Banco Bbva Argentina SA (BBAR) 2019 Q1 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 Francés' 1Q '19 Results 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 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 under U.S. 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 Francés' annual report on Form 20-F for the fiscal year 2017, filed with the U.S. Securities and Exchange Commission.

Today with us, we have Mr. Ernesto Gallardo, CFO; Ms. Ines Lanusse, IRO; and Ms. Cecilia Acuña, Head of Investor Relations.

Ms. Acuña, you may begin your conference.

Thank you.

Good morning, everyone, and thanks for joining us today for the discussions on BBVA Francés First Quarter 2019 Results.

I will now briefly comment on the most important topics of the quarter, and then we will be open to questions.

In the first quarter of 2019, BBVA Francés reached a net income of ARS 6 billion, 104.6% higher than in the previous quarter and 288.8% higher than the net income registered in the first quarter of 2018.

This net income includes the impact attributed to the sale of the 51% of BBVA Francés participation in Prisma Medios de Pago and the valuation of the remaining 49%.

Excluding these extraordinary results, net income of BBVA Francés reached ARS 3.9 billion, 32.5% higher than in the previous quarter and 151.8% than the net income registered in the first quarter of 2018.

During the first quarter of the year, the ROE -- the ROA reached 6.6% and the ROE, 58.8% compared to 3.4% and 31.7% published in the previous quarter, respectively.

Excluding Prisma sale impact, the ROA would have reached 4.3% and the ROE, 38.1%.

Net operating income reached ARS 16 billion, increasing 42.3% compared to the previous quarter and 98.7% compared to the first quarter of 2018.

Operating expenses reached ARS 7.6 billion, increasing 2.7% compared to the previous quarter.

This effect was mainly driven by a 5.5% increase in personnel expenses attributed to the salary negotiations with the labor unions and its compensation scheme, and was offset by 6.9% decrease in administrative expenses led by less expenses related to transport of value and live rents.

The efficiency ratio in the quarter reached 37%, showing an improvement of around 142 basis points compared to the previous quarter.

Regarding BBVA Francés' activity at the end of March 2019, the private sector loan portfolio total ARS 185.3 billion, increasing 2.1% during the quarter and 32.9% in the last 12 months.

These figures exclude both client financial services loans, which since the third quarter of 2018 are no longer included in the car secured loans in the balance sheet.

On a consolidated basis including the JVs, that is Volkswagen, Rombo and PSA, BBVA Francés loans book reached 8.6% market share, showing an increase of 30 basis points in the last 12 months.

In the first quarter of 2019, credit growth in Argentina was affected by the devaluation of the peso and higher interest rates.

Loans in pesos included both client portfolio, decreased 5.1%, compared with the previous quarter and increased 12.3% compared with the first quarter of 2018.

Regarding the U.S. dollar loans expressed in pesos, the macroeconomic situation resulted in 16.9% increase in the quarter and 100.7 -- 7.1% increase in the last 12 months, mainly due to the re-expiration of a new value of the currency.

Measured in dollars, they increased 2% during the quarter and decreased 4% on the annual comparison.

With regard to loans to individuals, credit card and personal loans recorded a positive performance, while mortgages loans reflected the impact of the increasing inflation.

Commercial loans growth was mainly due to the depreciation of the peso.

At the end of March, the asset quality ratio, measured as nonperforming loans over total loans, reached 2.21% with the coverage ratio of 114.42%.

Because of risk, reached 2.09%, 21 basis points above last quarter and due to some deteriorations in the recent portfolio.

Total deposits reached ARS 278.7 billion at the end of the first quarter, increasing 7.4% compared to the previous quarter and 74.2% compared with the first quarter of 2018.

Foreign currency deposits expressed in pesos grew 18.1% in the quarter, and 139.5% in the last 12 months.

Measured in dollars, they increased 3.5% during the quarter and 11% on the annual comparison.

Local currency deposits increased 1.2 in the quarter and 47.2% compared with the quarters of 2018.

This effect was mainly driven by the fair adjustments, time deposits, which offset saving accounts decrease in the quarter.

BBVA Francés continues to show another level of solvency.

As of the first quarter of 2018, the total capital ratio was 15.3%, 101 basis points higher than in the previous quarter, mainly due to the result experienced during the quarter.

The Tier 1 ratio reached 14.6% with an excess of capital of ARS 20.1 billion.

That ends our prepared remarks.

We will be happy to take your questions.

We are now open to the Q&A.

(Operator Instructions) The first question comes from Gabriel Nóbrega with Citi.

During the quarter, we saw that trends [showed] continued to increase while coverage decreased again.

I know that this is greatly due to the deterioration and your exposure to Molino's -- to this troubled corporate.

So could you just please remind us what is your total exposure to this company?

And what coverage have you reached already?

Our exposure to Molino Cañuelas is 3% of the total debt.

And as of March, the provisions are in line with 30%.

All right.

If you just allow me a follow-up here.

Do you expect to make more provisions throughout the year?

And also, if you do expect to make more provisions for this company, where should we see your cost of risk in 2019?

Well, we expect to make higher provisions probably up to 50% in this second quarter, and we have our expectations of the NPL by the end of the year is close to approximately between 2.5%, 2.6%.

All right.

That's very clear.

I also have a other question.

Looking at the past 2 or 3 months, the Central Bank has issued a lot of new regulations for the banks.

One that caught most of my attention was actually on the shortening of the credit card settlement period from 19 days to 10 days.

Could you maybe talk us through what are the main impacts to your P&L from this new regulation, please?

Okay.

Yes.

We have an impact that we will try to compensate with some measures that we will take with our alliances.

The impacts, if we consider a level of raise for Leliq at approximately 55%, and considering signs and measures that we will take to compensate this impact, will be in line with minus ARS 1.2 million for 2019, the whole year.

The next question will be from Walter Chiarvesio with Santander.

I have 2 questions.

One is related to the quite lower expenses, interest expenses on current account deposits.

The last quarter -- in the first quarter, you got ARS 1.9 billion decreased to ARS 0.7 billion almost.

Why -- how is that explained if you change the strategy on remunerated current account or something?

And the second point is that adding all personnel expenses and administrative expenses have an increase of 29% in the quarter year-over-year, which is quite below inflation?

And how do we explain that?

And what is your estimate for the rest of the year?

That is from my side.

Okay.

First, I start with the expenditures.

This year, we expect in line with inflation by the end of the year, and explanation compared with the previous year, it's mainly in 2 parts.

The first is that according to IFRS, we -- there is a reclassification in the way that we accounted the rent.

In the previous scheme, we're accounting expenditures that you see in the rent line, this decreased, and now we're seeing in the asset side.

We amortized every month.

That is one of the explanations of the lower inflation compared to the previous year.

On the second one, regarding the lower rate for current accounts, it's explained by -- the Central Bank in February changed the reserve requirements.

So in the context that for sight account, the reserve requirements are higher, we pay less for remunerative current accounts.

Is that related to remunerative current accounts, is that something that changed in the first quarter that was different from the fourth quarter?

I don't remind that.

The Central Bank changed the way that the reserve requirements are in February.

So we have that base for sight deposit, 30% of the requirement have to be integrated in cash.

And for the time deposit, depends on the day, is 17%.

So for sight deposits, the remunerated requirement, but in cash, is higher.

We try to pay less for this current account -- remunerated current account.

(Operator Instructions) The next question comes from [Santiago Masini] with AR Partners.

I'm seeing that the great losses more than doubled in peso, quarter-over-quarter and considering that the coverage went slightly down and it feels a bit slightly up, but not so much, I'm wondering how did the write-offs moved during the quarter compared to the previous quarters.

And what could be the explanation behind this sharp increase in great losses in the first quarter of the year?

In this quarter, it's mainly explained by the deterioration of the retail portfolio.

Okay.

So that's attributed to that.

Okay.

Okay.

The next question comes from [Juan Alonzo] with Cowen.

I would like to ask if this year, like the 2 years before, you adjusted also the fiscal balance sheet for inflation and related to the ongoing litigation with the asset.

And if that's the case, so what was the amount that you saved this year in tax and income taxes?

And what is the amount including the last 2 years on top of this one?

Okay.

The last 2 years was ARS 1.2 billion in the -- yes, around ARS 2 billion.

ARS 1.1 billion the first year and ARS 1 billion the second one.

And this year, for 2019, we are analyzing the measures that we will take.

Okay.

And also if I may, if you could touch a bit about the impact on the inflation adjustments that you would need to post on the 20th, how would that be if you could give us any color.

I don't have the figures on the local balance sheet for the first quarter.

No -- yes, I was meaning about the 2018 results.

Tomorrow, we will publish the 20-F so we have there the 2018 figures adjusted by inflation.

(Operator Instructions) This concludes our question-and-answer section.

At this time, I'd like to turn the floor back over to Ms. Acuña for any closing remarks.

Thank you.

Thanks again to those -- to all of -- to join me now and do not hesitate to contact us directly for any further questions.

Have a nice day.

Thank you.

This concludes today's presentation.

You may disconnect your lines at this time, and have a nice day.

Thank you.