Banco Macro SA (BMA) 2024 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 the Banco Macro's 2Q 2024 earnings conference call. We would like to inform you that the 2Q '24 press release is available to download at the Investor Relations website of Banco Macro at www.macro.com.ar/relaciones-inversores. Also, this event is being recorded and all participants will be in listen-only mode during the company's presentation. (Operator Instructions) It is now my pleasure to introduce our speakers.

Joining us from Argentina are Mr. Gustavo Manriquez, Chief Executive Officer; Mr. Jorge Scarinci, Chief Financial Officer; and Mr. Nicolas Torres, IR. Now I will turn the conference over to Mr. Nicolas Torres. You may begin your conference.

Thank you. Good morning, and welcome to Banco Macro's second quarter 2024 conference call. Any comments 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 it's available at our website.

Second quarter 2024 press release was distributed yesterday and it's available at our website. All figures are in Argentine pesos and have been restated in terms of the measuring unit current at the end of the reporting period.

As of 2020, the bank began reporting results applying hyperinflation accounting in accordance with IFRS IAS 29 as established by the Central Bank of Argentina. For ease of comparison, figures of previous quarters have been restated applying IAS 29 to reflect the accumulated effect of the inflation adjustment for each period through June 30, 2024.

I will now briefly comment on the bank's second quarter 2024 financial results. In the six months ended June 30, 2024, Banco Macro's net income totaled ARS93.1 billion. This result was 55% or ARS115.9 billion lower than in the six months of 2023.

As of the second quarter of 2024, the accumulated annualized return on average equity and accumulated annualized return on average assets were 5.4% and 1.7%, respectively. In the six months ended June 30, 2024, operating income before general, administrative and personnel expenses totaled ARS2.38 trillion, 36% or ARS628.2 billion higher than in the six months of 2023.

Net operating income before general, administrative and personnel expenses for the first half of 2024 were ARS1.59 trillion, increasing 41% or ARS464.7 billion when compared to the first half of 2023. Banco Macro's second quarter 2024 net income totaled a ARS233.2 billion loss, which was ARS559.6 billion lower than the previous quarter and ARS397.3 billion lower year-on-year, mainly due to the mark-to-market of government securities, financial assets at fair value to profit or loss and lower FX gains registered in the quarter.

It is important to note that if government securities including financial assets at fair value to profit or loss, namely inflation-adjusted bonds due in 2027 have been valued instead at amortized cost, second quarter 2024 net income would have been ARS605.5 billion higher.

Furthermore, as it is probably known, Banco Macro recently exercised about half of some of the put options that it held on certain inflation-adjusted securities. Given the current breakdown of our government securities portfolio, the bank estimates that net income could have been around ARS300 billion higher had the remaining inflation-adjusted securities being valued at amortized cost.

In the second quarter of 2024, provision for loan losses totaled ARS16.5 billion, 26% or ARS5.9 billion lower than in the first quarter of 2024. On a yearly basis, provision for loan losses decreased 20% or ARS4 billion.

Operating income after general, administrative and personnel expenses were ARS99.1 billion in the second quarter of 2024, 93% or ARS1.4 trillion lower than in the first quarter of 2024 and 85% or ARS544 billion lower than a year ago.

In the quarter, net interest income totaled ARS188 billion, 6% or ARS12.7 billion lower than in the first quarter of 2024 and 53% or ARS213.1 billion lower year-on-year. Interest income decreased 27%, while interest expenses decreased 33%.

In the second quarter of 2024, interest income totaled ARS619.7 billion, 27% or ARS229.8 billion lower than in the first quarter of 2024 and 46% or ARS521.4 billion lower than in the second quarter of 2023.

Income from interest on loans and other financing totaled ARS410.2 billion, 26% or ARS142.7 billion lower compared with the previous quarter, mainly due to a 25.9 percentage point decrease in the average lending rate, which was partially offset by a 9% increase in the average volume of private sector loans.

On a yearly basis, income from interest on loans decreased 10% or ARS45.2 billion. In the second quarter of 2024, interest and loans represented 66% of total interest income. In the second quarter of 2024, income from government and private securities increased 40% or ARS44.7 billion quarter-on-quarter and decreased 74% or ARS457.2 billion compared with the same period of last year. In the second quarter of 2024, income from repos totaled ARS48.7 billion, 73% or ARS131.4 billion lower than the previous quarter and 29% or ARS19.5 billion lower than a year ago.

In the second quarter of 2024, FX income totaled ARS25.6 billion, 73% or ARS69.9 billion lower than the previous quarter and 91% or ARS256.1 billion lower than a year ago. FX income gain was due to the 6.3% Argentine peso depreciation against the US dollar and the bank's long dollar position during the quarter. It is important to notice that the bank's average long dollar position decreased 59% during the quarter.

In the second quarter of 2024, interest expense totaled ARS431.7 billion, decreasing 33% or ARS217.1 billion compared to the previous quarter and 42% or ARS308.3 billion lower when compared to the second quarter of 2023.

Within interest expense, interest on deposits decreased 33% or ARS208.8 billion quarter-on-quarter due to a 25.4 percentage point decrease in the average rate paid on deposits, while the average volume of deposits from the private sector increased 16%.

On a yearly basis, interest on deposits decreased 42% or ARS304.5 billion. In the second quarter of 2024, the bank's net interest margin, including FX, was 19.9%, lower than the 26.2% posted in the first quarter of 2024 and a 38.3% posted in the second quarter of 2023.

In the second quarter of 2024, Banco Macro's net fee income totaled ARS95.7 billion, 8% or ARS6.8 billion higher than the first quarter of 2024 and was 2% or ARS2.1 million lower than the same period of last year.

In the second quarter of 2024, net income from financial assets and liabilities at fair value to profit or loss totaled a ARS121.2 billion gain, decreasing 92% or ARS1.39 trillion in the quarter. This gain was smaller due to the negative mark to market of some government securities, basically inflating adjusted bonds in the amount of ARS1.41 trillion.

In the quarter, other operating income totaled ARS46.2 billion, 7% or ARS3.3 billion lower than in the first quarter of 2024. On a yearly basis, other operating income increased 62% or ARS17.8 billion.

In the second quarter of 2024, Banco Macro's administrative expenses plus employee benefits totaled ARS203.5 billion, 15% or ARS35.3 billion lower than the previous quarter. Due to lower employee benefits, which decreased 14% and lower administrative expenses, which decreased 17%.

On a yearly basis, administrative expenses plus employee benefits increased 14% or ARS25.6 billion. As of the second quarter of 2024, the accumulated efficiency ratio reached 22.2%, deteriorating from the 14.7% posted in the first quarter of 2024 and 22.2% posted one year ago.

In the second quarter of 2024, expenses decreased 14% when net interest income plus net fee income plus other operating income decreased 77% compared to the first quarter of 2024. In the second quarter of 2024, the result from the net monetary position totaled ARS462.7 billion loss, 56% or ARS591.3 billion lower than the loss posted in the first quarter of 2024 and 14% or ARS56.1 billion higher than the loss posited a year ago.

This result is a consequence of lower inflation during the quarter. Inflation was 18.6% in the second quarter of 2024 compared to the 51.6% registered in the first quarter of 2024, while the net monetary position remained unchanged. In the second quarter of 2024, given Macro's net income for the quarter, no income tax charge was recovered. Part of the information is provided in Note 21 to our financial statements.

In terms of loan growth, the bank's total finance reached ARS3.47 trillion, increasing 17% or ARS504.1 billion quarter-on-quarter and 5% or ARS154.5 billion higher year-on-year. Within commercial loans, documents stand out with a 7% or ARS43.6 billion increase when others increased 27% or ARS158.3 billion.

Within consumer lending, personal loans increased 29% or ARS111.9 billion, while credit card loans increased 11% or ARS77.8 billion. Peso financing increased 20% or ARS463.8 billion in the quarter, while US dollar financing increased $2 million.

It is important to mention that Banco Macro's market share over private sector loans as of June 2024 reached 9.1%. On the funding side, total deposits increased 13% or ARS769.5 billion quarter-on-quarter, totaling ARS6.74 trillion and decreased 5% or ARS329.3 billion year-on-year.

Private sector deposits increased 11% or ARS591.5 billion quarter-on-quarter, while public sector deposits increased 30% or ARS181.9 billion quarter-on-quarter. The increase in private sector deposits was led by demand deposits, which increased 23% or ARS581.5 billion, while time deposits decreased 2% or ARS54.5 billion quarter-on-quarter. Within private sector deposits, peso deposits increased 17% or ARS774.6 billion, while US dollar deposits decreased 6% or $97 million.

As of June 2024, Banco Macro's transactional accounts represented approximately 52% of total deposits. Banco Macro's market share over private sector deposits as of June 2024 totaled 8.1%. In terms of asset quality, Banco Macro's nonperforming to total financial ratio reached 1.23%. The coverage ratio, measured as total allowances under expected credit losses over nonperforming loans under Central Bank rules, reached 181.4%.

Consumer portfolio of nonperforming loans deteriorated 5 basis points up to 152% from 147% in the previous quarter. while commercial portfolio and nonperforming loans deteriorated 1 basis point in the second quarter of 2024.

In terms of capitalization, Banco Macro accounted an excess capital of ARS2.36 trillion, which represented a capital adequacy ratio of 35.7% and a Tier 1 ratio of 34%. The bank's aim is to make the best use of this excess capital. The bank's liquidity remained more than appropriate. Liquid assets to total deposit ratio reached 98% in the second quarter of 2024.

Overall, we have accounted for positive first half of 2024, we continue showing a solid financial position. Asset quality remained under control and closely monitored. We keep on working to improve more our efficiency standards, and we keep a well-optimized deposit base.

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

(Operator Instructions) Ernesto Gabilondo, Bank of America.

My first question will be on your loan growth and asset quality expectations for this next year? And my second question is if you can elaborate a little bit more on the puts that Macro executed with the central bank. And also, if you know the timeline and the implications of the repos that the Central Bank is proposing.

And also, can you remind us how much is your position on securities linked to inflation? And what would be your strategy going forward with these instruments? And finally, my last question is on ROE. How do you see it for the end of the year? And where do you think will be the sustainable level?

This is Jorge speaking. About your first question in terms of asset quality. I think that on the level that we are showing is extremely good and know. I think that going forward, if the economy will recover as is expected for 2025, we are going to be a bit more aggressive in growing in lending. And therefore, delinquency could rise a little bit, but to manageable levels.

Again, I think that this is already commented before. But since 2008, the peak that we had in our delinquency rate was 3% in 2009. So I think without any problems, we could be rising this -- the current ratio to levels of between 2 and 2.5 without any problem in the case that we become more aggressive in lending.

I will go to your third question. I will leave your second question for the last one. The third question about the bonds that we have that are adjusted to inflation. Currently, we have a level of ARS3.7 billion or in your case, it's trillion, bonds that are tied to inflation. This is approximately 120% of the equity, and it's also 110% of the monetary position. The monetary position is the one that is basically the one that adjusted our income statement to inflation.

And in that sense, we are linked to hedge against inflation. Going forward, I think that depending on what's happened with the inflation rates that in last month was 4% on a monthly basis. And we believe that inflation is going to continue in the upward trend. However, we are according to the economy that we listen they are not expecting inflation to become below the 2% unless until November and December and the probability of that is maybe in the order of 50%.

So for the moment, we are going to keep this portfolio tied to inflation. And if market conditions change, we are going to, at some point, maybe exercise the put option or make it to a swap into fixed rate notes depending on market conditions.

In terms of your fourth question in terms of ROE going forward for 2024, we think that we would be ranging between 10% or 13% in real terms going forward in a more sustainable level, we think that we could be delivering between 15% to 20% ROE in real terms.

And your second question about the exercise of the put option that we did on July 1, basically, the ALCO decided to execute half of the position of the bonds that we have tied to inflation after the conference that (inaudible) and the President of the Central Bank held saying that the amount of pesos was going to be fixed in the market.

Therefore, we decided to execute that position in order to get extra liquidity and to have more elements in order to be more addressing in future lending. And on repos that the Central Bank is offering, I mean, for banks would have some transitionary liquidity problems, I think they are okay.

In our case, we are extremely liquid. We are not, of course, using those repos. But the repos are always the -- they have been always there. And the only thing this new thing is that the Central Bank reduced the interest rates on the repos to a level of 48%. So to make it more accessible for banks in order to get extra liquidity. So I think these answered all your questions, Ernesto.

Just a follow-up. The first one is -- well, two follow-ups. One, in terms of the loan growth. So any color on what could be the pace of loan growth for this year and for next year? And then the other follow-up, you were mentioning that you executed half of the puts. So can you just remind us how was the amount of those securities that you held before?

Yeah. In terms of, your second question, yeah, related to the half of the puts options that we had, it was like ARS2 trillion in bonds that we exercised and sell to the Central Bank, and that amount of pesos, we see that as extra liquidity. And currently, we hold another ARS2 billion -- sorry, ARS2 trillion in put options in case that we want to exercise this inflation-linked bonds to the Central Bank.

Going to the loan growth for 2024, we expect to have positive rates in the order of maybe 15% area for 2024. And we believe that with a recovery on GDP in 2025, we could be at least 30%, 35% positive rates of growth in loans for next year.

Brian Flores, Citibank.

I wanted to ask on NIMs, right? Because as you say, repos are still helping, but I think the average earn yields are decreasing. Also, you have some relief on the deposit base. I don't think it's a very hard question, right, because it's a very fluid environment. When do you think NIMs could stabilize? I think that's my first question.

And then on the second one, you mentioned capital, right? Do you have any updates on any regulatory changes that would allow you to distribute maybe higher dividend yields going forward.

Brian, to answer your second question first. I mean we have to wait till next year. For the moment, we haven't seen any new regulation coming. Remember that when we have to pay dividends essentially when the Board proposed to the shareholders' meeting the payment of dividends is in March, so we have to wait till next year. That time is basically when the Central Bank always puts up new regulation on the amount of dividend that basically could be delivered on the amount of installments.

Remember that last year, the number determined was six, this year, the number determined was reduced to 3. So I think that we are positive in the way that it's the economy conditions improved and the Central Bank reserves increase going forward. We are positive that we could be allowed to pay dividends maybe in only 1 installment that would be positive.

In terms of your first question and NIM, if you have a chance to go through the press release, the NIM in pesos increased or expanded a little bit, basically, you're right, there were some -- little increase in the cost of funds. Remember that in our case, the amount of transaction deposits where we paid almost 3%, there is almost 45% of total deposits.

And on the time deposit side, basically in those that we are the financial agent of the 4 provinces, we could be paying slightly below average interest rates. So this give us a kind of slight competitive advantage in order to continue expanding a little bit the NIMs.

And going forward, we think that the NIMs are going to remain pretty stable. So the increase in the net interest income is going to come through the increase in lending through an -- or hand-in-hand increase in the funding.

Perfect. If I can follow up just with your last comment. How is demand evolving? Where do you think or where do you see the biggest opportunities to grow your loan book right now?

There was a decrease in interest rates in the system that was a consequence of the reduction in inflation. And we think that there was a recovery in lending in most of the areas, basically SMEs and some consumer.

Going forward, we think that we see some recovery in the real levels of salaries. We are going to see consumption pushing a little bit harder. And also we are having these new investments in different areas as a consequence of this program approval for companies, we are going to see also corporates or companies also demanding for new lending.

So it is going to be across the board, in 2025. Imagine that the level of lending that we have is pretty sluggish, and pretty low. It's around 6% of loans to GDP. So we think that the potential growth here is huge

Marina Mertens, Latin Securities.

So in the last -- in the previous two quarters, results were driven by the strong performance in the securities portfolio, which the trends reversed this quarter and negatively impacted results. Do you expect the securities portfolio to keep on driving results in the remainder of the year? Or when should we expect to see the increase in loans to have a more relevant impact on results.

In terms of income coming from the bond portfolio, as we stated in the press release, after executing or exercising half of our bond portfolio or the puts that we have on the bond portfolio, the remaining half of that the ALCO decided to account it on the cost-plus yield, instead of having mark-to-market.

So going forward in coming quarters, we are going to see more stability in the results coming from bonds. And we think that with the pickup in lending, we are going to start seeing the bonds or in this case, interest income from loans are going to start having a bit more better performance in the income statement line.

Yuri Fernandes, JPMorgan.

Just one on the loans versus securities mix, right? And even on the security mix, right, you have this -- I think it's less -- this new instrument that is one year. Basically, my question is on loans and on this last -- maybe you are increasing the duration, right, of our assets. I think the fiscal liquidity ladder is one year. Although you have the put you can sell this, but I think like Itaú a one year-term kind of instrument, you are growing more of your loans.

So trying to think about your net monetary results like inflation is moving lower, so this should be tailwind. But having more loans and having less, I would say, inflation in particular, how to think about your balance sheet versus inflation? Like, if inflation is growing and inflation starts accelerating, is the balance sheet getting weaker at some degree because you have more longer-term maturity assets than you used to have in the past when you have more short-term instruments. That's my first question.

My second question is regarding further M&As, right? You just had Itaú, I think there is still consolidation to happen in Argentina. So I just would like to know the appetite of Banco Macro for new opportunities if your message is well, let's digest Itaú, let's keep you working with what we have or no, we have a lot of excess capital, and we are still open for new opportunities.

And a third question, more on regulatory update, right? This is still, I think, an important topic. If you can remind us what can be the next Central Bank regulatory change that can benefit the banks. I think there were many moving parts on rates and reserve requirements. What should we expect for the future on the regulatory front to be a tailwind for you.

In terms of your first question, holding this inflation linked securities, we are hedging our balance sheet against the adjustment for inflation on the monetary position. So by increasing the duration of our loan book, always having positive real rates, the impact on the balance sheet and the impact on the inflation-adjusted income statement is going to be positive. So we are not seeing any challenge or any damage or risk there. So it doesn't mean that the increase in duration is going to negatively affect our exposure to inflation. No.

On your second question about M&A opportunities, yeah, we are going to complete the legal merge with Itaú in the fourth quarter of this year. So by December of this year, everything is going to be under Banco Macro's umbrella.

Going forward, I mean we will be keeping a close eye to any opportunity that might happen in the banking sector. We think that we are one of the only buyers here. So any potential player that could be interesting on leaving, I think that it's going to knock our door. So we're going to be keeping close eye, as I mentioned before there.

On your third question, Central Bank regulations that could improve a little bit the banking industry. I think that there are many. I think little by little the Central Bank is working on different regulations, but to be -- they want to go very slowly. We do not want to make any mistakes and to have -- to take a measure that after two weeks, they had to turn it around. So I think that they are a little by little removing the caps on interest rates as they remove the floor on the deposit rates.

So I think that the Central Bank is working really good here, going very slowly because there is a complete bunch of regulations that need to be removed but carefully. So going forward, I think that they are going to have these new regulations on the positive for the banking sector in order to be less regulated, and that is going to be, in our view, positive for the big players as Banco Macro.

Carlos Gomez, HSBC.

Two questions. The first one is if you could explain in simple terms for us, what happened to the bond portfolio this quarter? What is that in contrast to the previous quarter? And what we should expect in the coming quarters? What should be the normal profitability yield on securities that we might expect? And -- I think that will be it, yeah.

No. I mean as of June, we decided to execute or to exercise the puts on half of our position, and that happened on July 1. So at the end of this second quarter, that's why the portfolio remains in terms of the amount of bonds that we have remains the same.

In the third quarter, you're going to see the impact on the of the exercise of the puts and a reduction in the bond portfolio. And again, we decided to make a change in the accounting instead of having mark-to-market, it's going to be at a cost-plus yield mechanism. So going forward, if we are maintaining this amount of bonds, a more reasonable level for the income from the bond portfolio is going to be in the area between ARS30 trillion to ARS50 trillion on a quarterly basis.

Okay. And the position that you exercise, you have it now in CPI linkers, right?

Yeah.

Okay. Very good. And then my second question has already been asked before is regarding your capital and the fact that you're paying a big dividend. The prospects have changed. You are doing M&A, there is loan growth in the system.

Would you review -- I mean, we know that you have a lot of excess capital, but we could see a lot of it consumed pretty rapidly if loan growth goes up. Would you consider, for the coming years, perhaps you want to retain more capital rather than pay more dividends?

If you see the reduction in the capital ratio from the first quarter to the second, you can see that there was a reduction for Tier 1, looking at Tier from 44.5% to 34%, so 10 percentage points there because of the payment of dividends.

Going forward, we agree. And of course, we would like to have a more normalized level of excess capital. But the combination of organic growth that we think that we are going to need for future years plus some M&A opportunities that -- might have in the past that we think that would appear some other banks wanted to leave Argentina, they continue to pay attractive cash dividends. I think that is the need that we want to maintain.

So going forward, a more sustainable ratio for capital in the future for Macro could be in the area of 18% to 22% Tier 1, not the current level. So that is going to be consumed through organic growth plus cash dividends. First and then the opportunity for another M&A. So going forward, between 19% to 22% seems more reasonable for us. That is we would like to have in the future with maybe higher market share performance in the season.

Okay. And to go back to the M&A, and we understand you are open to all possibilities, is there anything in the works or anything that would you anticipate that you might be considering in our transaction, let's say, in the next three or four quarters?

Honestly, we are not looking to anything for the moment. I think that if something happens, could be next year. I don't know exactly which -- how many quarters, but next year or in 2026.

There are no more questions at this time. This concludes the question-and-answer session. I will now turn the call over to Mr. Nicolas Torres for final considerations.

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

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