Banco Macro SA (BMA) 2012 Q4 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 the Banco Macro's fourth-quarter 2012 earnings conference call.

We would like to inform you that the fourth-quarter 2012 press release is available to download at the Investor Relations website of Banco Macro, www.ri-macro.com.ar. Also, this event is being recorded and all participants will be in a listen-only mode during the Company's presentation. After the Company's remarks are completed, there will be a question-and-answer session. At that time, further instructions will be given. (Operator Instructions).

It is now my pleasure to introduce our speakers. Joining us from Argentina are Mr. Jorge Pablo Brito, member of the Executive Committee; Mr. Guillermo Goldberg, Commercial Deputy General Manager; Mr. Jorge Scarinci, Finance and IR Manager; and other members of the Bank's management team.

Now, I will turn the conference over to Mr. Jorge Scarinci, Finance and IR Manager. You may begin your conference.

Good morning, and welcome to Banco Macro's fourth-quarter 2012 conference call. Any comment we will make today may include forward-looking statements which are subject to various conditions and these are outlined in our 20-F, which was filed to the SEC and is also available at our website. The fourth-quarter 2012 press release was distrusted yesterday and it is also available at our website.

Banco Marco is one of the leading private banks in Argentina with a strong presence in the interior of the country and a branch network of 428 branches. Even though we are a universal bank, we focus on low- to middle-income individuals and SMEs. Banco Marco is a financial agent of four providences in Argentina; Salta, Jujuy, Misiones and Tucuman.

I will now briefly comment on the Bank's fourth-quarter 2012 financial results. Banco Marco's net income for the quarter was ARS425.8 million or 23% higher than the ARS346.4 million earned one year ago. The Bank's accumulated annualized 2012 ROE and ROA of 27.1% and 3.3% respectively remained healthy and showed the Bank's earnings potential. Nevertheless, Banco Marco accounted additional provisions for the payment of bonuses and one-time payment of ARS80 million in the quarter.

Had these payment of bonuses and provisions been excluded, fourth-quarter 2012 net income would have been ARS505.8 million and the result would have represented an ROE and ROA of 33.1% and 4.2% respectively.

On a fiscal year basis, Banco Marco earned ARS1.5 billion in 2012 or 27% higher than the ARS1.2 billion earned in 2011. In the quarter, net financial income totaled ARS1.1 billion or 24% higher than the ARS902.3 million registered one year ago. This performance can be traced to a 31% year-on-year increase in the financial income and a 40% year-on-year increase in financial expenses.

Within financial income, interest on loans rose 35% year-on-year due to a 26% growth in the average loan portfolio and a 165 basis point increase in the average lending interest rates. In the fourth quarter of 2012, interest on loans represented 86% of total financial income compared to the 84% in the fourth quarter of 2011.

On the other hand, net income from government and private securities decreased 29% year on year due to lower income from government securities, mainly LEBACs and NOBACs, which was justified which was by a smaller average portfolio of the securities.

Meanwhile, within financial expenses, interest on deposits grew 44% year on year due a 26% increase in the average volume of deposits and 144 basis point increase in the average time deposit interest rates. The former combined effects resulted in an increase of the Bank's net interest margin from 10.9% in the fourth quarter of 2011 to 11.9% in (technical difficulty).

Ladies and gentlemen, this is the operator. I apologize but there will be a slight delay in today's call. Please hold and the conference will resume momentarily. Thank you for your patience.

Okay everyone, so I would like to apologize for this cut off. I was just commenting on the Bank's loan growth. I will repeat that the Bank's financing to the private sector grew 9% quarter on quarter and 28% year on year among which loans for productive investments have been included.

Credit cards and personal loans also grew during the quarter. On the funding side, total deposits grew 4% quarter on quarter and 24% year on year. Private sector deposits grew 5% on a quarterly basis and public sector deposits also grew 1%. Within private sector deposits, an increase in peso deposit of 7% was observed, while foreign currency deposit decreased 4%.

As of December 2012, Banco Marco's transactional accounts represented approximately 46% of total deposits, and therefore, the Bank's average annualized cost of funds was 8%.

In terms of asset quality, Banco Macro's nonperforming to total financing ratio reached 1.78% compared to last year's level of 1.49%, and the coverage ratio reached 154.5%.

In terms of capitalization, Banco Macro accounted an excess of capital of ARS2.1 billion, which represented a capitalization ratio of 19%, even though in the fourth quarter of 2012 the new operational risk requirement increased to 100% from 75% in the previous quarter, and the credit risk requirement increased due to the loan portfolio growth. The Bank's aim is to make the best use of this excess capital.

The Bank's liquidity remains healthy. Liquid assets to total deposit ratio reached 31.7%.

Therefore, Banco Marco accounted for another positive quarter. We continued showing a solid financial position. Asset quality is under control and closely monitored. We continue working to improve more our efficiency standards. We have one of the cleanest balance sheets in Argentina's banking sector and we keep a well-optimized deposit base with one of the lowest costs of funds in Argentina's banking sector.

So, Operator, at this time, we would like to take the questions that people might have. Thanks.

(Operator Instructions).

Federico Rey, Raymond James.

I have two questions. The first one is regarding the credit losses. I would like to understand what's the reason of the increase in the quarter. Is it related to the expansion of the loan portfolio or the corporate client that you mentioned in the press release?

And the second question is regarding margins, I would like to have your view in respect of what you see going forward considering the expansion of the loan book and the expansion that could be driven by the implementation of the new Central Bank regulation that obliges banks to expand or to allocate an additional 5% of their deposits into investment projects? Thank you.

Hi, Federico. Your first question in terms of credit losses, now we highlighted there that part of the provisions in the quarter was related to this commercial client basically and to a minor extent the increase in the loan portfolio impact on the provisions for the quarter. The main factor was the change in the category or the downgrade in the category on these commercial clients that impacted in the provisions of the quarter.

Second question related on margins going forward, in terms of interest rates, we are expecting them -- margins to be relatively stable. Honestly, we are not expecting the impact on these additional 5% of deposits to be extended on this investment productive loans to impact on our margins. And we demonstrated that in the third and the fourth quarter of 2012 when we continued maintaining or even increasing or widening our margins even though we were extending those type of loans.

So going forward in 2013 in terms of interest rate margins, we are seeing them relatively stable.

Okay. Thank you.

(Operator Instructions).

Alonso Aramburo, BTG Pactual.

Thank you for the call. Two questions, one is can you give us some clarity as to what was that ARS80 million provision that you booked in the quarter? And second, can you give us a sense of what sort of past-due loans or NPLs are you expecting for 2013 and what kind of levels of provision should we expect on the back of that?

Hi, Alonso. How are you? As to your first question, we also mentioned in the press release the provision for the payment for bonuses that we allocated in the fourth quarter and also the one-time payment that the Bank did and also the whole banking sector did for the Banker's Day. So that accounted for the ARS80 million provision that we accounted in the administrative expenses in the quarter.

In terms of your second question, past-due loans going forward, we are expecting to of course nominally keep on growing in loans and that will be reflected in the provisions. In terms of past-due, we are not foreseeing or forecasting an increase in unemployment. We are seeing that relatively stable. The economy is expected to grow a little bit higher than what it grew in 2012. Therefore, we are not forecasting a major change in past-due loans. We could be in the range of 2% of past-due loans to total loans in 2013.

Great, thank you.

Welcome.

Boris Molina, Santander.

A couple of questions. The first one is a little bit related to your outlook for the year in terms of volume growth. And there was a special pickup in consumer credit in the fourth quarter, a bit more stronger than we were probably expecting. So I don't know if you detected a change in the behavior of consumers related to restriction in dollars where they are borrowing more with some -- there is a special jump in many lines. Or, maybe you could add some color what you are seeing in terms of demand of credit and how the outlook looks for the year where you still continuing to expect mid-20% loan growth or lower or this has changed somehow since last year.

And my second question has to do with a little bit of an outlook of what you expect from capital -- consumption capital regulation going forward? Have we seen the last of the operating and market risk consumption increases that were stated for the year or could we expect more capital consumption going forward on the regulatory actions that might affect results in 2013?

Hi, Boris. Loan growth we are expecting to have a nominal growth of -- in the range of 30% or plus in 2013. But we are not seeing major changes on consumers, basically on their behavior on taking loans. I would think that we could see a pickup in between the first quarter and second quarter this year basically because we are expecting [salary] increases to made throughout the economy between March and May. So the capacity for taking loans will increase there.

But in terms of the behavior, we are not seeing changes. We have not seen changes in the past, we are not expecting major changes in the near future or at least in 2013.

In terms of your second question of capital regulation, the Central Bank is putting out several measures and requirements in order to conduct capital requirements to be vis-a-vis what is Basel's requirement. So this is going to take at least a couple of more years. The Central Bank is working on that. You have to take into account that the whole banking sector in Argentina is very well capitalized with very low level of past-due and low level of capital [combined] risk. And therefore, I am not seeing a major impact on the banking -- or at least on the major banks in Argentina to acquire or to allocate to these new regulations that the Central Bank has been putting out.

And again, that will take at least two or three more years in order to be vis-a-vis with the Basel II.

Thank you. One question, do you detect any changes in terms of the [profit] of commercial credit demand or is it still going to remain subdued and growth more driven by the consumers and mortgages?

No, what we are seeing is that consumers continue to demand personal loans or credit card loans in order to have a sort of hedge against the increasing price over the inflation. In terms of the commercial behavior, we are seeing that that is picking up basically on some companies that want to take these loans for their productive investment that has been put out by the government.

Apart from that what we are seeing is that the demand for commercial lending continues to be relatively short term between one month and six months, no further than that. But no other changes or different things than that.

Okay, wonderful. Thank you.

Welcome.

[Peter Boone, Sunrise Capital].

I was just wondering what you thought the prospect this year is for the peso and in particular if there happened to be a very sharp devaluation at some point, what impact would that have on the Bank? Thank you.

Hi, thanks for your question. What we are seeing for this year the (inaudible) was for the depreciation of the peso. So is that correct?

Yes, that's correct, yes.

According to our estimates, we expect the peso to depreciate against the US dollar between 17% and 20% this year. And in relation to that and the impact on Banco Marco's balance sheet, you know and that is also stated and posted in our press release. We have a loan position in US dollars, and therefore, that will represent an income between and 17% and 20% on that position that we have in US dollars.

Okay, thank you.

Welcome.

(Operator Instructions).

And there are no questions at this time. This concludes the Q-and-A session. I will now turn the call over to Mr. Jorge Scarinci for his final consideration.

Okay, I would like to thank everyone for taking your time to listen to our call. Of course, this call is also recorded. And, well, thanks everyone. Have a good weekend. Bye-bye.

This concludes today's conference call. Thank you for your participation. You may now disconnect.