Banco Bbva Argentina SA (BBAR) 2016 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to BBVA Frances third-quarter 2016 conference call. We would like to inform you that this event is being recorded. (Operator Instructions).

First of all, let me stress that some of the statements made during the 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 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 20F for FY15 filed with the US Securities and Exchange Commission.

Now, I'll turn the conference over to Ms. Cecilia Acuna, Head of Investor Relations. Mrs. Acuna, you may begin your conference.

Thank you. Good morning, everyone. As usual, we will start with a brief summary of the most important topics of the third quarter 2016 and then we'll be open to questions.

BBVA Frances is a universal Bank with presence in the three market segments and a wide distribution network, with total 301 offices, including 251 consumer branch offices and 34 branch offices specialized in small and medium-sized companies and institutions.

Corporate banking is divided by industry: consumption, heavy industries, and oil and gas, providing personalized attention to large corporations.

Complementing its distribution network, the Bank has 15 in-company branches, one point of sale outlet and one express point, 691 ATMs and 776 self-service terminals. At the end of September, the Bank had 6,114 employees.

Strengthening the Bank's strategy of consolidating its leading position in the car loan business, on September 26, 2016, BBVA Frances completed the purchase of 51% of [Volkswagen's] Credit Compania Financiera's capital stock.

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

During the second quarter of 2016, the real GDP published by the Statistics National Agency fell 3.4% annually and decreased 2.1% with respect to the first quarter of 2016 in seasonally adjusted terms.

The monthly estimator of economic activity registered a decrease of 1.1% in the July/August period with respect to the second quarter of 2016.

In the industrial sector, the monthly industrial estimator decreased 7.3% in September with respect to the same month in 2015, falling 4.6% during the year.

Following the same trend, the synthetic index of construction activity planned 13.1% in September, accumulating a drop of 12.8% from the end of 2015.

In June 2016, the index resumed the publication of inflation index, it published monthly inflation in its report, but did not include the historical period. During the third quarter, the CPI index moved 3.3% compared to the previous quarter.

The national public sector fiscal balance recorded a primary deficit of ARS101.9 billion during the third quarter, increasing 96.1% compared with the deficit of the still ARS51.9 billion recorded during the third quarter of 2015. These numbers do not include income from central bank and the Argentine Institute of Social Security revenue.

Primary public sector spending increased by 35.1% and public sector revenue showed an increase of 25.2% during the period. Public debt interest payment increased by 85.1% and considering income from central bank and [assessed] revenues, the total deficit reached ARS50.7 billion representing a 56.5% increase compared with the same period of 2015.

In the external sector, the accumulated trade surplus reached $975 million during the period July/August 2015 (sic), as a result of total exports of $10.7 billion and total imports of $9.7 billion.

In the third quarter of 2016, the central bank stock of international reserves decreased by $606 million reaching a total balance of $29.9 billion.

At the end of September, the central bank maintained a bilateral currency swap agreement entered into with the People's Bank of China.

[Further], in February 2016, the Central Bank has serviced $5 billion from a repo transaction with private bank of which only $1 billion was renewed to date. The BADLAR interest rate for private banks decreased by 555 basis points in the third quarter of 2016, averaging 24.6%.

The stock of private sector loans in pesos increased by 3.2% during the quarter, and 19.5% compared to the third quarter of 2015. Whereas private sector loans in dollars grew by 28.7% and 110.6% during the same periods respectively.

Total deposits in the financial system increased by 2.7% in the third quarter, and 32.8% in dollar terms. During the same period, private-sector deposits denominated in pesos increased by 1.6%, and 20.9%. Those denominated in dollars increased by 10.5% and 62.8% respectively.

Now, let's turn into the Bank's performance. BBVA Frances reached accumulative net income of ARS3.1 billion at the end of September 2016, which is a return on equity of 27.6% and a return on assets of 3.4%.

Net income for the third quarter was a gain up ARS933.9 million showing a slight decrease compared to the previous quarter, mainly explained by a decline of ARS506 million in the net financial income, and totally explained by the impact of the increase in the cash minimum requirements and lower gains derived from the public bond portfolio (inaudible).

Financial income arising from the intermediation with the private sector increased by 38.4% compared with the third quarter of 2015, mainly due to both a higher volume of lending, as well as higher interest rate.

In addition, income from the CER adjustment and the foreign exchange difference also registered growth. They were partially offset by 10.1% decrease in the gains derived from the public bond portfolio.

Financial expenses grew 43.8% compared with the same quarter of 2015 and decreased 6.4% compared to the previous quarter, mainly due to a decline in the interest rate.

The press release includes a new chart which shows the interest earnings assets and the interest-bearing liabilities with the aim of releasing the impact we had from volume and interest rate in the net interest margin.

Provision for loan losses increased compared to the third quarter of 2015, due to higher volume of lending and some deterioration of the loan portfolio. Whereas it decreased compared to the previous quarter mainly due to an improvement in collection efforts.

Net income from services increased by 36.1% and 28.2% compared with the same quarter of 2015, and with the previous quarter respectively.

In the year-to-year comparison growth was (inaudible) higher fees for credit cards, fees associated with deposit accounts, and foreign-trade operations, as well as fees generated by capital market advisory work.

The growth was partially offset by the increase in service charge expenses related to promotions associated with the LatAm Pass kilometers program.

During the third quarter the impact of the price increase was reflected mainly in fees related to deposit accounts, credit cards and safety boxes.

Administrative expenses grew 44.2% and 7.3% compared to the same quarter of 2015 and the previous quarter respectively. Personnel expenses increased in both. The annual and quarterly comparison mainly reflect the salary increases and a higher number of employees.

General expenses increased by 41.2% annually, and by 14.4% during the quarter. The annual increase was mainly due to a higher volume of activity; the general increase in prices; the depreciation of the currency; and increase in tariff.

During the quarter, high expenses in (inaudible) levels, electricity and communication, taxes and maintenance explain the growth.

In connection to the activity levels, the private sector loan portfolio, net of allowances for loan losses, totaled ARS71.1 billion at the end of September, representing an increase of 42.4% and 8% compared to the third quarter of 2015, and to the previous quarter respectively.

During the year, loans denominated in pesos increased 29.1%, whereas those denominated in foreign currencies grew at a faster pace, representing 14.6% of total loans at the end of the third quarter.

In the last 12 months, consumer loans increased by 37%. Such increase was led by credit cards, which registered growth of 34.3% during the period. While car loans and personal loans also registered increases of approximately 20%.

Commercial loans increased by 62.4% in the same period, mainly due to a higher portfolio of foreign trade operations and discounted (inaudible).

During the quarter, consumer loans grew 3.8%, whereas the commercial loan portfolio increased by 13.3%, mainly due to higher loans to small and medium-sized companies.

At the end of September, the asset pricing ratio was 0.83%, while the coverage ratio reached 251.62%.

Exposure to the public sector national government increased by 27.9% compared with the third quarter of 2015, whereas it decreased 22.4% compared with the previous quarter, mainly due to the sale of national government bonds.

The Bank's portfolio of Central Bank bills and notes show a decrease both during the period under analysis and in the last 12 months, reflected a higher demand of service and a higher minimum cash requirement.

At the end of September, the public sector national government assets represented 2.6% of the Bank's total assets.

Total exposure to the Central Bank's bills and notes, net of holding [fleet] to reverse repo transactions, represented 7.2% of the Bank's total assets.

Total deposits reached ARS91.1 billion at the end of September, represented an increase of 45.4% in the last 12 months, and registered a slight decrease during the third quarter.

It is important to mention that in the previous quarter included temporary deposit from the public sector. Net of this balance, this increase, during the quarter, would be 3.5%.

During the last year, both [private] accounts and term deposits reached a significant growth, increases 49.4% and 38.5%, respectively.

Total peso-denominated deposits increased by 24.3% in the last 12 months.

Foreign currency-denominated deposits increased significantly compared with both the same quarter of 2015 and with the previous quarter.

Foreign currency-denominated deposits totaled ARS21.8 billion, representing 23.7% of the Bank's of total deposit. It is important to mention that transactional deposits represent 56.9% of the Bank's total deposit.

On August 8, 2016, the Bank issued Series 19 and 20 of its bonds, which were fully subscribed and paid for a total amount of ARS207.5 million during 18 months, with a variable interest rate equivalent to the BADLAR rate, plus 2.4%, and for [ARS292.5 million] due in 36 months, with a variable interest rate of 3.23%, respectively.

It is important to mention that the Series 21 and 22 for a total amount that cannot exceed ARS750 million are now in the issuance process.

BBVA Frances maintains adequate levels of liquidity and solvency. At the end of September, liquid assets represented 43.6% of the Bank's total deposit.

The capital ratio reached 14.8% of weighted risk assets, with an excess of capital of ARS7.3 billion, which is 77.5% higher than the minimum regulatory requirement.

Considering this additional buffer, 3.5%, the excess of capital will reach to ARS3.3 billion.

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

(Operator Instructions). Ladies and gentlemen, as I am not showing any questions at this time, I would like to turn the floor back to Mrs. Acuna for any closing remarks.

Okay, thanks again for joining us. If you have any further questions, please contact us in our office.

Thank you everyone. This does conclude today's presentation. Thank you for joining us today. You may disconnect your lines at this time. Have a nice day.