Q1 2024 Grupo Financiero Galicia SA Earnings Call
Welcome to first quarter 2024 earnings release, My name is Ellen and I'll be accordingly. Therefore today's event. Please note. This call is been recorded and for the duration your lines will be on listen only however, you will have the opportunity to ask questions. At the end of this can be done by pressing star one on your telephone keypad.
Speaker Change: Require assistance at any time, please press star zero and Youll be connected to an operator I will now hand, you over to your host Pablo for Vida to begin today's conference. Thank you.
Pablo: Thank you.
Pablo: Good morning, and welcome to this conference call.
Pablo: I will make a concise introduction and then we will take your questions.
Pablo: Some of the statements made during this conference call will be forward looking statements within the meaning of the safe Harbor provisions of the U S Securities laws and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed.
Pablo: Yeah.
Pablo: According to the monthly indicators for economic activity.
Pablo: The Argentine economy recorded an eight 4% year over year contraction during March.
Pablo: Year to date terms, the economic downturn reached to five 3%.
Pablo: During the first quarter the primary surplus reached <unk>, 6% of GDP and on overall surplus of <unk>, 2%.
Pablo: Compared to a <unk>, 4% primary deficit in the first quarter of last year.
Pablo: This result was explained by a 254, 6% year over year increase of revenues.
Pablo: <unk> primary spending rose 144, 1%.
Pablo: The national consumer price index accumulated at 51, 6% increase during the first quarter.
Pablo: And the 287, 6% in the last 12 months ended on March 31 2024.
Pablo: However, monthly inflation has decelerated.
Pablo: Some months from 25, 5% in December 2023 to eight 8% in April 2024 trend, which is expected to continue.
Pablo: On the monetary front, the monetary base increased by $2 nine trillion pesos in the first quarter of this year recording.
Pablo: 132, 1% increase in year over year terms.
Pablo: After taking office the central lung devalued the exchange rate by 54, 2% on December 13th.
Pablo: 118, 3% variation.
Pablo: After which the effects has maintained a 2% monthly crawling peg.
Pablo: The exchange rate averaged 853 pesos per dollar in March.
Pablo: 76, 1% devaluation in year over year terms.
Pablo: The overnight repo rate remain the reference monetary policy interest rate after having replaced the leak rates in December 2023.
Pablo: Since then the monetary authority lowered the policy interest rates five times from 133% to 40%.
Pablo: It is also worth to mention that on March 11th.
Pablo: Central banks eliminated the regulation that establish a minimum interest rates on time deposits.
Pablo: In March 2024, the average rate on peso denominated private sector time deposits for up to 59 days stood at 85, 3%.
Pablo: 13, nine percentage points above the average for much of last year.
Pablo: Since March rates for time deposits were lower in line with the reduction of the monetary policy interest rate and currently stands at an average of close to 30%.
Pablo: Private sector deposits in pesos averaged $42 four trillion pesos in March increasing 29, 6% during the quarter and 137, 8% in the last 12 months.
Pablo: Time deposits in pesos rose 42, 5% during the quarter and 104, 2% year over year, while peso denominated transactional deposits increased 21, 2%.
Pablo: 174, 8%, respectively in the same period.
Pablo: Private sector dollar denominated deposits amounted to $16 7 billion.
Pablo: As of the end of March increasing 14, 7% during the quarter and 2% as compared to March 2023.
Pablo: Peso denominated loans to private sector average $18 five trillion pesos in March <unk>.
Increasing 24% in the quarter and 144% when compared to a year before.
Pablo: Private sector dollar denominated loans amounted to $4 3 billion recording a 24, 5% expansion during the quarter and 17, 5% price when compared to March last year.
Pablo: Turning now to our results for the quarter net income attributable to Grupo Financiero Galicia amounted to 255 5 billion pesos.
Pablo: 263% higher than the year ago quarter.
Pablo: Mainly due to profits from Banco Galicia for $244 3 billion pesos.
Pablo: Capex for $22 6 billion pesos and from <unk> asset management, 411, 3 billion pesos.
Pablo: Set by a $16 4 billion pesos loss from Galicia for orders.
Pablo: This profit represented a seven 1% annualized return on average assets and a 32, 4% return on average shareholders' equity.
Pablo: Banco Galicia net income for the quarter was 319% higher than in the year ago quarter.
Pablo: Mainly due to 157% increase of the operating income.
Pablo: Partially offset by 102% increase of the loss from the net monetary position.
Pablo: Net operating income increased 102%, primarily due to a 209% higher net interest income offset by an 18% lower results from financial instruments.
Pablo: 36% decrease in the result from gold and foreign currency quotation differences.
Pablo: Average interest, earning assets reached $6 six trillion pesos.
Pablo: 25% lower than in the same quarter of last year, mainly due to a 61% decrease of the portfolio of government securities and a 33% reduction in the average balance of loans in pesos.
Pablo: In the same period, its yield increased 63 percentage points, reaching 127%.
Interest bearing liabilities decreased 29% from March of last year amounting to five three trillion pesos, mainly due to a 59% decrease in time deposits in pesos.
Pablo: During this period its cost increased nine seven percentage points to 52, 2%.
Pablo: Interest income increased 55% due to a 48% growth of interest from government securities.
Pablo: <unk> hundred 38% increase of interest on repurchase agreement transactions and a 12% increase of interest on loans and other financing.
Pablo: Interest expenses decreased 14% as a consequence of <unk>.
33% lower interest on time deposits due to the decrease in its average volume.
Pablo: Net income decreased 6% from March last year, mainly due to a 25% lower profit from fees on bundles of products.
34% decrease on utility bills and collection services, partially offset by a 68% increase of our fees.
Pablo: Net income from financial instruments decreased 18% due to lower results from government securities and two losses from derivative financial instruments.
Pablo: Gains from gold and FX quotation differences was 36% lower from the year ago quarter, including the results from foreign currency trading.
Pablo: Other operating income increased 43% in the quarter because of 126% increase in other adjustments on interest on miscellaneous receivables.
Pablo: As regards provision for loan losses, the amount for the quarter was 37% higher than the one recorded in the year ago quarter, reaching to 47 3 billion pesos.
Pablo: Personnel expenses were 3% higher than in the first quarter of 2023 in line with a 5% increase of staff and a salary agreements with the union.
Pablo: Administrative expenses were 10% higher as a consequence of the 34% higher taxes, and 20% higher expenses for maintenance and repair amount of goods.
Pablo: Offset by a 51%.
Lower expenses for publicity from promotion and research.
Pablo: Other operating expenses increased 64%, mainly due to higher charges for our provisions.
Pablo: The income tax charge was 517% higher than the first quarter of 2023 due to higher operating results.
Pablo: Yeah.
Advanced financing to the private sector reached three nine trillion pesos at the end of the quarter down 20% in the last 12 months with peso denominated loans, decreasing 29% and dollar denominated loans growing 37%.
Pablo: Net exposure to public sector decreased 15, plus.
Pablo: Year over year, because of lower exposure to the central Bank.
Speaker Change: Ladies and repurchase agreement transactions.
Speaker Change: Public sector exposure, excluding central bank exposure represented 23% of total assets compared to 13% as of the end of the first quarter of last year.
Speaker Change: Deposits reached six five trillion pesos, 26% lower than a year before mainly due to a 52% decrease of time deposits in pesos and a 47% decrease of current account in pesos.
Speaker Change: The bank's estimated market share of loans to private sector was 12, 2% 52 basis points lower than at the end of a year ago quarter and the market share of deposits from the private sector was 10, 2%.
Operator: The bank's estimated market share of loans to the private sector was 12.2 percent, 52 basic points lower than at the end of the year-ago quarter, and the market share of deposits from the private sector was 10.2 percent, 38 basic points higher than in the same quarter of 2020. The bank's liquid assets represented 102.5% of transactional deposits and 64.4% of total deposits, compared to 115.9% and 57.9%, respectively, from a year before. As regards asset quality, the ratio of non-performing loans to total financing ended the quarter at 2.09 percent, recording a 41 basis points improvement as compared to the 2.50 percent of the first quarter of the prior year.
38 basis points higher than in the same quarter of 2023.
Speaker Change: The bank's liquid assets represented 102, 5% of transaction deposits and 64, 4% of total deposits compared to 115, 9% and 57, 9% respectively from a year before.
Speaker Change: As regards asset quality the ratio of nonperforming loans to total financing.
Speaker Change: The quarter at 209% recording a 41 basis points improvement as compared to the 250% of the first quarter of the prior year.
Speaker Change: At the same time the coverage with allowances reached 148%.
Speaker Change: Down 38 percentage points from the 186% recording a year ago.
Speaker Change: As of the end of March 2024, the bank's total regulatory capital ratio reached 32, 1%, increasing 862 basis points from the end of the same quarter of the prior year, while tier one ratio was 39% up 900.
Speaker Change: And 35 basis points during the same period.
Speaker Change: In summary, in a particularly challenging and volatile political and macro environment. Grupo Financiero, Galicia was able to keep asset quality liquidity and solvency metrics at healthy levels and to improve the level of profitability. Despite the significant in.
Operator: At the same time, the coverage with allowances reached 148%, down 38 percentage points from the 186 percent recorded a year ago. As of the end of March 2024, the bank's total regulatory capital ratio reached 32.1%, increasing 862 BPs from the end of the same quarter of the prior year, while the Tier 1 ratio was 30.9%, up 935 BPs during the same period. In summary, in a particularly challenging and volatile political and macroeconomic environment, Grupo Financiero Galicia was able to keep asset quality, liquidity, and solvency metrics at healthy levels and to improve the level of profitability despite the significant impact of the high inflation and the steep recession recorded in the quarter. We are now ready to answer the questions that you may have. Thank you.
Speaker Change: <unk> of the high inflation on the steep recession recorded in the quarter.
Speaker Change: We are now ready to answer the questions that you may have thank.
Speaker Change: Thank you.
Speaker Change: Thank you if you'd like to ask a question or make a contribution in todays call. Please press star one on your Penny for Keybanc capital. Your question. Please press star two youll be advice when to ask your questions.
Operator: Thank you. If you'd like to ask a question or make a contribution on today's call, please press star 1 on your telephone keypad. To withdraw your question, please press star 2. You'll be advised when to ask your question. We'll take our first question from Ernesto Gabilando, Bank of America. Your line is open, please go ahead.
Speaker Change: Yeah.
Speaker Change: We will take our first question from our Nashville, Gabby Lando Bank of America. Your line is open. Please go ahead.
Speaker Change: Frankly, with hydro <unk> Butler Concordia preclinical.
Ernesto Mara Gabilondo Mrquez: Thank you. Hi, good morning, Pablo.
Speaker Change: My first question would be on the loan growth.
Speaker Change: Hum.
Speaker Change: There's a longer one.
Speaker Change: It will be the marker Samsung.
Speaker Change: Loan growth.
Speaker Change: You can elaborate on how are you.
Speaker Change: B Groh D a.
Speaker Change: Great.
Speaker Change: Sure.
Speaker Change: And then my second question will be on your own pocket Greenfield, a mark or Dr complaint Bang her car.
Speaker Change: A real long road under normalized range smaller airplanes.
Speaker Change: How would you see the evolution of the nonproductive Greenfield.
Speaker Change: Sure.
Speaker Change: Last dream I would like to ask you about your Ottawa two firms.
Speaker Change: I would like to hear about your cloud.
Speaker Change: Quater Greenberg.
Speaker Change: You will start to learn but I've gone through we'll have a little more.
Speaker Change: Got it.
Speaker Change: Perfect.
Speaker Change: Our current quarter will be down program.
Speaker Change: Brooklyn Manhattan.
Speaker Change: Recovering from her early.
Speaker Change: So how would you.
Speaker Change: Or would you ever lose her groggy or how do you <unk>.
Speaker Change: And how do you see green level.
Speaker Change: Term frankly.
Ernesto: Okay, Hello, Ernesto well first in loan growth.
Pablo Firvida: Thanks for the opportunity. My first question will be about your long-road expectations. I just wonder what the macro assumptions behind the long road are. You can elaborate on how you see GDP growth for this and next year and also inflation and interest rates. And then my second question will be on your loan-to-deposit ratio as most of the Argentine banks are starting to resume real long roads under normalized rates and low inflation.
Pablo Firvida: And lastly, what are your expectations for the evolution of the loan-to-deposit ratio in the next year? I would like to hear about your thoughts for the second quarter, given that you will start to land, but at the same time, you will have a lot of moving parts. I think my perception is that the second quarter will be tough, but then you will have a second half that recovers in terms of the ROE. So, how would you see the ROE evolution throughout the year? How do you see the ROE for this year, and how do you see it sustainable longer term?
Ernesto: And we see it.
Speaker Change: As you mention is.
Speaker Change: Growing in real terms.
Speaker Change: This year the trigger.
Speaker Change: We'll be when inflation is close to 5% per month, we are going in there in the right track. According to our estimates the year will end up with loans growing around 30% in real terms.
Speaker Change: This has two.
Speaker Change: I would say assumptions on inflation and GDP evolution inflation close to 140% for the full year, although with a moving target and it has been coming down actually.
Speaker Change: Perhaps closer to 135%.
Speaker Change: The recession, we are we have seen in the first quarter.
Pablo Firvida: Okay. Hello Ernesto.
Speaker Change: Looks like it's getting.
And getting to a bottom so but nevertheless, the full year will they will be with the will suffer a GDP contraction of roughly three 8%.
What our chief economist is forecasting in most of the economies are in the same region, but for next year, we are forecasting a 5%.
Speaker Change: GDP growth.
Lower inflation.
Speaker Change: How much low.
Speaker Change: The transfer of many things that I would say between 35 and 40%.
Speaker Change: Still high but coming.
Speaker Change: From these high levels, we have been having in the in the in the last few years I would say.
Speaker Change: And next year with a much lower inflation and GDP.
Pablo Firvida: Well, first, loan growth, we see, as you mentioned, growing in real terms this year. The trigger will be when inflation is close to 5% per month. We are going on the right track.
Speaker Change: Growing as I mentioned, the loan book should be expanded.
Pablo Firvida: According to our estimates, the year will end up with loans growing around 30% in real terms. This has two assumptions about inflation and GDP evolution. Inflation is close to 140% for the full year, although it's a moving target and it has been coming down. Actually, we are perhaps closer to 135%.
Pablo Firvida: The recession we have seen in the first quarter looks like it's getting to a bottom, but nevertheless, the full year will suffer a GDP contraction of roughly 3.8%. That is what our chief economist is forecasting, and most of the economists are in the same region. But for next year, we are forecasting a 5%... GDP growth and much lower inflation. [inaudible] from these high levels we have been having in recent years, I would say.
Speaker Change: Significantly and perhaps the first loans to react with the commercial ones and then the individuals.
Pablo Firvida: Next year, with much lower inflation and GDP growing, as I mentioned, the loan book should be expanded significantly. Perhaps the first loans to react will be the commercial ones and then the individual ones. Still, it's too early to say how much or what percentage in real terms, but it will definitely be substantial.
Still it's too early to say, how how much or what percentage in real terms, but definitely it will be substantial.
Speaker Change: There was a loan deposit yes, yeah.
Pablo Firvida: The loan-to-deposit ratio, in terms of interest rates, how do you see them for the rest of the year and next year? Well, interest rates have been coming down significantly, not only the repo rate, but also that is the reference rate that has had an impact on all the rates. One month ago, I remember that the repo rate was at 70 percent; today, it's at 40, and then deposits, as I mentioned in the first quarter, were at 85 percent; today, they are at 30 percent.
Speaker Change: Moving to the longer bucket number perfect very certain kind of her current rates, how do you see them.
Speaker Change: For the record year in nuclear.
Speaker Change: Yes.
Speaker Change: While interest rates have been coming down significantly not only the repo rate, but also there is a reference rate debt.
Speaker Change: Has have an impact on order rates.
Speaker Change: One month ago, I remember that the repo rate was up to 70% today's had 40.
Speaker Change: Time deposits.
Speaker Change: As I mentioned in the first quarter was 85% today.
Speaker Change: <unk> percent interest rate and so they are at 30.
Speaker Change: 30%. So we are seeing interest rates coming down it will be.
Pablo Firvida: So we are seeing interest rates coming down, a function of the evolution of the economy; with this reduction in inflation and interest rates, we see this loan demand picking up quickly. So we will see some type of margin compression coming from very, very high levels, and it will be gradual, but we are seeing that the volume will more than offset the compression in margins. Okay, given that the reference rate was around more than 100% last year and today it's already at 40%, do you think it could be sustained at these levels, at least for this year, before going a little bit lower? Yes, that could be the case.
Speaker Change: Sanction of the evolution of the economy with this reduction in inflation and interest rates.
Speaker Change: We see this loan demand is picking up.
Speaker Change: Quickly.
Speaker Change: So we will see some type of margin compression coming from very very high levels and will be gradual.
Speaker Change: But we are seeing that the volume.
Speaker Change: We more than offset the compression in margins.
Speaker Change: Yes.
Robert: Robert I remember girlfriends road Rockford around more than 100% one here our group already at 40%.
Robert: It could be more for cleaner brighter.
Speaker Change: Before going.
Speaker Change: Going a little bit lower.
Speaker Change: Yes, good could be the case.
And also the Central Bank has many.
Pablo Firvida: Also, the central bank has many... I would say simultaneous objectives, and they said that this reference rate, but they are also looking at the evolution of the effects, so perhaps for this year, it will be difficult to see much more reduction in interest rates, but for next year, it could be the case that interest rates will be going down again. Of course, the central bank, I don't know if to say of course, but the central bank typically doesn't allow us to anticipate their moves.
Speaker Change: I would say simultaneous objectives.
Speaker Change: And <unk>.
Speaker Change: <unk> said that this reference rate, but also are looking at the FX evolution.
Speaker Change: So perhaps for this year it.
Speaker Change: It will be difficult to see much more reduction in interest rates, but for next year.
Speaker Change: Could be the case that interest rates will be.
Speaker Change: Going down again.
Speaker Change: Of course.
Speaker Change: The Central Bank.
Well I don't know to say of course that the central banks typically.
Speaker Change: Don't allow us to anticipate their moves they are very efficient.
Pablo Firvida: They are very efficient in setting new price signals and regulations, but looking at the inflation and the effects we are seeing, it looks like this interest rate level could remain for this year or perhaps with a small. READ ACTIONS OR ADJUST.
Speaker Change: In setting a new.
Speaker Change: The slight seasonal regulations, but.
Speaker Change: Looking at inflation and the effects, we have seen it looks like.
Speaker Change: Interest rate level it could remain for for this for this year or perhaps it's small.
Speaker Change: Ah reductions or adjustments.
Speaker Change: Perfect perfect.
Speaker Change: When we go to the loan to deposit ratio, if I'm not wrong in the third quarter ended with 50% loan to cost ratio.
Pablo Firvida: When we go to the loan-to-deposit ratio, if I'm not wrong, the third quarter ended with a 50% loan-to-deposit ratio. It's the difference between pesos and dollars. Of course, in dollars, it's much lower, although we have been seeing a pickup in dollar loans, in the demand for dollar loans. So it can grow, and we don't have... or I would say the ratios are so low that there is plenty of room to grow.
Speaker Change: It's the difference between pesos and dollars of course in dollars is much lower.
Speaker Change: Although we have been seeing.
Speaker Change: Pickup in dollar loans in the amount of dollar loans.
Speaker Change: So it can grow.
Speaker Change: And we don't have.
Speaker Change: Yeah.
Speaker Change: Or I would say that the ratios are so low that there is plenty of room to grow.
Speaker Change: We don't see them getting into the <unk>.
Pablo Firvida: We don't see them getting to... the levels we had in 2017 that were close to 90 or 95 percent, but we will, Navigate through this transition, but we are, we have room to improve that rate. In terms of ROE expectation, last year, Grupo Financiero Galicia had an ROE of 17.4%. This third quarter was very strong, with about 32%. It will be hard to replicate the same numbers, so we will see some declining ROE in the following quarters.
Speaker Change: It was we had in 2017 that were close to 90 or 95%, but.
Speaker Change: We win.
Speaker Change: Yeah.
Speaker Change: Navigate in this transition that we are we have room to.
Speaker Change: To improve that ratio.
Speaker Change: In terms of ROE expectation last year, Grupo Financiero Galicia had an ROE of 17, 4%. This first quarter was very strong with about 32% it will be a hard to replicate the same numbers. So we will see some.
Speaker Change: Declining Roe.
Speaker Change: In the following quarters.
Speaker Change: But.
Pablo Firvida: But, in my opinion, it will be in the area of 20% for the full year. Of course, as you also mentioned, Ernesto, there are many moving parts, but we are confident that we will adapt to these price signals I mentioned.
Speaker Change: In my opinion will be in the area of 20% for the full year.
Speaker Change: Of course as you.
Speaker Change: You also mentioned a net there are many moving parts, but we are confident that we will.
Speaker Change: Adapt to these price signals.
Speaker Change: Financially.
Speaker Change:
Yeah.
Pablo Firvida: Excellent, so the ROE for the full year was around 20%, and you think it could be maintained for the next years at 20%.
Speaker Change: For the full year around 20%.
Speaker Change: Could be maintained.
Speaker Change: <unk> per ton.
Yes, perhaps.
Speaker Change: Being a little bit conservative and taking into account the first quarter, but yes with the information we have today and I.
Pablo Firvida: Yes, perhaps I'm being a little bit conservative, taking into account the first quarter. But yes, with the information we have today, I would say 20% and, perhaps, the same level or even a little bit higher for next year.
Speaker Change: I would say, 20% and perhaps at the same level or even little bit higher for next year.
Speaker Change: Okay.
Speaker Change: Carlo.
Pablo Firvida: Excellent. Thank you very much, Pablo. You're welcome.
Carlo: Youre welcome.
Pablo Firvida: You're welcome, Ernesto.
Carlo: We will take our next question from Brian Flores with Keybanc. Your line is open. Please go ahead.
Operator: We will take our next question from Brian Flores, Citibank. Your line is open, please go ahead.
Speaker Change: Hi, Pablo thank.
Brian Flores: Hi Pablo and team, thank you for the opportunity. I have two questions. The first one is on strategy. I wanted to ask you how you are preparing to compete against Syntex, right? You have a very strong consumer franchise. But I think eventually, Fintechs will pressure, and they have pressured everyone regarding fees, and they are very fast in terms of implementing a great offer for consumers. So, just one thing to get your views on how you are preparing your franchise going forward, particularly as we saw this quarter some pressures on non-interest expenses, which also is a very important item, right, at the end. Efficiency, efficiency gains are a very important part of the equation.
Pablo: Thank you for the opportunity.
Brian Flores: I have two questions. The first one is on strategy.
Pablo Firvida: So, just how are you thinking about this? And then I'll ask my second question. Thank you. Yeah.
Brian Flores: I wanted to ask you how are you preparing to compete against <unk> right to have a very strong consumer franchise.
Speaker Change: But I think eventually syntax pressure and they have pressures everyone regarding fees.
Speaker Change: And I'm being very fast in terms of implementing.
Speaker Change: Great offer for consumers. So just wanting to get your views on how are you preparing your franchise going forward.
Speaker Change: Particularly as we saw this quarter.
Speaker Change: Some some.
Speaker Change: Pressures on noninterest expenses, which also is a very important.
Speaker Change: Item right.
Speaker Change: <unk> efficiency efficiency gains are.
Speaker Change: A very important part of the equation. So just how are you thinking about this and then I'll ask my second question. Thank you.
Brian Flores: Yes, Hi, Brian.
Pablo Firvida: Yes. Hi Brian.
Brian Flores: Well.
Speaker Change: We have been competing with Fintech for many years now.
Pablo Firvida: Well, we have been competing with fintechs for many years now, and Mercado Pavo is the largest. FinTech or Big Tech due to the fact that they were born through MercadoLibre. They sold, they got the clients from the e-commerce platform, and then they converted these clients into MercadoPago clients. So they have many clients with their wallet. We have NaranjaX, that is, I would say, the second FinTech in terms of active monthly users. And all the banks are digital; you need scale to become more efficient, that's why, in a way, we announced the purchase of HSBC.
Speaker Change: Medical power is the largest fintech or big tech due to the.
Speaker Change: They were born.
Speaker Change: Through Mercado Livre.
So they.
Speaker Change: And they got they got the clients from the ecommerce platform and then they converted these clients into multiple power clients.
Speaker Change: So they have many.
Speaker Change: <unk> clients.
Matt: Awarded we have Matt answer.
Matt: That is I would say the second fintech in terms of.
Active monthly users.
Speaker Change: And all the banks are D. G W.
Speaker Change: You need scale to become.
Speaker Change: More efficient.
That's why in a way we announced the purchase of HSBC.
Speaker Change: We also had as you mentioned.
Pablo Firvida: We also have, as you mentioned, a pressure on fees because of the high inflation level in the quarter, and the price increases couldn't be reflected or adjusted in the first quarter. So, the next quarter, you will see an improvement in income.
Speaker Change: The pressure on fees.
Speaker Change: This quarter that mainly.
Speaker Change: Because of the high inflation 11 in the quarter.
Speaker Change: The price increases.
Speaker Change: Couldn't be reflected or or adjusted in the first quarter. So the next quarters, you will see an improvement in fee income so.
Speaker Change: If I had to say today, where banks are making money I would say that much more we become the cooperates.
Pablo Firvida: So, and if I had to say today where banks are making money, I would say that much more with big corporates, medium-sized SMEs, the agricultural sector, price-banking clients, and not so much the typical massive fintech clients. Having said that, we tackle these not-so-profitable businesses with NaranjaX. As I mentioned, we have been competing with them, and I think that both Mercado Pago and Naranja X, and perhaps other much smaller companies, are a kind of barrier for newcomers.
Speaker Change: <unk> sized SME cyclical sector.
Speaker Change: The banking clients and not so much the.
Speaker Change: Typically a massive thing.
Speaker Change: The client having said that we tackle this non so profitable businesses with net and kayaks and.
As I mentioned, we have been.
Speaker Change: Competing with them and I think that both mercado Pago on narcotics and perhaps other much smaller companies.
Speaker Change: Our kind of barrier for newcomers it should be very difficult for I don't want to mention another.
Pablo Firvida: It should be very difficult for... I don't want to mention another company that... Any new fintech coming to Argentina from zero, it's almost impossible, in my opinion, easy to raise money. Now you have to have profitability much quicker than in the past.
To accompany that.
Speaker Change: Yeah.
Speaker Change: Any new Fintech coming to Argentina from Seo.
Speaker Change: It's almost impossible in my opinion.
Speaker Change: Very costly and.
Speaker Change: Perhaps it was each year when the interest rates in the world was much lower than it was.
We seek to raise money.
Speaker Change: Now you have to have profitability much quicker than in the past.
Speaker Change: And the other governors island.
Speaker Change: Yes. The second question Wason on the communique that you published very recently on the sanctioned by CMV.
Pablo Firvida: [inaudible] Yes, the second question concerns the communique that you published very recently on the sanction by CMV. I just wanted to ask you how you reached this conclusion. Was it on, is it your estimate, is it based on conversations with the regulator, or is it internal and with your lawyers, and it could have some upside risk? And when I say upside risk, could it be more than what you are estimating? Because in the communique, we didn't have many details, so if you could expand a bit on this, it would be great. Yes.
Speaker Change: Just wanted to ask you how did you reach this conclusion was it on is it your estimate is based on conversations with the regulator or is there an internal and with your lawyers and it could have some upside risk.
Speaker Change: Say upside risk is could it be more than what you're estimating just because on the communicate we didn't have much details. If you could expand on this would be great. Thank you.
Speaker Change: Yes.
Speaker Change: Yeah.
Well in this.
Pablo Firvida: Yes. Well, this sanction, as you mentioned, actually was an investigation that the CNB, the local SEC, informed us on April 30th and that they initiated this investigation. So we, in turn, initiated our internal investigation in order to find out if what the CND alleged was the case or not. Actually, at that moment, we didn't have a significant 6K because when an investigation begins, there is nothing to communicate. Yesterday, as we issued the press release and we advanced with the internal investigation, we said, or we communicated formally that we were in this process.
Speaker Change: Sanctioned SaaS you mentioned actually was an investigation that the CMV.
Speaker Change: Got it.
Speaker Change: And important to us on April 30.
Speaker Change: And that the.
Speaker Change: We initiated this investigation.
Speaker Change: So we in turn initiated our internally in deterioration and to find out.
Speaker Change: If what the CMV allege was the case or not.
Speaker Change: Only at that moment, we didn't have.
It's a relevant a significant 6K.
Speaker Change: Because when there is.
Speaker Change: And the mitigation begins there is nothing to communicate it yesterday as we issued the press release and we advance with the internal investigation and we said we communicate formerly.
Pablo Firvida: We will answer to the CNB on May 29, the number that the CNB is saying that was, and what we got above what should be the correct number is 23 billion pesos. The preliminary numbers, our preliminary numbers are much lower, but that will be answered on May 29th. But in order to be prudent, we have a provision of 23 billion pesos plus another 23 billion pesos. So, actually, the provision is 46 billion pesos. It was not. [inaudible] cover.
Speaker Change: That we were in this process, we will answer.
Speaker Change: Two the CMV on May 29.
Speaker Change: The number that the CMV.
Speaker Change: Yeah.
Speaker Change: Saying that was.
Speaker Change: And what we bought above the what should be the correct number is 23 billion pesos.
In the preliminary our preliminary numbers are much lower but that will be answered on may 29, but in order to be prudent.
Speaker Change: We had a provision of 23 billion pesos plus another 23 million business. So actually the provision is 46 billion pesos. It was not.
And something we spoke with the regulator and it was a prudent decision.
Speaker Change: In order to have in our books.
Speaker Change: Yeah.
Speaker Change: Cover.
Speaker Change: Most of all.
Pablo Firvida: Most of all, and perhaps more than the final number that the CNB and the central bank will tell us. The thing is not so easy, the number, because executing, well, you know, all the banks that pay a prime have the right to sell a defense bond to the central bank. In this case, it was a dual bond, and it was not very liquid. And the price that the central bank, on an ordinary basis, sets is an extrapolation of some dots.
Speaker Change: And perhaps more.
Speaker Change: More than the final.
Speaker Change: Number and we wouldnt, the CMV and the central lung.
Speaker Change: Tell us this is not so easy this the number.
Speaker Change: Because executing well.
Speaker Change: The banks.
Speaker Change: Got it.
Speaker Change: Brian had the put right to sell to the Central Bank.
Speaker Change: <unk> bonds.
Speaker Change: In this case it was a.
Speaker Change: Corn and it was not very liquid.
Speaker Change: The price that the.
Speaker Change: Central Bank on another 90 basis sets.
Speaker Change: An extrapolation of some dots and so.
Pablo Firvida: And so there are many different analyses in which you can say which is the correct price. And depending on that, the impact is 23 billion pesos or half or whatever, or even nothing if you compare, I don't know, other dual bonds or dollar links or other instruments. So that is what we said as we issued the results. We are saying that we built a provision because of this initial investigation that it's not at all closed. I don't know if it was clear.
Speaker Change: There are many different analyses in which you can say, which is that the correct price and depending on that the impact is 23 billion pesos or half or whatever or even nothing if you compare.
Speaker Change: No other.
Speaker Change: <unk> also has a link or other instruments. So that is what we said as we are.
Speaker Change: We issued the results we are saying that we built a provision.
Speaker Change: Because of this.
Speaker Change: In initial investigation that is not totally close.
Speaker Change: I don't know if <unk> is.
Speaker Change: It was clear.
Speaker Change: No. It was it was clear I just think maybe a quick follow up that would be useful. So you are saying.
Brian Flores: It was clear. I just think maybe a quick follow-up would be useful. So you're saying, as you mentioned, it could be less, but also, I mean, is there a probability that it could be more than this? Or do you think maybe the... The limit on this, returning the $23 billion plus the $23 billion, which maybe the limit is around $50 billion. Or do you think there is a chance the regulator will sanction a higher number?
Speaker Change: As you mentioned it could be less but also I mean is there a probability that it could be more than this or do you think maybe the.
Speaker Change: Limitations on these <unk>.
Speaker Change: Returning the 23 billion plus the 23 billion.
Speaker Change: Maybe the limit is around for us.
Speaker Change: Around 50 billion, where do you think there is a chance to see the regulator.
Speaker Change: A higher number.
Speaker Change: It really is.
Pablo Firvida: Really, it's difficult to predict. University of California, San Luis Obispo, California State University, San Luis Obispo; it's also impossible to predict the fine. So, as I mentioned, in a prudent way, we've provisioned these 46 billion pesos. But it's hard, really, to say if it's enough or it's a lot, or if we'll be marginal in the effect in the next quarter.
Speaker Change: Difficult to predict.
Speaker Change: If you analyze.
And discard the adults the extrapolation the numbers should be.
Speaker Change: Much lower but.
Speaker Change: In both the impossible to predict.
Speaker Change: Also the fine so.
Speaker Change: I mentioned as a prudent way we provision these 46 billion pesos.
Speaker Change: But it's hard really to say <unk> or <unk>.
Speaker Change: It will be marginal.
Speaker Change: In the next quarters.
Speaker Change: Okay, but just to finalize and I'm sorry to ask one on this topic, maybe a lot of questions would you say this will be maybe 29, youre going to youre going to present in Uruguay answer formally to CMV by when do you think we could get like a final resolution from CMV.
Brian Flores: Okay, Pablo, just to finalize, and I'm sorry here to ask a lot of questions about this topic, but you say this will be maybe by 29 you're going to present and you're going to answer formally to CMV. By when do you think we could get a final resolution from CMV?
Speaker Change: The CMV definitely have.
Pablo Firvida: The CNB doesn't have a deadline; they are not... There is not a process or a procedure that says that in 10 days you have to answer. We hope to get the answer as soon as possible; we would like to close this investigation because, definitely, we are not happy at all with the situation. So the sooner, the better, but it's not in our hands. We will answer, but the answer will not be public. Once the situation is closed or settled, it will become public. Very clear, thank you. You're welcome, Brian.
Speaker Change: And deadlines.
Speaker Change: Or not.
Speaker Change: There is not a process or a procedure and that says that.
Speaker Change: In 10 days you have to have to answer.
Speaker Change #100: We hope to get the answer as soon as possible, we would like to close this investigation because definitely we are not happy at all with the situation.
Speaker Change #101: The sooner the better.
Speaker Change #101: But it's not in our hands.
Speaker Change #102: We will answer the answer will not be bottleneck.
Speaker Change #103: And once the situation is.
Speaker Change #103: Clothes or settle it will become public.
Speaker Change #104: Super clear thank you.
Brian Flores: Youre welcome Brian.
Speaker Change #105: We will take our next question from Carlos Gomez HSBC. Your line is open. Please go ahead.
Operator: We will take our next question from Carlos Gomez, HSBC. Your line is open. Please go ahead.
Speaker Change #106: Hello, Thank you for taking the question.
Carlos Gomez: Hello, thank you for taking the question. The first one, you show very helpfully that your government exposure is now 23% of total assets, and it has been increasing. Is there an internal limit that you have set for that exposure? And if we understand correctly, that is not counted, I mean part of that is not counted, the leg-ups are not counted as part of your public sector exposure today, right?
Speaker Change #107: The first one.
Carlos Gomez: So hopefully that your government exposure is now 23% of total assets and he has been in question is there an internal limit that you have set for that.
Speaker Change #109: And if I understand correctly that is not counted Dr.
Speaker Change #110: Preferred is not counted the lockups are not counted as part of your public sector exposure.
Speaker Change #109: Right.
Speaker Change #111: That'll be my first question the second refers to loan demand.
Pablo Firvida: That would be my first question, as it refers to loan demand. So, do you expect loans to grow by 30% now? We understand that things move very fast in Argentina, but you had a decline of 2% in the first quarter. What are you seeing so far? We are, you know, in the middle of the second quarter. What are you seeing so far, and are there any signs of renewed demand in Argentina that give you hope that you will be able to get to that 30% by the end of the year? Thank you. Yeah
<unk>.
Speaker Change #112: Just back now to grow 30% and when there's something that has moved pretty fast in Argentina.
Speaker Change #113: But you have to decline of 2% in the first quarter.
Speaker Change #114: What are you seeing so far we have.
The middle of the second quarter that you've seen so far and are there any signs of renewed demand in Argentina that that gives you hope that you will be able to get to that 50% margin.
Speaker Change #114: Yes.
Carlos Gomez: Hi, Carlos.
Speaker Change #115: While we see.
Pablo Firvida: [inaudible] and Juan Huiti. Well, we made a difference between the government exposure, which, as you said, was 23% of total assets, and the Central Bank exposure, mainly ripped off today after the leaks disappeared, and they stood at 17%, so in total, 40%. There are regulatory limits on government exposure, and we also have our internal limits. And this 23% doesn't include the new LECAPs that were issued. Basically, the new LECAPs will be seen in the second quarter.
Speaker Change #116: And while we make a difference between the government and exposure is that true.
Speaker Change #117: It was 23% of total assets.
Carlos Gomez: And the Central bank exposure, mainly repo today.
Carlos Gomez: Disappear.
Carlos Gomez: And they stood at 17% so in total 40%.
Carlos Gomez: There are regulatory limits on Golar <unk> exposure and we also have our internal limits.
Carlos Gomez: This 23% and doesn't include the new law caps that were issued.
Speaker Change #118: Basically the newly caps.
Speaker Change #118: It will be seen in the second quarter.
Speaker Change #119: Our objective is to keep this.
Pablo Firvida: Our objective is to keep this percentage around 25% of total assets when the loan demand from the private sector picks up. Basically, this will be the source of funding. It will be a shift from one of these assets that the government wants to lend to the private sector. We have, we are seeing some, I would say, timid or shy loan demand coming from companies; it began with dollars that we are seeing in the first quarter. And when we speak with the commercial people of corporate banking or SMEs or the agricultural sector, they say that the clients have many projects, but they are waiting for some clarity or some more predictable macro variables, mainly So in our assumption, we are seeing low demand, a rebound, already in the second semester, in the second half of the year.
Speaker Change #119: Percentage.
Speaker Change #119: Around 25% of total assets.
Speaker Change #120: And when the loan demand from the private sector picks.
Speaker Change #120: Picks up.
Speaker Change #120: Basically this will be the source of funding to be a shift from one of these assets that they go on the months to lending to the private sector.
Speaker Change #121: We have we are seeing some.
Speaker Change #121: I would say timid or shy.
Speaker Change #121: The loan demand coming from companies.
Speaker Change #121: Began with dollars.
Speaker Change #121: We're seeing in the first quarter.
Speaker Change #121: And when we speak with the commercial people of corporate banking or SME or the telco sector, they say that they.
Speaker Change #121: Clients have many projects that they are waiting for some.
Speaker Change #122: The clarity or some.
Speaker Change #123: I would say more it's a.
Speaker Change #123: Predictable microbiome levels, mainly lower inflation.
Speaker Change #124: Your path on effects. So in our assumption we are seeing.
Loan demand rebounding.
Speaker Change #124: Already.
In the in the early second half of the ore in the second semester in the second half of the year.
Speaker Change #124: Yeah.
Speaker Change #125: Alright, you until you expect.
Pablo Firvida: All right, so you expect, I mean, you still expect that recovery to happen. And to give you another easy question, you mentioned inflation and GDP. What's your forecast for the currency?
Speaker Change #126: Do you still expect that recovery to happen and Entravision. Another easy question, you mentioned inflation in beauty.
Speaker Change #126: As far as the currency.
Speaker Change #126: For the current year.
Pablo Firvida: For the current year. Between 135% and 140% inflation. As I mentioned before, it's a moving target. At the beginning of the year when we were making our annual budget, most of the economies were thinking 200%, then 180%, and it has been coming down, and for next year, perhaps early, the current estimates are around between 35% and 40%. And also, as I mentioned, still very high, but coming from the very high levels of the previous years, it's a good declining trend.
Speaker Change #127: What does it mean.
Speaker Change #128: 135, and 140% inflation.
Speaker Change #128: Yeah.
Speaker Change #129: As I mentioned before it's a moving target.
Speaker Change #130: At the beginning of the year or when we were making our annual budget.
Most of the economies for things into 100%, then 180 and it has been coming down.
Speaker Change #130: And for the city for next year.
Speaker Change #130:
Speaker Change #130: It's perhaps early that the current estimates are around.
Speaker Change #131: Between 35 and 40%.
Speaker Change #132: And also as I mentioned very still very high but coming from the very high levels.
Speaker Change #132: The previous years.
Speaker Change #132: Declining trend.
Speaker Change #133: Yes. Thank you and no. My question was about the currency, where do you expect the peso.
Speaker Change #134: And then on the Ccs exchange rate and again Andrew.
Pablo Firvida: and the CCL exchange rate to finish. And again, I understand nobody knows.
Speaker Change #134: No.
Speaker Change #135: The blue chip swap the CCL.
Pablo Firvida: Now, the new chip swap, the CCL, well, right now, in this week mainly, we saw some recovery or increase in the price of the CCL. It's hard to predict because we have the limitations on FX movements. The expectation is that the government will release most of these limitations, perhaps in September. And at that moment, perhaps we will see some.
Speaker Change #136: Well right now.
Andrew: On the industry, mainly we saw some recovery or increase in the price of the CCL.
Andrew:
Speaker Change #138: Hard to predict because we have the Sip book now the limitations on an FX.
Movement.
Speaker Change #138: Our.
Expectation is that the government will release most of this.
Speaker Change #138: Limitations, perhaps in September.
Speaker Change #138: <unk>.
Speaker Change #138: That moment, perhaps we will see some.
Speaker Change #138: Increase in BFS.
Speaker Change #139: And the gap between the official effects on the financial.
Pablo Firvida: And the gap between the official effects and the financial dollars should narrow back as it was, de la. The number I saw was 1,200 for the official exchange rate at the end of the year. But this is the, it's even harder to project than the inflation number. So, still having all these restrictions and making the DFT makes it hard.
Speaker Change #139: It should.
Speaker Change #140: <unk> back as it was.
Speaker Change #139: Yeah.
Speaker Change #141: The the left.
Speaker Change #142: The number I saw was 1200.
Speaker Change #142: Dsos for the official exchange rate at the end of the year.
Speaker Change #143: But this is the it's.
Speaker Change #144: Even harder to predict.
Speaker Change #144: And then the inflation number.
So still.
Speaker Change #145: Having all these restrictions.
Speaker Change #146: It makes the estimates card.
Speaker Change #147: What is important to understand that for bonds.
Pablo Firvida: What is important to understand is that for banks... We have to be hedged in dollars. We cannot be long, or we could be something long in dollars through forward contracts. But in general, a devaluation doesn't have a direct impact on our balance sheet. Of course, there is an indirect impact on the numbers of our clients. And in general, when there is a devaluation, as the private sector is long in dollars in Argentina, there is a kind of wealth effect. But today, I would say that the main variable to monitor is inflation.
Speaker Change #148: We have to be a hedge in dollars, we kind of belong or some we got some something longer.
Speaker Change #149: Through our contract, but in general in General is evaluation.
Speaker Change #150: It doesn't have a direct impact on our balance sheet.
Speaker Change #150: Of course, there is an indirect impact.
Speaker Change #151: The numbers of our clients.
Speaker Change #151: In general when there is a devaluation as the private sector is long in Argentina.
Speaker Change #152: There is a kind of.
Speaker Change #153: Wealth effect.
Speaker Change #154: But today I would say that the main variable to monitor is inflation.
Speaker Change #154: Okay.
Speaker Change #154: Okay. So for the products right now in terms of 240 efficiently century.
Pablo Firvida: Okay, so for the products right now, $1,200 at the official exchange rate. Yes.
Yes.
Speaker Change #155: Thank you so much.
Carlos Gomez: You're welcome Carlos.
Pablo Firvida: You're welcome, Carlos.
Speaker Change #156: We will take our next question from Alonso Aramburu BTG. Your line is open. Please go ahead.
Operator: We will take our next question from Alonso Aramburu, BTG. Your line is open. Please go ahead.
Speaker Change #157: Yes, hi, good morning, and thank you for.
Alonso Aramburu: Pablo, I wanted to ask you about your capital ratios, given the demand you're expecting very strong this year, and I would imagine that in 2025, you would also expect long growth in real terms, probably about 40% as well. How do you see your capital ratios evolving? You have excess capital today. So just if you can give us some color on that, and also related to that, what do you think? Thank you.
Speaker Change #158: But I wanted to ask you about your capital ratios given the demand you're expecting there.
Speaker Change #159: Very strong this year and I would imagine that in 2025, you would also expect loan growth in real terms, probably about 40% as well how do you see your capital ratios are evolving you have excess capital today.
Speaker Change #159: So just if you can give us a color on that.
Speaker Change #159: Related to that.
Speaker Change #160: What do you think it could be a dividend policy of the bank. Thank.
Speaker Change #160: Thank you.
Speaker Change #161: Hi, Alonso.
Pablo Firvida: Hi Alonso. Well, the capital ratio is about 30%, so very high, much higher than we would like. And actually, we announced dividends, and we paid dividends. In May, Grupo Financiero Galicia paid 220 billion pesos. One was 65 billion pesos, and the second one was 140.3 billion pesos.
Alonso Aramburu: Well the capital ratio is above 30%. So it is very high.
Alonso Aramburu: It's much higher than what we would like and actually.
Alonso Aramburu: We announced a dividend and we paid dividends.
Speaker Change #163: He made.
Speaker Change #164: Grupo financier anticipated two tranches one was.
Speaker Change #165: 65 billion pesos. The second one was 142.3 lithium pesos.
Speaker Change #166: And while the second.
Pablo Firvida: Why the second of 140.203 billion pesos is because the central bank approved the payments of dividends from the banks to the holding company in three installments. Therefore, Grupo Financiero Galicia will receive two additional installments. Let's say between 145 and 160 for the next installments because they will be adjusted by inflation in June and July, and then the Board of Directors of Grupo Financiero Galicia will decide the best moment to pay the other installments to the Grupo Financiero Galicia shareholders.
Speaker Change #166: 142000.
Speaker Change #167: 41, two or three 8 billion pesos.
Speaker Change #167: Because of the Central Bank approval.
Speaker Change #168: The payments of dividends from the bank to the holding company in three installments.
unknown: So Grupo Financiero Galicia will receive two additional installments, let's.
unknown: Let's say between 145160, the next installments, because they won't be adjusted by inflation.
Speaker Change #170: In June and July.
Speaker Change #171: And then the board of directors of Grupo Financiero Galicia win.
Speaker Change #172: Decide the best moment to pay the installments to the Grupo Financiero et cetera for us so capital ratio will be reduced with the payment of dividends.
Pablo Firvida: So the capital ratio will be reduced with these payments of dividends. We will also have an increase in our capital once we combine Banco Galicia and Grupo Financiero Galicia with HSBC. We have to see what the final effect will be. And because the price was set in dollars, but at the moment.
Speaker Change #173: We will also have an increase in our capital once we combine.
Speaker Change #173: Banco Galicia, and Grupo Financiero <unk> with HSBC.
Speaker Change #174: We have to see what will be the final effect.
Speaker Change #174: Because the price was set in dollars but.
Speaker Change #175: At the moment.
Speaker Change #176: When we announced the transaction.
Pablo Firvida: When we announced the transaction, the price to book we paid was 40%. I assume there will be a capital gain there. And with all the sensitivity analysis we can do, we see enough capital to pay dividends, absorb HSBC, and grow our loan book this year and next year. And, of course, we will be generating results. So really, capital is not an issue in the medium term, I would say.
Speaker Change #176: The price to book.
Speaker Change #177: We paid was 40%.
I assume there will be a capital gain there.
Speaker Change #178: And with all the sensitivity analysis, we can make.
Speaker Change #179: We see enough capital to distribute dividends to absorb HSBC and to grow our loan book this year and next year.
Speaker Change #179: Of course, we will be in June.
Speaker Change #180: <unk> results, so really capital, it's not an <unk>.
Speaker Change #181: Issue in the medium term I would say.
Paul: Okay. Thank you Paul.
Pablo Firvida: Okay, thank you, Pablo. You're welcome.
Paul: Youre welcome.
Pablo Firvida: You're welcome, Alonso.
Paul: Yes.
Speaker Change #183: We will take our next question from David Kadow Cantor. Your line is open. Please go ahead.
Operator: We will take our next question from David Cardo. Fionta, your line is open, please go ahead.
Yes, Thank you well congratulations on the results from the quarter.
David Cardo: I have a couple of questions. First, on HSBC's acquisition, I understand that it's not yet consolidated with the group, but I'd like to know, well, if you could give us some color on the rationale behind it, like, are there any... Synergies between those portfolios you've seen, I mean, prior to yours, that you're expecting to get, or something of a sort. Second, going back to the administrative process, you are still on the go with CNV. Other than the money, other than the financial, the fine that you may get, are there any other, let's say, trading restrictions that might be imposed on the group?
Speaker Change #184: Couple of questions first on HSBC.
Speaker Change #185: Recession I understand first.
We have consolidated with.
The groups.
Speaker Change #186: But I like to know if you could give us some color on the rent.
Speaker Change #187: As you know.
Speaker Change #187: Behind it.
Speaker Change #188: Are there any.
Speaker Change #189: Synergies between both portfolios. So we are seeing.
Speaker Change #190: Do you expect it again.
Or Samsung.
Speaker Change #190: And.
Speaker Change #190: Second.
Speaker Change #190: Excellent.
Speaker Change #190: The enrichment process.
Speaker Change #190: Let me go with CMV.
Speaker Change #190: Mark.
Speaker Change #191: Bonnie LMI financial China, New May again are there any other.
Speaker Change #192: Let's say trading restrictions that might be imposed on the grill.
David: Hello, David.
David: Well first.
Pablo Firvida: Well, first, I will begin with the second part. I think that once we... Well, first, we have to finish with the investigation, no? But let's say we need to pay the money back, the additional gain, and the fine. It should be, I don't know what other sanctions could be. Really, so far, with the information we have today, I would say no other effects.
David: I will begin with the second part.
Speaker Change #194: I think that once we are.
Speaker Change #195: First we have to finish with the investigation now, but let's say.
Speaker Change #196: We need to pay.
Speaker Change #197: The money back the additional.
Again, an undefined.
Speaker Change #197: It should be.
Speaker Change #198: I don't know what other sanctions.
Speaker Change #198: B.
Speaker Change #198:
Speaker Change #199: Perhaps some.
Speaker Change #200: In the U R.
Speaker Change #201: Finds to individuals.
Speaker Change #201: Really.
Speaker Change #201: So far.
Speaker Change #202: With information, we have today I would say no other effects.
Speaker Change #203: Of course, we are as I mentioned.
Pablo Firvida: Of course, we are, as I mentioned, not happy at all. We take a lot of pride in our reputation. Internally, it was a very bad surprise.
Speaker Change #204: We are not happy at all.
Speaker Change #203: Yeah.
Speaker Change #205: Take care of a lot of our reputation.
Speaker Change #205: Internally it was.
Speaker Change #205: Very bad surprise, but we need to finish and litigations the answer.
Pablo Firvida: But we need to finish investigations, the answer, and the outcome. With HSBC, we are waiting for two things to happen to get the closing. One is the approval from the central bank, and the other one, which we feel, or we estimate, will occur in the second semester, perhaps in the fourth quarter.
Speaker Change #205: Outcome.
Speaker Change #205: And.
Speaker Change #205: With HSBC.
Speaker Change #206: We are waiting for two things too to get the closing one is the approval from the Central Bank and the other one that we feel or we estimate that will occur.
Speaker Change #207: In the second semester, perhaps in the fourth quarter and the other thing we have to to achieve.
Pablo Firvida: And the other thing we have to achieve, or HSEC has to achieve, is to be able to disconnect HSEC Argentina with HSEC Argentina, headquarters. There are some IT problems, The Argentine Bank to operate as an independent vehicle. Well, the logic or the rational..., with the purchase of HSEC, the price was a good one, in our opinion.
Speaker Change #208: Or HSBC has to achieve is to be able to disconnect HSBC, Argentina with HSBC.
Speaker Change #209: Headquarters there some.
Speaker Change #209:
Speaker Change #210: The software and how are things that must be disconnected in order to lead it.
Speaker Change #211: The Argentine bank to operate as an independent vehicle.
Speaker Change #212: Well the logic or the rationale.
Speaker Change #212: In.
Speaker Change #212: Yes.
Speaker Change #213: With the purchase of HSBC.
What was the price was a good one in our opinion.
Speaker Change #214: In the price within a put any synergy.
Pablo Firvida: In the price, we didn't put any synergies in, but I'm sure there will be some of them. We are getting a new client, and it's hard to grow.
Speaker Change #215: But I'm sure there will be some of them.
Speaker Change #216: We are getting new clients.
Speaker Change #216: It's hard to grow.
Hum.
Pablo Firvida: Organically, you need a lot of time, so M&A is a good way to gain market share. They have not only good clients, but they also have good employees. We are looking to get more talent. They have certain products and niches, like they are very good at comics and foreign trade. They have good wealth management.
Speaker Change #216: Organically.
Speaker Change #217: You need a lot of time, so M&A is a good way to gain market share.
Speaker Change #218: They have not only good clients.
They also have a good employees.
Speaker Change #219: We are looking at also to get more talent.
Speaker Change #220: They have certain products in our niches like.
Speaker Change #221: They're very good in comex in foreign trade.
Speaker Change #222: Have a good wealth management, we are also getting an insurance company and an asset management company. So it will give us 335% increase in market share.
Pablo Firvida: We are also getting an insurance company and an asset management company, so it will give us a 3%, 3.5% increase in market share. However, there could be some overlap between certain branches. We will need to see which ones are owned branches, either by the current HSE or Galicia, and which are rented. Perhaps there could be some overlapping, but typically, in a normal year in any bank, you lose a certain number of people, so without doing anything very active, we could be getting to a good number of people, considering our staff and their staff.
Speaker Change #222: There could be some overlapping.
HSBC Alicia: Certain branches, we will need to see which ones are own branches either by the current HSBC Alicia.
HSBC Alicia: Which are rented.
HSBC Alicia: And perhaps at headquarters could be some overlapping.
Speaker Change #224: But typically in a normal year.
Speaker Change #226: In any event you lose it.
Speaker Change #225: Certain number of people so.
Speaker Change #225: Without doing anything very active we could be getting through.
Speaker Change #227: It's a good number of people considering our stuff on there so.
There will be synergies, but as I mentioned, the one not priced in.
Pablo Firvida: So, there will be synergies, but as I mentioned, they were not priced in. I don't know if I answered you both. Yes, absolutely. Perfect. Thank you.
Speaker Change #227: And then if I answer both.
Speaker Change #228: Questions, Yes, absolutely perfect. Thank you.
Speaker Change #228: Jonathan.
Speaker Change #228: Oh.
David Cardo: You're welcome, David. We will take our next question from Marina Mertens.
Speaker Change #228: We will take our next question from Marina Maultasch Latin Securities. Your line is open. Please go ahead.
Operator: We will take our next question from Marina Mertens, from Latin Securities. Your line is open. Please go ahead.
Marina Maultasch: Hi, Tyler were mining so I have just one question on guiding and it sometimes and regulations, so, which additionally agency extend to be mix, keeping them coming lands and how do you expect it to impact <unk>.
Speaker Change #228: Yes.
Speaker Change #228: Yeah.
Martin: Hi, Martin.
Marina Mertens: Hi Marina. Well, we are convinced that the Central Bank will dismantle many regulations that were built in the previous administrations because the Central Bank believes more in competition and not so much in micro-regulation. So the regulation that worried us the most was the minimum interest rate on time deposits that they lifted, or they eliminated that minimum interest rate on time deposits in mid-March, so it was a good signal.
Martin: Well.
Speaker Change #231: We are.
Speaker Change #231: Convinced the central Bank.
Martin: We'll make.
Martin: We will dismantle many regulations that were built in the previous administrations and because this central bank building.
Speaker Change #232: Beliefs more in the in the competition and not so much in the micro.
Speaker Change #232: Relation.
Speaker Change #232: So.
Speaker Change #233: The in the regulation that worries us the most was the minimum interest rates on time deposits that they lifted or they eliminated that minimum interest rate on term deposits in mid March.
Speaker Change #234: So it was a good signal.
And then any mandatory lending to smes on or any gap on interest rates or more flexibility to merge branches is something we are seeing as necessary.
Speaker Change #234: We're going to tackle that.
Speaker Change #235: One thing that.
Marina Mertens: Then any mandatory lending to SMEs or any cap on interest rates or more flexibility to merge branches is something we are seeing as necessary, and they are going to tackle that. One thing that banks, in general, have been fighting for for many years is to level the field with certain fintechs. Some fintechs are not regulated by the central bank, and we keep on saying that if they take deposits, if they lend loans, they must have reserve requirements, and capital requirements. They have to provide information to the central bank. They have to know their clients in order to avoid money laundering or this type of thing.
Speaker Change #236: Banks in general are in <unk>.
Speaker Change #237: Writing for for many years.
Level this deal with certain fee index. Some fin techs are not regulated by the Central Bank and.
We keep on saying that in the.
Speaker Change #238: The positive big run loans, they must have restarted.
Speaker Change #239: We said requirements capital requirements.
Speaker Change #240: Have to provide information to the central Bank.
Speaker Change #241: You have to know the clients in order to avoid.
The money laundering or these type of things.
Speaker Change #241: So that would be also a good thing not only eliminating distorted regulations.
Pablo Firvida: So that would also be a good thing. Not only eliminating distortive regulations that set caps or floors, but also [inaudible] We had some discussions with Mercado Pago regarding the QR, and this has been an issue for many months, even a year, I think, and well, there is a need to have similar... Rights and Obligations.
Speaker Change #242: Six cups or floors.
Speaker Change #243: But also.
Speaker Change #244: Regulating index.
Speaker Change #245: We had some discussions with mercado Pago revising the QR.
Speaker Change #245: And this.
Speaker Change #245: Has been an issue for many months, even a year end thing.
Speaker Change #246: Well there is need to.
Speaker Change #246: Similar.
Speaker Change #246: Right.
Speaker Change #246: Obligations.
Pablo Firvida: That's, I would say, the main thing. So far, the central bank has been more focused on effects, inflation, and its balance sheet, and I think that's the best. The second round of measures, in my opinion, will be more regulating or deregulating the financial system.
Speaker Change #246: That's I would say the main thing so far the central Bank has been more focused on FX inflation on their balance sheet and I think it's the best.
Seeing the seasonal now the second round of measures in my opinion will be more.
Speaker Change #247: Relating or deregulating, the financial system in the us.
Speaker Change #248: Okay. Thank you.
Marina Maultasch: So welcome Marina.
Speaker Change #249: There are no further questions on the line. So I'll now hand, you back to your host for closing remarks.
Operator: There are no further questions on the line, so I will now hand you back to your host for closing remarks.
Speaker Change #250: Okay. Thank you all for attending this call.
Operator: Well, okay, thank you all for attending this call. If you have any further questions, please do not hesitate to contact me. Good morning, and have a nice weekend.
Speaker Change #251: If you have any further questions. Please do not hesitate to contact us.
Speaker Change #251: Morning.
Speaker Change #252: Nice weekend bye.
Speaker Change #253: Bye bye.
Speaker Change #254: Thank you for joining today's call you may now disconnect.
Operator: Thank you for joining today's call. You may now disconnect.
Speaker Change #254: Hum.
Speaker Change #254: Okay.