Banco Macro SA (BMA) 2021 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 '21 Earnings Call. We would like to inform you that the 2Q '21 press release is available to download the Investor Relations website of Banco Macro, www.macro.com.ar/relaciones-inversores. Also, this event is being recorded. (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.

Thanks, Sara. Good morning, and welcome to Banco Macro's Q2 '21 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 2021 press release was distributed yesterday and it's also 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 the first quarter of 2020, the bank started 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, 2021.

I will now briefly comment on the bank's second quarter 2021 financial results.

Banco Macro's net income for the quarter was ARS 4.6 billion, 90% higher than the first quarter of 2021 and 50% lower than the result posted a year ago. The bank's second quarter 2021 accelerated ROE and ROA of 7.8% and 1.7%, respectively, remained healthy and showed the bank's earnings potential.

Net operating income before general and administrative and personnel expenses for the second quarter of 2021 was ARS 39.4 billion, decreasing 5% or ARS 1.9 billion quarter-on-quarter due to relatively small loan loss provisions and higher income from financial instruments at fair value to profit or loss. On a yearly basis, net operating income decreased 1% at ARS 355 million, due to lower net interest income and lower net fee income.

Operating income after general administrative expenses and personnel expenses was ARS 19.4 billion, 7% or ARS 1.6 billion lower than in the first quarter of 2021, and 1% lower than in the second quarter of 2020. In the quarter, net interest income totaled ARS 25.5 billion, 4% or ARS 957 million lower than the result posted in the first quarter of 2021. And 50% or ARS 4.6 billion lower than the result posted 1 year ago as a result of different regulations adopted by the Central Bank that set caps on lending rates and floors on deposit rates.

In the second quarter of 2021, interest income totaled ARS 44.3 billion, 12% or ARS 5.8 billion lower than in the first quarter of 2021, and ARS 215 million lower than the previous year. Within interest income, interest on loans decreased 7% or ARS 1.7 billion quarter-on-quarter and interest income decreased 15% or ARS 4 billion year-on-year. In the second quarter of 2021, interest on loans represented 52% of total interest income.

Net income from government and private securities decreased 14% or ARS 3.2 billion quarter-on-quarter due to lower LELIQ volume and lower income from government securities. Compared to the second quarter of 2020, net income from government and private securities increased 30% or ARS 4.6 billion. In the second quarter of 2021, FX gains including investment in directed financing, totaled a ARS 640 million gain, 53% or ARS 709 million lower than in the first quarter of 2021. The gain is due to the 4% Argentine peso depreciation against the U.S. dollar and the bank's loan spot dollar position. On a yearly basis, FX gains decreased 47% or ARS 569 million.

In the second quarter of 2021, interest expenses totaled ARS 18.8 billion, 20% or ARS 4.8 billion, lower compared to the first quarter of 2021, and 31% of ARS 4.4 billion higher on a yearly basis. Within interest expenses, interest on deposits decreased 20% or ARS 4.5 billion quarter-on-quarter, mainly driven by a 16% decrease in the average volume of time deposits and by 129 basis points decrease in the average interest rate paid on deposits. On a yearly basis, interest on deposits increased 37% at ARS 4.8 billion.

In the second quarter of 2021, interest on deposits represented 95% of the bank's financial expenses. In the second quarter of 2021, the bank's net interest margin, including FX, was 18.8%, higher than the 17.4% posted in the first quarter of 2021 and lower than the 19.8% registered 1 year ago.

In the second quarter of 2021, net fee income totaled ARS 6.8 billion, 3% or ARS 186 million higher than in the first quarter of 2021. On a yearly basis, net fee income decreased 3% to ARS 218 million. In the second quarter of 2021, net income from financial assets and liabilities at fair value support a loss total of ARS 5.3 billion gain, 4% or ARS 221 million higher than in the previous quarter. This gain is mostly related to higher income from government and private securities.

In the quarter, other operating income totaled ARS 1.4 billion, decreasing 23% or ARS 421 million compared to the first quarter of 2021. On a yearly basis, other operating income decreased 12% or ARS 189 million.

In the second quarter of 2021, Banco Macro's personnel and administrative expenses totaled ARS 12.3 billion, 4% or ARS 441 million higher than in the previous quarter, due to higher employee benefits and higher administrative expenses. On a yearly basis, personnel and administrative expenses decreased 5% or ARS 693 million, showing the strict cost control policies adopted by the bank's senior management.

In the second quarter of 2021, deficiency ratio reached 38.4%, deteriorating from the 35.7% posted in the first quarter of 2021. In the quarter, expenditures increased 3% or ARS 446 million, while net interest income plus net fee income plus other operating income decreased ARS 1.3 billion.

In the second quarter of 2021, the result from the net monetary position totaled a ARS 13.6 billion loss, 15% of ARS 2.5 billion lower than the loss posted in the first quarter of 2021 due to lower inflation observed in the quarter. 200 basis points below the first quarter 2021, down to 10.95% from 12.95% posted in the first quarter of 2021. On a yearly basis, the loss related to the monetary position increased 119% or ARS 7.4 billion.

This is the second quarter in which the result from the net margin deposition is shown pursuant to Communication A-7211 of the Central Bank of Argentina, in which the inflation adjustment on our LELIQ and other government securities holdings is included, which was previously shown in net income from financial instruments at fair value to profit or loss.

In the second quarter of 2021, Banco Macro's respective tax rate was 21.8%, lower than the 51.4% registered during the first quarter of 2021 and the 29.9% registered a year ago. In terms of loan growth, the bank's financing to the private sector totaled ARS 267.8 billion, decreasing 7% or ARS 20 billion quarter-on-quarter, and 19% or ARS 61.7 billion lower year-on-year as a consequence of the economic recession that affected the Argentina during 2020 and weak loan demand.

Commercial loans decreased 13% or ARS 13.4 billion, among which others stand out as loans extended to SMEs as part of the relief package given the COVID-19 pandemic started to come due.

Consumer lending decreased 5% or ARS 7.3 billion. Personal loans decreased 6% while credit card loans decreased 4%. Within private sector financing, peso financing decreased 5% or ARS 12.4 billion, while U.S. dollar financing decreased 31% or $19 million.

It is important to mention that Banco Macro's market share of the private sector loans as of June 2021 reached 7%. On the funding side, total deposits totaled ARS 492.3 billion, and decreased 3% of ARS 15.1 billion quarter-on-quarter and decreased 19% or ARS 117.5 billion year-on-year. Private sector deposits decreased 1% quarter-on-quarter, while public sector deposits decreased 16% quarter-on-quarter. The decrease in private sector deposits was led by time deposits, which decreased 7% or ARS 15.7 billion quarter-on-quarter, while demand deposits increased 4% or ARS 8.6 billion.

Within private sector deposits, peso deposits decreased 3% or ARS 11.1 billion, while U.S. dollar deposits decreased 8% or $81 million. As of June 2021, Banco Macro's transactional accounts represented approximately 51% of total deposits. Banco Macro's market share over private sector deposits as of June 2021 totaled 5.1%.

In terms of asset quality, Banco Macro's nonperforming total financial ratio reached 1.68%. The coverage ratio, measured as total allowances under expected credit losses over nonperforming loans under Central Bank rules, totaled 212.91%. Consumer portfolio and nonperforming loans deteriorated 89 basis points, up to 1.88% from 0.89% in the previous quarter, while commercial portfolio and nonperforming loans deteriorated 11 basis points in the second quarter of 2021, up to 1.1% from 1% in the previous quarter.

During 2020, asset quality was positively affected by measures provided by the Central Bank of Argentina in the current context, particularly the 60-day grace period that was added to debtor classification before a loan was considered as nonperforming. In March 2021, the Central Bank established a travel transition, which was completed by June 1, 2021, and financial entities must classify their debtors according to the general debtor classification.

In terms of capitalization, Banco Macro accounted an excess capital of ARS 167 billion, which represented a total regulatory capital ratio of 38.3% and a Tier 1 ratio of 30.9%. It should be noticed that pursuant to Communication 7312 issued by the Central Bank of Argentina. The distribution of profits by financial entities is suspended until December 1, 2021. The bank's aim is to make the best use of this excess capital. The bank's liquidity remained more than appropriate. Liquid assets per deposit ratio reached 93%.

Overall, we have accounted for another positive quarter. We continue showing a solid financial position. Asset quality remain under control and closely monitored. We keep on working to improve more our efficiency standards, and we keep a well itemized deposit base.

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

(Operator Instructions) There are no questions at this time. This concludes the question-and-answer session. I will now turn over to Mr. Nicolas Torres for final consideration.

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

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