Grupo Financiero Galicia SA (GGAL) 2014 Q4 法說會逐字稿

Welcome to this Grupo Financiero Galicia Fourth Quarter 2014 Earnings Release Conference Call. This call is being recorded. At this time, I'd like to turn the call over to Mr. Pablo Firvida. Please go ahead, sir.

Thank you. Good morning and welcome to this conference call. I will make a short introduction and then we will take your questions. I need to say that some of the statements made during this conference call will be forward-looking statements within the meaning of the Safe Harbor provisions of the US Federal Securities Laws.

These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements.

First of fall, I would like to mention that beginning in the fourth quarter of fiscal year 2014, the financial information from Banco Galicia has been incorporated to Grupo Financiero Galicia's press release. As the Grupo owns 100% of the shares of Banco Galicia, which have been deleted from the Buenos Aires Stock Exchange.

In the report, we also include additional information from Grupo's main subsidiaries Sudamericana Holding and Galicia Administradora de Fondos and from the bank's consumer finance subsidiaries, Tarjetas Regionales and Compania Financiera Argentina.

I will begin with the economic situation of the fourth quarter. According to private estimates, the Argentine economy showed a 3% annual poll for the fourth quarter and a 2.6% contraction in 2014.

In the fourth quarter, the primary deficit reached 0.8% of GDP and after the payment of interest; the global balance represented 1.2% of GDP. Thus the primary deficit of 2014 which 0.9% of GDP while the global deficit was 2.5% on GDP.

Consumer prices expanded 3.4% in the quarter and 23.9% in the last 12 months as measured by the official index while for private estimates, (inaudible)6.1% and 40.6% respectively.

On the monetary front, the Argentine Central Bank expanded their monetary base by ARS80.2 billion in the fourth quarter, ARS85.4 billion in 2014. And the average monthly foreign currency exchange rate increased from ARS8.42 to ARS8.55 per $1, representing a 1.6% depreciation. The depreciation for the full year was 35.3%.

In December, the average rate on peso-denominated private sector bank deposits increased to 23.8% from 21.3% in September 2014.

Private sector deposits at the end of the quarter amounted to ARS686 billion, growing 8.2% during the fourth quarter of the year. Transactional deposits increased 12.3% and time deposits increased 4.1%. In the last 12 months, deposits in pesos grew 29% and deposits in dollars increased 7.4%.

At the end of the year, total loans to private sector amounted to ARS550 billion recording an 8.6% increase from September 2014 on 20.2% in their annual increase.

Turning now to Grupo Financiero Galicia. Net income for 2014 amounted to ARS3.3 billion mainly due to profits from Banco Galicia for ARS3.1 billion and in Sudamericana Holding for ARS205. Net income for the quarter amounted to ARS893 million nearly 95% of which stems from results generated by Banco Galicia. The bank's net income increased 71.9% in 2014 and 37.6% from the year ago quarter. The bank's credit exposure to private sector reached ARS79 billion at the end of the year, up 20% in the last 12 months and deposits reached [Ps.55 billion], up 25% during the same period.

Demand estimated in market share of loans to the private sector was 8.78% and the market share of the proceeds from the private sector was 8.79%.

Net income from services for the quarter grew 37.2%, as compared with the same quarter of the prior year, as a consequence of higher fees related to national and regional credit card company and to to deposit accounts. Net financial income grew 8.6% in the same period relatively affected by losses on a tax position. Without this effect, net financial income grew 36.2% due both to the increase in volume and in the spread.

Average interest earning assets grew nearly Ps.16 million year-over-year, and its yield 214 basis points. While interest variabilities grew by approximately Ps.[10.5 million] during the same period, and it's cost increased at 140 basis points.

Provision for loan losses for the quarter amounted to Ps.517 million, slightly above the Ps.508 million recorded in the same quarter of the prior year, mainly due to the increase recorded in the consumer loan portfolio.

As regard to asset quality, the NPL ratio ended the quarter at 3.6% decreasing 33 basis points as compared to the prior quarter ending 2014 at the same level of the year before. This NPL ratio is consolidated considering the loan book of the bank, the credit card subsidiary and CFA.

The consolidated coverage of NPLs with allowances reached 105.8%, up from 103.8% from of the end of 2013.

Administrative expenses were 26.5% higher year-over-year with personnel expenses growing 18.8% mainly due to sudden increase agreements with the unions and the remaining administrative expenses growing 37.7%, due to the increase of expenses related to services provided to the bank.

As of December 31, 2014, the bank's consolidated computable capital exceeded by Ps.3 million to Ps.7.1 million minimum capital requirement or 43.2%. And the total capital ratio reached 15.9%, increasing 163 basis points in the year. The bank's liquid assets at the end of the quarter represented 35% of the bank's transactional deposits and 39% of it's total deposits. Higher than the 65% and 31% ratios from a year before respectively.

In summary, during the fourth quarter of 2014. The banks has good operating results despite the deterioration of the main economic variables, improved its asset quality and its capital ratio and (inaudible)liquidity indicators. We are now ready to answer the questions that you may have. Thank you.

Thank you, sir.

(Operator Instructions)

Chris Delgado, JPMorgan.

Thanks for taking my questions. I've two questions. First relates to expenses on the whole. For the first time, you actually saw an increase in headcount. Over the past six quarters, I believe there has been decline. Can you talk a little bit about why that headcount increase occurred and then your thoughts about expenses for 2013 on the whole? And then, my second question just kind of relates to loan growth, could you just give us a sense, the environment in Argentina is still very challenging while your expectations are for loan growth this coming year?

Okay. Hi, Chris, the increasing headcount is I would say marginal and it doesn't mean that we change the trend. Going forward, we foresee that we will go on with the current situation, but basically we try to not to renew people that is leading, and depending on demand, would be some net increase and some in other month. Net decreases for the full year the impact should be slight decrease. IN terms of expenses, 55% of non-interest expenses are related to personnel.

The quantity I already mentioned in case of the price will depend on unions. And typically between April and May, the negotiations occur and we think that it will be a tough negotiation because of the last year inflation around 40. But this year, expectations are closer to 26, 27. So, I think we could see something around 30% sudden increases for the employees. For the rest of the administrative expenses, the challenge is to have increases less than inflation perhaps you will not see it fully because some amortizations of development in IT basically will begin in 2015, but the rest of administrative expenses should grow less than inflation. On loan growth as you mentioned, 2014 wasn't a great year in terms of the growth, 2015 will be more the same. We're expecting something around 25% loan growth in the case of (inaudible)something less for that system.

That'd be great, that's very helpful. Thanks.

You are welcome.

Federico Rey, Raymond James.

Yes, hi, good morning, everybody. Thank you for the call and think you for the opportunity regarding capital and dividend. And my question is with this level of capital you are allowed to pay dividends and you are planning to move forward or not? Thank you.

Hi, Federico. We've a designed level at 43% excess capital and we need 75% excess capital in order to pay dividends. And recently, there was a new regulation that requires a big systemic Bank as recalled to have the additional capital in order to pay dividends, so at the banker level not in the medium term. Grupo Financiero Galicia many times declared dividends in order to recover the personal asset tax and also because they receive dividends from the insurance Company and from other subsidiaries. But around Ps.800 million will be the number payable in April or May. So not important compared to the net income of the year.

Okay, thank you.

You're welcome.

(Operator Instructions) Chris Delgado, JP Morgan.

Hi, just one last question actually. This quarter the interest rates were down pretty notably in government securities. So, If you talk a little bit about why that happened that'd be helpful? And then also just your outlook for net interest margin for the full year?

Okay. Yes, Chris. The results from our exposure to the public sector is basically tied to the results on the (inaudible)large central run paper. The trading position and the results is small and it has to -- in some quarters, perhaps it has more volatility due to price increases and revaluation, but its hard to predict basically depends on the prices of bonds. The other question was the net interest margin. We feel that with all this new regulation, having caps on personal loans, last productive line and also the minimum rate we have to pay for small time deposits that the pressure is for some compression, but also we must keep in mind that we can or we are flexible in order to lend the different products -- to different segments. We have to look at our breakdown of deposits between transaction and term deposits. So in general, there should be some compression, but nothing I would say dramatic. If I had to say you number for 2015 closer to 12% for example.

Great. Thank you.

(Operator Instructions). Sr. Firvida, we have no other questions at the moment, sir.

Okay. Thank you for attending this call. If you have any questions, please do not hesitate to contact us. Good morning. Thank you again.

And that concludes today's conference. We thank everyone for joining us.