Banco Macro SA (BMA) 2014 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 Banco Macro's third-quarter 2014 earnings conference call. We would like to inform you that 3Q 2014 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; and Jorge Scarinci, Finance and IR Manager; Ines Lanusse, IR Officer; and other members of the bank's management team.

Now I will turn the conference call over to Mrs. Ines Lanusse, IR Officer. Please begin.

Good morning and welcome to Banco Macro's third quarter 2014 conference call. Any comment we may 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 available at our website.

Third quarter 2014 press release was distributed last Monday and it is also available at our website.

Banco Macro is one of the leading private banks in Argentina with a strong presence in the interior of the country and a branch network of 431 branches. Even though we are a universal bank, we focus on low- to middle-income individuals and SMEs. Banco Macro is a financial agent of four provinces in Argentina; Salta, Jujuy, Misiones, and Tucuman.

I would now briefly comment on the bank's third quarter 2014 financial results. Banco Macro's net income for the quarter was ARS985.5 million or 72% higher than the ARS571.9 million earned one year ago.

In the quarter net financial income totaled ARS2.1 billion or 37% higher than the ARS1.6 billion registered one year ago. This performance can be traced to a 45% year-on-year increase, ARS1.2 billion in financial income and 57% year on year increase, ARS592 million increase in financial expenses. Within financial income, interest on loans rose 34% year on year due to an increase of 450 basis points in the average private lending interest rate and an increase in the average volume of the loan portfolio.

In third quarter 2014, interest on loans represented 76% of total financial income compared to the 82% in third quarter 2013.

On the other hand, net income from government and private securities increased ARS581 million year on year due to a higher income from government securities, especially LEBAC and NOBAC.

Income from foreign currency decreased 64% year on year due to a lower FX position revaluation caused by a deceleration in the depreciation of the Argentine peso. Meanwhile within financial expenses interest on deposits grew 61% year on year due to an increase of 460 basis points in the average time deposit interest rates and a higher average volume of these deposits.

Excluding assets gains, the former combined effect resulted in an increase in the bank's net interest margin from 13.3% as of the third quarter 2013 to 15.7% as of the third quarter of 2014. Had we excluded [bond gains] and guaranteed loans from the calculation, the bank's net interest margin would have been 14.3% as of the third quarter 2014 from last year's levels of 13.6%.

The bank's net fee income grew 53% year on year, mainly driven by fee charges on deposit accounts and debit and credit card fees. Administrative expenses rose 36% year on year mainly due to an increase in personnel expenses, mainly higher salaries and other concepts and other operation expenses.

The increase in personnel expenses is based on the effective payment of salary increases in line with the salary increase that we give the unions on April 2014 and other (inaudible).

The accumulated efficiency ratio reached 44.6%, largely improving from the 50.9% level posted on the third quarter 2013. In terms of loan growth, the bank's financing to the private sector increased 5% quarter on quarter and increased 13% year on year among which commercial loans for productive investments have been included.

Personal loans and credit cards also grew year on year. On the funding side, total deposits grew 4% quarter on quarter and 27% year over year. Private sector deposits grew 2% on a quarterly basis and public sector deposits also grew 11%.

Also on a quarterly basis within private sector deposits a decrease in foreign currency deposit was experienced while peso deposits increased 2%.

As of June 2014 Banco Macro's transactional accounts represented approximately 46% of the total deposits and therefore the bank's average annualized cost of funds was 11%.

In terms of asset quality, Banco Macro's non-performing to total financing ratio reached 1.85%, from last year's levels of 1.76%. The coverage ratio reached 138.69%.

In terms of capitalization, Banco Macro accounted an excess capital of ARS5.7 billion, will represent a capitalization ratio of 24.7%. The Bank's aim is to make the best use of this excess capital.

The Bank's liquidity remains healthy. Liquid asset to total deposit ratio reached 43%.

Banco Macro 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 the Argentine banking sector, and we keep a well-optimized deposit base, with one of the lowest cost of funds in Argentina's banking sector.

At this time we would like to take the questions you may have.

[Peter Boone, Chenos].

I was just wondering, given your strong capital position whether you see at the moment opportunities in terms of strategic acquisitions that you could use the capital on within Argentina. And then secondly could you just outline what your current dividend policy is and also policy with respect to share buybacks? Thank you.

Hi, Peter, this is Jorge Scarinci. According to your first question, I think that our history is a track record of acquisitions. And of course that is the reason, a possibility or alternative, we are going to keep an eye on that to study that. And of course if the price is suitable for the bank and the assets also, we might be going for that. For the moment we are not seeing any acquisition targets here in the Argentine market for the moment.

The second part of your question or your second question. According to our dividend policy and share buyback we used to -- bought back and big chunk of our capital, I think it was 14% of our capital between 2008 and 2009. And now basically we are not implementing another share buyback program basically because of the liquidity of the stock even though we are analyzing different scenarios. But I would say that that is the main cause why we are not implementing that share buyback program.

Okay. And then dividend policy, I --

Yes, of course you know that the restrictions, we are over the high restrictions or requirement established by the Central Bank here. And the dividend that we will be paying in 2015 are going to be said in the shareholders' meeting. I think it will be between March and April next year.

I see. Is there anything you can say with respect to a target in terms of percent of income as long as you're above that threshold or some other guidance as to what the level would be?

Honestly, for this time of the year it is not easy to answer that question, but when you look backwards we would try to pay as much dividend as we can considering the high requirement of the central bank. But for the moment I cannot give you an exact number of that.

Yes, okay, thank you very much.

You are welcome.

(Operator Instructions) Yuri Fernandes, JPMorgan.

Quick question on your securities (inaudible). It has been very high in the past two quarters, it amounted ARS760 million in this quarter from ARS500 million in the second quarter and ARS108 million in the third quarter 2013. So I would just like to ask you about these, if this should be recurring and where is this (inaudible) coming from. Thank you.

Hi, how are you? Sorry, I couldn't get the first part of your question, which is the item that you are talking about?

No, basically the government and private securities income, they have been very high in the past quarter.

Yes, that's the consequences of a kind of assets and liability management policy, the stock or the portfolio of Central Bank debt has been increasing in the last two quarters, and basically that's the main reason for the increase in the income from those type of instruments.

Okay. Thank you.

Welcome.

Alonso Aramburu, BTG Pactual.

I just wanted to ask a question on asset quality. You saw an improvement of the NPL ratio this quarter. But the press release mentions that some clients were sent off balance sheet and that's the reason for the improvement. Can you just give us some color as to which clients are these and why is the bank doing this?

Hi, Alonso. Well, we have stated before that the bank has become a bit, much more conservative than Central Bank requirements in terms of NPLs. And basically what happened is in the month of July we sent to off balance sheet items some commercial loans that basically was the main reason why the increase in the off balance sheet loans in the third quarter. An amount of approximately ARS44 million that were like extraordinary in the month of July related to the average of between ARS30 million and ARS40 million a month that we sent to off balance sheet account, mainly which are consumer loans. So I would say that the bid was in July around ARS44 million of commercial loans that were sent as an extraordinary to off balance sheet.

And when you look at overall trends because NPLs were increasing at the beginning of the year and now they've improved, I mean how are you seeing trends evolving in the fourth quarter and what are your expectations for the next few months?

Basically what we are seeing is that, it's a kind of a [roller coaster], but in our case it is ranging the ratio between 180 and 2% or 170 and 2%. Going forward, next quarter we are seeing similar conditions, but maybe in the first half of 2015 we could see that ratio maybe slightly going above 2% as a consequence of the recession and the slowdown in the economy that we are seeing in Argentina. But basically we are not seeing a dramatic change in the ratio in the near future.

Okay. That's great news. And I have one more questioning regarding your net interest margin which has been increasing and increased a lot also this quarter. There is a new regulation on deposits, on rates that you need to pay on deposits. How do you see the mean moving based on this new regulation?

(Inaudible) of course we could see some trimming down of the net interest margin between 1 percentage point and 1.5 percentage point. So that is how we are seeing this being affected, not only macro but also all the financial industries in Argentina, so around that. That is our forecast on the margin.

Okay, great. Thank you very much.

Welcome.

(Operator Instructions) Ladies and gentlemen at this time I'm showing no additional questions. I'd like to turn the conference call back over to management for any closing remarks.

Okay. Thank you very much for your time and have a good day. Thank you.

Ladies and gentlemen, that does conclude today's conference call. We do thank you for attending today's presentation. You may now disconnect your telephone lines.