Q3 2022 Banco Macro SA Earnings Call
Please press Star then zero to signal the operator.
It is now my pleasure to introduce our speakers joining us from Argentina are Mr. Gustavo Manriquez, Chief Executive Officer, Mr. Jorge <unk>.
Sure.
Currency and Chief Financial Officer, Mr. Nicolas Torres Investor Relations now I would like to turn the conference over to Mr. Nicolas Torres you May begin your conference Sir.
Thank you good morning, and welcome to Banco Macros third quarter 2020 conference call any comment 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 with the SEC.
Oliver at our web site.
Quarter 2022 press release was distributed last Wednesday, and the total available on our website.
Our peers are.
Argentine peso and have been restated in terms of the missionary unit at the end of the reporting period.
As of 2020, the bank began reporting results applying hyperinflation accounting in accordance with Ias 29, as published by the Central Bank of Argentina.
For ease of comparison to previous quarters have been restated applying ias 29 to reflect the accumulated effect of inflation adjustment.
For each period through September 32022.
I will now briefly comment on the banks third quarter 2020 financial results.
My first net income for the quarter was $8 9 billion pesos, 76% higher than the second quarter of 2022 and <unk>.
4% lower than the result posted a year ago.
As of the third quarter of 2020, the bank's accumulated annualized ROE and ROE of seven 7% and one 9% respectively remains healthy and shows the banks earnings potential.
Net operating income before general and administrative and personnel expenses in the third quarter of 2020, with 122 million pesos, 22% or 22 billion versus higher quarter on quarter due to higher income from financial instruments at fair value at the bottom left.
Higher FX gains.
On a yearly basis net operating income increased 54% of $42 6 billion pesos due to higher income from financial instruments at fair value.
And higher FX gains.
Operating income.
When you think of expenses.
$75 1 billion pesos, 39%, a 21 billion pesos higher than in the second quarter of 2022, and 101% or $37 7 billion. This is higher than the <unk>.
Third quarter of 2021.
In the quarter net interest income totaled 63.
Billion pixels, 3% or $2 1 billion lower than the result posted in the second quarter of 2010 2000.
17% or 90 million pesos higher than they were so posted one year ago.
Third quarter of 2020 to interest income totaled $177 2 billion pixels, 17% or 20 billion because it's higher in the second quarter of 2022, and 50% at 45 8 billion higher than the previous year.
Within interest income interest on loans totaled $55 5 billion pesos and increased 9% or $4 6 billion quarter on quarter.
Many of you two or 324 basis points increase in the average lending rate.
Loans increased 22% or $9 8 million pesos year on year.
In the third quarter of 2022 interest on loans represented 40% of total interest income.
Net income from government and private securities increased 19% or $12 2 million picks us quarter on quarter due to higher income from government securities compared to the third quarter of 2021 net income from government and private securities increased 86%.
36 million pesos.
In the fourth quarter of 2022 income from breakfast totaled $3 9 billion versus 358% or 3 million bucks higher than in the previous quarter, and 3% or $107 million purchase lower than a year ago.
In the third quarter of 2022, FX games, including investments in very good financing totaled at 16 billion pixels gain nine from tightening infrastructure then in the second quarter of 2020, and $15 billion basis higher than the previous year due to the bank's long dollar position and the peso depreciation during the quarter.
In the third quarter of 2020 to interest expenses totaled $73 7 million versus 43% or $22 1 billion.
<unk> increased compared to the second quarter of 2000 10-Q.
100% of $36 8 million in purchase higher on a yearly basis.
What do you mean interest expenses interest on deposits increased 45% of $22 4 billion quarter on quarter, mainly driven by a 950 basis points increase in the average interest rate paid on deposits, while the average volume of private sector deposits increased 6%.
On a yearly basis interest on deposits increased 106% or $37 2 billion pesos.
In the third quarter of 2022 interest on deposits represented 98% of the bank's financial expenses.
In the third quarter of 2020, the bank's net interest margin, including FX of 28, 1% higher than the 24, 7% posted in the second quarter of 2020, and 19, 1% registered in the third quarter of 2021.
In the third quarter of 2022 net fee income totaled $14 2 billion <unk>, 2% or three.
315 prices, meaning lower than in the second quarter of 2020.
On a yearly basis net fee income decreased 1% or 80 million pages.
In the first quarter.
2022, net income from financial assets and liabilities for value the profit or loss totaled 20 pipeline type basis gain one kind of in the 93 or $16 5 billion picks us higher than the previous quarter. This.
This increase was mostly related to higher income from government securities, which increased 116% or $14 7 million pixels.
On a yearly basis net income from financial assets and liabilities for a bank.
<unk> increased 304% from $19 2 billion pesos.
In the quarter other operating income totaled $3 7 billion pesos, 20% from 911 million lower compared to the second quarter of 2020.
On a yearly basis other operating income increased 16%, a 570 million in Texas.
And the third quarter of 2020 to Banco Marcos personal admission expenses during 2016 versus 3% or $854 million versus lower than the previous quarter personnel expenses decreased 4% when admission to the sprint remained unchanged.
On a yearly basis personal eliminating expenses increased 5% or $1 2 billion pesos.
As of the third quarter of 2022, the efficiency ratio reached 49, 1% improving from the $31 two posted in the second quarter of 'twenty two.
In the third quarter of 2020 expenses decreased 3%, while net interest income plus net fee income plus our operating income increased 23% compared to the second quarter of 2022.
In the third quarter of 2022.
From the.
Provision totaled $58 3 billion peso lost 25% or $11 7 billion, which is higher than the loss posted in the second quarter of <unk> due to higher inflation observed in the quarter 467 basis points above second quarter 2022 level inflation was 22% in the quarter compared to $17 three.
In the second quarter of 2022.
In the third quarter of 2022, my perspective tax rate was 46, 7% and more information is provided in the 'twenty two in our financial statements.
In terms of loan growth the banks financing to the private sector totaled 570 billion fitness nutrition, 7% or 37, 2 billion quarter on quarter, and 9% of $53 1 billion purchase lower year on year.
Within commercial lending overdrafts, and definitely standout with an 18% decrease from 9% decrease respectively.
Meanwhile, we didnt consumer lending personal loans decreased 12% of credit card loans decreased 6%.
But in private sector financing, if the financing decreased 6% uptick of $3 3 billion in Texas, while U S dollar financing decreased 26% or $63 million.
It is important as mentioned by Banco macros market share over private sector loans as of September 2022, seven.
Seven 3%.
On the funding side total deposits totaled $1, one premium basis, and increased 7% or $77 7 billion in Texas.
And 13% or $132 1 billion pesos higher year on year.
Private sector deposits increased 5% quarter on quarter, while public sector deposits increased 32% quarter on quarter.
The increase in private sector deposits was led by time deposits, which increased 7% or $34 5 billion pesos, while demand deposits decreased 5% or $21 4 billion pesos.
But in private sector deposits peso deposits increased 10% or $94 3 billion basis, when he adopted deposits decreased 25% or $289 million.
As of September 2022, macro transactional accounts represented approximately 43% of total deposits.
Market share over private deposits as of September 22 to around six 5%.
In terms of asset quality Banco macros non performance total financial ratio reached.
27% and the coverage ratio measured a third allowance under expected modest over nonperforming loans under Central Bank rules totaled one 313%.
Consumer portfolio nonperforming loans were unchanged at one 3%, while commercial portfolio of nonperforming loans increased 15 basis points.
Third quarter of 2022.
In terms of capitalization Banco macro accounted an excess coming out of $351 9 billion pesos, which represented a total capital ratio of 44% and a tier one ratio of 36, 1%.
It should be noted that our disciplined and intend to open a CFC coming out of the Central Bank Republic, Argentina in pharmacy that he has the type of authorized Banco macro to distribute products in cash or in time for an aggregate amount of $19 7 billion pesos.
And then distribution should be carried out in 12 monthly equal and consecutive installments as of this date the bank of Spain.
In installments.
Paid another one in December .
So what I'm, saying is to make the best use of this excess capital.
Liquidity remained more than appropriate liquid assets to total deposit ratio reached 90%.
Overall, we have accounted for another positive quarter, we continue showing a solid financial position added quality remain under control and closely monitored we keep on working to improve more efficiency standards, and we'll keep a well optimized deposit base.
At this time, we would like to take the questions you may have.
At this time, we're going to open it up for questions and answers. If you would like to ask a question. Please press star on your please press star one on your Touchtone phone. Please on mute your phone and record your name clearly when prompted one moment. Please for the first question.
And the first question will come from Alonso Garcia with Credit Suisse. Please go ahead.
Hi, Good morning, everyone and thank you for taking my question.
My question is regarding your exposure to the public sector, especially the national Treasury I mean, I understand that in this environment right.
Negative real interest rates and very low credit demand.
The way you can protect your shareholders equity you're right from inflation, but it is there is there.
Is that in this quarter you had a.
In relative terms right, that's a pretty much of your total assets you had a slight decline your exposure to public sector compared to previous quarter. Just wanted to hear your thoughts on on your exposure to the national Treasury going forward considering that next year, most likely Craig in mind Michael.
Main subdue and that interest rates mine might remain as well.
It'd be territory real terms. So I don't know if you have any kind of internal limits or any color you can provide on these exposure going forward. Thank you.
Hi, Alonso good morning, this is Scott.
Honestly, we do not have an internal benchmark in terms of exposure to the public sector.
This is ranging.
Differently.
Quarters.
Taking into consideration the behavior of interest rates the deeper in the <unk>.
Instruments.
<unk> is issuing in terms of getting the.
That from the market.
Honestly, we feel comfortable with the exposure that we have again this might.
The change depending on the quarter, and we think that the public sector debt.
No program to be renewed going forward.
Perfect.
My questions. Thank you very much.
What some of those.
The next question will come from Nicolas Riva with Bank of America. Please go ahead.
Thanks, very much hurricane Nicole thanks for taking my questions.
I have two questions first if you can.
Give us an outlook for 2020 three in terms of when do you expect to see you.
If you expect to see some recovery in credit demand next year, and we have seen continued negative loan growth in real terms, but if you're going to discuss the outlook for 2023.
Well as for Mpls.
<unk>, where are you reporting Roe.
Close to 10% in real terms, which I think is not bad compared to nominal Roe.
Current inflation in our Latin American markets, but if you can disclose.
So again the outlook for loan growth Npls on Roe's Nextera.
Second more specific.
I did see an increase on the net long position in dollars this quarter, which before was around $400 million.
I need to increase to about $1 $2 billion in the quarter.
If you can discuss.
What drove this increase if you'd watch deliberate if we should read us the bank positioning for.
A stronger devaluation in the official exchange rate.
The short term.
Hi, Nicholas how are you.
On your first question in terms of the outlook for 2023.
Honestly according to local economies they are expecting a kind of a slowdown in economic activity.
In 2022 real GDP is expected to be up.
Close to 5% and for next year. According to the consensus that we have seen economists are expecting between 1% and 2%.
Positive growth.
In Argentina, so it kind of a slowdown compared to 2022.
So in terms of <unk> loan demands, we expect that nominal interest rate will continue at high levels. So we are not expected a recovery in loan demand in real times.
For 2023.
Even though the slowdown we are not expecting a pickup in npls, we believe that the level of coverage with provisions.
And what we are seeing in terms of the behavior of the different sectors in Argentina, where does is picking up.
A pickup there so in terms of npls that could be ranging between the current level of under one 5%.
<unk> 2023.
Ro.
We are expecting to continue this level ranging between 8% to 12% and positive levels. So no big difference compared to what we are delivering right now.
In terms of your second question on the.
On the net long procedure and there are no changes in regulations. So.
<unk> can be.
Zero percent.
In what is U S dollar that the position that of increase at <unk>, mainly driven by the increase in.
Bonds linked to the dollars and these bonds are follow the behavior of the official effects. So that is the increase that you are seeing in the quarter that is the way that we find in order to hedge the the equity of the bank both to the in place.
<unk> investing in bonds that are tied to the sir that is inflation behavior.
On the what we call. The dollar linked bonds that are in pesos that follow the depreciation of the official effects.
Okay. Thanks, very much for all of that.
Welcome Nicolas.
The next question will come from Carlos Gomez with HSBC. Please go ahead.
Yeah.
Mr. Gomez your line is open.
The next question will come from Holly on Joe <unk> with <unk>. Please go ahead.
Hi, Good morning, Hi, Jorge.
I'm wondering looking at the system on how a lot of banks are struggling in terms of profitability.
What are you what are you seeing what's your view on the current situation of the system.
And what do you think would be a way forward for the Argentine financial sector, and how do you picture macro backdrop.
Fossil.
Yeah.
Yeah.
Thanks for your question.
What we are seeing is that the.
Banking sector in Argentina continues to be healthy very liquid.
Bolting in pesos or in dollars.
And the only thing is that because we adjust our.
P&L.
To inflation of course banks are suffering losses because of the net asset position there.
I'd say, we continue to see profitability on average on the banking sector of course is much easier for banks as macro.
A much larger sites on smaller banks, but.
Overall, we believe are going to continue to see that the health of the banking sector in Argentina. It is pretty good.
Going forward, we think that at some point, maybe not in 2023, but maybe 2024, maybe in the second half of that year.
<unk>.
A new government at the end of 2023 with a more 70 <unk> economic program that could bring a bit more of stability.
<unk>.
Kind of demand from loans.
Inflation is going to go down, but we'll have to wait until second half of 2020 for that to happen. So Meanwhile, I think that banks will continue to show.
Flat or negative.
Performance on loans basically on the back of a.
Hi, nominal interest rates that we are having an excellent next year.
Good level of Npls ROE to range in the area of 10.
They're not big changes going forward honestly.
Okay, if if I may a second one.
You pointed out that you don't see loan growth for next year in real terms, which makes perfect sense, how do you balance.
Profitability and exposure to the public sector.
About that are you are you thinking of lowering or try to lower the amount of deposits or.
I don't know what Youre thinking there Jorge.
Oh, yes.
That would be the case of decreasing exposure to public sector was up two at some point decrease.
Liabilities or deposits, yes of course for the moment that is not our view we are going to keep on.
Trading profit <unk> exposure to the public sector again.
We believe that.
That with the Central Bank back on the leaks are having no problems on although we are seeing is that the debt on the treasury that we use that to hedge our equity.
Showing good performance, we have not seen for the moment prominent for the treasury to rollover. The beds of course. This is a dynamic process and we are going to continue to monitor that.
This might change in the first or second quarter of next year, depending on market condition. If that would be the case, we are going to consider with excellent there, but for the moment, we feel pretty comfortable with the level of exposure to the public sector.
Thank you very much Jorge.
Blake.
Yeah.
The next question will come from Carlos Gomez with HSBC. Please go ahead.
Hello, Flora and apologies for the technical difficulties we saw.
Wanted to get your opinion about your use of capital.
Our capital ratio has been before it was interesting that you can be given me here.
Is there any possibility to anticipate any M&A in the coming two years, which has to offer.
Or higher dividends or do we have to wait until 2024, when the economic cycle.
To provide the uses for that capital.
Thank you.
Yeah.
Hi, Carlos good to hear from you. Thanks for the question.
It's not easy.
Honestly, we know that we have a huge excess of capital.
The point here.
Okay.
We depend on the Central Bank authorization.
On a on a higher dividend and that is going to be discussed.
In March April next year.
I couldnt be that positive there. So I think that my my best scenario for next year is a kind of similar.
Dividend than the one that we deliver.
This year.
And of course, we are always open to do any M&A TVT, depending unfortunately target dependent right.
Doug.
In the current conditions. It is not easy to find out but of course, we are all done.
You go to every two weeks in the transaction to be on the table.
Okay, but it doesn't sound like.
Like do you think it is very likely.
No I mean.
This is.
We are working.
Not easy.
In other words, no Tc environment so.
We are trying to make the best use of this excess capital again.
It's a quite difficult.
Difficult considering the current economic scenario in Argentina. So.
We are trying to find any potential.
Solutions to that.
We review that the board is committed to on a monthly basis to do that but for.
For the moment, we are not finding and partner.
Part of the solution to that.
Thank you very much.
Thanks Carlos.
So the next question will come from Santiago <unk> with Franklin Templeton. Please go ahead.
Hi, Jorge Nicholas Thanks Bye.
By my question on the focus on on the net income from financial assets and set of ideas through P&L line.
I don't know if you could give us.
More color on the drivers so hopefully they'll be campaign in this line.
Revaluation of assets.
It related to inflation.
Sir I would like to know if you can help us on the drivers of that line. Thank you.
Okay.
Quite some deal Hawaii.
I mean, the book as we sleep in this line.
They are basically done.
Green bonds.
What we call what we call the wireless bonds that can be adjusted by inflation or.
The performance of the effects.
Higher so.
These loans are mark to market.
They are you could see volatility in the quarterly performance of this line depending on how.
The prices of these bonds.
So basically those are the main important.
Elements on this line.
Okay.
Thanks, a lot.
Wait until deal.
Yes.
There are no questions. At this time. This concludes the question and answer session I would like to turn the conference back over to Mr. Nicolas Torres for any final considerations. Please go ahead.
Thank you all for your interest in Banco macro we appreciate your time and look forward to speaking with you again good day.
The call has now concluded. Thank you for your participation you may now disconnect.
[music].