Q4 2021 Banco Macro SA Earnings Call
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Good morning, ladies and gentlemen, thank you for waiting at this time, we would like to welcome everyone to Banco Macros <unk> 21 earnings conference call.
To inform you that the <unk> 21 press release is available to download at the Investor Relations website of Banco macro www dot macro dot com a.
Forward slash release relates Gionet hyphen anniversaries.
Forward slash.
Also this event is being recorded and all participants will be in a 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 to signal the operator.
It is now my pleasure to introduce our speakers joining us from Argentina are Mr. Gustavo <unk>, 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 Chad.
Good morning, and welcome to Banco Macros fourth quarter 2021 conference call any.
Any comment we may make today may include forward looking statements, which are subject to various conditions and these sort of mine in our 20-F, which was filed to the SEC and available on our website.
Quarter 2021 press release was distributed yesterday and is available on our website.
Alright in Argentine pesos and have been restated in terms of the measuring unit at the end of the reporting period.
The first quarter of 2020.
2020, the bank to do the kind of reporting results applying hyperinflation accounting in accordance with I guess.
2009, as established by the Central Bank of Argentina for ease of comparison, Peter for previous quarters have been restated applying ias, 29% to reflect the related effects of the inflation adjustment for each period through December 31st.
2021.
I will now briefly comment on the banks fourth quarter of 2021 financial results.
Banco macros net income for the quarter was $10 5 billion pesos, 30% higher than the third quarter of 2021, and 120% higher than the result posted a year ago.
The bank's fourth quarter, 2021 accumulated ROE and ROA eight of 12, 2% to 8% respectively remained healthy and shows the banks earnings potential.
Fiscal year 2021, total comprehensive income totaled $27 1 billion pesos, 26% lower than the result posted in fiscal year 2020.
Net operating income before general and administrative and personnel expenses in the fourth quarter of 2021 was $49 7 billion pesos, increasing 4% or $2 1 billion pesos.
Due to higher net interest income and higher FX gains.
Partially offset by higher loan loss provisions.
On a yearly basis net operating income before general and administrative.
Personnel expenses increased 5% or $2 4 billion pesos.
In fiscal year 2021, net operating income before general and administrative.
First on expenses.
$194 5 billion pesos, 3% lower than the previous year.
In the fourth quarter of 2021 provision for loan losses totaled 2 billion pesos $1 7 billion higher than in the previous quarter. The bank decided to increase loan loss provisions given the uncertainty and problematic adverse macroeconomic scenario arising from our loan agreement with the IMF regarding the Richard.
Argentina step on.
On a yearly basis provision for loan losses decreased 40% or $1 3 billion pesos.
Operating income after general and administrative expenses.
Two points.
4 billion pesos, 1% or 167 million pets are slower than in the third quarter of 2021, and 2% or $511 million, which was higher than the fourth quarter of 2020.
In the quarter net interest income totaled $35 7 billion pesos, 9% or $2 9 billion pesos higher than the result posted in the third quarter of 2021, 9%, a $2 8 million pesos higher than there are some closer to one a year ago.
In fiscal year 2021, net interest income was 10% lower than in fiscal year 2020, as a result of different regulations adopted by the Central Bank.
On lending rates and floors on deposit brands.
In the fourth quarter of 2021 interest income totaled $56 9 billion pesos, 3% or $1 9 billion higher than in third quarter of 2021 due to higher income from government securities and 9% of pipeline and billion peso slower than the previous year.
Within interest income interest on loans increased 8% or $2 1 billion pesos quarter on quarter due to a 5% increase in the average volume of private sector loans and 93 basis points increase in the average lending rate.
When a yearly basis income from interest on loans, what's broken unchanged with a <unk> 7 million pesos decreased.
In the fourth quarter of 2021 interest on loans represented 52% of total interest income.
In fiscal year 2021 in personal loans totaled $114 8 billion pesos and decreased 11% compared to fiscal year 2020.
Net income from government and private securities increased 2% or 520 million basis quarter over quarter due to higher income from government securities compared to the fourth quarter of 2020 net income from government and private securities decreased 13% or $3 8 billion pesos.
In the fourth quarter of 2021 FX gains include investments in direct financing totaled $1 6 billion peso gain due to the port perfect.
Argentine peso depreciation against the U S products and advanced lung perfusion.
Okay.
In the fourth quarter of 2021 interest expense totaled $20 3 billion pesos, a 4% or 1 billion pesos increased compared to the third quarter of 2021, and 29% or $8 7 billion pesos higher on a yearly basis.
Within interest expenses interest on deposits decreased 4% or 894 million per quarter.
Mainly driven by a 4% decrease in the average volume of private sector deposits. What is the average interest rate paid on deposits was unchanged.
On a yearly basis interest on deposits increased 28% or 8 billion pesos.
In the fourth quarter of 2021 interest on deposits represented 96% of the bank's financial expenses.
In fiscal year, 2021 interest expense increased 3% compared with fiscal year 2020.
In the fourth quarter of 2021, the banks net interest margin, including FX was 21, 2% higher than the $19. One posted in the third quarter of 2021, and then the 16, 3% registered in the fourth quarter of 2020.
In the fourth quarter of 2021 net fee income totaled $8 8 billion pesos, 2% or 176 million, but was higher than third quarter of 2021.
On a yearly basis net fee income increased 3% or two.
<unk> hundred 17 million pesos.
In fiscal year 2021, net fee income was 2% lower than the previous year.
In the fourth quarter of 2021, net income from financial assets and liabilities at fair value for profit or loss totaled $3 5 billion pesos gain 7% or 268 million lower than the previous quarter.
A yearly basis net income from financial assets and liabilities at fair value decreased 29% or $1 4 billion pesos.
In fiscal year 2021, net income from financial assets and liabilities for everybody's in profit dollars was 18% higher than in fiscal year 2020, 'twenty, mainly due to higher income from government securities.
In the quarter other operating income totaled 2 billion pesos, increasing 2% compared to the third quarter of 2021 on a yearly basis other operating.
Uh-huh income decreased 6% or 116 million pesos.
In the fourth quarter of 2021.
Personal and administrative expenses totaled $15 6 million pesos high percent or 727 million pesos higher than in the previous quarter due to higher administrative expenses on a yearly basis personal leasing.
<unk> decreased 4%.
8 million pesos.
For fiscal year, 2021, administrative expenses plus employee benefits decreased 4% compared to fiscal year 2020, so in the strict.
Policies adopted by the bank's senior management.
Out of the fourth quarter of 2021 efficiency ratio reached 37, 5% improving from 37, 6% posted in the third quarter of 2021.
This decrease.
3%, while net interest income plus net fee income provided operating income decreased 8%.
In the fourth quarter of 2021, the results from the net monetary position totaled $15 2 million pixels loss, 7% or $1 1 billion higher than the last.
The third quarter of 2021.
As a consequence of higher inflation observed in the quarter, which was 93 basis points above the third quarter level.
Completion of the West 10, 21% in the fourth quarter.
Up from $9 28 in the third quarter of 2021.
In fiscal year 2021, my perspective tax rate was five 8% lower than the 33, 1% tax rate registered during fiscal year 2020.
It should be noted that in fiscal year 2021 the effective tax rate was affected by the implications of inflation adjustment and accounting and tax policies and the termination of the income tax deal and deferred income tax funded our information is provided in note 23 to our financial statements.
In terms of loan growth the banks financing to the private sector totaled 349 billion pesos increasing 4%.
$11 9 billion pesos quarter on quarter, and decreasing 8% from $32 1 billion pesos year on year.
Within commercial nodes overdraft standout with an 8% or $1 8 million purchase increased quarter over quarter, mostly due to.
Extended to SME.
On the consumer side mortgages increased 13% or $2 6 million pesos when credit card loans increased 9% or 8 billion pesos in the quarter.
2021 pledged loans stand out with a 49% increase while other loans decreased 41%.
It was extended to SME as part of their COVID-19 relief package started to become due.
It is important to mention that Banco macro market share over private sector loans as of December 2021 reached six 9%.
On the funding side total deposits decreased 1% or $8 7 billion quarter on quarter and decreased 20% or $148 9 billion pesos year on year.
Private sector deposits decreased 1% quarter on quarter, while public sector deposits decreased 5% in the quarter.
The increase in private sector deposits was led by time deposits, which decreased 8% or $19 8 billion pesos quarter on quarter, while demand deposits increased 5% or $14 6 billion pesos.
Within private sector deposits, especially deposits increased 1% or $5 6 billion pesos. When he just started deposits decreased 16% or $182 million.
So in December 2021, Banco macros transactional accounts represented approximately 55% of total deposits.
Market share for private sector, but as of December 2021 totaled five 4%.
In terms of asset quality, Banco <unk> nonperforming to total financial ratio reached one 3%.
Ratio measured as total allowance on our expected credit losses over a nonperforming loans under central bank growth improved significantly and totaled 209, 61%.
Consumer portfolio nonperforming loans improved 65 basis points down to one 4% from two 5% in the previous quarter, while commercial portfolio nonperforming loans deteriorated 43 basis points in the fourth quarter of 2021 after <unk>, 99% from 57 in the previous quarter.
The improvement in commercial nonperforming notes can be traced to the sale of part of the consumer loan portfolio.
In terms of capitalization Banco macro accounted an excess capital of $197 8 billion pesos, which represented a total regulatory capital ratio of 36, 1% and a tier one ratio of 39%.
The bank's aimed to make the best use of this excess capital.
The bank's liquidity remained more than appropriate liquid assets.
Ratio reached 19% overall, we have accounted for another positive quarter, we continue showing a solid financial position asset quality remain under control and closely monitor.
Keep on working to improve our efficiency standards and we keep a well optimized deposit base at this time, we would like to take the questions you may have.
Thank you we will now begin the question and answer session.
I would like to ask a question. Please press Star then one on your telephone keypad.
One moment please for our first question.
And the first question will come from Ernesto <unk> with Bank of America. Please go ahead.
Oh, hi, good morning.
Nicholas Thanks for the opportunity.
So my first question.
The implications of the IMF agreement.
How do you see this translate into.
Loan and deposit growth this year.
Are you seeing will be the challenges for the year.
It goes well.
We still have high grades and high inflation level. So.
I think that could put some pressure for real growth.
The results of the net monetary position.
And also.
And another question I would say related to cost of risk.
We saw during the quarter did you have created upfront provisions related to the uncertainty of the IMF agreement.
However, I just wanted to know what is the base case scenario because I've seen at the end it could be accepted by Congress and there could be a great man. So if that is the case do you expect to release some of those provisions during the year.
Or do you expect to keep a high coverage ratio.
And then my last question is on what would be your expectation for the arrow.
Of this year. Thank you.
Okay.
Hi, Michael.
Are you.
Let me answer first your second question related to the to the provisions that we made in the fourth quarter.
From an accounting point.
To view those provisions.
We're basically done.
At the end of December .
At that time.
There was a vehicle for uncertainty, whether Argentina was going to reach an agreement with <unk>.
Yes.
And now that we are in February reaching the end of demands.
The due date is the 22nd half of March.
The most prolonged scenario is that Argentina would reach an agreement with the IMF. So.
So if that is the case and depending on economic conditions on how the economy evolves in 2022.
We could be reverting part of these provisions along 2022.
But we have to see how the economic conditions are farm.
In Argentina.
Now answering your first question.
I would say that.
Reaching an agreement with <unk>.
Is preventing Argentina.
To collapse from the from the World.
So even though the agreement will be reached in the beginning of March let's say.
According to local economies.
Micro Spectation four D series.
And let's say inflation mid to high Fifty's.
GDP grow in real terms between one five and 2%.
In that case and considering that scenario, we are forecasting the Boston loans growing.
In the area of inflation could be slightly higher in terms of loans.
In terms of.
<unk> rates.
Honestly, the central banks as increase interest rates in January and in February I would say that the central bank is going to keep on monitoring the monthly evolution of inflation before increasing again rates, but we are not expecting the many increases alone 200.
2022 for the moment.
Could be another increase between one or two percentage points, maybe between May June July , but will depends on inflation evolution.
So, let's say that margins could be slightly wider compared to 2021.
Your third question in terms of ROE if that is the case, we could be getting a narrow in 2000 and <unk> that could be.
<unk> 2021, maybe.
In the area of 15 or maybe.
In the higher teens.
Again dc's.
Yeah.
Very early too to forecast.
Of course, it depends on many issues.
But for the moment, we are working with that scenario.
Thank you very much and just a follow up on the Arrow. So give me 21 full year.
Making the numbers I think the ROE was around.
112%.
So you're seeing it could be more at around 15% in this year or it will be more <unk> and then what are the assumptions behind on the dividend.
You know the regulator and somehow the banks today.
<unk> of the accumulated earnings as of 2021, so what will be embedded in your guidance of Euro gentlemen, David Thats.
Yes, assuming that it.
As I mentioned before I mean.
While the margin.
Maybe could be rebuilt in parts of the provisions.
<unk>.
Having loans growing slightly above inflation.
We chitra.
We are forecasting that to an approximately 15% ROE for two evident to you could be achievable.
In terms of the dividend remember that the dividends are already.
Taken out from the equity in the case of Banco macro.
So.
The ROE calculation at that time, making is already considering that.
Excellent. Thank you very much.
We're going with that.
Thank you and the next question will be from Yuri Fernandes with JP Morgan. Please go ahead.
Thank you Jorge I have a quick one on Texas, we saw a tax reversal in this quarter. So if you can provide more detail than I and I know, it's very hard to forecast an effective tax rate given the inflation, but if you can give us a guidance for 2022, what to expect an effective tax rate.
And I have a second question regarding our sale of your consumer portfolio.
You don't provide a number in the release so I don't know if this was big.
This helped npls are not like I guess asset quality trends in Argentina. They have been overall, okay right.
All good but just checking if you can provide some color on the state of the consumer loans, while you sold what was the size.
Anyway anything you can share with us thank you.
How are you. Thanks for your question in terms of taxes.
Basically what's happening until they had 21 wells.
The difference between the fiscal balance in the accounting balance in Argentina.
With inflation involved there and Thats why.
We'll reach out and effective tax rates, so low in 2021, but I would say that if you want to forecast 2022, I will cover a.
A number more close to maybe 30% going back to normal levels.
There were some.
The difference between the fiscal and accounting balance in inflation adjustments in the bank and Thats why the reversion on taxi that's happened in the fourth quarter.
In terms of the sale on the consumer was a small sale basically the bank.
Usual yield Samsung announced usually some sense.
These type of transactions that are small transactions, meaning look forward to the size of the bank in terms of asset quality.
<unk> been saying, we keep a very close eyes on having the best Thunder seeing in asset quality with the elevated to coverage ratios. The idea to continue on that I would say that the recovery in the economy to other in 'twenty, one that was slightly above 10%.
<unk> has shown that.
It was a big recovery compared to the loans that we have in 2020 because of the pandemic.
For this year, we are forecasting as we mentioned.
GDP growth between one 5% to 2% and for the moment, we are not considering big changes in the behavior of the Npls.
So the idea is to have this under control.
Similar levels of debt.
One that we are seeing for the moment I would say ranging below.
Of course below 2% in terms of Npls and the coverage well above the 100 level.
Perfect if I may.
Just a follow up on asset quality.
Historically, I guess you had like a 2% cost of freeze can repairs in 2021. It was very low because of all the additional provisions from 2020.
And as I said like overall.
The deferral programs overall are good asset quality low leveraged trying in Argentina.
Do you have any views.
Provisions to normalize in 2022 or given you have this 2 billion additional <unk> like it.
Your base case is to still run with cost of risk below historical level.
It depends I would say that would be running below the 2% in 2022 basically yes that is.
What we have in mind.
Perfect. Thank you very much.
Welcome.
And the next question is from Robert Gilman, a private Investor. Please go ahead.
Hello.
First of all what is the situation with the.
Yeah.
Dividend.
Uh huh.
Sure.
Good morning, Robert in terms of the.
<unk> situation.
We are still up in the central banks for permission.
Two by the dividends for the moment there is no answer from the Central Bank.
So we are in a wait and see position.
That is all what we have for the moment.
And the second question is and this is Brian .
Thank you Scott.
As of the surplus capital that you have.
Yeah.
The buyback is something that the board.
Contents consider honestly for the moment that is not on the table.
That is not meeting that could.
Could be on the table in the next month or so but for the moment, we do not have that.
On the table.
Thanks, Jim.
You are welcome.
And thank you once again, if you would like to ask a question. Please press Star then one.
Question will come from Carlos Gomez with HSBC. Please go ahead.
No.
To ask about the dividend.
First.
Understand correctly, the Central Bank said that you could pay dividends plus installments, which seems quite briefly.
That is scheduled that you might consider additional on that option.
Mark My rationale comes along.
And second do you have clarification on as to whether the dividend payments with respect to the ones that you have already closed or are the ones that you wanted to cancel 2009.
For 2021.
Different question on taxes some of your colleagues presented claims.
Statutory <unk> for tax adjustments in previous years and actually prevailed.
<unk> received.
Rebates for that to sort of a debate.
Do you have pending litigation that does is that something that we could expect the Q2, all you're past that statements out ladies adult thank you.
Okay.
Could you tell us how are you.
U S.
<unk>.
In terms of the dividend.
Yes, I mean that is what the central bank has been.
Same.
When they are approved.
We will have to pay that in 12 monthly installments.
<unk>.
The scenario can change it will reach an agreement with the IMF.
Maybe Argentina.
Received back between $4 billion to $5 billion. So this situation could maybe change in the future for the moment the 12 component in pesos.
Still they are for the moment, we have not received confirmation from the central bank debt, we can pay.
Pay dividends.
According to the new Formula from the 26 billion that we have a provision approximately we can't pay between 2020 1 billion pesos.
But again, we still do not have the approval to pay them.
Taxes, no we do not have any tax plan spending on.
The local authority or no we're balanced nothing about that.
Thank you. Thank you so much.
Hello.
And once again, if you'd like to ask a question. Please press Star then one.
The next question will come from Rodrigo <unk> with our partners. Please go ahead.
Hi, how are you. Thank you for the opportunity of asking questions.
First a quick follow up on the ROE guidance.
Expectation, so 15% is that in place any kind of relaxation on the regulatory front.
Honestly, it's impossible to say Thats really regulations are going to be relaxed basically whether we are seeing is less.
The better margin.
Maybe slightly better.
The recovery on the loan book.
Again, I'm, saying about area of 15% so that could be I don't know 13, 14, 15 and 16 so.
Imagine that in Argentina to make forecasts on anything you see extremely difficult so.
For the moment that is what we are seeing a slight improvement in Roe.
If the cases.
Team from 12% to 15 is a marginal improvement.
So I.
I'm not saying that we are going to double the money in 2022 compared to <unk> 21. It says.
Slide or margin or margin improvement that we are forecasting a narrow.
And we are now in February so we have 10 months to go on in Argentina with inflation being between $55 50, 560% according to local economies.
Imagine that these.
Forecast could change in the next quarter, so with the elements that we have right now that is what we are forecasting.
Okay. Thanks, and then a second one regarding your strategy to protect the equity from the high inflation environment judges Clayton.
We see that the deposit base.
Something in real terms by 20%.
Uh huh.
What are you doing in order to defend or equity from from inflation.
What we are doing is what we come I mean, we are.
Long dollars they much as we can according to local regulations and then with.
All we can in terms of.
Bonds tied to inflation basically that is.
The way that we are trying to hedge the equity on these complicated scenario.
Okay. Thanks, so much.
The lithium.
Ladies and gentlemen, as there are no further questions. This concludes our question and answer session I would like to turn the call back 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 soon good day.
Thank you Sir.
France has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
Thank you Chad.
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Sure.
Yes.
Okay.