Q3 2023 Banco Macro SA Earnings Call
Speaker 1: you
Speaker 2: Good morning ladies and gentlemen, and thank you for waiting. At this time we would like to welcome everyone to Banco Macro's third quarter 2023 earnings conference call.
Good morning, ladies and gentlemen, and thank you for waiting.
At this time, we would like to welcome everyone to Banco macros third quarter 'twenty twenty-three earnings conference call.
Speaker 2: We would like to inform you that the 3Q23 press release is available to download at the Investor Relations website of Banco Macro, www.macro.com.ar slash relaciones hyphen and there's algorithms and just add some content unless you know please check out those guy
We would like to inform you that the three Q23 press release is available to download at the Investor Relations website of Banco macro www Dot macros dot com dot a R. Slash, let's see on his hyphen and their surveys.
Also this event is being recorded and all participants will be in listen only mode. During the Companys presentation.
Speaker 2: Also, this event is being recorded and all participants will be in listen-only mode during the company's presentation.
After the company's remarks are completed there will be a question and answer session at that time further instructions will be given.
Speaker 2: After the company's remarks are completed, there will be a question and answer session. At that time, further instructions will be given.
Speaker 2: Should any participant need assistance during this call, please press star 0 to signal the operator.
Should any participant need assistance during this call. Please press star zero to signal the operator.
Speaker 2: It is now my pleasure to introduce our speakers. Joining us from Argentina are Mr. Gustavo Manriquez, Chief Executive Officer, Mr. Jorge Scarenci, Chief Financial Officer, and Mr. Nicolas Torres, Investor Relations. Now I will turn the conference over to Mr. Nicolas Torres. You may begin your conference.
It is now my pleasure to introduce our speakers.
Joining us from Argentina are Mr. Gustavo Manriquez, Chief Executive Officer, Mr. Jorge its currency, Chief Financial Officer, and Mr. Nikolas tourists Investor Relations now I will turn the conference over to Mr. Nicolas Torres you May begin your conference.
Speaker 3: Thank you, Gary. Good morning and welcome to Banco macros third quarter 2023 conference call. Any comments we may make today may include forward-looking statements which are subject to various conditions and these are outlined in our 20F which was filed to the FCC and available at our website.
Thank you Barry.
Good morning, and welcome to Banco Macros third quarter, 'twenty 'twenty conference call.
Any comment we may make today may include forward looking statements, which are subject to various conditions and these are in our 20-F, which was fine.
Available at our website.
Speaker 3: Top quarter 2023 press release was distributed last Wednesday, and it's available at our website.
But what are 23 press release was distributed last Wednesday, and it's available at our website.
Speaker 3: All feeders are in Argentina and Texas and have been restated in terms of the measuring of the new current at the end of the reporting period.
Well, if he was already in Arkansas, and Texas have been restated in terms of the majoring unicorn.
The end of the reporting period.
Speaker 3: As of 2020, the bank began reporting results applying high-perinflation accounting in accordance with IFRS IAS 29 as established by the Center Bank of Argentina.
I said 2020, the bank began reporting the top line of hyperinflation accounting in accordance with Ias 29 have been published by the Central Bank bargain P F.
Felicia Barton Peter for three quarters have been restated the pain I guess printing I reflect accumulative effect based on that Chuck.
At September 32020.
I will now briefly comment on the banks third quarter 2023 financial controls.
Banco macros net income for the quarter was $7 5 billion in Texas.
Nowhere in the second quarter, three 5% millwork them, so close to a year ago.
The banks accumulated ROE and 11.
8%, respectively remains healthy central banks earnings potential.
Operating income before general administrative and personnel expenses.
Third quarter point.
Regarding the $6 5 billion pixels.
364 million quarter on quarter.
On a yearly basis net operating income before general in them.
First one on expenses.
This 23% or $66 7 million pixels.
Yes.
In the first quarter of 2023 provision for loan losses totaled $4 9 billion pesos, 35% or $2 6 billion lower than the previous quarter on a yearly basis or with your programs.
43% or $1 5 billion.
Yes.
Operating income after general administrative and personnel expenses was 235 billion pesos or one 1%, a one 7 billion, which is higher than the second quarter of 2023, 31%.
This is higher than the third quarter.
'twenty two.
In the quarter net interest income.
$112 7 billion, 23% $32 8 billion pesos lower than the result posted in the second quarter up 3% or $38 6 million, but slower than the result posted one year ago.
In the first quarter of 2023 interest income totaled $429 1 billion in Texas what percent for $15 1 million, but it was higher in the second quarter of 2000.
I'm, 31%, a $102 3 billion picks is higher than the previous year.
Within interest income interest on loans increased 11% or $18 1 billion quarter on quarter.
574 basis points, the average lending rate, while the average volume of private sector knows what's bucking unchanged.
When a yearly basis income from either some loans.
Hey, Kevin.
Higher.
In the third quarter fund III interest on loans represented 42%.
Okay.
Net income from government and private securities decreased 7% or 16 billion quarter on quarter.
Net income from government Securities.
<unk> first quarter of 2020 net income from government and banks.
12% or 21 8 billion fixed.
In the first quarter of 'twenty three income from repos totaled $37 6 billion, 52% or $12 8 million pets is higher than the previous quarter, and 304% or 28 point pretty good but it was higher than the same period last year.
In the fourth quarter of <unk>, FX gains, including investment and they'll deal with the financing totaled $238 1 billion bushels gained $135 8 million pets is higher than the previous quarter and 600 million pets is higher than a year ago.
If we focus mainly due to the 36 four.
And Argentine peso depreciation against the U S dollar and the banks.
Including Gordon and whatnot.
In the first quarter of 'twenty born free interest expense totaled $316 4 billion bushels, an 18% or 47.9 billion pesos increase compared to the second quarter upon country at 80% or one kind of on boarding 91 basis higher on a year to date.
Within interest expenses interest on deposits increased 19% importantly, eight 7 billion quarter on quarter, mainly driven by.
70 basis points increase interest rate paid on deposits, while the other one probably petabytes decreased 3%.
On a yearly basis interest on deposits increased 8% or one kind of $38 2 billion pesos.
Okay.
In the first quarter of 2020 free interest on deposits represented 98% the bank's financial expenses.
In the third quarter of 2023 of the bank's net interest margin, including FX.
Yeah.
7% higher than the 38, 3% posted in the second quarter 0.3, and higher than the 28, 1% in third quarter of 2022.
In the fourth quarter with 23 net income net fee income totaled 35 point, probably been picked us putting a bit slower than the second quarter up 123 in a yearly basis net income was 5% a 1.6 million pets is higher.
In the fourth quarter of 'twenty, one free net income from financial assets and liabilities for about three months.
$36 4 billion loss, mainly due to the mark to market of government Securities.
On a yearly basis net income from financial assets and items for our bank.
$97 2 billion pesos.
In the quarter other operating income totaled 11 from premium ambitious increased 9% or 1 billion purchased convert in the second quarter of 2020 on a yearly basis. Other operating income increased 26% for $2 4 billion pesos.
In the fourth quarter of 2023.
Personal lines Mr.
Phillips $66 2 billion versus 3%, a 1.6 million pets is higher than the previous quarter.
These benefits, which were partially offset by 102, you can take a decrease and that makes it a bit extended.
On a yearly basis personal expenses increased 7% or $4 4 billion pesos.
In the fourth quarter of 2023, that's interest rates up 22, 4% deterioration from the 21, 10% plus again, the second part of the complaint.
And if that would've come from the pre expenses increased 3%, while net interest income net fee income other operating income decreased 1%.
The fourth quarter of 2023, there was some kind of a net monetary position.
$202 9 billion to slow considerably higher than the loss posted in the second quarter fundings of three it's a consequence of higher inflation observing the core which was 1001 and.
Four basis points higher than the second part of town and country and pension.
Water pinpoint frequent 38.
8%.
Compared to 23, 8% in the second quarter of 2023.
And the support of friends from my prospective tax rate 65 per cent uncluttered information whereby not.
22, 12 financial statements.
In terms of the bank's total payment.
Totaled one point too pretty ambitious decrease in Pakistan.
8 billion quarter on quarter, and 5% 57, 8 billion pesos millwork year on year.
But in commercial loan Oh, my God found out with a 5% or $5 9 billion decreased while <unk> increased 16% from 32 billion pesos.
It is important as mentioned by Banco macros market share overtime.
I'm appointing three seven.
Seven 7%.
On the funding side total deposits decreased 22% by kind of 6 billion quarter on quarter converting.
Good premiums.
25% or 610.
Because year on year.
Private sector deposits decreased 23%.
One 8 billion quarter on quarter, but probably better be.
875 million.
What I don't work.
The decrease in private sector deposits was led by time deposits, which could be 30% or 307 2 billion quarter on quarter, while demand deposits increased 16% or 107 3 billion.
Within private sector deposits.
24% or 549 7 billion pesos when he has more than 20.
28% a 351.
I've got to get them there.
'twenty three but Microsoft sexual accounts represented approximately 46%, but building blocks that come out.
Market share over private sector deposits.
September 20, 353%.
In terms of asset quality, Banco macros, non performing total financial ratio reached 190% coverage ratio.
Oh, the allowance and their expected credit loss or nonperforming loans under a central bank groups remained stable at 133, 93%.
Consumer portfolio nonperforming don't be delayed at this.
Points up to 148 from one.
43% in the previous quarter.
The commercial portfolio nonperforming loans improved four basis points from the second quarter up from $3.
114% from 118% in the previous quarter.
In terms of capitalization Banco macros.
I think there's capital 788, 3 billion, pyxis, which representing that took us a little pick up there.
37, 9% tier one ratio at 34, 8%.
The bank is to make the best use.
Scott.
The banks liquidity remains appropriate liquid assets to total deposit ratio reached 99%.
Overall, we have accounted for another positive quarter, we continue showing a solid financial position asset quality remain under control and closely monitor we keep on working to improve more RPG stomach we keep.
Well, that's my supply base.
On November 2nd.
2023, the central Bank of Argentina.
Now bankruptcy M a C.
One o'clock Banco macro has now acquired 100% of the shares and boats, a Hong Kong Taiwan.
Any computers.
Balancing.
The price of men and women at $50 million, which was based on November three.
I'm on for something from a potential adjustment that will be eventually set based on the results I think the bank on our antenna tuners to able to one question and a brief.
The cogent date would be that the mine at a future date.
At this time, we would like to take questions that you may have.
At this time I'm 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.
If you are 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 today is from Ernesto <unk> with Bank of America. Please go ahead.
Hi, Good morning, Gustavo Jorge Nicholas Thanks for the opportunity.
My first question will be on the potential economic outlook for Argentina.
Which do you think could be the key execution risks for the new administration.
How do you see the possibility to implement structural reforms.
See the rain that congress to be kind of debated.
Neither the officially assume the right parties will have the majority.
Also related to these macro political context.
We have seen kabuto will be appointed as the new economy Minister.
He has been hinting that the capital controls will not be lifted right away.
And are they the legislation process would be a medium term target. So having said that how have you seen a dual currency in the medium term how.
How should we think about the the Argentine peso against the Blue sheet.
And considering the high inflation levels when should we start to think of lower rates for for Argentina.
And I'm also kind of related to these.
We haven't seen that.
Millay will want to.
Remove the central bank reviews of the leaks exposure.
So if that happens.
How are you positioning these excess liquidity are.
You wanted to allocate it into loans.
Again, considering these conflicts of high levels of interest rates and inflation.
So you're seeing will be the credit demand.
Next year.
<unk>.
Yeah.
Hi, Nicole.
Good morning. This is cutting edge. He thanks for your questions I will try to summarize my.
And my answer.
On the outlook for 2024 port and Peanuts in beds.
Yeah.
Even though it is a we totally but.
Most of the Konami consultants in Argentina or like the by the next hearing into two.
The first job.
Inflation compared to the second half.
Basically be gone so.
I think the market is expecting some devaluation on on the official effects.
Stomach Jasper and so on.
I'm, sorry, Brian Ts and also on the oil and gas prices and that would affect short term inflation.
And therefore, the first half of 'twenty to 'twenty, two before we should be seeing a high inflation number.
Compared to second half again, according to local economies here.
And in terms of <unk>.
Let me switch and honestly it.
It seems to be.
Like a year ago. They were elected however, it's only one week seems relay was elected president.
And for sure.
Things in Argentina runs in a very high.
High speed.
However, we are still two weeks before December 10th when she's going to be appointed team.
And therefore in the last week, we have seen or heard.
Many names to be appointed as the immediate medium.
I mean, it turns on him they were like a lay down.
Names appeared.
So I would say that we have to be a little bit careful and patient.
The names on the industries that we have made.
Chico.
The next four years or Argentina.
I think that the.
Yeah.
The.
Biggest challenge for me Nate basically if inflation of course.
How he will try to reduce the fiscal day S E T.
And also we.
We found that he's planning to send to the Congress and again here the Congress.
He was he will lead the hardball.
And when we come to you because the amount of diabetes, I'm, saying that we don't mean to delay or very few.
Honestly, it's not an easy task.
As of today to make what is going to copy their next.
30, or 90 to 120 days of Middle age.
Period.
And so we have to be able to get patients on on the Hudson can see how things people.
According to <unk>.
Malaysia statement he has a clear picture on that.
Economic.
So you have pizza hut situation.
He will try to do is based on the measures but again.
Got to wait because.
Measures will be taken from December onwards on your projects are going to be sent to the Congress. After December 10th So we have to wait a little bit more to cheat official announcements are not the only.
The newspaper statements on an unrelated proposals.
And this is including everything also they'd already station. That's two months ago was an issue and now apparently is whether it'd be easy.
Could take place in two or three years after the normalization of the economy.
Same happened with integration of the Central Bank.
Now the loss.
Statements are saying that may change that.
It's not going to be close date number one but he wants to improve the balance of the central Bank first so again.
I'll be the patients on the evolution of the announcements on.
Yeah on the teach out.
No project and make sure that it will take place after the.
December 10.
In terms of Banco macro we decided to and we do use at some point.
The exposure to the Central Bank.
So yeah I'd say.
Mid September but more in the fourth quarter, we decided to just talk to the reduction of the least exposure to the central Bank.
At some point, we do see some and <unk> has the ball seats also extending additional loans short term loans to AAA companies and also increasing the amount of sovereign bonds in local currency in pesos.
Basically do all bonds onboard a lien bonds.
And so.
That was a kind of a summary on the bunch of other questions that you all.
No no, but very interesting very interesting Jorge just a follow up on these related to your exposure to dwell bongs and dollar linked bonds.
So how are you thinking for next year.
Because we have seen that most of the banks have been if he did because they have not been lending and then have you seen these excess liquidity.
Into the securities So I'm thinking that next year could be more.
Challenging.
And actually this quarter.
What are we saw a lot of volatility you did very well in terms of FX gains.
We have some nauseous enough security so how should we think about these or how should we think about this into D. V D, which are the variables that we will have to be looking at.
In the next quarters.
Yeah, I mean, you're writing in the third quarter, there was some and declining prices basically on the dwell barring some dollar lien bonds.
Consequence of some a statement made by me.
Millet at that time.
However, what we are seeing in the fourth quarter, each a big recovery in the prices of these bonds.
And nowadays the markets are continue showing some ami.
Hedge against the potential.
Potential devaluation of the pizza and effects.
So the fourth quarter performance on these vantage is looking very good.
Honestly. This is a way that we have been mentioning these many times that is a way of hedging the equity of the bank.
<unk> banks cannot be long in donuts.
So we found VITAS.
The other way.
What are you protecting the equity deal of the bank for next year.
I think that conditions might change depending on.
How the market evolves how inflation expectations.
For the second half.
He says dictation for inflation decline this could bring and of course in hand in hand with the decline of nominal rates. These wood.
Bring additional loan demand.
But again this happens is going to happen by the end of 2024. So I think that next year should be challenging and at some point and bonds would have to see where to allocate the excess liquidity and in the case of Banco macro we have been.
Proving in the last few years, we always try to integrate the excess liquidity in a profitable assets with the risk reward equation to be positive for the bank all with looking at profitability solvency and liquidity.
So that's the idea.
Oh excellent excellent.
And last question, how do you see the arrow for this and for next year.
Okay.
I mean for this year.
Well the fourth would be it's not closed yet.
We might see something in the area of all high teens, or maybe maybe close to 20% depending on the evolution or bond prices. So I mean that area for next year tougher to forecast.
Let's assume that you are working with scenario between 10% to 15%.
Yes.
Perfect perfect. Thank you very much.
Please go ahead.
The next question is from Brian Flores with Citibank. Please go ahead.
Yeah, Hi team. Thank you for your two last questions I have two questions. The first one is on the strategic rationale of deposits we saw.
Pardon me, maybe from some of your peers, a shrinkage in deposits on a quarter on quarter basis. So I just wanted to understand them.
What is your rationale behind you.
That is my first question and then.
On the on the second question, which is.
Effects on the effective tax rate.
I think he knows where very few but just I was wondering with deep effects are recurring in nature, and we should see something more for for the remainder of the year.
Any other anything you're very helpful. Thank you.
Hi, Brian how are you.
Okay, let's start with your second question in terms of the taxes I mean, if you look at it the ninth month.
Our income tax rate.
85%.
And basically that was it.
It was slightly below in the first two quarters and basically the third quarter, we are catching up in order to reach the 35% income tax statutory rate.
That we have here in Argentina.
In terms of your first quarter did they did CAGR of deposit is relied too it's already related to what they are mentioning to make those questioning I mean, we decided at some point to reduce some institutional deposits in the strategy of reducing.
The allocation of assets on the exposure to the Central Bank basically because we decided to pay lower interest rate to those depositors that they moved to other box.
The main reason.
The reason for that.
Okay, perfect and then just to confirm that you didn't you very clearly.
When you think about our route for next year.
Hum.
Correct.
Yes. He does that is correct again very preliminary estimates because of course next year.
Going to be.
Importantly, any sense. So we're going to have new breath of new economic covenant new measures.
So as of today, we are working with that scenario that could change at the beginning of 2000 2040, depending on the measures and of course the outcome.
Yeah, that'd be calling to my might be looking for in terms of inflation GDP change right.
Thank you. Thank you.
Welcome.
The next question is from Nicolas Riva with Bank of America. Please go ahead.
Thanks, very much Nicolas in order for the chance to ask questions. So of course I want to circle back on the prior question. The initial question that a well it must have made multiple questions, but one of the topics that he wanted to discuss was lately.
The leaks exposure. So I mean, these guys really talking about Banco macro, but no I was a CFO of one of the largest banks you can provide some insights into.
The leaks exposure. So I mean, these guys really talking about Banco macro, but no I was a CFO of one of the largest banks you can provide some insights into.
At this point what do you think is the new administration's plan for the affordability because it seems to me right.
If you're talking based on.
On what I see here from New York would be that the market solution that the new administration is talking about could be just exchanging the stock of the leaks for longer term government bonds is that the way you seed US way I know you said that you have in nutritional across and even taken off because we're gonna do that'd be summer Tennessee.
Seems like a year of scenes. They wanted they look for somebody who has only been a week and also if at this point you think that the restructuring of the leaks.
Could include any haircut to the principle I would assume going forward that there's going to be very little if any new issuance from leaks, but I wanted to also get your thoughts in terms of how you would think it would be something ministration who's going to treat that stock of outstanding AR.
Thanks, very much Warren.
Okay.
I think we also are using for your question.
Honestly.
Well, we've heard for the moment in terms of.
Oh, what did the new administration might be doing or only.
I appreciate the comments.
All of them are on a piece of it and we have heard a bunch of different measures.
In terms of Banco Marco.
And tell you that if.
As I mentioned before we decided to reduce its exposure to the central bank.
So.
We are going to reach December with no exposure to leaks.
Yeah, I mean zero percent of lending exposure to the Central Bank started in December.
So these are proteins that we started almost two months ago.
And according to what we've seen in the in the last the auctions. There are other private banks that are following the same.
Bob that we initiated two months ago.
And so at some point.
I would tell you that.
Administration is going to have a much smaller.
The amount of the leaks to work on.
In my personal view most of that is going to be had will probably own bonds.
But honestly I don't know what they are going to all part of what they are willing to do it.
We've been at least dog that is going to be much much smaller after December 10th considering what we have seen it in the late two.
Auctions, but the only thing you're gonna TTC not easy for me to tell you what they are going to do honestly because.
All the payments have been very unofficial.
According to the brands.
It still don't know what you'd be decoupled is going to be the quantum of me to him he's going to go to a temporary ban.
Again, no cause speculations there. So we did it would not be fair for me to comment on.
On those kind of measures.
All right if I can one follow up so you said by the end of this year, but I didn't know if December we plan to have zero leaks in our own balance sheet would you feel comfortable moving all of that exposure just from a central bank liabilities to just owning a federal government bond or would you prefer to reallocate those leaks into a mix of.
<unk>.
National government bonds, but also some loans to the private sector.
Oh, yes, I comment it doesn't even know I mean, we started with the brokers that lasted for two months. It was a gradual process of decreasing the amount of leaks.
And on the other hand, reducing the amount of some institutional depositors.
Thus extending new loans to private companies AAA in the short term plus.
Some point increasing exposure to.
It's operating bonds in pesos. So it's a combination of all that.
Okay. Thanks very much.
You're welcome.
Again, if you have a question. Please press Star then one.
The next question is from Carlos Gomez with HSBC. Please go ahead.
Thank you so much so two questions one is when one looks at your equity.
It has barely changed year on year.
That's right.
Hum.
And should we expect.
Or.
Yes.
Yeah.
The second question is regarding the acquisition of Argentina could you give us some indication about who's going to take.
Sadly.
This is the conference operator. Unfortunately, your line seems to be breaking up could you try repeating your first question.
Okay.
Hello.
Go ahead Mr Gomes.
Yes, and apologies for the quality of the line.
My question was regarding to changes in shareholders equity, which has been almost zero year on year and I wanted to know exactly why that is if it is the valuation of the pumped second if you could give us some indication about the impact of the acquisition of Bankrate I'll watch and do not want to cut it to bush.
Yeah.
Yeah.
Okay.
Hi, Carlos but where are you in terms of you would be able to loosen I mean, and this is a consequence of.
The cash dividends that we've been paying.
And reducing the amount of of course, the equity plus the increase on the.
Resulting in real terms and that basically in the first nine months of the year are kind of.
And compensating for the culture the.
Dividend payment basically throw disease.
Why did the equities.
It's not changing that magical there too.
Last year.
In terms of Utah, who we.
We are.
I mean, there is not going to have a major impact in our capital base.
Capital is going to continue to be senior done.
The one that we published in the third quarter basically remember that for the payment issue.
Oh got it.
Local debt one year duration for the payment of our Ito. So basically the capital raise is not going to be operating at all.
Thank you so much.
We're going to go.
The next question is a follow up from Nicolas Riva with Bank of America. Please go ahead.
I'm, sorry, I'm not sure Jorge for taking my follow up question. One question about your Euro dollar position outside of the country. One of the things that she or he told mentioned in their earnings call was that an advantage for the acquiring bank them for them to start really what's up there quite in a bank Banco macro coupe with dollars outside of the country from what I remember when.
You issued the 2026 bond for 400 million births in 2016, most of those $400 million were kept offshore if you can remind us what's your dollar position outside of the country. I know that you just mentioned that you need to be sure our local bond to.
For the $50 million, but if you can remind us your dollar position I'm sort of the country, but it would be very helpful. Thanks.
Yeah.
Give me one second because at least I got to check at the end of September.
So Brett please.
Yeah.
Chinese glass for the delay because.
Because around $50 million as of September 2023 are tempting correspondent banks.
Okay. So that's essentially beforehand, but also you heard issued back in 2016 minus the $50 million for to acquire you don't essentially.
Yeah Brooks yet okay. Okay. Thanks very much.
Yeah when it comes.
There are no more questions at this time. This concludes our question and answer session I will now turn it 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.
Right.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
[music].