Q3 2021 Banco Macro SA Earnings Call
Good morning, ladies and gentlemen, and thank you for waiting at this time, we would like to welcome everyone to Banco Marcos third quarter 2021 earnings Conference call.
We would like to inform you that the press release is available to download at the Investor Relations website of Banco Marco Www Dot Marco a our last release, you honest and basketball.
Also this event is being recorded and all participants will be in listen only mode. During the Companys presentation. After the Companys remarks are completed there will be a question and answer session at that time further instructions will be given should any participant need assistance. During this call. Please press star zero two single signal an operator.
It is now my pleasure to introduce our speakers joining us from Argentina are Mr. Gustavo Manriquez, Chief Chief Executive Officer, Mr. Jorge <unk>, 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 Tom.
Good morning, and welcome to Banco Macros third quarter 2021 conference call any comments, we may make today may include forward looking statements, which are subject to various conditions and these are relying in our 20-F, which was filed to the SEC and it's available at the website.
Third quarter 2021 press release was distributed last Wednesday, and it's also available at our website.
Peter's already in Argentine pesos and have been restated in terms of the measured in units at.
At the end of the reporting period.
The first quarter of 'twenty.
The bank began reporting results applying hyperinflation accounting in accordance with <unk>.
29.
As published by the Central Bank.
By comparison Peters from previous quarters have been restated.
Ias, 29% to reflect the accumulated effect of inflation adjustment for each period through September 32021.
I will now briefly comment on the banks third quarter 2021 financial results.
Banco macros net income for the quarter was seven 4 billion.
Billion pesos, 46% higher than the second quarter, 2021 and similar to that of a sharp posted a year ago.
The bank's third quarter, 2021 accumulated ROE and ROA eight of $10, one and two two respectively remained healthy and showed the banks earnings potential.
Net operating income before general and administrative and personnel expenses for the third quarter of 2021 was $43 2 billion pixels 87 I think.
In the medium pace was higher quarter on quarter due to higher net interest income and net fee income and I read it.
Indian small loan loss provisions.
On a yearly basis net operating income decreased 5% or $2 3 billion pesos due to lower net interest income and lower net fee.
Yeah.
Operating income after general and administrative expenses.
25 billion pesos, 4% or 719 million pesos lower than in the second quarter of 2021.
One 8 billion peso slower than in the third.
Great.
Okay.
Pardon me please hold.
Great.
I believe we have retracted sneakers are you there.
Hello.
Hello speakers your line is live.
Yes.
Here again.
Yes.
Shall I continue.
Yeah.
Please proceed.
Okay.
Operating income after general and administrative expenses were $20 5 billion pesos, 4% or 719 meeting, but slower than the second quarter of 2021, and 8% or $1 8 billion pesos lower than in the third quarter of 2020.
In the quarter net interest income totaled $29 7 million, British 7% or one 9 billion bushels and there were some proceeds in the second quarter of 2021.
An 8% or $2 5 billion bushels, millwork and posted one year ago as a result of different regulations adopted by the Central Bank that's capex.
Perhaps from lending brakes and brought on deposit rates.
In the third quarter of 2021 interest income totaled $9 9 billion pesos, 3% or one 5 billion higher than in the second quarter of 2021, and 11% or $6 2 billion peso slower than the previous year.
Within interest income interest on loans decreased 1%.
47 million business.
Due to a 1% decrease in the average volume of loans, and then 90 basis points decrease in the average lending rate in.
Interest income decreased 8% from $2 2 billion pesos year on year.
In the third quarter of 2021 interest on loans represented 50% of total interest income.
Net income from government and private securities increased 5% or a $1 2 billion quarter on quarter due to higher income from government Securities, which was partially offset by lower income from private securities.
Compared to the third quarter of 2020 net income from government and private securities increased 12% or 3 billion pesos.
We will start one of 2021 income from repos totaled $2 2 billion pesos, 48% or 706 million higher than the previous quarter, and 1 billion pesos lower than a year ago.
In the third quarter of 2021, FX gains, including definitely better.
Financially total.
192 million pixels gain 107 million pesos lower than the second quarter, 2021, and 68% or $1 2 billion pesos lower than the previous year due to.
The procedure and rate of the Argentine peso.
In the first quarter of 2021 interest expenses totaled $20 1 billion pixels, 2% or 366 medium, Texas decreased compared to the second quarter of 2021, and 15% or $3 7 billion pesos higher on a yearly basis.
Within interest expenses interest on deposits decreased 1% or 279 million pesos quarter on quarter, mainly driven by a 23 basis points decrease in the average interest rate paid on deposits, while the average volume of private sector deposits remained unchanged.
On a yearly basis interest on deposits increased 14%, hopefully one 2 billion pixels.
In the third quarter of 2021 interest on deposits represented 95% of the bank's financial expenses.
The third quarter of 2021, the bank's net interest margin, including FX was 19, 1% higher than the 18, 8% posted in the second quarter of 2021, and seven 1% registered in the third quarter.
<unk> and 'twenty.
The first quarter of 2021 net fee income totaled $7 8 billion pesos, 6% 433 million pesos higher than in the second quarter of 2021.
On a yearly basis net fee income decreased 3% or 212.
Yes.
In the third quarter of 2021, net income from financial assets and liabilities at fair value through profitable loss totaled $3 5 billion pesos gain 40% or $2 3 billion pay slower than in the previous quarter. The decrease is mostly related to lower income from government and private securities.
In the quarter other operating income totaled $1 8 billion.
Decreasing 15% to 24 million pets as compared to the second quarter of 2021.
On a yearly basis other operating income decreased 2% or 37 basis.
In the third quarter of 2021, Banco macros personal administrative expenses totaled $13 5 billion pesos, 1% from 96 medium prices higher than the previous quarter due to higher expenses, which were offset by nowhere personalized experiences.
On a yearly basis personal Ananda and eastern expenses decreased 8% or $1 1 billion pesos showing the strict cost control policies adopted by the bank's senior management.
As of the third quarter of 2021, the accumulated efficiency ratio reached 37 six.
6% deteriorating from the 37% posted in the second quarter of 2021.
A couple of the third quarter of 2021 expenses decreased 6% or 1 billion pesos, where net interest income plus net fee income plus other operating income decreased probably billion pesos compared to the third quarter of 2020.
In the third quarter of 2021, the result from net monetary position totaled.
$12 8 billion peso lost 13% or 2 billion pesos lower than the last part of it in the second quarter of 2021.
You can lower inflation from serving the quarter 167 basis points below.
Second quarter of 2021 inflation.
Inflation was down to now 928 from 10 95 in the second quarter of this year.
On a yearly basis, the loss related to the monetary position increased 26% or $2 7 billion pesos.
This is the third quarter in which they were sold from the net monetary position is shown are shown to communication 7211 of the central bank of Argentina in which the inflation adjustment on a relief and other government Securities Holdings is included.
And what's shown in net income from financial instruments at fair value through profit or loss.
In the first quarter of 2021, Banco macros effective tax rate was three 7% lower than the 21 eight registered in the second quarter of 'twenty, one and the 39, 6% registered a year ago.
The low effective tax rate is related to the deferred income tax and more information was provided in note 19.
19 in our financial statements.
In terms of loan growth the banks financing to the private sector until the $305 9 billion pesos, increasing 5% or $13 3 million pesos quarter on quarter.
And 14% or $48 2 billion pesos lower year on year as a consequence of the economic recession that affected Argentina during 2020, and the weak loan demand.
Commercial loans increased 10% or $8 4 billion pesos, among which overdrafts and detriment to stand out with a 14th and 25% increase respectively.
Consumer lending increased 3% of probably being in pesos credit card loans increased 3%, while pledged loans increased 46%.
Okay.
Within private sector financing basically financing increased 5% or $14 6 billion pesos when the U S dollar financing decreased 9% or $20 million.
It is important to mention that Banco macro market share over private sector loans as of September 21 reached seven.
Seven 3%.
On the funding side total deposits totaled 542, 2 billion pesos and increased 1% or $4 1 billion basis quarter on quarter and decreased 28% or $209 1 billion pesos year on year private sector deposits increased 1% quarter on quarter, while public sector deposits decreased 4%.
Oh boy.
The increase in private sector deposits was led by time deposits, which increased 2% or 5 billion pesos quarter on quarter, while demand deposits increased 1% or $2 4 billion pesos.
Within private sector deposits peso deposits decreased 238 million basis, what are you sort of deposits increased 1% or $14 million.
That's up to September 2021, Banco macros transactional accounts represented approximately 51% of total deposits.
Banco macros market share over private sector deposits.
'twenty, one pilgrim type one 7%.
In terms of asset quality, Banco macros, non performing to total financial ratio reached 167%.
Congratulation measured as total allowances under expected credit losses over a number of funding from the Central Bank growth totaled 175, 9%.
Consumer portfolio nonperforming loans did you related 17 basis points to two 5% from $1 88 in the previous quarter, while commercial portfolio nonperforming loans.
Five basis points from the third quarter of 2021 down to <unk> 67 per cent from one 1% this quarter.
Yes.
During 2020 as reported was positively affected by the measures adopted by the Central Bank of Argentina, and the current pandemic COVID-19 context, particularly the 60 day Grace period that we decided to debut a classification before alone what consider rational pardon me in March 2021% of the bank's establish a gradual transition which was completed by June.
2021, and financial introduced classified them according to the general vector classification.
In terms of capitalization Banco <unk>.
Counted an excess capital of $182 7 billion pesos, which represented a total regulatory capital ratio of 37, 2% and tier one ratio of 34%.
It should be noted that percent communication.
101 to hit by the Central Bank the distribution of profits by financial institution is suspended until December of two.
<unk> 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 to total deposit ratio reached 90% in the third quarter.
Overall, we have accounted for another positive quarter, we continue to have a solid financial position asset quality remain under control and closely monitor will keep on working to improve our efficiency standards and we keep a well atomized deposit base.
At this time, we would like to take the questions you may have.
At this time, we're going to open up the call for question and answers if you'd like to ask a question. Please press star one on your Touchtone phone.
If you'd like to withdraw yourself from the question queue Press Star then two please UN mute your phone and please be sure to ask your question properly when you are up.
All right. Our first question comes from Ernesto Gaba Limbo from Bank of America. Please go ahead.
Hi, good morning Nicholas.
Thanks for your presentation for the opportunity.
I have a couple of questions from my side.
First one is on the economic political outlook.
After the midterm elections.
Do you think are the key challenges ahead.
And what are the key dates to follow.
And also if you can share with us how are you seeing interest rates inflation effects.
On loan growth.
And my second question is on your net interest income.
We saw unimportant grow during the quieter.
But also we think its benefited from grapples with the Central Bank.
So how sustainable do you see.
Keep those gains.
What should be the strategy for nims in the next quarters. Thank you.
Okay.
Hey, Michael this is quota carrying CCAR what are you.
The economic outlook.
I think the D C <unk>.
<unk>.
Yeah.
<unk>.
Well the other Argentine banks have been commenting in there.
The conference calls.
Basically we are forecasting some TV, we had growth in GDP for next year.
222.
According to the consensus was in place rent is going to be in the.
Mid 50.
Hum.
And for the moment, we are looking forward for.
Stable margins.
And of course.
This is a dynamic process changes.
Changes could have been but for the moment those are the elements with the one that we are working with.
And in terms of political outlook.
Well.
You already know the result of the recent.
Congress elections.
For the moment I would say that the main issue that the government is considering it.
In agreement with the IMF that according to the local brands.
Mike happened in the next.
30 to 60 days, but DTC breath.
Articles commenting.
Big government.
Stating that they are almost.
Reaching an agreement with Amex, but of course, we want to see that in as an official announcement and of course to see days there.
The details on the on that agreement.
So Meanwhile, we could see some volatility in terms of.
Other effects.
Oh.
Stock price so our bond prices something that we are accustomed to.
In terms of your question related to the interest income and we saw that we got from.
Central Bank.
Repos that is something that we have been.
Doing basically as a way of allocating excess liquidity you know that we.
We decided to put the amount of deposits in pesos that are not in loans in pesos that exist.
He is allocated in leaks.
Repos with the Central Bank.
While.
We look at a covering or hedging.
The equity of the bank.
We tried to use the amount of data that we can.
And bonds all the treasury in pesos.
Tied to inflation.
Although that might be.
So that piece.
<unk>.
I think the question is do you you you asked.
Yes. So thank you very much and just a last question on the new Barbie and of COVID-19, the army ground.
What do you think will be the strategy of Banco macros in terms of your balance sheet I don't know if you want to Dana.
High level of research coverage ratio or maybe to create some additional provisions at some point.
Or on the opposite you'll feel comfortable already with the balance sheet.
Yeah.
I think that we for the moment, we feel pretty comfortable with the asset quality.
Wages that we are showing I think thats, our one of the best in the system and we have been in the last I would say 18 months very cautious on the amount of provisions.
The amount of <unk>.
Yes.
Yes write off levels. So for the moment I think that these.
Omicron.
Beauchamp the COVID-19, <unk> early to talk about Chile, and Argentina and of course, we're going to follow Central Bank regulations, but.
Again as I commented, we are going to be.
The most critical that we can be on in order to protect the asset quality levels to continue to be one of the best quality.
Crediting.
In Argentina.
Perfect. Thank you very much okay.
Youre welcome.
Yeah.
The next question comes from <unk> <unk> with Scotiabank. Please go ahead.
Hi, Good morning, Gustavo Nikolas. Thank you for taking my question I have two questions one on Costa. Please one on the profitability outlook.
In terms of cost of risk this year, because the move has been quiet no one close to zero percent. So I wanted to know how should we expect this to evolve.
What level of cost of risk can we expect for 2022.
And then Phil profitability.
Really we saw that really improving in the past well sung mentioned around 15% in the third quarter.
So given that inflation is expected to be around 50% in 'twenty, two and cost of risk may increase versus the levels that we have seen so far how should we think about <unk> going forward.
10% of that is sustainable into 2022, what's the base case that you are working on unfold on next deal.
Okay.
Hi.
Are you.
According to the cost of risk.
Yes.
Think that this year is a.
It'd be low but of course last year was extremely high. So you have to think about over on average in the last two years going forward for 2022, we are going to be.
Yeah.
We might see what we're helping with this view.
The burden of COVID-19, and the impact on the world and of course here in Argentina.
But I would say that the cost of risk in 2022 should be higher than 2021, you are correct in your forecast.
And in terms of profitability, we think that even though inflation that you suspected to be mid fifties.
We expect at some point.
To see some.
Domestic rates to increase a little bit so I think that could be good news for the bank and for the margin and in order to trying to maintain the.
15% ROE in 2022.
Okay. That's helpful. Thank you very much.
<unk>.
Welcome.
The next question comes from Paula <unk> with.
TPC gene. Please go ahead.
Hi, Thank you for taking my question I have two questions. The first one is if you could give us some color on model.
For marketing in terms of users compared to my colleague follow on my second question is if you have any plans to reduce the number of Brian James.
Thanks.
Yeah.
Hi, Bob how are you.
With your second question.
Now for the moment, we are okay with the number of branches of carry.
Of course, sorry.
We always tried to make.
To opt.
Optimize the level of our branch network for the moment, we are not planning now.
Matthew.
Opening of a.
Branches.
And so I think that the number of branches is going to range. The current number that could be.
Little changes they are ups and downs.
Yeah on your first question I mean, we are working on we are improving.
And I think that the COVID-19.
Ausiello rated the use of digital elements for <unk>.
Banking transaction.
<unk> model is improving.
Well above our expectations in the last 18 months, we think that this trend will continue.
And we are going to put all the airports.
The necessary investments in order to keep on improving the odd because you know that this is a very cost efficient way of making a.
Bank transaction and I think that people.
As I mentioned before accelerating did their knowledge on these type of elements because of the COVID-19, and the consequences. There. So this is something that the policies as it improved a lot and we think that this is going to continue in the next couple of years. That's why we are very positive on this.
Okay perfect. Thank you very much it was very helpful.
Youre welcome.
Again, if you would like to ask a question press Star then one to join the queue.
Next question comes from Yuri Fernandes with JP Morgan. Please go ahead.
Good morning, Jorge Nicholas I handle the first one regarding Prisma, if you can comment what.
Is missing here, we've seen the news articles like some comment on the multiples I guess part of the contract, but there are discussions about effects. So if you can provide some color what should be the value that we should expect for the four 5% stake that macro hedge on Prisma I have a follow up.
Regarding cost of risk also you mentioned Jorge.
Jorge that cost of risk could be higher right.
But how much higher right because there is 0.3 cost of risk as I said, it's too low.
Any historical lateral was closer to 2% right.
617 for 2022 should we see cost of risk back to the spark levels or is it still a transition year that it will move up because again 0.3 cost of risk is very low for perhaps the bank.
But still below the historical average like how should we see like how much higher.
Hi, nice here for Ya and finally, I have a third and last question regarding transferring says three Oh can I respond to settle if you can comment your views on that like do you believe this can be big like Disney Centennial's transfers in Argentina and that can be a risk for debit cards are are not not really liked what is your take on.
These new future. Thank you.
Julian how are you.
In terms of the phrase my question honestly that decent nonpublic informations. So unfortunately, we cannot give.
Details on that so I think that you understand.
In relation to that.
In terms of a particular question on cost of risk.
I would say that.
Depending on again, depending on what happens with COVID-19.
Impact.
We are working with its scenario between one five and 2% cost of risk for 2022, but again, we'll have to see what's happening with what's happening with the COVID-19.
I know your third question in terms of.
Three point old competencies that is something that is.
Targeting heat Argentina.
QR code.
Also improving a lot of time with model you can you can do that but this is one of the of the U S.
I would say elements of.
The digital.
Facilities that we have here that is just starting but again because of the.
Of the pandemic consequences is increasing a lot.
But again, it's in the very early stages here.
No Super Super.
Super clear and I totally understand thank you very much.
Youre welcome Julie.
There are no further 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.
Yeah.
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.
Okay.
Yes.
Yes.
Right.
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Yes.
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