Banco Bbva Argentina SA (BBAR) 2014 Q3 法說會逐字稿

Please stand by. We're about to begin. Good day, ladies and gentlemen, and welcome to the BBVA Frances Reports Consolidated Third 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, ma'am.

Thank you. Good morning, everybody. First of all, let me express 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 1973 and the 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 third quarter of 2014, and then we'll be open to questions.

BBVA Frances is currently undergoing a transformation process in order to embrace a more digital model essential to face the challenges that the industry presents, more regulations, greater transparency and accountability, and increased competition due to changes in the customers' preference as a result of the technological revolution. In the past year, the number of digital [trough] customers, as well as those who operate [similar-wide] devices, have increased significantly.

After we [follow up] this process, the Bank has created a new digital and transformation banking division, which will include the current function of the corporate development and transformation division, with the goal of improving customers' experience across all channels. Furthermore, BBVA Frances also implemented [some] organization and changes, [redefining] roles and simplifying the org chart in order to adapt the bank's internal structure to its business needs.

As of September 30, 2014, the Bank and its subsidiaries have 5,335 employees. The branch office network totaled 278 offices, including 248 consumer branch offices and 30 branch offices specialized in the middle market segment. Corporate banking included seven business unit grouped by industry.

Complementing its distribution network, the Bank has 13 in-company branches and two point-of-sale outlets, 669 ATMs, and 752 quick deposit boxes. In line with expansion plans, three new branches, Chascomus in Buenos Aires, Las Heras in Santa Cruz, and Colon in Entre Rios, and three VIP spaces, Tucuman, Caballito and Catedral, were opened during the quarter. In addition, Pasos de los Libres branch in Corrientes was relocated, adding space and more comfortable layout for employees and customers.

Now, I'd like to make a brief review of the macroeconomic environment. The Monthly Estimator of Economic Activity decreased by 0.9% in August 2014 compared to July 2014, where it fell by 1.2% year-over-year. However, it increased by 0.2% during the period of July-August 2014 compared to the second quarter of the year.

Regarding the industrial sector, the Monthly Industrial Estimator increased by 0.3% in July-August compared to the second quarter, while it decreased 1.8% compared to the same two-month period of the previous year. In the construction sector, the Synthetic Index of Construction Activity remained stable in July-August 2014 compared to the second quarter of the year but fell 2.1% with respect to the same two months in 2013. Inflation, measures in 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 4.2% in the third quarter of 2014. The new index is national in scope and uses the year 2013 as a base year. Given this change, no historical data exists, and it's not possible to make a comparative analysis with the previous rates.

The national public sector fiscal balance showed a primary surplus of ARS1.6 billion during July-August 2014. Compared to the same period of 2013, it decreased 4.6%. On the other hand, primary public sector spending increased 44.8% and public sector revenues had a small increase of 44.1% in the same period.

In the external sector, the accumulated trade surplus reached $2.1 billion during the third quarter of 2014, 44.5% higher than that recorded in the same period of the previous year. The performance of the trade balance is the result of total exports of $19.3 billion, decrease 10.9%, and total imports of $17.2 billion, decrease 14.9%, during the same period.

In the FX market, the exchange rate close at ARS8.46 per US dollar at the end of September, increasing 4.1% compared to the ARS8.13 rate registered on June 30, 2014, and 46.2% from the same period of the previous year.

During the third quarter, the stock of international reserves of the Central Bank decreased by $1.4 billion to $27.9 billion at the end of September. During the quarter, the Central Bank purchased $500 million in the FX market. The Badlar interest rate for private bank decreased 351 basis points in the third quarter, averaging to 21.1% compared to the 24.7% average in the second quarter of 2014.

Regarding activity in the financial system, private sector loans in pesos increased 5.3% compared to the previous quarter, while private sector loans in dollars decreased by 3.5%. Total deposits in pesos in the financial system increased by 4.6% during the same period, and private sector deposits in pesos increased by 14.6%, and those denominated in dollars decreased by 1.8%

Now, let's turn to the Bank's performance. As of September 30, 2014, BBVA Frances net income reached ARS629 million. Such result includes a lot of ARS53.5 million due to variations in the public bond portfolio valuation. Net financial income grew 32.5% compared to the same period of 2013 and 21.8% compared to the previous quarter, mainly due to intermediation with the private sector as a result of an improvement in the funding mix.

Income from securities and short-term investments registered an increase in the third quarter of 2014 compared to the previous quarter and to the same quarter of the previous year, mainly due to higher income resulting from the Central Bank bills and notes portfolio. It is important noteworthy that these balances include nonrecurring income originated by variation in the valuation of securities. The quarter under review and the previous quarter recorded losses of ARS53.5 million and ARS95.3 million respectively while, for the third quarter of 2013, it registered a gain of ARS79.8 million.

In addition, the CER adjustment line also reflected a significant increase compared to the same quarter of 2013, mainly due to the new price index implemented since January 2014. Furthermore, the line item "Foreign exchange difference and others" registered a decreased compared to the same quarter of 2013 as a consequence of a lower foreign currency position while, compared to the previous quarter, this line item registered higher gains, mainly due to revaluation of such position.

As of September 30, 2014, net income from services increased 30.8% compared to the same quarter of 2013 and 9.1% compared to the previous quarter. In the annual comparison, growth was due to higher consumption with debit and credit cards plus higher fees associated with deposit accounts and insurance, together with those originated by PSA Finance, which was partially offset by higher fees paid for promotions, especially those related with the LANPASS program. In the quarterly comparison, the performance is mainly due to higher fees for consumption with debit and credit cards and to higher activity in deposit accounts. Service charge expenses grew 13.4% during the period.

Administrative expenses increased 52.5% and 19.9% compared to the third quarter of 2015 and the previous quarter respectively. Personnel expenses increased compared to both periods, mainly reflecting salary increases, a higher number of employees, and the impact of organizational changes. General expenses grew 28.9% in annual terms as a consequence of higher volume of activity, as well as the increase in prices and the effect of peso devaluation over agreements denominated in dollar terms, mainly related to advertising and technology. In the quarterly comparison, general expenses grew 6.8% due to higher expenses in advertising, mainly sponsorship fees and taxes.

As regard to activity level, as of September 30, 2014, the private sector loan portfolio totaled ARS40.5 billion, increasing 20.9% year-over-year and 6.9% during the quarter. Compared to the previous year, loans to the retail segment grew 27.1%, reflecting outstanding performance of the credit card portfolio due to higher consumption and financing. Loans for small and medium size companies grew 27.8% mainly due to higher commercial loans, checks, and leasing, while corporate loans grew 9.9% in the same quarter.

It is noteworthy that, during the first nine months of 2014, the Bank has placed approximately ARS2.6 billion in credit lines for productive investments, complying with the Central Bank regulations, accumulating a total amount of [ARS7.9] billion since the second quarter 2012. In the quarterly comparison, both commercial and retail loans registered increases of 8.7% and 5.1% respectively.

BBVA Frances have maintained the best asset quality indicators in the financial system despite the [same] deterioration in the ratios observed during the last month. At the end of September, the asset quality ratio was 0.94%, while the coverage ratio reached 225.89%. Exposure to the private sector national treasury increased comparable to the same quarter of 2013 and to the previous quarter, mainly due to bond purchases. The Bank's portfolio of Central Bank's bills and notes also reflected a significant increase in the last 12 months while it remained stable during the quarter. At the end of September, private sector national treasury assets represented 3.8% of the bank's total assets. Total exposure to the Central Bank's bills and note net of holding lead to reverse repo transactions represented 7.7% of the Bank's total assets.

Regarding liabilities, total deposited reached ARS49.7 billion at the end of September, increasing by 25.8% and 3.5% compared to the same quarter of 2013 and to the previous quarter respectively.

In annual term, sight accounts increased 34.3%, whereas time deposit grew at a lower rate, 15%. It is also improving the funding mix, sight accounts representing 58.6% of the Bank's total deposits.

It is noteworthy to highlight that, in the last 12 months, peso-denominated deposits grew 23.7%, sight accounts increased by 32%, and time deposits by 13.8%. The quarterly change reflected a slight slowdown in the deposits, which increased by 3.5% growing [on recurring] account balances, where saving accounts and time deposits remain stable.

On August 26, 2014, the Bank approved the issuing of its series 12 and 13 of negotiable obligations for the total amount of ARS500 million due in [18 and 33 and 36] months respectively. The subscription period started on October 31 and the issuance date will be November 13, 2014.

BBVA Frances maintain high levels of liquidity and solvency. As of September 30, 2014, the liquid assets represented 39.4% of the Bank's total deposit. The capital ratio reached 16.2% of the weighted risk assets, with an excess of capital over Central Bank minimum regulatory requirement of ARS4.7 billion, 95.8% over the minimum require.

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

(Operator Instructions.) And Ms. Acuna, there appears to be no questions at this time. Do you have any additional or final remarks?

Sorry?

We have no questions at this time, ma'am.

Oh, okay, (inaudible). Thanks again for joining us. And if you have any further question, please contact us in our offices.

This does conclude the conference. We thank you for your participation.