Q3 2019 Earnings Call

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You are currently on hold for the group or Financiero Galicia third quarter 2019 earnings release conference call at this time or something today's audience sometime to be on the resort. We appreciate your patience.

Thank you.

Welcome to the Grupo Financiero Galicia third quarter 2019 earnings release Conference call. This call is being recorded at this time I would like to turn the call over to Pablo Firvida. Please go ahead Sir.

Thank you.

Morning, I want them to these conference calls.

They could shorten direction.

We'll take your questions.

Some of the statements made during these conference calls before looking statements within the meaning the safe Harbor provisions up the U.S. Federal Securities laws.

That's subject to an uncertainty that's good color I, probably starts to differ materially from Google Express.

According to <unk>.

During the quarter meet recorded at 1.3% year over year construction.

That's a quarter of couldn't do 19.

There are too much to your 0.6% year, where are you expansion into second quarter.

During the first nine months spoken to 19 the brand like these kind of surplus.

22.9 billion pesos.

Exceeding by 25.4 billion pesos the targets for the period.

According to the National Institute of Statistics.

Sure consumer price index recorded its 37.2% increase.

The first nine months hopefully here.

On the money 30 front.

Okay, and Thats interbank going through the monetary base by 65 point.

Thank you. Thank you yeah, sorry for that technique.

And I will get back to what I was saying.

On the monetary fronts, the Argentinean Central Bank constructed the monetary base by 65.8 billion pesos during the third quarter at 4.9% decrease I guess its second quarter. Meanwhile, the exchange rate averaged 56.5 peso purchase order in September .

And your 9% increase because you already before June 29 to.

When compared to September 20, India fixed rate increased 46.4%.

In September do you ever its rate based so denominated private sector tend to bullshit for up to 59 days well, 60% 9.1 percentage points I lost you ever to recorded last June .

Well I just took the bullshit you pay so amounted to 2.32 0.5 trillion pesos, increasing 1.8% during the quarter I'm, 42.5% since September last year.

Section of the closer to basis rose, 7.6% during the fourth quarter, 37.8% in that last 12 months.

It was denominated time deposits decreased 3.6% in the quarter I picked up 48% year where are you.

You know they shouldn't private sector of the closer to endorse amounted to $21.4 billion.

Reaching 31% during the quarter on 20.9% as compared to September last year.

So you end up the quarter peso denominated loans to check door amounted to one point 65 million pesos recording is set up 41% increase during the quarter on a 4.6% increase when compared to September was out here.

Turning to U.S. dollar denominated launch amounted to $13.4 billion recording if you've seen 41% decrease.

During the quarter on a 15.7% decrease when compared to September last year.

Ladies and gentlemen, please standby, while we read reconnects are a speaker or there will be music on the call until it continues its one moment. Please.

Thank you sorry for another technique for.

For all then.

It seems so receptive to political uncertainty it come through recent premium increased significantly under the reputation of the economy accelerated that's a consequence, the government took emergency measures, including best Reaper fighting and capital controls.

Turning now to local peanuts, you'd already shifted income attributable to were booked for the support of frenzy 19 amounted to 11.6 billion pesos.

75% tell you is on that same quarter of the previous year, mainly due to brophy Sterling bank or at least chip for 10.1 billion pesos from talking about the candidates for 1.1 billion pesos from somebody kind of clothing for 228 million pesos I'm from I just had any thoughts on that for a departure.

Yes.

When you say net operating income coffee. So do you want me didn't pay so unfortunately upset by personnel and he said you expenses or 53 million pesos. Its profit represented 7.1% annualized return on another assets under 58.2% return whenever it's a holistic.

Compared to 3.6 54.6 off a year ago.

I think where he said that income for the quarter increased 197% from the year ago quarter eye surgery, So well see how you're gonna do knits operating income mainly related to the world. The net income from financially it turns into profits from goes on foreign currency equals they shouldn't be Francis.

Net interest income for the quarter increased 14% as compared to the saying do you have 20 a gene.

Hi, Marty I see consequences for 43% how your interest on loans I know reports you said, we've been friends actions.

Net income from financial instruments increased 67% from the one recording the same quarter two into your gene I.

As a consequence of how you're holding self centered on paper to the heat, partially offset by lower yield on Goldman Securities, mainly three surety business the comps.

Perfect from gold and foreign currency quotation dependencies amounted to 1.7 billion pesos.

Moving 3.8 million piece of property.

Ladies and gentlemen, once again, please standby there will be music until we reconnect first speaker one moment. Please.

Thank you.

Well if you to these technical problems and we are suffering.

Referred to give you had time to you anyway, that's holding formation I will go into two releasing the press release, so yeah, I mean, no ready to answer the questions.

Thank you and perfect.

Thank you, ladies and gentlemen on the phone lines that if you have a question for you signaled by pressing star one on your telephone keypad, if you're using a speaker phones. Please make sure. Your mute function is turned off till I signaled to reach our equipment.

Again, ladies and gentlemen, if you'd like to ask a question. Please press star one now a pie. So just a moment to allow everyone an opportunity to signal for questions. Your first question comes from Gabriel No Breguet Citibank. Please go ahead.

Hi, everyone and thank you for the opportunity you think Pablo for the thorough presentation as well my question is still on the political outlook I know, what's already been three weeks since the since the the elections, but I wanted to.

To get a sense from you, whether you've seen and them what strategies has the bank been been taking I'm, having taking into account what you've been seeing and I'll make a second question afterwards. Thank you.

Well and it's really hard to.

To say yeah.

The big Big elected breastfeeding, there's going to to do awards regulations.

Meaning not only every single day shows just for the furniture season.

Mainly on economics that are worth Michelle.

He will take it because we don't even know who is going to be the I mean, they said they are having had no they owe that means to.

So in the bank has been a focus on being very liquid.

Both indoors.

Basis.

And I would say im trying to predict as much as supposed to profitability and they've got to be done situation and it asset quality. Then we we are seeing it first we saw its off all the efficiencies that we have been it trying to get these utilization, but really.

Yeah going forward, we need to see it was the economy than we'd be willing to be their members of the of the cabinet.

What measures can be taken that would affect Directv is if I know subsidies and sorry, I I don't.

Yeah I'd answer if you have any specific questions regarding that now what we what we could be doing.

<unk> I understand them at some very difficult. So thank you for that Hmm I actually have am follow up going to the asset quality I'm doing this quarter I saw on that the banks made a lot more charge offs and they consequence, we actually saw the until ratios for the back.

Income decreasing so what actually went up.

To understand here is why did you make so much higher charge offs. There's some corridor and if you believe that we are at the peak of of the until ratios or when could we even reach disappear. Thank you.

Well, then NPL ratio in group you too.

Yeah, certainly I would say recovery in the denominator on loans and also if you had sold some and indeed was loan book that was a bus view for many months you will start around 1.7 billion pesos.

So in both effects. It I explained the improvement in Dnbi other Rachel.

We think that it next year.

And we could see some recovery in loan demand, we see than in any environment with lower interest rates.

Hubs will itself.

To improve even farther the yes its quality. So perhaps we are a kudos to to the to the highest level, we have to see again a economic plan.

Members of the cabinet, but if you already we should be closer to two that big.

Very clear and thank you.

You're welcome.

And your next question from Alonso Garcia of Credit Suisse. Please go ahead.

[noise] with money everyone I think you for taking my question.

My question is Texas, I mean, you this inflation adjustment that you on.

Her banks are doing for Texas, <unk> steel subject to any sort of ruling by Ah That's authority, whereas you'd already fine now Oh <unk>. I mean is there are risks could you can't do you have to revert you said you isn't meant that the another year or is there a risk that you are not going to.

Due to eat makes your inflation rates also.

Hey, you from for that or is you'd already something final and my second question would would be on the legal solution. I mean, we'll raise so I think you kind of declining these exposure <unk> third quarter. My question do you see there's still room.

Or appetite on your end to do that we should further thank you very much.

Hey alone so.

Indicates an income tax in the the lowest yard that we can adjust their numbers by inflation in order to calculate the income tax.

In the third quarter, we did that the.

Charge was roughly 2 billion pesos, if we hadn't done that it would have been something around 1.6 billion pesos higher but it's under the government regulation.

In the first in the second quarter, what we did east we in deed in it all together in the second quarter the adjustments corresponding to the first time second quarter. If that's a we don't foresee any change on in the fourth quarter, we should see it seem either.

The effective tax rate at the after the third quarter around 16%.

Regarding the leaks.

We.

They decided to be very liquid.

So we split.

I would say the exposure to listen to our done between the leaks and report transactions. So there you will see that we have roughly 45 billion face off between.

It's awfully leaks on another 45 of for PC with repo transactions. The startup is shorter term instrument.

Hey, good in order to be it very very liquid.

Great. Thank you.

You're welcome.

Your next question comes from Yuri Fernandes from JP Morgan. Please go ahead.

Thank you gentlemen, I have a question regarding the debt for filing.

It was unable to find today executive value off the heat on your fingers I think you mentioned two points you beat them only cops.

But not sure if that's being backed from the desperate for filing so she can clarify what's what their mouth that would be nice and I had a second question regarding yard loans in dollars.

How had been your 40 some debt you mention about heavy more liquidity in dollars, but are you Andy what are the did that youre strategy far far for that segment. Thank you.

Okay.

You would be the amount or did it did or the impact of the debt Reprising was a around 2 billion pesos.

Yeah. The instruments is that we had you know was nothing. This is today are the same that we had at the end of September so it's a perhaps hard to see they expect effects on each different a bond, but you do up to 2 billion pesos.

And that it's likely that it will be recovered when we.

Collect the remaining 85% off those reprofiling short them they paper.

They launch in dollars.

The decision was to keep on originating loans indoors to export there's again with these same.

Main objective to be very deep with.

Therefore, I would say it worse scenario then yes, why the one so we are already we then we then have a BDC on so all these young off if Doris views that we bought it. So we are prepared.

We have we have been I would say a wee overreacted, hey, so we're very comfortable and we did as usual what's to stop or do they depend on us and we are offering is launching basis to export theirs.

Great. Thank you.

You're welcome.

Your next question comes from Carlos Gomez of HSBC. Please go ahead.

Hey, good morning.

Two questions first on every profiling and do you happen to be down there. So lost you said you might recover you didnt legal recourse that the bank legally already negotiation with the other bonds.

Got it then used to.

But that teas unilaterally piling up to that.

I would say come what's your expectation for tax rate in 2000, and let me. Thank you [noise].

Yes [laughter].

Well in you mean, it's taking these issue to the courts in order to.

To to fight for their Reprofiling.

Yes.

Well its a.

No, it's very short them really in.

No I would say it just wasn't up these costs, it's part of the off they find there's obviously some rules I would say it really was a very short term and postponement of payment. So the although they do have they been achieved in accounting terms was I would say significant.

We would consider to be lumpy so significant.

We think we will collect them into short term.

Okay.

And regarding the income tax rate.

Yes.

It will be 25% next year.

Yes.

So far it will be 25% the income tax rate next year.

[noise] gum on.

Inflation adjusted earnings or not another earnings.

Adjusted by inflation the into the the tax rate would be 25%.

Okay, So I'm heading into adjusted banks like something like this year.

Yes.

Once again, ladies and gentlemen, if you have any additional questions. Please press star one again, ladies and gentlemen, Please press star one for questions.

One moment please.

Mr. Firvida there are no longer any questions in the queue I'd like to hand, it back over to you for closing remarks.

Okay. Thank you for a thing in this call Im sorry for that there can you got to throw them see if you have any questions. Please do not hesitate to call us.

Good morning Bye bye.

And this concludes today's call. We thank you for your participation you may disconnect your lines and have a wonderful day, everyone take care.