assets represented 40% of the Bank's total deposits. The capital ratio reached 15.8% of weighted-risk assets, with an excess of capital of ARS4.4 billion, which represents 91.2% over the minimum regulatory requirement.

BBVA Frances paid in July 2014 stock dividends for an amount of ARS28.8 million. Thank you very much. We are now ready to answer your questions.

(Operator Instructions) Santiago Ruiz, Raymond James

Hello, Cecilia. Can you tell me- what is the net FX position as a percentage of the equity?

Hello. We are compliant with the regulation. It is close to 30%.

Okay. And can you tell me?what was the evolution of the NPLs in (inaudible)?

We are seeing signs of deterioration, as I said. And I think it's lower than 1.5% the [retail] NPLs.

Okay. Thank you.

(Operator Instructions) At this time there are no questions in the queue.

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

This does conclude today's conference. Thank you for your participation.