Banco Macro SA (BMA) 2015 Q2 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 2Q 2015 earnings conference call. We would like to inform you that the 2Q 2015 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. (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; Ines Lanusse, IR Officer; and other members of the Bank's management team.

Now, I will turn the conference over to Mrs. Ines Lanusse, IR Officer. You may begin your conference.

Good morning, and welcome to Banco Macro's second quarter 2015 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.

Second quarter 2015 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 435 branches. Even though we are a universal bank, we focus in 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 second quarter 2015 financial results. Banco Macro's net income for the quarter was ARS822.7 million or 12% higher than the ARS732.7 million earned one year ago, based on a wider interest margin and higher fees. On a quarter-on-quarter basis, second quarter 2015 net income declined 26% based on lower income from bonds and equity portfolio and higher personnel expenses, which were underestimated in the first quarter of 2015.

The Bank's annualized second quarter 2015 ROE and ROA of 25.8% and 4%, respectively, remained healthy and shows the Bank's earnings potential.

In the quarter, net financial income totaled ARS2.1 billion or 23% higher than the ARS1.7 billion registered one year ago. This performance can be traced to a 20% year-on-year increase in financial income and 18% year-on-year increase in financial expenses.

Within financial income, interest on loans rose 27% year on year due to a 80-basis-point increase in the average private sector lending interest rate and to a 24% growth in the average private loan portfolio.

In the second quarter of 2015, interest on loans represented 85% of the total financial income. On the other hand, net income from government and private securities decreased 15% year over year due to the decrease in the market prices.

Meanwhile, within financial expenses, interest on deposits grew 10% year on year due to a 17% increase in the average volume of interest-bearing deposits of time deposits and to decrease of 130-basis-point increase in the average time deposit interest rates.

Excluding FX gains, the former combined effect resulted in an increase in the Bank's net interest margin from 15.2% as of the second quarter 2014 to 17.6% as of the second quarter of 2015. Had we also excluded income from government and private securities and warranted loans, including fair adjustments on the calculation, the Bank's net interest margin would have been 15.6% compared to last year's levels of 14.2%.

The Bank's net fee income grew 30% year over year based on fee charged on deposit accounts and debit and credit card fees.

Administrative expenses rose 32% year over year, mainly due to an increase in personnel expenses, primarily higher salaries, and higher other operating expenses. The increase in personnel expenses is based on the reactive payment of salary increases in line with the salary increases agreed with the unions in June 2015. The accumulated efficiency ratio reached 48.5% in the second quarter of 2015.

In the second quarter 2015, Banco Marco's effective income tax rate was 36.2% compared to 37.6% registered in the first quarter of 2015.

In terms of loan growth, the Bank's financing to the private sector grew 7% quarter on quarter. On a yearly basis, the Bank's financing to the private sector increased 29% year over year, among which commercial loans for productive investments have been included. Personal loans and credit cards also grew year over year.

On the funding side, total deposits grew 11% quarter over quarter and 26% year over year. Private sector deposits grew 11% on a quarterly basis, while public sector deposits grew 6%. As of June 2015, Banco Marco's transactional accounts represented approximately 47% of the total deposits, and therefore, the Bank's consolidated average cost of funds was 10%.

In terms of asset quality, Banco Marco's nonperforming-to-total financing ratio reached 1.92% from last year's levels of 2.02%. The coverage ratio reached 131.23%.

In terms of capitalization, Banco Marco accounted an excess capital of ARS6.6 billion, which represented a capitalization ratio of 22.4%. The Bank's aim is to make the best use of this excess capital.

The Bank's liquidity remains appropriate. Liquid assets-to-total deposits ratio reached 40.2%.

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 Argentine banking sector, and we keep a well-optimized deposit base.

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

(Operator Instructions). Alexandra Aranda, Itau.

Hi, good morning, Ines, Jorge. Just two questions, if I may. Could you tell us what to expect on the cost side for the second half? And how do you see your efficiency ratio evolving?

And then if you may give us a view on how are you seeing the means for the second half, should we expect further compression or stable levels? Thank you.

Hi, Alexandra. This is Jorge Scarinci. On your first question, the cost side for the second half, we are expecting no volatility compared to the second quarter basically as the salary adjustment has been done in the second quarter. And therefore, you might see some marginal movements or changes depending on other operating costs. But, in terms of personnel expenses, no major changes going forward.

And in terms of the efficiency ratio, we expect the quarterly deterioration that we suffered to be -- going forward to be improving in the third and fourth quarter of the year, basically as a consequence of a higher net interest income and as we expect to see in the future better behavior on the public securities and fixed income portfolio that we held.

In terms of the net interest margin going forward, we expect this to be quite stable. What we are trying to do is to extend personal loans and create car loans in order to compensate the low rate that we are extending on the [lead] loans. Therefore, we're expecting some stability on the net interest margin in the second half of the year.

Okay. Thank you very much.

Welcome.

(Operator Instructions). Walter Chiarvesio, Santander.

Yes, hi, good morning. Thank you for the call. My question is related to the position of central bank bills. Can you give us your view about -- or would you expect to -- these holdings to (inaudible) into the future? And what is the Bank's plans about how to proceed with these holdings? Are you expecting to exchange it by private sector loans? Are you expecting to increase the central bank bills' position? My question stems from the fact that the banking system is increasing those bills.

And another question would be if you think that there might be some risk that these increasing positions could be exchanged by some longer-term bond in the future that could affect the profitability of the bank to some extent. That is the question.

Hi, Walter. This is Jorge. In terms, as I think that you know this, the central bank notes that banks have, and in the case of Banco Macro, basically, it's a way (inaudible) to allocate excess liquidity. So, what we are doing, as we have been doing the last at least three or four years, is basically to balance this portfolio, taking into consideration the loan demand.

Of course, it would be much more profitable for us to extend new loans, basically because the average rate is much higher than the rate that we are getting from the central bank notes [LEBACs].

Going forward, we will continue to have the same policy to balance this portfolio, depending on the private loan demand. And therefore, we expect this to be pretty stable, at least in the next two quarters.

And going forward, the second -- or your second question, basically, I don't know. It's impossible to know or to answer that question in this moment.

Okay. Perfect. Thank you very much, Jorge.

Welcome.

(Operator Instructions). Federico Rey, Raymond James.

Hi, Ines, Jorge. I have two questions. The first one is related to loan growth, if you can comment on what's your potential for the rest of the year.

And second question, you mentioned about the [idea] to increase lending in the consumer portfolio in order to compensate for lower yields at the SMEs or the [growth productive] line. In that respect, do you see any kind of deterioration in asset quality, given that you're expecting to increase the lending in the retail business? Thank you.

Hi, Federico. Loan growth we expect for this year to be in the -- maybe in the high 20s, will have a lot to do, though, what's happening with economic activity in the second half.

According to the statistics, Argentina is slightly growing, according to the official statistics. But, again, it will depend on what happened with loan demand going forward. And we expect that to be between mid and high 20s nominal loan growth rate for the year.

In terms of the second question, we are trying to increase consumer portfolio, both personal loans and credit cards, basically, from a nominal point of view by not reducing market share. That's the idea. And the second purpose is to maintain the net interest margin.

And going forward, we are not forecasting a deterioration in asset quality or a big deterioration. We might see some sporadic cases. But, we have not seen a generalized situation in terms of deterioration of asset quality, at least in our portfolio.

Okay. Thank you, Jorge.

Welcome.

(Operator Instructions). [Martina Curie], [LP Advisors].

Hello, Ines. Hello, Jorge. I wanted to ask you about if we could get some more details on the reduction in the net income from government and private securities.

Yes, hi, Martina. Yes, basically, on this quarter, we suffered a lower performance on the public bonds and on the fixed -- and the equity portfolio that we have built in the past. When you do a combination of both the total (inaudible) that you could see that in the interest income line, you will see a decline between the first quarter and second quarter of ARS622 million.

That's the combined effect that you can see in that line. Of course, there, you have some segments that basically were positive, in the case of the LEBACs performance. And in the case of the public bonds and the equity portfolio, they performed negatively.

Okay. Thank you.

Welcome.

(Operator Instructions). Juan Vasquez, Fuente.

Yes, hello, everybody. You pretty much already answered this question, but my question was about leverage. The Bank has 10% in healthy equities with low leverage ratios. So, I was wondering if you expect to be able to increase the leverage going forward.

Hi, Juan. Going forward depends what you mean by going forward. Of course, in the future, and with a normalized economic scenario, the Bank will be able to increase the leverage. For the moment, I think that, on the short run, we are planning to maintain the leverage levels.

Okay. That's fair enough. Yes, that was related to some of your previous questions. So, I think I have a clear picture. Thanks.

Okay.

(Operator Instructions). There are no questions at this time. This concludes the question-and-answer session. I will now turn the call back over to Mrs. Ines Lanusse for any final considerations.

Thank you, all, for your interest in Banco Macro. We appreciate your time and look forward to speaking to you again. Good morning.

Thank you. This concludes today's conference. You may now disconnect your lines, and have a wonderful day.