Banco Bbva Argentina SA (BBAR) 2015 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the BBVA Frances report consolidated fourth-quarter earnings for FY2015 conference call. Today's conference is being recorded.

I would 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 made during this conference call may be forward-looking statements within the meaning of the Safe Harbor provisions found in Section 27A of the Securities Act of 1933 and the US federal securities law.

These forward-looking statements are subject to risk and uncertainties that could cause actual results to differ materially from those expressed in these 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 of the most important topics of 2015, and then we'll be open to questions.

During 2015, BBVA Frances' commercial actions continues to be a fundamental part of its strategy, by which it aims to improve [popularity] and client cross sell. The new [app process goal] was the main (technical difficulty) through which BBVA Frances' [advertised its] promotions [and discounts], available not only for clients, but also for [non-]customers.

BBVA Frances also ratified the alliance with [land] through which it offers benefits and discounts to extend the [LAN] through which it also benefits and [which] comes to extend LANPASS kilometers to [fly around] Argentina and the world.

At the end of December 2015, the Bank and its subsidiaries had 5,784 employees. The branch office network totaled 285 attention-to-client units, including 251 consumer branch office and four branch offices specializing in the middle market segment and institutions.

Corporate banking is divided by industry; consumer, heavy industries and energy. Complemented is the (inaudible) network. The Bank has [14 Company] branches, one point of trade outlet, and one point of express attention, 694 ATMs and 797 self-service terminals.

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

In December 2015, after assuming office, the new Argentina national government declared a statistical emergency as a consequence of inconsistencies detected in the information provided by the national statistics agencies. This measure involved the suspension of the release of new economic figures such as PPI, GDP, among others.

In case of economic activity, no data was issued for the fourth quarter of 2015. The last public figures correspond to the second quarter GDP which shows a 2.3% increase compared to the same quarter of 2014. During the [fourth] semester, GDP accumulated a 2.2% variation versus 2014.

Regarding the national [annual] Consumer Price Index, the latest information corresponds October, an accumulating inflation of 11.9% for the (technical difficulty) period, and 14.3% compared to October 2014.

The Consumer Price Index calculated by the Department of Statistics and Censuses, an agency of the Ministry of Finance of the City of Buenos Aires, which was used to calculate the CER, grew 19.8% and 23.8% in the same period, whereas it grew 26.9% for the January December 2015 period.

The national [public sector] of (inaudible) finance shows a primary deficit of ARS11.1 billion during October and November, latest (inaudible) information for the fourth quarter, a decrease of 24.8% compared to the deficit of ARS14.8 billion reached in the same period of the previous year.

In the same primary public sector spending rose 28.3%, while public sector [earnings] show an [increase] of [22.7%] both year over year.

In the [externalized] sector, the latest trade balance that (inaudible) corresponds to October 2015 which recorded a surplus of $254 million. This is result of [42.7] lower than that for October 2014, reflecting $5.2 billion of exports and $4.9 billion of imports. Accumulated in the last 12 months, the result reached a surplus of $2.4 billion.

In the FX market, exchange rate closed at ARS[13.005] per $1 at the end of December, increasing 38.5% compared to the [ARS9.41] rate [which existed] as of September, and 52.6% compared to the [fourth] quarter of 2014. The significant increase in the exchange rate is the result of the suspension of restrictions to operate in the (technical difficulty) market.

In the fourth quarter of 2015, the Central Bank (inaudible) of International Research decreased $7.7 billion, closing the period at $25,563 billion. During the quarter, the Central Bank [sold] $6 billion in the FX market. The Central Bank maintained that [bill or right] (inaudible) increase was [deal] signed with the People's Bank of China.

The (inaudible) interest rate for private banks increased 323 basis points in the [fourth] quarter, averaging 24.2% compared to 20.9% in the third quarter of 2015.

Regarding activity in the financial system, private sector loans in pesos increased 12.5% compared to the third quarter of 2015; while private sector loans in dollars fell 22.8%.

Total deposits in pesos in the financial system increased by 11.2% in the [fourth] quarter compared to the previous one; and in the same period, private sector deposits denominated in pesos increased by [9.1%], and those denominated in dollars increased [30.7%].

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

BBVA Frances' net income reached ARS3.8 billion at the end of December 2015, achieving a return on equity of 31.5%, and a return on assets of 4.1%. Net financial income increased 24.1% during the year.

Higher volumes of intermediation with the private sector were partially offset by the increase in the [family] income mainly due to the increase in the bank deposit guarantee insurance, the effect of the application of minimum interest rates, [time] deposits, and faster growth of deposits over loans. As a result, net income from intermediation with the private sector grew 13.4% compared to the previous year, whereas income from the public bonds portfolio registered a significant gain during the same period.

In the second quarter of 2015, the Bank implemented a redefinition of the charges generated by credit and debit card operations from administrative expenses to service charge expenses in line with the standards applied in the industry.

Not taking into account such redefinition, net income from services could have increased 25.2% annually. Growth was mainly due to higher consumption with credit cards, fees associated with insurance, fees generated by an increase in the [stock] of deposit accounts, together with those generated by [PCA] finance.

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

Regarding administrative expenses, also not considering the redefinition, the increase would have been up 25.9% year over year.

Personnel expenses grew 21.6% in the last 12 months, mainly due to the increase in wages as agreed with the labor union, and a higher number of employees due to the internalization of resources.

General expenses increased 32.3% in the last 12 months. The Bank's expenses reflected higher taxes and depreciation expenses in connection with the improvement work carried out in the Bank's headquarters and branches, together with the ATM renewal plan and 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 ARS56.5 billion at the end of the year, an increase of 36.5% in the last 12 months. The Bank maintains its market share at 6.5%.

In 2015, consumer loans registered remarkable growth; increased its portfolio by 42.4%. Such increase was mainly due to credit cards with an increase of [59.8%] where cover loans increased at a lower pace of 23.6%, and personal loans of 20.6%. Commercial loans grew 29.3% annually, mainly due to the performance of loans through small and medium-sized companies.

It is important to mention that management of a line of credit for productive investments for micro, small and medium-sized companies was instrumental in placing loans and leasing, reaching the targets published for the [day].

BBVA Frances has maintained the best asset quality indicators in the financial system. The number of [nominal] ratio reached 0.64% at the end of [December], with a recovery ratio of [0600.6%].

[Exposure] to the public sector national treasury increased 16.1% during 2015, whereas the Bank's portfolio of Central Bank bills and notes grew 39.4%. At the end of December, the public sector national treasury assets represented 3.3% of the Bank's total assets. Total exposure to the Central Bank bills and notes, net of holdings linked to reverse repo transactions, represented 10% of the Bank's total assets.

Total deposits reached ARS76.9 billion, growing 49.4% in the last 12 months. During the same period, both time deposits and current account registered a good performance, increasing [59.9%] and 43.8% respectively. Transactional deposits represent 56.8% of the Bank's total deposits.

During the year, the Bank issued five placements of its negotiable obligations for a total amount of ARS835.7 billion.

BBVA Frances once again maintained high levels of liquidity and solvency. At the end of December, total shareholders' equity reached ARS13.7 billion, while the excess of capital over the Central Bank's minimal regulatory requirements reached ARS6.6 billion, or 47.9% of the Bank's total stockholder equity. The capital ratio reached 15.5% of the weighted risk assets.

It is important to mention that Mr. Martin Zarich was appointed as BBVA Frances' CEO on January 11, 2016, after Central Bank issued the corresponding authorization.

On January 2, 2016, Central Bank also authorized BBVA Frances to distribute cash dividend by a total amount of ARS400 million for the FY14. And based on the result of FY15, the Board of Directors has resolved to propose a cash dividend payment in the amount of ARS230 million (inaudible). Such payment is subject to applicable regulatory authorization.

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

(Operator Instructions). Federico Rey, Raymond James.

A quick question about loan growth. We saw a material acceleration in lending activities in the fourth quarter of the year. This is a result of higher demand or the Bank became more aggressive in the origination side?

Thanks.

No. It was higher demand.

Okay. Thank you.

(Operator Instructions). There are no further questions. Please continue.

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

Thank you. Ladies and gentlemen, this concludes our conference call for today. We thank you for your participation. You may now disconnect your lines, and have a great day.