Q4 2022 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 macros fourth quarter 2022 earnings conference call.
We would like to inform you that before Q22 press release is available to download at the Investor Relations website of Banco macro www dot macro dot com dot a R slash where lassi owns in their sales.
Also this event is being recorded and all participants will be in listen only mode. During the Companys presentation.
After the company's 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 Manriquez, Chief Executive Officer, Mr. Jorge currency, 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 Gary Good morning, and welcome to Banco macro fourth quarter 2022 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 to the SEC and available at our website.
Fourth quarter 2022 press release was distributed yesterday and it's available on our website.
If he was already in Argentine pesos and have been restated in terms of the measuring unit current at the end of the reporting period.
As of the first quarter of 2020, the bank began reporting results applying hyperinflation accounting in accordance with Ifr Ias 29 as established by the Central Bank of Argentina.
For ease of comparison figures of previous quarters have been restated applying ias, 29% to reflect the accumulated effect of inflation adjustment for HBO through December .
2022.
I will now briefly comment on the banks fourth quarter 2022 financial results.
Banco macros net income for the quarter was $16 6 billion pesos, 59% higher than the third quarter of 2022, and 19% lower than the result posted a year ago.
<unk> fourth quarter, 2020 to ROE and ROIC of 16, 9% and three three.
Percent, respectively remained healthy and showed the bank's earning potential.
In fiscal year 2022, total comprehensive income totaled $37 5 billion pesos, which was 32% lower than the result posted in fiscal year 2021.
Net operating income before general administrative and personnel expenses for the fourth quarter of 2022 with $131 3 billion pesos, increasing 8% or $11 3 billion quarter on quarter due to lower income from financial instruments at fair value through profit or loss.
On a yearly basis.
Net income before general and administrative and personnel expenses increased 36%, a 34 billion pesos.
In fiscal year 2022, net operating income before general administrative and personnel expenses totaled $498 2 billion pesos, which was 36% higher than the previous year.
In the fourth quarter of 2020 provision for loan losses totaled two 5 billion pesos, which was 861 million pesos higher than in the previous quarter when.
On a yearly basis provision for loan losses decreased 34% or $1 3 billion pesos.
Operating income after general administrative and personnel expenses was $78 2 billion pesos, 11% or can be slower than in the third quarter of 2022, and 79% of $34 5 billion pesos higher than in the fourth quarter of 2021.
In the quarter net interest income.
<unk>, three 6 billion pesos, 12% or $9 1 million pesos higher than the result posted in the third quarter of 2022, and 20% or 14 million pesos higher than the result posted one year ago.
In fiscal year 2022, net interest income was 20% higher than in fiscal year, 2020. One as a result of different regulations adopted by the Central Bank that said caps on lending rates and floor on deposit rates.
In the fourth quarter of 2020 to interest income totaled 198, 6 billion pesos, 23% of $37 7 billion business higher than in the third quarter of 2022 due to higher income from government securities.
Was 79% or $87 8 billion pesos higher than the previous year.
Within interest income interest on loans increased 7% or $4 5 billion pesos quarter on quarter due to a 570 basis points increase in the average lending rate.
On a yearly basis income from interest on loans was 21% and $12 billion higher.
In the fourth quarter of 2022 interest on loans represented 35% of total interest income.
The difficult year of 2022 interesting loans totaled 251 billion pesos and increased 12% compared to fiscal year 2021.
Net income from government and private securities increased 34% or 37 billion basis quarter on quarter due to higher income from government securities compared to the fourth quarter of 2021 net income from government and private securities increased 144% or 71 9 billion pesos.
In the fourth quarter of 2022 FX gains include investments in their equity financing totaled $30 6 billion pesos gain due to a 20% Argentine peso depreciation against the U S dollar and the banks long dollar position.
Yes.
In the fourth quarter of 2022 interest expense totaled 101.
Billion pesos, which was 33% or 28 6 billion pesos higher compared to the third quarter of 2022, and 179% or $73 8 billion pesos higher on a yearly basis.
Within interest expenses interest on deposits increased 34% from $28 5 billion pesos quarter on quarter, mainly driven by a 10%.
It's an increase in the average volume of private sector deposits, while the average interest rates paid on deposits increased 860 basis points.
On a yearly basis interest on deposits increased 187% or 73 8 billion pesos.
In the fourth quarter of 2022 interest on deposits represented 98% of the bank's financial expenses.
In fiscal year, 2022 interest expense increased 67% compared to fiscal year 2021.
In the fourth quarter of 2022, the bank's net interest margin, including FX was 32, 7%.
Which was higher than the 28.
1% posted in the third quarter of 'twenty two.
And the 21, 2% registered in the fourth quarter of 2021.
And fourth quarter 2022, net fee income totaled 17 billion pesos, 2% or 361 million pesos higher than in third quarter of 2022.
On a yearly basis net fee income wasn't unchanged from a year ago.
We took a year 2022 net fee income was 4% higher than in the previous year.
In the fourth quarter of 2022, net income from financial assets and liabilities to fair value of profit or loss totaled $3 3 billion pesos loss, which was 32 billion lower than the previous quarter, mainly due to our bonds.
In fiscal year 2022, net income from financial asked Tonight.
First of all if appropriate I'll ask with 24% higher than the fiscal year 2021.
Due to higher income from government securities.
In the quarter other operating income totaled $5 7 billion.
It impacts us increasing 31% compared to the third quarter of 2020 on a yearly basis other operating income.
49% or one nine.
1 billion pesos.
In the fourth quarter of 2020 to Banco macros personal administered expenses totaled $29 2 billion pesos, 4% or $1 2 billion, but slower than the previous quarter due to lower employee benefits, which were partially offset by higher administrative expenses when.
On a yearly basis personal and administrative expenses decreased 4% or $1 2 billion pesos.
In fiscal year, 2022, admin expenses, plus employee benefits increased 1% compared to fiscal year 2021, showing the strict cost control policies adopted by the bank's senior management.
And so for the fourth quarter of 2022, the efficiency ratio reached 28, 6% improved from the 29, 1%.
In third quarter of 2022.
And in the fourth quarter of 2022 expenses increased 3%, while net interest income plus net fee income plus other operating income increased 33%.
In the fourth quarter of 2022, the result from the net monetary position.
$56 9 billion pesos loss, which was 17% or $11 4 billion plus or slower than the loss posted in the third quarter of 2022 as a consequence of lower inflation.
468 basis points below the third quarter of 2020 to inflation in the quarter was 17, 3% compared to 22% in the third quarter of 2022.
In fiscal year 2020 to Banco macros effective tax rate was 31, 1% higher than the five 8% tax rate registered during fiscal year 2021. It should be noted that in fiscal year 2021 effective tax rate was affected by the implications of inflation adjustments on accounting and tax balances.
And then the termination of the income tax due and deferred income tax more information is provided in note 25 to our financial statements.
In terms of loan growth the banks financing to the private sector totaled $596 4 billion pesos, increasing 2 billion quarter on quarter, and increasing 12% or $83 3 billion pesos year on year with.
Within commercial loans overdrafts stand out with a 2% or $1 1 billion pesos decreased quarter on quarter.
On the consumer side credit card loans increased 6% per 10 billion pesos in the quarter, while personal loans and mortgages decreased 7% and 4% respectively.
In fiscal year, 2022 credit cards loans stand out with a 3% increase quite personal loans decreased 25%.
It is important to mention that Banco macro market share over private sector loans as of December 2022.
Seven 4%.
On the funding side total deposits decreased 2% or $23 5 billion quarter on quarter, and increased 13% or $148 3 billion pesos year on year.
Private sector deposits increased 2% quarter on quarter, while public sector deposits decreased 30.
30% quarter on quarter.
The increase in private sector deposits was led by demand deposits, which increased 5% from 27 6 million plus quarter on quarter, while time deposits decreased 2% or 9 billion pesos.
Within private sector deposits peso deposits decreased 4% or $41 7 billion pesos, while U S dollar deposits decreased 7% or $72 million.
As of December 2020 to Banco macros transactional accounts represented approximately 45% of total deposits.
<unk> market share of private sector deposits as of December 2022 totaled six 3%.
In terms of asset quality, Banco macros, non performing to total financial ratio, which 125% the coverage ratio measured as total allowances under expected credit losses over nonperforming loans and the Central Bank rules.
And total 151, 7%.
Consumer portfolio nonperforming loans.
14 basis points.
Down to one one from 123 in the previous quarter, while commercial portfolio nonperforming loans deteriorated 52 basis points in the fourth quarter of 2000.
Which was up to 195% from $1 43 in the previous quarter.
In terms of capitalization Banco macro accounted an excess capital of 410 billion pesos, which represented a total regulatory capital ratio of 39, 9% and our tier one ratio of 36, 6%.
The bank's aim is to make the best use of this excess capital.
Liquidity remained more than appropriate liquid assets trade.
<unk> reached 95%.
Overall, we have accounted for another positive quarter, we continue showing a solid financial position asset quality remain under control and closely monitor will keep on working to improve our efficiency standards and we'll keep our 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 it up for questions and answers. If you would like to ask a question. Please press star one on your Touchtone phone.
If you were using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
One moment please for the first question.
Our first question is from Ernesto <unk> with Bank of America. Please go ahead.
Hi, good morning, Oh, the pharmacologic or cross selling opportunity.
My first question is from a political and macro outlook.
Can you give us some color on who I grew up a crucial coherent telecom regroup and how argument shall bow lagoon.
I'm done on the macro outlook in Brazil.
From an equation are well above not going for administration, So wondering Gary Parker group.
Hum and your government would be able group, who Kirk Oliver.
Of course about Boeing I heard a good conclusion, a recurring theme.
<unk> grown our curriculum question from lumber Oh, how should we think about a long road here considering the high level of inflation.
And then my last question for me her cookbook ROE you've heard clinically how should we think about it.
Corporate come down or come.
Corn during the Hurricane Harvey.
Thank you.
Yeah.
Yeah.
So we haven't I still good morning. This is Jorge <unk>.
<unk>.
On the political outlook.
I think it's early.
Honestly there are.
Many names that could be candidates.
But the the.
Primary elections are in August .
Till then.
Lisa until May we can hear a bunch of names.
All right around.
Canada, but I think that after may we're going to have a shorter list of potential candidates. So honestly I don't know what would be this.
Worth.
Spending time.
Right now talking about what could be the economy is because again the list is going to be much narrower than the all the names that we are seeing appearing the breadth.
And in terms of.
The macro expectations.
We believe that in in 2023 and according to private consultants.
Inflation is going to remain similar levels done the level of 222.
And in terms of interest rates.
We are not forecasting in the short term.
Any kind of movement on interest rates honestly for the moment, we are not seeing a decline in interest rates in the second half for the moment.
And in terms of of loan growth in 2023.
Also according to the consensus was off of.
The market GDP is going to be nearly flat in real terms.
And therefore, we're expecting almost no growth in real terms in in loans, so it's going to be.
Similar to the inflation.
In terms of expectations for ROE.
We would like to maintain that 10% area as a kind of a forecast.
For this year.
If we are not having any strange event, we think that we could achieve it without any problem.
Yeah.
Perfect. Thank you very much.
Yeah.
Youre welcome.
So.
The next question is from Brian Flores with Citibank. Please go ahead.
Okay.
Hi, Jorge Carlos Thank you for the opportunity.
Two on my side. The first one is I wanted to understand a bit better the mechanics of the mark to markets in government Securities.
I was just curious about it because we saw that during the quarter you saw the net interest income from these securities going up.
Mainly in line with what were some of the third quarter, but we saw a very different outcome.
Outcome regarding the mark to market. So just can you remind us how this works and then I'll ask and a second question. After that is thank you.
Yeah.
Hi, Brian how are you, yes, it's a bit complicated.
There are two or three different places in the income statement, where you have the income from securities.
But.
Yeah.
In the interest income side, there you have like the accrued interest.
In another line you have part of the bond portfolio.
<unk>.
Exposed to a mark to market it.
System, So we have like.
Two the brand.
She is the one that is that you accrue the income and on the other line is below the net income there you put the difference between the accrued income mark to market on.
And also recovered some mark to market bonds dot.
The result of that is put on there.
Oh great.
It's following hold on one SEC.
Yeah.
It's below the net interest income line that is net income from financial instruments.
Fair value, so it's a bit complicated, but income from securities or trade all over think unstated in different accounts.
Okay perfect.
Question is you did mark to market don't mechanically or it is something that you kind of decide to do them.
That's sort of a point in time, just because for example in during the.
The third quarter, we saw very different.
With rates going up so just wondering if this is something you do periodically or do a more deterministic thing.
I mean, if you're talking about the decline between the third quarter fourth quarter. In this line of net income from financial instruments at fair value that is mark to market only that they work.
Net increase in prices in those bonds doesn't have a mark to market.
That's it yes.
The Mark to market is mechanical yes.
But that is perfect. Okay, and then just for the second question.
We wish you have a very high capital ratio. Just wondering have you heard any any updates from the regulator regarding and the permission to distribute.
Higher dividends.
We expect to have a news on that front in the coming two or three weeks.
In terms of the the allowance to distribute dividends again for the moment no news, but we think that we might have some news.
Before of course, the shareholders meeting so in the next couple of months a couple of weeks, we should have some news.
That's perfect. Thank you.
Youre welcome Brian .
The next question is from Yuri Fernandes with JP Morgan. Please go ahead.
Oh, Thank you I have a follow up regarding securities here I guess you know it's the most relevant revenue line for you right.
We were checking most like loan revenues they are only 30% 35% of the gross financial income.
Security is a big Big chunk and you also have the treadmills are there Marty.
Mark Tomorrow, you'll see I mean, it's pretty relevant right. So my question is.
There was a discussion that rates could continue to move up in Argentina, I think the IMF. They had the hopes that we could see positive real rates in Argentina, I really don't know if thats possible or not there is also adapting discretion, but my question is if rates continue to move much higher is that.
Good for you like can you reprice quickly both portfolios or Mark to market May hurt you like again I'm trying to just understand I understand like in a in a more loan kind of.
<unk>.
What is the sensitivity to the need to right to say that it goes through I don't know 80, 90, how that impacts our market. Thank you.
Yeah.
Hi, Julie.
Let's say that's in making a summary.
Your question, Yes, if there is an increase in <unk>.
Interest rates will have a positive impact on our P&L basically recover chunk off.
Higher chunk of money on.
In liquidity that we can reprice faster than our deposit base.
Thank you.
You're welcome.
The next question is from Carlos Gomez with HSBC. Please go ahead.
Hello, Hello, Nicholas and thank you very much for having Dan how do they call them, taking the question.
We're going to another electoral cycle.
And as you said we have expectations.
Things can change there would be a new.
Policy going forward, how would you compare.
This is start of 2003 with the start of 2015 18 years ago. When we were.
Similar situations.
But what do you think is more positive and was a small negative compared to that to that point. Thank you.
Yeah.
Hi, Carlos how are you I think that's a good question.
Of course, it is a different scenario in 2000.
<unk> I think that's it.
They appear as helpful.
Mauricio Mercury's political figure was completely new.
There was a beagle positive expectations on she's precedency.
And of course, the World I think that was much different.
Is that the word that we have today.
Today, I would say that even though there are some positive expectations on a change of government.
I think that everyone knows that.
The new government, we have less time that was Mauricio Mercury had.
In order to try to set up all the reforms and measures.
I think that the inflationary environment in Argentina.
Today is much higher than the one that we had in 2015 the level of reserves in the Central Bank East is much.
The shorter or smaller now compared to 215.
So I think it is there you have the difference.
Coincidences I think that should.
Today, I think thats the scenarios have each march harder for the New administration down Ward Mauricio Margaret cut in 2015.
I think thats in the timing and of course the world the region are completely different.
Expectations from the New administration ECS.
Is different than my regional militia might be heading 2015, so I think it's a bit tougher.
For the coming.
Governments.
Okay.
This way the last time in the last cycle all the banks you know when people started moving needed capital. They have capital ratios are you right now more inclined to preserve capital for that feature a month or two this to be the pure allowed by the central Bank.
Okay.
Yes, I mean, we think that you have.
A big success.
We would like.
Maybe to distribute part of that.
But we.
We think at the same time that could be in the future.
At time of possibilities.
For a more concentration in the banking sector in Argentina. So we want to also have some excess capital if there is an opportunity for <unk>.
On M&A.
The transaction.
But we are conscious that the level of capital that we have right now.
Is above the level that we would desire in a more normalized economic scenario.
Thank you very much okay.
Great.
Welcome Carlos.
Again, if you have a question. Please press Star then one.
The next question is from Rodrigo knee store with Latin Securities. Please go ahead.
Hi, Thank you for taking my question.
Ah kidney this gas Banco macros current strategy with regards to exports.
Public sector.
The Central Bank.
Given the upcoming elections, we expect to make any changes on the strategy.
And then.
Are you willing to extend.
Or Dubai Treasury instruments not much beyond.
During the pre election date or do you prefer to stick to make too many HC.
<unk>.
Yeah.
Thank you.
[noise] federally legal.
We think thats, we accommodate our strategy depending on the economic cycle.
And for the moment I think that this.
Scenario of high level of inflation with the <unk>.
Low demand from the private sector.
<unk> put us in a kind of.
[noise] compulsory.
Beds on some public sector assets, but of course going forward. If there is economic scenario improves of course, we are going to go back on and focus more on.
On the private sector loan demand that is our core business.
We want to continue growing.
And then.
In terms of the security.
The maturities on our security portfolio basically we were ranked is the yield that we can get in may be shorter or longer.
We think that.
We are we assign a very low probability of any kind of problem with the peso did with these government and with the next government. So we feel comfortable with the level of data.
And linked to the.
Treasury and debt to the central bank that we have.
But we believe that going forward in a more.
Better economic scenario the level of exposure to volatility is going to be.
Much smaller.
But we feel comfortable with that level that we have right now.
Great. Thank you very much.
They will wake up.
There are no more questions at this time. This concludes the question and answer session.
I will now 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 good day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
[music].
Yeah.
[music].