Q1 2024 Banco BBVA Argentina SA Earnings Call
Good morning, ladies and gentlemen, and thank you for waiting.
Operator: Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to BBVA Argentina's first quarter 2024 results conference call. We would like to inform you that this event is being recorded, and all participants will be in listen-only mode during the company presentation. After the company remarks are completed, there will be a question and answer section. At that time, further instructions will be given. Should any participant need assistance during this call, please press star zero to reach the operator.
At this time, we would like to welcome everyone to BBVA Argentina's first quarter 2024 results conference call.
We would like to inform you that this event is being recorded and all participants will be in listen only mode. During the company presentations.
After company remarks are completed there will be a question and answer section.
At that time further instructions will be given.
Should any participant need assistance during this call. Please press star zero to reach the operator.
Speaker Change: First of all let me point out that some of the statements made during this conference call maybe forward looking statements within the meaning of the Safe Harbor provisions found in section 27, a of the Securities Act of 1933 under U S Federal Securities Law.
Operator: First of all, let me point out that some of the statements made during this conference call may be forward-looking statements within the meaning of the safe harbor provisions found in Section 27A of the Securities Act of 1933 under U.S. federal securities law. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statement. Additional information concerning these factors is contained in BBVA Argentina's annual report on Form 20-F for the fiscal year 2023 filed with the U.S. Securities and Exchange Commission. Today with us, we have Mrs. Ines Lanusse, IRO. Mrs. Lanusse, you may begin your conference.
Speaker Change: These forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward looking statements.
Additional information concerning these factors is contained in BBVA Argentina's annual report on form 20-F for the fiscal year 'twenty twenty-three filed with the U S Securities and Exchange Commission.
Speaker Change: Today with US we have Mrs. Inez venues I R O. Mr. <unk> you may begin your conference.
Operator: Good morning and welcome to BBVA Argentina's first quarter 2024 results conference call. Today's webinar will be supported by a slide presentation available on our investor relations website in the financial information section. Speaking during today's call will be Ines Lanusse, our Investor Relations Officer, and Carmen Morillo-Arroyo, our Chief Financial Officer, who will be available for the Q&A session. Please note that, as per Central Bank regulation, we have begun reporting results applying hyperinflation accounting pursuant to IFRS Rule IAS 29. For each of these purposes, the 2023 and 2024 figures have been restated to reflect the accumulated effect of inflation adjustment for each period through March 31, 2024. Now, let me turn the call over to Ines.
Speaker Change: And welcome to be the Argentina first quarter 2034 results conference call. Today's webinar will be supported by a slide presentation available on our Investor Relations website under financial information section.
Speaker Change: Speaking during today's call. It will be you know San Jose, our Investor Relations Officer, and got them in Lodi, Charlottesville, Our Chief financial officer would be up for the Q&A session.
Speaker Change: Please note that starting January sorry, 2021.
Speaker Change: One Greg you nation, we have begun reporting we started applying hyperinflation accounting.
Speaker Change: Once all your Forex rule Ias 29.
Speaker Change: <unk> 20th century city anchor anything far figures have been restated to reflect the accumulated effect of inflation adjustment for each period March 31st 2035.
Speaker Change: Now, let me turn the call you'll like arena.
Speaker Change: Thank you Brendan and thank you all for joining us today 2000, I'm twenty-four honestly they normally like government.
Ines Lanusse: Thank you, Belén, and thank you all for joining us today. 2024 starts with a new Millet government substantially modifying the economic policy framework and focusing its efforts on a strong fiscal and monetary adjustment to reduce inflation. The reduction of the fiscal deficit in the first month of the year, the relative currency stability after the significant depreciation of the Argentine peso in December 2023. The accumulation of international reserves and the contraction of economic activity have allowed a recent moderation of the monthly inflation, which, however, still remains high.
Speaker Change: Actually modifying the economic policy framework.
Speaker Change: Exactly when a strong fiscal and monetary adjustment, reducing flesh that reduction they spent deficit in the first month of the New York and relative currency and then Ricky.
Speaker Change: After the significant depreciation of the Argentine peso in December 'twenty, two 'twenty three yeah accumulation of international I always said on the call.
Speaker Change: Contraction in economic activity have allowed our weekend moderation of the monthly wage however, it remains high.
Speaker Change: Despite the uncertainty related risks according to BBVA research.
Ines Lanusse: In spite of the uncertainty and related risks, according to BBVA research, it is likely that these factors could set the basis for an inflation slowdown in the following month, and these would eventually be completed by additional measures in the context of the release of a more integral stabilization program.
Speaker Change: I think that these factors set the basis or an inflation slowed down in the following months.
Speaker Change: What is actually being completed by additional measures in the context of the rainy.
Speaker Change: I'm more in tech brands that'd be the station.
Speaker Change: BBVA research estimate on inflation.
Ines Lanusse: BBVA research estimates annual inflation will end close to 155% and that GDP will drop around 4% this year. It is important to mention that interest rates have fallen quicker than expected, and it is expected that these should drop further as inflation continues to decline. Now, moving into business dynamics, as you can see on slide three of our webcast presentation, our service offering has evolved in such a way that by the end of March 2024, retail digital client penetration reached 62 percent, while retail mobile clients reached 58. The response on the side of customers has been satisfactory, and we are convinced this is the path to pursue in the aim of sustaining and expanding our competitive position in the financial sector.
Speaker Change: So, 155% and that GDP was dropped around 4%.
Speaker Change: It is important to mention that interest rates are falling quicker than expected.
Speaker Change: It is expected that he should drop other inflation continues to decline.
Speaker Change: Now moving to business dynamics as you can hear me okay.
Ines Lanusse: Retail digital sales measured in units reached 93.6% in the first quarter of 2024 and represented 73.6% of the bank's total sales measured in monetary value; new customer acquisitions on digital channels reached 81% in the first quarter of 2024 from 76% in the first quarter of 2023. The bank actively monitored its business financial conditions and operating results in the aim of keeping a competitive position to face contextual challenges. Moving to slide four, I will now comment on the bank's first quarter 2024 financial results. Inflation-adjusted net income in the first quarter of 2024 was 34.2 billion pesos, falling 41 percent from the net income in the fourth quarter of 2023.
Speaker Change: And patients.
Speaker Change: This offering has evolved in such a way that by the end of March.
Speaker Change: Or we didn't need to go find and exploration.
62%, while we can move on to fly them.
Speaker Change: Yeah.
Speaker Change: Our response on the side of customer has been satisfactory and yeah and then this is a back to Brazil.
I'm also saying and extending our competitive position in the financial system.
Speaker Change: We don't need you don't say measured the newness.
Speaker Change: 93, 6% in the first what else a thousand or I represent 70 threep on exports.
Speaker Change: So don't they measured in one of 3000.
Speaker Change: New customer application so they just don't panic.
Speaker Change: 81%.
Speaker Change: 1024 from Saturday.
Speaker Change: 76% one of 2020.
Speaker Change: Our bank activity monitors and fitness.
Speaker Change: Sure.
Speaker Change: I know we're racing with Oh.
Speaker Change: Keeping a competitive decision.
Speaker Change: Excellent.
Speaker Change: Moving to slide four I will now comment on the bank's first quarter 2020, or I'm not sure with them.
Ines Lanusse: This implied a quarterly ROE of 6.6 percent and a quarterly ROA of 1.6 percent. Quarterly operating income in the first quarter of 2024 was 631.2 billion pesos, 13% lower than in the fourth quarter of 2023. Quarterly operating results are mainly explained by a lower operating income, mainly due to lower income from foreign exchange and gold gains, particularly in contrast with the fourth quarter 2020 extraordinary results, which were impacted by the devaluation of the Argentine peso versus the US dollar.
Ines Lanusse: This was offset by one, better results from income from the measurement of financial instruments at fair value to P&L, also by contrast with the results in the fourth quarter 2023, where a loss was reported due to the dual bond valuation. Two, better net income from write-down of assets at amortized costs and at fair value through OCI, mainly due to the sale of inflation-linked bonds, and three, lower personal benefits and other operating expenses. Net income for the period was highly impacted by income from the net monetary position.
Speaker Change: He Argentina inflation adjusted net income in the first quarter of 2015 or 34.2 video Facebook falling 14, 1% and then net income in the fourth quarter of 2020.
Speaker Change: He seems like a quarterly or a weak exports exports.
Speaker Change: On a quarterly or a way one six.
Speaker Change: Well I really operating income in the fourth quarter of 2010 before was 630 112 billion, 13% lower than in the fourth quarter 2020 pretty well.
Speaker Change: Quarterly operating results are mainly explained by lower operating income mainly due to lower income from foreign exchange.
Speaker Change: And particularly in contrast, with the fourth quarter 2020, extraordinary which were impacted by the devaluation of the Argentine peso. It's nice to say you are selling.
Speaker Change: He was all set by one that's a response from income from measurement.
Speaker Change: Yeah.
Speaker Change: Yeah now also by contrast, with what we saw in the fourth quarter 2000, and you see where I love once the Florida.
Speaker Change: Malaysia.
Speaker Change: Net income for them right now as I said, I don't want to say, Scott and I'd say about them.
Speaker Change: Yeah, I need you to just say Oh inflation linked bonds I'm sorry, no upwards, then if it's I know they were breaking it.
Speaker Change: Net income for the Pea that was I in fact, it's my income from net monetary position.
Ines Lanusse: In spite of inflation being slightly lower in the first quarter of 2024 than in the fourth quarter of 2023, the increase in the monetary position in the first quarter of 2024 versus the fourth quarter of 2023 more than proportionally offset the mentioned decrease in inflation. That increment was impacted by a higher value of public securities in the fall quarter of 2023, especially under the fair value through OCI valuation criteria. Turning to the PLL lines in slide five, net interest income for the first quarter of 2024 was 787.8 billion pesos, increasing 4.8% quarter over quarter.
Speaker Change: Sign of inflation likely know were in the first quarter of 2004 nine in the fourth quarter. The solvent I'm. Thank you D. The increase in the monitor Patricia.
Speaker Change: What else about when I'm, saying before boys, what Florida as I mentioned, it's really more than proportionally upset.
Speaker Change: I shall decrease in inflation.
Speaker Change: And then or impacted by a higher value.
Speaker Change: In the fourth quarter 2000 and he.
Speaker Change: Especially under the Santa Monica do OPI isolation cranking them.
Speaker Change: Turning to the P&L lines in slide five net interest income for the first quarter of 2024 was 787 8 billion pesos, increasing four 8% while the corner in the first quarter of 2024 in for things that you can see that that means.
Ines Lanusse: In the first quarter of 2024, interest income decreased less than interest expenses in monetary terms. The former was due to lower income from public security, and the latter was due to lower expenses on time deposits and investment accounts. In the first quarter of 2024, the quarterly decrease in interest income is mainly driven by, one, lower income from government securities explained by the termination of the issuance of LELIC by the Central Bank in December 2023, reducing its volume at year end, and two, lower income from loans, mainly discounted instruments, credit cards, and other loans, the latter affected by the fall in floor plans.
Speaker Change: The extensive monetary to before.
Speaker Change: Before you to lower income from Barclays securely and they're not used to lower expenses on time deposits and investment.
Speaker Change: In the first quarter of 2024 quarterly interest income is mainly driven by one no. Our income from government securities explain sort of the nation on the insurance.
Speaker Change: By the Central Bank in December 20th legacy radios volume on a year end and to know where income below 90 discounted installment credit cards. Another no they're not they're affected by the oil in floor plan.
Ines Lanusse: This was partially upset by, one, a better income from repo at lower rates than the acute by the leak, and, two, income from inflation-linked bonds. On the other hand, interest expenses decreased 16% due to lower time deposits and investment account expenses, lower volume, and the deregulation of the minimum rate by the end of the quarter. Interest on time deposits, including investment accounts, explains 47% of interest expenses versus 71.2% of the previous quarter.
Speaker Change: He was partially upset by one other income from legal.
Speaker Change: No our rate and they have huge unmet need.
Speaker Change: And two income from inflation linked bonds.
Speaker Change: The other hand interest expenses equally important is you know I think both at an event and I called it know what volume and the deregulation of the minimum rate by the end of the fourth.
Speaker Change: In personal banking deposits, including investment account explain 47% interest expense for instance, 71, 2%.
Speaker Change: His quarter.
Ines Lanusse: Net fee income as of the first quarter of 2024 totaled 50.5 billion pesos, falling 6.4% quarter over quarter. In the first quarter of 2024, the income totaled 91.1 million pesos, falling 15.1% quarter over quarter. In spite of the general quarterly decline on all lines, the decrease is mainly explained by fees from credit cards, which fell 17.3%, and fees linked to liabilities, which fell 14.4%. Regarding the former, apart from being impacted by expenses related to the BBVA loyalty program, it was also affected by a decrease in activity and consumption; regarding fees linked to liabilities, and increasing fees from accounts maintained and abandoned did not compensate for the falling activity.
Speaker Change: Net income for the first quarter of 2024.
Speaker Change: 55 million pesos or six 4% quarter over quarter.
Speaker Change: In the first quarter of 2020 for income totaled $91 1 billion pesos.
Speaker Change: One 1% quarter over quarter.
Speaker Change: But on the general floor and they decline on all lines of degrees 90, a slate I E from credit cards, which for 17 point people attend E notes in diabetes, which sat at 14, 4%.
Speaker Change: Regarding the former apart from being impacted by expenses related to Blue belt, where they really.
Yeah no.
Speaker Change: It was also affected by a decrease in our country.
Speaker Change: Regarding the <unk>.
Speaker Change: Liability I mean, we can see on my problem, one thing I'm bundle.
Speaker Change: And say for the falling up.
Ines Lanusse: On the side of the expenses, these totaled 40.6 billion pesos, falling 23.9% quarter over quarter. Lower expenses are explained by lower activity plus a contract with high seasonal fees expenses in the fourth quarter of 2023. Additionally, there was a decrease in fees linked to the payroll marketing campaign.
Speaker Change: On the side, you'll see expenses he held that 46 million faithful falling 20 people and 9% for all of the core.
Speaker Change: No where expenses are explained by lower activity now has a contract with higher seasonal expenses in the fourth whereas the cellphones and D.
Speaker Change: Additionally, there was a degree in fees linked to payroll marketing company.
Ines Lanusse: In the first quarter of 2024, loan loss allowances decreased 14.3 percent, explained by the good behavior of the loan portfolio. During the first quarter of 2024, total operating expenses were 209.6 million pesos, decreasing 3.5 percent quarter over quarter, of which 29 percent were personal benefits. Personal benefits decreased 11.2% quarter over quarter. The quarterly change is mainly explained by the contrast with the inflation adjustment of vacation stop provisions and variable compensation recorded in the fourth quarter of 2023, plus wage negotiations with the unions that match inflation during the first quarter of 2024.
Speaker Change: In the first quarter of 2020 for now no allowance is equally or 10, 3% explained by the good behavior of the loan.
During the first quarter of 2024.
Speaker Change: And expenses were 296 million pesos, equating to eight 5% quarter over quarter or 29% were person has benefits.
Speaker Change: Personal benefit equally 11.2% quarter over quarter.
Speaker Change: The change is mainly explained by the Congress with inflation adjustment that they should stop Frobisher environmental compensations reported the fourth quarter of 2000 and sympathy that's wage negotiation with you here at the match inflation during the first quarter 2024.
Speaker Change: Although the first quarter of 2020 for administrative expenses, well 30 people or 1% quarter over quarter.
Ines Lanusse: As of the first quarter of 2024, administrative expenses grew 33.1 percent quarter over quarter. This is mainly explained by an increase in the amount of the price of foreign currency services contracted with a parent company. The quarterly efficiency ratio as of the first quarter of 2024 was 65.4%, above the 46.4% reported in the fourth quarter of 2023.
Speaker Change: It's mainly explained by an increase in Vietnam, right, Oh boring parts and service it on traffic with the parent company.
Speaker Change: The quarterly efficiency ratio, although the first quarter of 2010 before well 65.
Speaker Change: Above the 46, 4% reported in the fourth quarter of 2000 in.
Ines Lanusse: The quarterly increase is explained by an increase in expenses contrasted with a decrease in income, especially due to lower interest income and the impact of inflation on the monetary position. In terms of activity, on slide six, private sector loans as of the first quarter of 2024 totaled 2.7 trillion pesos, increasing 12.7%. Loans to the private sector in pesos fell 16.2% in the first quarter of 2024. During the quarter, the decrease was especially driven by lower generalizationality in practically all products.
Speaker Change: The quarterly increase explained by any feed and extensive unprecedented cuisine.
Speaker Change: Actually you know we're interested in them and they are in place and then monetization.
Ines Lanusse: The decrease was partially offset by a 20.9% increase in overdrafts, mostly due to their short duration. Loans to the private sector demonetized in foreign currency increased 18.4 percent, explained by a 26 percent growth in financing and pre-financing of equity. Loans to the private sector in foreign currency measured in U.S. dollars increased 69.3 percent quarter over quarter. However, during the quarter, the retail portfolio fell 16.2%, and the commercial portfolio decreased 9.4%. As observed in previous quarters, loan portfolios were impacted by the effect of inflation in the first quarter of 2024, which reached 61.6%. In nominal terms, BBVA Argentina managed to increase the retail, commercial, and total loan portfolio by 27.1%, 37.4%, and 32.1%, respectively, during the quarter.
Speaker Change: In terms of activity on slide six.
Speaker Change: Sector now in the first quarter of 2015 for hotel too.
Speaker Change: Two seven trillion increasing.
Speaker Change: Increasing four seven.
Speaker Change: Southern Britain loans to the private sector in pesos and 16, 2% in the first part of the thousands of people during the quarter, a decrease was especially driven as I know our general seasonality in practice I hate oil price.
Speaker Change: And he was partially upset by a 29% increase in all of it back mostly.
Speaker Change: Mostly due to a very short duration.
Speaker Change: No to the private sector demand.
Speaker Change: In foreign currency increased 18, 4%.
Speaker Change: Flanked by a 26% growth in financing and refinancing goes next.
No so the private sector and foreign currency measured in U S dollars increased.
Speaker Change: 69% quarter over quarter.
During the war the retail portfolio.
Speaker Change: Important to defense and the commercial portfolio and equally nine 4%.
Speaker Change: I thought in previous board young portfolio were impacted by the effect of inflation in the first quarter of 2024, which reached 61, 6%.
Speaker Change: Mediate Argentina manage to increase everything commercial until the loan portfolio by.
Speaker Change: Seven 1% 37 clauses.
Speaker Change: I'm, 30% to 41% respectively. During the quarter no cases, so far thing quarterly inflation dance.
Ines Lanusse: In no case so far since quarterly inflation levels, the consolidated market share of private sector loans reached 10.08% as of the first quarter of 2024, improving from 9.33% a year ago, and unsurpassing two-digit figures. As of the first quarter of 2024, the asset quality ratio maintained a very good performance at 1.23%, in line with the good behavior of the commercial portfolio. On the retail portfolio, there is a slight increase in the NPL portfolio due to credit cards, but with no significant impact on the NPL ratio.
Speaker Change: <unk>, Argentina consolidated market share of private sector loans.
Speaker Change: Tangible you awake.
Speaker Change: The first quarter of 2024 in pulling from 930 equally scent I hear no I'm, sorry, Bessie two digits.
Speaker Change: I think the first quarter of 2020 for asset quality ratio keeps a very good performance at one point they need to be bought.
Speaker Change: And that would that would behavior of the commercial portfolio.
Speaker Change: On the retail portfolio.
Flagging printing in theater portfolio.
Speaker Change: Got it.
Speaker Change: With no significant impact on the N and M. P O H.
Speaker Change: On the funding side as you know, it's like seven private nonfinancial sector deposits in the first four months of elements than before.
Ines Lanusse: On the funding side, as seen on slide seven, private non-financial sector deposits in the first quarter of 2024 sold for 4.6 trillion pesos, falling 15.6 percent. The bank's consolidated market share of private deposits reached 7.37 percent as of the first quarter of 2024. Private Non-Financial Sector Deposits in Pesos Total 3.2 Trillion Pesos Decreasing 9.3% compared to the fourth quarter of 2023. The quarter of change is mainly affected by a 21.2% decline in saving accounts and an 8% fall in checking accounts, especially non-interest-bearing checking accounts.
Speaker Change: 4.6 premium faithful only 15 going to exports and the bank's consolidated.
Speaker Change: Consolidated market share of Franklin deposits reached 737% of the first quarter of 2024.
Speaker Change: Private nonfinancial sector deposits and faithful to trillium faithful decreasing nine people compared.
Speaker Change: Compared to the fourth quarter of 2023.
Speaker Change: Florida change is 90 effect I had 21, 2% decline in saving accounts and an 8% fall in checking yourself, especially non interest bearing checking accounts.
Ines Lanusse: Private non-financial sector deposits in foreign currency expressed in pesos fell 27.3% quarter over quarter, mainly explained by seasonal factors in the fourth quarter of 2023. In terms of capitalization, BBVA Argentina continues to show strong solvency indicators as of the third quarter of 2024. Capital ratio reached 35.6%. Growth in the ratio was mainly driven by a fall. Exposure to the public sector in the first quarter of 2024, excluding central bank instruments, represents 13.9% of total output, below the 15.9% in the quarter of 2023 and below the last ratio reported by the system of 26.5% as of February 2024.
Speaker Change: Private nonfinancial sector deposits in foreign currency and scrap paper that 27, 8% quarter over quarter, mainly explained by seasonal factors in the fourth quarter.
In terms of capitalization E. Argentina continues to show some further it seems as though the first one of those albums went before.
Speaker Change: Sure.
Speaker Change: 35, 6% rote in the ratio was mainly driven by Oh, we did that.
Speaker Change: Expose it to the public sector in the fourth first quarter of 2024, excluding central Bank instruments represents 13, 9%.
Speaker Change: No that's 18, 9% in the fourth quarter.
Speaker Change: 1023, and we know that ratio reported by the system.
Speaker Change: 5% February 'twenty 'twenty four the bank's total liquidity ratio remains healthy at 92%.
Ines Lanusse: The bank's total liquidity ratio remains healthy at 92% of total deposits as of March 31, 2024. Last but not least, as of the date of this report, the bank has announced the payment of dividends in pre-installment in cash or cash. The total amount due will be 264.2 billion pesos, inflation adjusted as of December 31st, 2023, and per 20 central bank law, it must be updated to the current currency value of each payment date.
Speaker Change: As of March 31st 2020 for.
Speaker Change: No that's not the least I thought the date of this report the bank has announced the abatement or even anything seen Saturn dash or time, that's all that I'm not you.
Speaker Change: You will need to hire at 60 bump until the New York today, they talked to Felicia that as debt as of December 31st 2020 for me I'm Grateful that the Central Bank is not it's not I'd say the current currency value of each payment date.
Speaker Change: This concludes our prepared remarks, we will now take your questions. Operator, Please open the line for questions.
Ines Lanusse: This concludes our prepared remarks. We will now take your questions. Operator, please open the line for questions. We will now begin the question.
Speaker Change: We will now begin the question and answer session.
Operator: We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question is from Carlos Gomez with HSBC. Please go ahead.
Speaker Change: To ask a question you May press Star then one on your telephone keypad.
Speaker Change: If you were using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: To withdraw your question. Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: Our first question is from Carlos Gomez with HSBC. Please go ahead.
Carlos Gomez: Hello Ines, and good morning. I would like to know if you can go through us slowly as to why the net interest income declined so much in your case compared to your peer banks in Argentina this quarter. I'm afraid I was not able to follow it closely.
Speaker Change: Hello, Nathan good morning.
Carlos Gomez: I would like to know if you can go through us.
Speaker Change: Slowly as to why.
Speaker Change: Interest income.
Carlos Gomez: Declines so much your case compared to your peer banks in Argentina this quarter.
Carlos Gomez: Understood.
Speaker Change: Thank you.
Carlos Gomez: Hi, Carlos Good morning, Yes, basically one of the main fact curious that affects our net income. This quarter is the fact that the model we use we use a different valuation model.
Ines Lanusse: Hi Carlos, good morning. Yes, basically, one of the main factors that affect our net income this quarter is the fact that the model we use, the different valuation model that banks have to value securities in their P&L, no? We believe the portfolio strategy should be analyzed based not only on one quarter but over more quarters. Now, that said, our valuation criteria for securities compared to peers affects our P&L negatively in the first quarter, and this is particularly because of the extraordinary result we gave in the OCA line in the previous quarter. Remember that last year, our equity grew 25% in real terms. Now... why is net income very affected by this fact that passed in the past?
Carlos Gomez: Pat Giovanni's securities in the P and L. A we believe the portfolio strategies should be analyzed faced not only one quarter, but in more quota.
Carlos Gomez: Now.
Carlos Gomez: That said, our valuation country, FY sequela with each compared to peer it affects more than they get paid our P&L in the first quarter and this is particularly because of the extraordinary restarted we gave in D. O P. A line in the previous quarter, but remember that last year, our Iraq P. D rule 25 and in Rio.
Carlos Gomez: No.
Carlos Gomez: While net income is very affected by the fact that that back in the past because because of that extraordinary result, my equity move much more than probably the peers, which not recognize these valuation in the equity and that's G. I.
Ines Lanusse: Because of that extraordinary result, my equity grew much more than probably the peers, which do not recognize this valuation in the equity, and that generates a higher loss by inflation adjustment. And that's why we are seeing a higher effect, a negative effect, in the P&L. So it's quite different, you know, to compare banks with different models. If you would do a proxy, for example, if we would have the model of cost instead of fair value, for example, you should analyze our figures by discounting from the equity around 260 million pesos. To that, you should apply the approximately 52 inflation rate that we had in the quarter.
Carlos Gomez: Our rates are high.
Speaker Change: You know by inflation adjustment and that's why we are seeing a higher effect a negative effect in the P&L. So it's quite difficult.
Speaker Change: To compare banks with different models.
Speaker Change: If you would do a trout sea for example, if we would have the moral of cost instead of fair value. For example, you should analyze our figures by discounting from the equity around 260 million on Batesville.
Speaker Change: You should have applied approximately 52 inflation that we had in the quarter and if you do you are you on that yeah, we would be around <unk> 20. So basically the problem is the comparison between the two models now and in our case.
Ines Lanusse: And if you do your math, the ROE would be around the mid-20s. So basically, the problem is the comparisons between the two models. In our case, it's probably a little bit more transparent because we reflect not only what we gain from the securities but also the valuation of those securities and the effect of inflation in the TNL every quarter. On the model that is at cost, you don't reflect that valuation, so your equity doesn't grow that much.
Speaker Change: Yeah, a little bit more transparent because will reflect not only what we gained from that securities. But also the valuation of those securities and the effect of inflation in the P&L every quarter on the model that is that Oh gosh.
Speaker Change: You only you don't reflect that valuation.
Equity doesn't grow that much and you do not record that extra loss.
Ines Lanusse: And you do not record that extra loss affected by inflation. On the trading model, probably it is comparable, but it's a different way of managing portfolios. They are more supposedly concerned with trading. It's more a short-term criteria. It's another way of managing your securities, while the model we use at the bank, and it's the same model that BBVA as a holding company uses, is to protect the assets.
Speaker Change: Goodbye inflation on the trade in modeling well and Theyre trading more model, probably taste combine a comparable.
Speaker Change: Is that a different way how do you manage a portfolio now they are more supposedly the trading it's more of a short term quite Qi yeah. It's another way of managing your securities why the model. We use is that about the bank and it's the same model that D. D D. As a holding you used to protect yeah. That's why we.
Ines Lanusse: That's why we have this model that shows results on BNL and valuation on the OCA line. So basically, that is a key factor that affects our net income. And as I was mentioning, if you did the math or a proxy, if we had the model at cost, our ROE would be around the mid-20s. Then, yes, we also, despite expenses decreasing quarter over quarter, we have administrative expenses that grew. And those are mainly tied to assets, which are mainly costs related to the parent company. So that also affected our results. I don't know if that answers your question.
Speaker Change: This model that shelves are referred from BNS and evaluation on the Opa land. So basically that's a key factor that affected our net income and as I was mentioning if you do the math or a proxy if we would have to model off of and off a week would be around that mean.
Speaker Change: Twenties, then yes, we had also despite.
Speaker Change: Benefits decreased quarter over quarter, we have our administrative expenses that grew and those are mainly tied to FX a weaker.
Speaker Change: We are mainly cost related to the parent company. So that also affects ITAR a recession I don't know if that answers your question.
Speaker Change: Well.
Carlos Gomez: Well, more or less, let's go one by one. On the valuation at cost, so you had a big gain in the OCI line last year, last quarter in particular. Yeah, and that does not... flow through the income statement now as it gets realized, that's already in your results.
Speaker Change: Mark.
Speaker Change: Okay.
Speaker Change: Of course, so do either gaining deals yes.
Speaker Change: Last year.
Yeah, Doug.
Speaker Change: It does not.
Speaker Change: Flow through they go to sleep and now she gets realized.
Speaker Change: For sure.
Speaker Change: The fact is that your read T. When you started the first quarter of this year is much higher and the line of.
Ines Lanusse: The fact is that your equity, when you start the first quarter of this year, is much higher, and the line of inflation adjustment, we'll recognize, is the low for your equity exposure to inflation. As my equity was so big, because we recognize the valuation of securities, we have a higher loss because of inflation because the monetary assets, the securities, are at their values. In the other model, you don't recognize that valuation in the P&L.
Speaker Change: Inflation adjustment well recognize is that at all.
Speaker Change: For your equity exposure to inflation as my equity was so big because we recognized the valuation of securities we have a higher loss.
Speaker Change: Because of inflation.
Speaker Change: Because of our monetary assets.
Speaker Change: Metairie happened this acuity all at the value of those securities India markets I've seen that in the other modality you don't ratchet up a nice that valuation in the P&L you only recognized when you go selling or when you go getting that the depending upon correct. So by not recognizing that.
Ines Lanusse: You only recognize it when you go selling or when you go selling the bond, correct? So by not recognizing that higher value of securities, your equity is lower, and by consequence, your exposure to inflation is less. That's why it's not comparable. So when you compare P&S, you don't only need to compare figures but also different business models.
Speaker Change: I hope that you all take QED your equity is no worse and by consequence, your exposure to inflation is less.
Speaker Change: That's why it's not comparable so when you compare P and if you don't know what you need to compare you guys thought it was all different business models.
Speaker Change: Okay.
Carlos Gomez: Okay, now this was this particular quarter, so how does that reflect on the rest of the year when, you know, inflation should be lower, and rates will also be lower? Going forward, we're still believing.
Speaker Change: Digital was this particular quarter, so how does that sort of slipped into <unk>.
Speaker Change: The rest of the year when.
Sharply lower in Bridgewater.
Speaker Change: Going forward, we're still believing we can despite this quarter, we have added or are we at our strategy and also regarding Lora said QAD.
Ines Lanusse: Going forward, we're still believing we can, despite this quota we have at a lower ROE, our strategy regarding our securities, basically, as you know, LELICS no longer exists. Most of our liquidity first went to repos, and now it's already placed in LECAP. From our security portfolio, we have more or less 24% of our portfolio in CPI bonds, and 67% are LECAP. We have 9% of Bonte also.
Speaker Change: Basically as you know late snow no longer at fifth most of all it's really deep first went through repo and now it's already placed in the top four.
Speaker Change: Omar security portfolio, we have more or less 44% of our portfolio and CPI bonds and 67 boyfriends are like US we have a 9% of them. They also so moving forward, we're changing our debt yield of AR and we're getting to a fix.
Ines Lanusse: So moving forward, we're changing the yield of, we're turning to a fixed rate, which is LECAP. We're still believing we can sustain a mid-teens ROE for 2024. Also, we are seeing an increase in demand. We are starting to see, according to our research department, loan growth for the system should grow positively this year, around 22%. We are starting to see an increase, a higher increase in commercial lending, which is part of the strategy of the bank. And that should reflect in the results of the bank, no? They are always intending to gain market share.
Speaker Change #100: Right, which is and we're still believe we can sustain a mid teens ROE for 2020 for Oh. He felt we are seeing an increase in demand we are starting to see Oh. According to our research Department, a young girl for the assistance of which we grow positive this year.
Yeah around 22%.
Speaker Change #100: We are starting to see an increase a higher increase on commercial lending, which is part of the strategy of the bank and that should reflect in the heavy side stuff there, but no always intending to gain market share.
Speaker Change #100: Yeah.
Speaker Change #101: Thank you so much.
Carlos Gomez: Thank you so much.
Speaker Change #101: Yeah.
Operator: Again, if you have a question, please press star then 1. Please stand by as we poll for questions. If there are no further questions, this concludes the question and answer section. At this time, I would like to turn the floor back to Mrs. Lanusse for any closing remarks.
Speaker Change #102: Again, if you have a question. Please press Star then one please.
Ines Lanusse: Okay, thank you for your time, and let us know if you have further questions. Have a good day.
Speaker Change #103: Please standby as we poll for questions.
Speaker Change #104: Showing no further questions. This concludes our question and answer section at this time I would like to turn the floor back to Mr. <unk> for any closing remarks.
Speaker Change #105: Okay. Thank you for your time, and let US know any lab set up questions have a good day.
Speaker Change #106: Thank you. This concludes today's presentation you may disconnect. Your line at this time and have a nice day.
Operator: Thank you. This concludes today's presentation. You may disconnect your line at this time and have a nice day.
Speaker Change #106: Yeah.
Speaker Change #106: [music].