Banco Macro SA (BMA) 2015 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 4Q 2015 earnings conference call.

We would like to inform you that the 4Q 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) After the Company's remarks are completed, there will be a question-and-answer session. (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 Mr. Jorge Scarinci, Finance and IR Manager and other members of the Bank's Management Team too.

Now I would like to turn the conference over to Mr. Jorge Scarinci, Finance and IR Manager. You may begin the conference, sir.

Good morning and welcome to Banco Macro fourth-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. Fourth-quarter 2015 press release was distributed yesterday, and 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 439 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 will now briefly comment on the Bank's fourth-quarter 2015 financial results. Banco Macro's net income for the quarter was ARS2 billion, 242% higher than the ARS575 million earned one year ago, based on a significant increase in net financial income. The Bank's accumulated fourth-quarter 2015 return on equity and return on assets of 37.2% and 5.8% respectively remained healthy and shows the Bank's earning potential.

On a fiscal year basis, Banco Macro earned ARS5 billion in 2015 or 44% higher than the ARS3.5 billion earned in 2014.

In the quarter, net financial income totaled ARS3.7 billion or 107% higher than the ARS1.8 billion received one year ago. This performance can be traced to a 79% year-on-year increase in financial income and a 50% year-on-year increase in financial expenses.

Within financial income, interest on loans rose 42% year on year due to a 41% growth in the average private loan portfolio with a 30 basis point increase in the average private sector lending interest rate. In fourth quarter of 2015, interest on loans represented 69% of total financial income. On the other hand, net income from government and private securities represented 23% of total financial income and jumped 291% year on year due to an increase in market prices mainly in our private bond securities portfolio.

Meanwhile, within financial expenses, interest on deposits grew 52% year on year due to a 36% increase in the average volume of interest-bearing deposits and a 310 basis point increase in the average time deposit interest rates.

Excluding FX gains, the former combined effects resulted in an increase of the Bank's net interest margin from 15.7% as of the fourth quarter of 2014 to 18% as of the fourth quarter of 2015. Had we excluded bond gains and [guarantee] loans excluding inflation adjustments on the calculation, the Bank's net interest margin would have widened to a further 15.7% from last year's level of 14.9%.

The Bank's net fee income grew 34% year on year with a 44% increase on debit and credit card fees and a 33% increase on fees charges on deposit accounts.

Administrative expenses rose 28% 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 June 2015.

The accumulated efficiency ratio reached 46.1%, improving from 47.7% posted one year ago as a result of a 31% increase in administrative expenses and a 36% increase on net financial income plus net fee income in 2015 compared to 2014.

2015 Macro's effective income tax rate was 33.2% compared to 36.1% registered one year ago.

In terms of loan growth, the Bank's financing to the private sector grew 11% quarter on quarter. On a yearly basis the Bank's financing to the private sector grew 42%, among with commercial loans from (inaudible) investment has been included.

On the funding side, total deposits grew 10% quarter on quarter and 40% year on year. Private sector deposits grew 14% on a quarterly basis, while public sector deposits decreased 10%. As of December 2015, Banco Macro's transactional accounts represented approximately 47% of total deposits, and therefore, the Bank's average cost of funds was 10%.

In terms of asset quality, Banco Macro's non-performing to total financing ratio reached 1.52% improving from last year's level of 1.92% and the coverage ratio reached 151.04%.

In terms of capitalization, Banco Macro accounted an excess of capital of ARS6.9 billion, which represented a capitalization ratio of 20.8%. The Bank's aim is to make the best use of this excess capital.

The Bank's liquidity remained appropriate. Liquid assets to total deposit ratio reached 38.4%.

So overall, we have accounted for another good quarter, we continue showing a solid financial position. Asset quality continues under control and closely monitored. We keep on 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.

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

Certainly. At this time, we are going to open it up for question and answers. (Operator Instructions) Federico Rey, Raymond James.

We saw an impressive increase in the acceleration in loan growth during the fourth quarter. I would like to understand what's going on, if the Bank became more aggressive in term of origination or if you saw a higher demand of credit?

Federico, basically there was -- the demand was similar in the third quarter. The point is that we were like accounting more loans in the fourth quarter compared than in the third quarter, but basically was an accounting difference, but the demand was similar and we are seeing in this first quarter of 2016, I would say, slightly sluggish loan demand. But the fourth quarter compared to the third quarter was similar, there was only accounting timing in there. But in terms of aggressiveness, we continue to supply all the demand that we can have and we can tackle.

Okay. In that respect, what's your loan growth estimate approximately for this year, it's closer to 30% to 35%?

We are working out with our budget, the season will be growing around 30% and we are working with a loan growth estimate in the mid -- between mid and high 30%s.

Okay. Thank you very much.

Welcome.

[Santo] Ruiz, [TCBG].

It's Santiago Ruiz from TPCG. Jorge, regarding cost, what is your estimate of salary increases for this year and also I would like to know if there is any plan on opening new branches this year?

Salaries increases, that would happen in short time according to the negotiations between the unions and the Bank's Chambers. We think that that will be in the high 20%s, so that is with the number where we are working with expenses increased in this 2016.

And in terms of opening branches, there will be some marginal opening and close. So in terms of the total number of branches we are not seeing big changes in 2016, so we will be close to the 440.

Okay. Thank you.

Welcome.

(Operator Instructions) Catalina Araya, JP Morgan.

I just want to get a sense of net interest income in 2016 because the fourth quarter was generally benefited from securities and FX gains, so just wanted to get what would be a normalized -- one, what's the normalized range for securities and FX going forward? And also how do you see your margins evolving in 2016? That's my first question.

And then just to follow up on cost, you mentioned that you expect salary increase around in the high 20%s. Would cost growth be also in the high 20%s or you see it above 30%?

First, your second question, we are seeing total expenses growing in the high 20%s. For the moment we are not seeing that surpassing 30%. And so that is the budget that we are working with.

In terms of your first question, what we're seeing for 2016 is margins being relatively stable. What we could see some slow-down or some decrease in nominal interest rate maybe in the second half of the year, but we'll see deposit rates going down hand in hand maybe with some loans rates going down. So in that case you will see margins relatively [stabling] in the average in 2016 compared to 2015.

In terms of the income that we might have in terms of our private securities portfolio and bond portfolio, that is something that -- in terms of our equity portfolio it's something that we are going to keep. So that will depends on market prices.

For the moment in this -- as far as in the first quarter we are having another positive quarter in that sense, not that positive as in the fourth one, but it is positive. And also the bond portfolio we have is a small portfolio. We have maybe a slightly higher portfolio in terms of Central Bank debt. That is very short term, only two months maturity and that is where we are locating such liquidity.

And that portfolio maybe in the future, again, also in the second half may be yielding rates below what we saw in the fourth quarter mainly in December and maybe in the first half of this year. But we are going to have in 2016 stable margins and in terms of net interest income we are seeing that increasing in the area of 20%-25% nominal at least.

Okay. Thank you so much.

You're welcome.

Alejandra Aranda, Itau.

Just two questions if I may. First, could you tell us what are you viewing in terms of your deposits and the composition? I saw that time deposits increased quite a lot in the fourth Q. What are you seeing going forward? We should expect time deposits to keep on weighting more over your total deposit rates?

And then in terms of your NPLs, what are you viewing for next year? Are you seeing a slight deterioration or should we be more worried?

In term of deposits we are seeing our deposit base grow in the area of 32% in 2016. And the composition is, yes, we are seeing slightly a higher participation of time deposits compared to transaction accounts. But basically the increase is going to be 60% and 40% respectively.

You have to take into account that when you look at the average cost of funds, as I mentioned in the conference call, also we put out in press release, it's 10%. So the increase that you might have in the average cost of fund is meaningless in that sense.

In terms of your second question, NPLs, we posted an improvement in terms of NPLs at the level of 1.5%. That number may be could slightly deteriorate in the area of 2%, but basically we are not worried about that. This is going to be [transition] year for Argentina.

Maybe GDP is going to be 0% or decrease in the area of below 1%. But in term of NPLs we are not worried. We have a good level of coverage with provisions and I mean, the deterioration could be in the area of 2%, but nothing to worry about.

Okay. Thank you.

Welcome.

Russell Abrams, Titan Capital Group.

I wanted to know, do you have any estimates in terms of what loan growth could be in deposit growth? Should dollar accounts become allowed again?

Basically loan growth, what we are seeing is, you know that almost 95% of our business and our balance sheet is in pesos. So we are seeing in 2016 no big increase in terms of deposit in dollars or loss in dollar. Basically that is going to remain with a nominal increase in the area between 5% and 10%, much lower than the increase that we are foreseeing for peso-denominated loans and deposits. Is that okay?

Yes. Is this something you want to be increasing though since the following rates are so much lower?

Basically we are going to increase our deposit if we are seeing demand in loans. If not, there's no case to increase the deposit rates in dollars. So we are going to track and have a close idea in terms of the loan demand in US dollars.

Okay. Thank you very much.

Welcome.

(Operator Instructions) Federico Rey, Raymond James.

Jorge, could you give us some idea or some clue regarding cash dividends you are expecting to make a proposal to the shareholders meeting, any idea of that?

I was waiting for that question. So, yes, the Board of Directors is still calculating and having conversation with the Central Bank in terms of the proposal of the cash dividend because consider that we are going to consider the dividend we could not distribute in the former years, and also the one that corresponds to 2015.

So the final number is still not defined yet, but that is going to happen in the near future. So when that happens, we are going to make the public announcement. With that also the shareholders meeting is going to take place late April. So only like at least 20-30 more days to see that number coming up.

Okay. Thank you.

There are no further questions at this time. This concludes the question-and-answer session. I would now like to turn the call back to Mr. Jorge Scarinci for final considerations.

Okay. Thank you all for interest in Banco Macro. We appreciate your time and look forward to speaking with you again soon. Thanks. Have a good day.

Thank you sir. The conference is now concluded. Thank you for attending. You may now disconnect.