Banco Macro SA (BMA) 2014 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 Banco Macro's fourth-quarter 2014 earnings conference call. We would like to inform you that fourth-quarter 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 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 would like to turn the conference over to Mr. Jorge Scarinci, Finance and IR Manager. You may begin your conference.

Good morning and welcome to Banco Marco's fourth-quarter 2014 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 available at our website.

Fourth-quarter 2014 press release was distributed yesterday 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 434 branches. Even though we are a universal bank, we focus on the low-to-middle income individuals and SMEs. Banco Macro is a financial agent of four provinces in Argentina; Salta, Jujuy, Misiones and Tucuman.

I will now briefly comment on the Bank's fourth-quarter 2014 financial results. Banco Macro's net income for the quarter was ARS575 million or 40% lower than the ARS953.4 million earned one year ago.

The Bank's accumulated fourth-quarter 2014 ROE and ROA of 33.4% and 5.1% respectively remains healthy and shows the Bank's earnings potential.

However, Banco Marco accounted one-time charges in the quarter, such as provisions for the payment of employees' bonuses and provision for one-time payment for ARS182.4 million and also a loss in income from government and private securities for ARS356.5 million, which were experienced in the quarter, and finally the cancelation of contingent liabilities for another ARS72.2 million that were accounted in the fourth quarter.

Had these concepts been excluded, fourth-quarter 2014 net income would have been ARS1.1 billion, representing an accumulated ROE and ROA of 38.4% and 5.8% respectively and being 15% above last year's result. Therefore, in a normalized basis, we consider we had a positive quarter.

On a fiscal year basis, Banco Marco earned ARS3.5 billion in 2014 or 42% higher than the ARS2.4 billion earned in 2013.

In the quarter, net financial income totaled ARS1.8 billion, flat compared to the ARS1.8 billion received one year ago. This performance can be traced to a 19% year-on-year increase in financial income and a 50% year-on-year increase in financial expenses.

Within the financial income, interest on loans rose 28% year on year due to a 346 basis points increase in the average private sector lending interest rates and to a 13% growth in the average private loan portfolio.

In fourth-quarter 2014, interest on loans represented 87% of total financial income. On the other hand, net income from government and private securities increased 291% year on year due to higher income from securities.

Meanwhile, within financial expenses, interest on deposits grew 46% year on year due to a 22% increase in the average volume of interest-bearing deposits and to a 360 basis point increase in the average time deposit interest rates.

Excluding FX gains, the former combined effect resulted in an increase of the Bank's net interest margin from 13.7% as of the fourth quarter of 2013 to 15.5% as of the fourth quarter of 2014. And we also excluded bond gains and warranty loans on the calculation, the Bank's net interest margin would have widened to a further 14.7% from last year's level of 13.9%.

The Bank's net fee income grew 33% year on year based on debit and credit card fees and fee charges on deposit accounts.

Administrative expenses rose 42% year on year, mainly due to an increase in personnel expenses, primarily higher salaries and higher other operating expenses. The increase in personnel expenses can be traced to salary increase agreed with the unions back in April 2014.

Therefore, the accumulated efficiency ratio, measured as cost to fee income, reached 47.7%, improving from the 48.7% posted one year ago.

In 2014, Banco Marco's effective income tax rate was 36.1% compared to the 35.3% registered in 2013.

In terms of loan growth, the Bank's financing into the private sector grew 6% quarter on quarter and 12% year on year. However, if we exclude or we do not consider loans to AAA companies, which in our case are considered as the companies of liquidity administration, the increase was 19% on a yearly basis.

On the funding side, total deposits grew 3% quarter on quarter and 26% year on year. Private sector deposits grew 7% on a quarterly basis, while public sector deposits decreased 16%. As of December 2014, Banco Marco's transactional accounts represented approximately 50% of total deposits, and therefore, the Bank's average cost of funds was 10.1%.

In terms of asset quality, Banco Marco's non-performing to total financing ratio reached 1.92% compared to last year's level of 1.72% (sic - see earnings release, page 11, 1.85%). The coverage ratio reached 135.3%.

In terms of capitalization, Banco Marco accounted an excess of capital of ARS5.9 billion, which represented a capitalization ratio of 24%. The Bank's aim is to make the best use of this excess capital.

The Bank's liquidity remains appropriate. Liquid assets to total deposit ratio reached 40.6%.

So overall, we think that we have accounted for another good quarter considering the negative quarterly effects detailed before. We continued showing a solid financial position. Asset quality continues under control and closely monitored. We keep on working to improve more our efficiency standards, and we have one of the cleanest balance sheets in Argentina's banking sector. Also, we keep a well-optimized deposit base.

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

Thank you. At this time, we are going to open it up for question-and answers. (Operator Instructions)

Boris Molina, Santander.

I have a couple of questions. I just wanted to make sure I got the numbers you mentioned right regarding the securities loss. You mentioned ARS350 million -- was it ARS356 million?

Yes, that's right. Yes.

And ARS72.2 million in contingent liabilities. Was this a contingent liability accounted in the margin or somewhere else?

Sorry, the liabilities were in other -- in other expense were accounted.

Okay, expense. And that is on top of the ARS182 million on operating expenses in the personnel line, right?

Yes, that right. Yes.

Okay, I wanted to make sure. Okay, now, I had a couple of questions. The first one is, if you could please tell us a little bit about how is the market evolving in the fourth quarter and in the beginning of the year? We have seen how commercial lending has been slowing down and then only consumer demand in the credit cards probably and personal loans are the ones that are doing relatively well.

So I don't know if you could explain to us a little bit what you are seeing in the market and what could you expect in terms of volume growth for the rest of the year?

And the second one is related to asset quality. We saw that the non-performing loan ratio was relatively flat, but it was a -- there was a little bit of an increase in non-performing loans in the commercial portfolio and an improvement -- I would say probably also because of the growth -- in the consumer portfolio. So what is happening in the Company segment? Is there something that you are worried about?

Okay, Boris, in terms of the first question, I think that loan growth is of course tied to what happens in the economy and what we saw in 2014 was a slight economy pace. And we are forecasting for 2015 another year of little growth or maybe a decline in real GDP.

Therefore, I would say that demand for loan is going to be sluggish. We are forecasting between 15% and 20% loan growth. That is our primary or preliminary expectation for this year.

In terms of commercial lending what we are seeing of course is again the compulsory loans that we have to extend due to the regulation of the Central Bank, and also the consumer side, the consumer segment is going to be tied to the salaries increases that are going to take place between March and May of this year.

But overall, we are not expecting a great year for loan demand in 2015 similar to some extent to what happened in 2014. In terms of --

Could you --?

Yes?

Sorry. So you expect, for example, in this 15% to 20% growth it will be probably very low single-digit or low double-digit growth in commercial and then consumer still growing with salary increases? What is the rate of salary increases that you expect? What have you seen in the market, is it 20%, 30%? What have you been seeing?

No, we haven't seen any salary increase yet. These negotiations start in March or late March. We are forecasting around mid 20s approximately or maybe high 20s depending on the sector. We are not expecting the consumer loans to increase by that amount, but maybe low 20s, mid 20s, something like that. But in terms of -- we are not forecasting a great deal in terms of loan growth basically.

Okay. But the idea that consumers is going to perform better than commercial is still there?

If I have to get, slightly above.

Okay. Wonderful.

Yes. And in terms of the second question, in terms of asset quality, basically there were some different companies that were moved from category two to category three and four. But honestly, there was not a -- were around ARS18 million in the quarter. So basically this is nothing to be worried about in terms of the commercial non-performing portfolio.

Okay, okay. And when you look at your margins, we've seen like interest rates in the last year or so rose from the low teens to around 20%. Do you expect interest rates to move any higher and do you expect your margins to continue -- it appears that your lending margin continues to expand because of the change in the mix with more consumers. Do you expect that your overall margins could continue to expand on a sequential basis during the year or do you think that fourth quarter margins is a good indication of what we could expect for the rest of the year?

Yes, I will assume maybe fourth quarter margins to be a good proxy for (inaudible) 2015. Yes, we are not seeing great movements on interest rates and also in the margins.

Okay, wonderful. Thank you so much, Jorge.

Welcome, Boris.

Patricio Danziger, Everest Capital.

Thank you for the call and thank you for the clarification on the one-offs. Just another question on the one-offs. You mentioned ARS356 million in trading losses and also ARS72 million and there's ARS182 million also in the press release. If I add up ARS575 million with the ARS356 million and the ARS182 million, I get to the ARS1.1 billion of net income that you mentioned previously. So can I understand this ARS72 million, if it's included in the ARS182 million and how does it work?

Now, the point that we are considering also, the net income tax effect on this potential income that we would have had. Therefore, when you do the calculations on the ARS182 million and ARS356 million, you have to consider that it's only 65% of that, not 100% of that.

I see, I see. Fantastic. Thank you. And then could you further explain a little bit more what is this ARS356 million in trading losses? Because I'm seeing in the press release that Lebacs and Nobacs are lower in the quarter. They are at around ARS5.7 billion versus ARS9.2 billion in the third quarter. Just to understand, where did the loss come from?

Yes, basically from private securities. That's a portfolio that Banco Macro built in the fourth quarter of 2014 basically on quoted shares on the local stock exchange. And when you do the market -- mark-to-market on that portfolio as of December, there you have a negative impact of around ARS250 million.

Also, you have another negative impact in the valuation of public securities in the case of, for example, (inaudible) that's of another -- of around ARS90 million. So basically the ARS350 million is different than those -- the securities, private securities portfolio and public bonds valuation or mark-to-market as of December 2014.

I see, I see. Thank you. And you basically sold Lebac and Nobac to buy other securities, because I see that this number coming down of Lebacs and Nobacs from the third quarter to the fourth quarter?

In part, yes. But in part we use Lebac and Nobac as another instrument of the liquidity as [intermission]. So in fact a part was sold for that and the other part for increase the cash that -- in December the demand for cash increased a lot in Argentina because of holiday, Christmas, et cetera.

Fantastic. And then the last one on the ARS182 million of extraordinary bonus payments and other provisions. I just would like to understand how extraordinary is this because every year there's a bonus payment? So how -- why is it extraordinary?

It's extraordinary in this quarter because we do not account for that on a monthly basis. We account for that on -- basically on the last quarter. And basically if you want the split up of the ARS182 million, you have approximately ARS100 million on the provision for the bonuses for employees and another ARS80 million in relation to one-time payment for employees that happened in the fourth quarter.

I see. I see. Thank you very much for all the answers, Jorge.

You're welcome, Patricio.

There are no questions at this time. This concludes the question-and-answer session. I will now turn over to Mr. Jorge Scarinci for any final considerations.

Okay, thanks everyone for your interest in Banco Macro. We appreciate your time and look forward to speaking with you soon. Have a good day. Bye-bye.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.