Banco Bbva Argentina SA (BBAR) 2015 Q3 法說會逐字稿

Good day ladies and gentlemen and welcome to the BBVA Frances reports consolidated third-quarter earnings for fiscal year 2015 conference call. Today's conference is being recorded. I would now like to turn the conference over to Ms. Cecilia Acuna. Please go ahead.

Thank you. Good morning everyone.

First of all, let me stress that some of the statements made during this conference call may be forward-looking statements under the meaning of the Safe Harbor provisions found in Section 27-A of the Securities of Act of 1933 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 2014, filed with the US Securities and Exchange Commission.

As usual we will start with a brief summary on the most important topics of the third quarter of 2015 and then we'll be open to questions.

During this quarter the Bank launched a significant marketing promotion, Frances Go 2.0. The Bank's traditional SMS discount service became a digital vehicle by which clients and non-clients may access a great variety of discounts and experiences. The new Frances Go service includes an interactive website and a smartphone app that allows clients of benefits and discounts that are tailor-made to their interest. It also has a distinguishing feature in the market, offering advantages to customers and non-customers through any means of payment. The product is incremental and modular, and will incorporate regular updates such as geo-localization.

It is also worth noting that BBVA El Celler de Can Roca world tour was one of the most outstanding commercial actions carried out in the development of the premium segment. It was very well-received by public and press.

BBVA Frances has been working to adapt its distribution model to current needs and open its first express branch located in downtown Buenos Aires. This new branch model includes a mix of technological and analogical financial solutions and channels to help its clients to quickly complete their transactions.

In addition, during this quarter the Bank opened two premium spaces at the branches located in the cities of San Juan and Posadas in Misiones.

As of September 30, 2015 the Bank has 5,664 employees and extensive branch office network of 285 offices, including 251 consumer branch offices and 34 branch offices specializing to middle-market segment companies and institutions. Corporate banking is divided by industry; consumption, heavy industry and oil and gas, providing personalized attention to large corporations. Complementing its distribution network, the Bank has 14 in-company branches and two point-of-sale outlets, 684 ATM and 801 self-service terminals.

Now I'd like to make a brief review of the macroeconomic environment. The monthly estimator of economic activity increased by 2.6% in August 2015 compared to the same period of 2014, and 0.2% compared to July 2015. Inflation, measured by the national urban consumer price index, which is used to calculate the CER adjustment for sovereign bonds, increased by 3.7% during the third quarter, measuring an accumulative inflation rate of 14.4% year over year and 10.7% in 2015.

The national public sector fiscal balance showed a primary surplus of approximately ARS0.8b during July, representing an increase of 3.1% compared to the surplus reached during the same period of 2014. Primary public sector spending grew 38% and public sector revenues increased [37.7%] during the same period. In the external sector the accumulated trade surplus reached $0.3b during the third quarter of 2015, a decrease of 86.2% compared to the same period of the previous year. Such amount is the result of total export of $17.1b and total import of $16.7b.

The exchange rate, Central Bank reference rate, closed September 2015 at ARS9.41 per US dollar, increasing 3.7% compared to the rate registered at the end of June 2015, and 11.3% if compared to September 2014.

During the third quarter of the year the Central Bank's stock international reserve decreased by $0.6b, closing the period at $33.3b. The Central Bank [maintained] its bilateral currency swap deal signed with the People's Bank of China.

The Badlar interest rate for private bank increased 48 basis point in the third quarter of 2015, averaging 20.9%.

During the quarter, private sector loans denominated in pesos increased 8.5% compared to the second quarter, while private sector loans denominated in dollars decreased 13.2%. Total deposits denominated in pesos in the financial system increased by 8.5% in the third quarter compared to the previous one, and in the same period private sector deposits denominated in pesos increased by 4.9%, and those denominated in dollar increased 2%.

Now let's turn to the Bank's performance. BBVA Frances total net income reached ARS998.1m for the third quarter of 2015, increasing 58.7% year over year and 49.6% compared to the previous quarter. The Bank achieved a return on equity of 33.2% and a return on assets of 4.4%. BBVA Frances accumulated gains in the first nine months of the year of ARS2.3b.

Net financial income grew 33% year over year and 17.9% compared to the previous quarter. Net financial income arising from the intermediation with the private sector grew 6.5% comparable year over year and to the second quarter of 2015. Such variation is explained by higher financial expenses, mainly due to the increase in bank deposit guarantee insurance, the effect of the application of minimal interest rates to time deposits, and a higher pace of growth of deposits over loans, which resulted in a higher cost of funds.

Income from securities and short-term investments included non-recurring income originating in variations in the valuation of public securities. Such results total gain of ARS100.2m during the quarter compared to losses of ARS53.4m recorded during the third quarter of 2014 and of ARS154.3m during the previous quarter.

It is important to highlight that during the second quarter of 2015 the Bank implemented a redefinition of those charges generated by credit and debit card operations from administrative expenses to service charge expenses, in line with the standard applied in the industry. Not taking into account such redefinition, net income from services would have increased 32% compared to the third quarter of 2014 and 9.2% during the quarter under analysis.

In the annual comparison service charge income grew 39.7%, mainly due to higher fees generated by an increase in deposit accounts, higher consumption with credit cards, together with those fees generated [by special] finance. Service charge expenses, include the redefined charges and those related to promotion associated with the LANPASS kilometers program. Similar behavior explains the quarterly variations.

In the third quarter of 2015, not considering the redefinition, administrative expenses would have shown a drop of 9.7% year over year and 5.9% during the quarter.

Personnel expenses decreased 3.8% in the annual comparison. It is important to mention that the third quarter of 2014 included the impact of the organizational changes implemented by the Bank, which was partially offset by the salary increase resulting from to the agreement signed with the unions, and a higher number of employees due to the internalization of resources. Personnel expenses grew 3.8% during the quarter.

General expenses grew 33% annually and 8.6% compared to the previous quarter, without taking into account the effect of the redefinition. Both the annual comparison and quarterly comparison of the Bank's expenses reflected higher taxes and depreciation expenses in connection with improvement work carried out in the Bank headquarters and branches, together with the ATM renewal plan and jointly with the impact of an increase in prices and a higher level of activity.

In connection to the activity level, the private sector loan portfolio totaled ARS49.9b at the end of September 2015, increasing 23.2% and 6.2% compared to the second quarter of 2014 and to the previous quarter respectively. BBVA Frances' market share of loans to the private sector was 6.5%.

In the last 12 months consumer loans grew 34.4%, reflecting the outstanding performance of the credit card portfolio, which increased 56.4% during the period. Loans to small and medium-sized company increased 31.6% due to increased placements in commercial loans, leasing, and foreign trade operations. The corporate segment portfolio decreased by 13%. During the quarter consumer loans grew by 9%, mainly due to higher credit card financing. And commercial loans grew by 2.3%.

BBVA Frances continues to maintain the best asset quality indicators in the Argentine financial sector. At the end of September the asset quality ratio was 0.74%, while the coverage ratio reached 269.69%. Compared to the third quarter of 2014 and the previous quarter, the improvement in the NPL ratio was due to lower non-performing loans.

Exposure to the public sector national treasury grew by 4.7% compared to the second quarter, and 2.1% during the quarter. The Bank's portfolio of the Central Bank bill and notes showed an increase in the last 12 months, and a slight decrease during the quarter, reflecting the liquidity management policy implemented by the Bank. At the end of September 2015 public sector national treasury assets represented 3.1% of the Bank's total assets. Total exposure to the Central Bank bills and notes, net of holdings linked to reverse repo transactions, represented 15.1% of the Bank's total assets.

Total deposits reached ARS63.2b, increasing 27.1% in the last 12 months and 5.3% during the quarter. During the year time deposits showed an important increase, growing 36.5%, while [SIL] accounts grew at the slower pace of 20.1%. Compared to the previous quarter, total deposits grew 5.3%, mainly driven by a 10.5% increase in time deposit, while [SIL] accounts grew only 1.6%. Deposits denominated in foreign currency increased 32.7% and 5.4%, compared to the third quarter of 2014 and to the previous quarter respectively, representing 10.7% of the Bank's total deposits.

On July 30 the Bank issued Series 16 of its bonds, which were fully subscribed and paid for a total amount ARS204.4m due in 24 months, with a variable interest rate equivalent to the Badlar rate plus 3.75%.

BBVA Frances maintained adequate levels for liquidity and solvency. At the end of September liquid assets represented 42.8% of the Bank's total deposit. The capital ratio reached 16.2% of weighted-risk assets, with an excess of capital of ARS6.3b, which represents 100.7% over the minimum regulatory requirements.

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

(Operator Instructions). It appears we have no phone questions at this time.

Okay. Thank you again for joining us and please do not hesitate to contact us in case you have any further questions.

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