Q4 2024 Banco BBVA Argentina SA Earnings Call
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Speaker Change: Good morning everyone and welcome to BBVA Argentina, 4Q24 and Fiscal Year, 2024 Results Conference Call.
Speaker Change: Today we first are Mrs. Belen Forcade, Investor Relations Manager, and Mrs. Carmen Mauricio Arroyo, CFO , who will be available for the Q&A session. These presentations and the 4Q24 earnings release are available on our Investor Relations website, ar.bpva.com.
Speaker Change: IR and will also be available for downloading the chat.
Speaker Change: First of all, let me point out that some of the statements made during this conference call may be forward-looking statements within the managing of the Safe Harbor Provision Founding Section 27A of the Securities Act of 1933 under the US Federal Securities Law.
Speaker Change: These forward-looking statements are subject to risk and uncertainties that could cause actual results to cheaper materially from those expressed in the forward-looking statements.
Speaker Change: Additional information concerning these factors is contained in the BBVA Argentina Animal Report on form 20 app for the fiscal year of 2023, filled with the U.S. Securities and Exchange Commission.
Speaker Change: During the company's presentation, all microphones will be disabled. At this time, we're going to open it up for questions and answers. If you have a question, please write it down on the Q&A field or click on raise hand for all your questions.
Speaker Change: You will then receive a request to activate your microphone, please activate it and pick up your handset to provide optimum sound quality when posing your question. I will now turn the call over to Belén Forcade, please go ahead.
Belen Fourcade: Good morning and thank you all for joining us today. The significant fiscal and monetary consolidation together with relative exchange rate stability have contributed to a process of inflation moderation throughout 2024 in Argentina.
Belen Fourcade: Likewise, after a short contraction in the first half of the year, there are dear signs of economic recovery which, after an expected average drop of 1.8% by the National Institute of Statistics for 2024, would expand around 5.5% in 2025 according to BBVA research.
Belen Fourcade: The prospects for reducing inflation have been improving every month and the forecast is that it will convert to around 30% or even less in 2025.
Belen Fourcade: The collapse of country risk is also remarkable, which went from 1900 BPs to less than 700 BPs at the end of 2024.
Belen Fourcade: On the other hand, one of the main factors of uncertainty is associated with the evolution of exchange rates and the pace of removal of exchange regulation since recently the personally made more appreciated and expected.
Belen Fourcade: The banking system continues to grow at a high rate driven by inflation control and the reform introduced by the new government.
Belen Fourcade: Now, moving on to business dynamics, as you can see on slide 3 of our webcast presentation, our service offer in Hasibol in such a way that by the end of December 2024, new customer acquisitions through digital channels with 88.0%, versus 78% a year ago.
Belen Fourcade: The response on the side of customers has been satisfactory and we are convinced that this is the path to pursue in the aim of sustaining and expanding our competitive position in the financial system.
Belen Fourcade: Retail digital sales measured in units which 91% in the fourth quarter of 2024 and we present 23.5% of the bank's total sales measured in monetary value.
Belen Fourcade: Moving to flag four and five, I will now comment on the bank's fourth quarter 2024 financial result.
Belen Fourcade: The BBVA Argentina's inflation adjusted net income in the fourth quarter of 2024 was 64.7 billion pesos, decreasing 39.6% quarter or quarter.
Belen Fourcade: This implies a borderly ROE of 9.5% and a borderly ROE of 1.7%.
Belen Fourcade: The 48.1% fall in quarterly operating results was explained by a lower operating income and higher operating expenses.
Belen Fourcade: The decline in income was mainly due to one. Higher loan loss allowances mainly driven by sustained growth and activity.
Belen Fourcade: 2 lower net free income, 3 lower net income as a result of a lower average monetary policy rate, and 4 lower interest generated by CPI link bonds.
Belen Fourcade: On the side of expenses, personal expenses and operating expenses are higher, the latter uses a devaluation of investment properties.
Belen Fourcade: It should be noted that the income tax line reflects her positive results derived from a change in accounting exposure that implies a regular classification of income tax calculation from other comprehensive income to the income statement.
Belen Fourcade: Netting up for the period was highly impacted by income from the net monetary position, although with lower impact and the prior quarter.
Belen Fourcade: Inflation on the fourth quarter of 2024 was 8.03% lower than the 12.1% in a previous quarter.
Belen Fourcade: Consequently, the income from net monetary position line recorded at 16.2% lower loss than the previous quarter, having a positive income in the quarter of a quarter net income comparison.
Belen Fourcade: Turning into a P&L line in slide six, we are going to comment on the financial results of the year. In 2024, BBVA Argentina net income was 357.7 billion pesos, 8.4% lower than the 359.2 billion pesos reported in 2023.
Belen Fourcade: This implies an accumulated annualized ROE of 12.5% and an ROE of 2.5% in 2024, compared to an ROE of 13% and an ROE of 2.7% in 2020.
Belen Fourcade: The 25.8% fall in real terms of a bank operating income is mainly explained by one.
Belen Fourcade: A fall in net interest income due to lower average rates in loans and due to lower inflation which has an impact on CPI link bond.
Belen Fourcade: and two lower income from foreign exchange and gold gains in particular due to the position in dual bond by the end of 2023, which increased the position in USD denominated assets
Belen Fourcade: Nonetheless, improvements in operating expenses are observed, especially in personal expenses and lower expenses due to turnover tax.
Belen Fourcade: This effect were compensated by better income from financial instruments at fair value through P&L, and an improvement in income from right down of assets at Amortized Costs and fair value throughout C.I. As a result of the say, exchange and maturity of bonds, mainly C.B.I. link bond.
Belen Fourcade: Regarding net interest income in 2024, this total 2.9 trillion pesos, falling 17.3% year-over-year.
Belen Fourcade: This was a result of one, a falling income from public securities, a public debt migrated from central bank instruments on to treasury debt.
Belen Fourcade: Together with an aggressive decline in the monetary policy way, until lower income from loans also was a consequence of lower market rates.
Belen Fourcade: Even so, interest expenses decreased as time-deposit rates were deregulated and followed the overall decline in market rates.
Belen Fourcade: Interest from 10 to 46.4% of interest expenses in the quarter versus 71% the prior quarter.
Belen Fourcade: In the year, Netflix income decreased 6.6%, explained by an 0.1% increase in income and an 8.1% increase in expenses.
Belen Fourcade: This performance is mainly due to one, a lower income from collecting services and transfers within an overall decline of the line that are part of these linked to liabilities and two higher expenses in foreign currency. Next, the income is also justified by the active strategy focused on client acquisition.
Belen Fourcade: As of December 2024, BBVA Argentina gained more than 142,000 clients, reaching 3.7 million total at the Philippines, which means a 3% growth year over year.
Belen Fourcade: During 2024, total operating expenses were 1.7 trillion pesos, decreasing 3.9% year-over-year in real terms, of which 31% were personal benefits cost.
Belen Fourcade: In the year, personal benefits fell 4.6%. In spite of wages following the pace of inflation, the year increased was lower, with adjustments of stock of vacation days and variable remuneration.
Belen Fourcade: A Ministry of Expensive School 3.9% year-over-year, mainly due to taxes related to wire transfers produced by given payments.
Belen Fourcade: followed by document distribution, advertising costs, and armor transportation services. The latter affected by the tax on domestic dynamics.
Belen Fourcade: The accumulated efficiency ratio as of the first quarter of 2024 was 61.8% above the 59.7% report in the first quarter of 2024 and the 58.6% report in the fourth quarter of 2024.
Belen Fourcade: The increase in this ratio is due to a decrease in income, both fee and the interest income.
Belen Fourcade: In 2024, total NIM was 35% versus 37.3% in 2023, recording a 234 VPs fall.
Belen Fourcade: However, even that the average maturity of interest-learning assets is longer than that of the bosses, price adjustment for expenses is faster than foreign income, mitigating the fall in the near.
Belen Fourcade: Additionally, USD denominated the bosses had a high relative role diluting the expensive to generate it by total deposits.
Belen Fourcade: sustained credit growth in real terms since April 2024 allowed the bank to take a more defensive stance to protect the margin from successive decreases in interest rates during the year, with a longer term fixed rate credit.
Belen Fourcade: Security portfolio management is to be noted as the bank has converted part of its floating rate securities into securities of longer materials at fixed rates in a context of the planning rate mitigating the threat on the need.
Belen Fourcade: Private sector loans as of the fourth quarter of 2024 total 7.6 trillion pesos, increasing 28.7% or 1.7 trillion pesos quarter of a quarter and 75% or 3.3 trillion pesos a year over a year.
Belen Fourcade: Longed to a private sector in Basel, increased 26.2% in water over water and 61.5% year over year.
Belen Fourcade: During the quarter, growth was especially driven by 1, at 25.5% increase in credit cards, followed by 2, at 26.5% increase in discounted instruments, and 3, at 29.2% increase in customer loan.
Belen Fourcade: This is followed by a 26.1% growth in loan to personnel and 23.7% growth in overdraft.
Belen Fourcade: In all cases, the increment is boosted by a tenant growth in real terms of the portfolio, levered on the lower market interest rates and greater commercial efforts.
Belen Fourcade: Longed to the private sector, the nominated and foreign currency increased 42.9% quarter over quarter and 194.66% year over year.
Belen Fourcade: Water in Greece is mainly explained by a 91% growth in financing and refinancing of
Belen Fourcade: During the quarter, the commercial portfolio grew 30.6% and the retail portfolio increased 26.5%. The commercial portfolio represents 56.7% of the total portfolio from 50.7% a year ago.
Belen Fourcade: As observed in previous quarters, lone portfolios were impacted by the effect of inflation during the fall quarter of 2024, which reached 8%.
Speaker Change: In nominal terms, BBVA Argentina managed to increase the retail, commercial and total loan portfolio by 36.6%, 41% and 39% respectively during the quarter, surpassing quarter-length inflation levels in all cases.
Speaker Change: As of the first quarter of 2024, the total growth loans and other financing over the profit ratio was 77.5% above the 64.9% recording in the third quarter and above the 55.5% in the fourth quarter of 2020.
Speaker Change: Participation of total loans over assets is 51% versus 43% in the third quarter of 2024 and 32% in the fourth quarter of 2023. Evidenceing a lower exposure to the public sector inland with a real growth of credit demand.
Speaker Change: BBVA Argentina's consolidated market share of private sector loans, which 11.31% as of the fourth quarter of 2024, improving from 9.35% a year ago and sustaining the two digit figures.
Speaker Change: As of the first quarter of 2024, asset quality ratios keep a very good performance at 1.13%, with non-performing loans growing below the growth of total loan portfolio.
Speaker Change: On the funding side, as of the first quarter of 2024, total deposits reached 9.9 trillion pesos, increasing 7.8% quarter-over-quarter.
Speaker Change: The banks consolidated the market share of private deposits with 8.72% as of the fourth quarter of 2024.
Speaker Change: Private non-financial sector deposits in pesos total 6.3 trillion pesos increasing 13.5% compared to the third quarter of 2024 and 23.5% compared to the fourth quarter of 2023.
Speaker Change: The portal is changed, is mainly accepted by a 14.1% increase in time deposits and a 15% increase in saline stratum.
Speaker Change: Flavid non-financial sector deposits in foreign currency expressed in vessels increased 0.8% quarter of a quarter and 23.8% year over year.
Speaker Change: This is mainly explained by a 20.9% increase in tender process, partially offset by a 0.4% fall in savings account.
Speaker Change: BBVA Argentina continues to show a strong urgency indicators on the fourth quarter of 2024. Capital ratio reached 19.5%.
Speaker Change: Capital excels over regulatory requirements with 138.5%. It is important to mention that capital ratio was highly impacted in the second quarter of 2024 by dividend distribution.
Speaker Change: Furthermore, the fall in the capital ratio in this quarterly explained by the 14.9% increase in risk weighted assets linked to a real growth in the loan portfolio, in line with increased in market risk requirements.
Speaker Change: As of the fourth quarter of 2024, total public sector exposure, excluding central bank, total 2.6 trillion pesos, decreasing 7.3% quarter of a quarter.
Speaker Change: In the year, exposure to a public sector decreased significantly if central banking from its work considered, varying in mind that the government migrated debt from the central bank to [inaudible]
Speaker Change: Exposure to the public sector, excluding central bank exposure represents 18% of total assets, below 71% in the third quarter of 2024, and as mentioned before, inland will be a long road demand.
Speaker Change: In the quarter, liquid assets who are 5.4 trillion pesos, decreasing 13.3% quarter over quarter.
Speaker Change: This was mainly driven by a declining cash and deposit in banks, a 9.9% fall in public securities, and a 98.1% fall in overnight transaction in foreign banks.
Speaker Change: As of December of 2024, the bank issued corporate bonds class, 31, 32, 33 and 34, two of them in pesos with tamara adjustment and two of them in US dollars, all of them maturing in a year or less.
Speaker Change: Without considering the issuance of corporate bonds in September , BBVA Argentina's last corporate bond issuance was in 2019.
Speaker Change: This concludes our prepared remarks. We will now take your questions. Operator, please open the line for questions.
Speaker Change: Thank you. We are now going to start the Q&A section for investors and analysts. If you wish you ask a question, please use the raise and button or type it down on the Q&A field. Wait while we'll move for questions.
Speaker Change: Our first question comes from Carlos Lopez from HSBC. Please Mr. Lopez, your microphone's open.
Carlos Lopez: Hello, Belén and thank you for taking my call. You may have said this before and I missed it. So what are your expectations for growth in loans, deposits, and profitability for 2020-25? Again, we can understand in that this is a lot of uncertainty here.
Hi, Carlos, how are you?
Carlos Lopez: Of course, on the set of private loans, we are expecting the system to grow about between 40 and 45% and we are expecting ourselves to grow around 60 or 65%.
Carlos Lopez: of course focusing on the increasing market share that we have been going on for this whole year and for the past at least five years.
Speaker Change: Of course, all of this subject to the uncertainty that you are mentioned Now, this is 45% nominal and your 65% nominal and you refer to 30% focus for inflation is that your focus or that is the market consensus.
Speaker Change: No, first of all, the 43% for the system is real, real terms and 35% is real terms, too.
Just wait a second, while we'll reconnect the speaker.
Speaker Change: I'm speaking just in real terms. We are reflecting so far. I'm sure Bella usually a little bit more concerned. Oh, sorry, I don't know where you heard. We are speaking all in real terms. Yep.
Hi.
Speaker Change: Yes, so you were saying that this 65% of growth that you expect is in real terms. And again, can you repeat what your expectation or your economic team expectation as of today is for inflation for this year?
Speaker Change: We are expecting 30%. I understand that we are being a bit more conservative than the market consensus, but we usually are, so we are keeping our expectations from 30 for the time being.
Speaker Change: And if you don't mind, could you go over your other economic assumptions? What do you expect for growth? And most importantly, what do you expect for interest rates and for exchange rates?
Speaker Change: Okay, for the time being, we are seeing the Monetary Policy Race right now at 29, but we are seeing 20-25 ending in a 24% Monetary Policy Race.
Speaker Change: an effect rate of around 1,300 pesos at the official rate and a BB growth of 5.5% for 2025.
Very good. Thank you very much.
Speaker Change: Once again, if you wish to ask questions, please use the rate and button or type it down on the Q&A field. Wait while we'll pull for questions.
Our next question comes from Carlos Lopez from HSBC.
Police and my phone's open, sir.
Speaker Change: 20% do you look at the profitability in terms of ROE or ROA and what is the range that you think is realistic for 2025 and beyond? Thank you.
The suspectation is in terms of short arrowing.
Speaker Change: Is that a temporary thing? And again, I realize that everything is in flux and it can take a lot. But when you look on the 26th, 27th, what do you think is a sustainable rate of return for you for the system in an environment of more growth, but also lower inflation?
Speaker Change: How he said that, we are supposed to maintain this mid-teens.
Speaker Change: and maybe by the end of 2027 and also maybe you can see something better, but we are not respecting much higher figures.
Okay.
Speaker Change: And since you are growing so much and eventually you will have more consumption of
Speaker Change: Capital, you already adjusted your capital with a big dividend last year and actually if you can remind me exactly how much you paid in 2004. What is your capital plan for 2025? Do you want to give a dividend and if so, do you have any particular level in mind?
Okay.
Speaker Change: We are waiting for the regulation. So that's one thing. The other thing is that we are projecting that we can pay a dividend this year if we are allowed to do so.
Speaker Change: So, we are expecting to pay a smaller payout and as of the income from last year and not from the accumulated income as it was last year.
Speaker Change: But you haven't defined it yet. We understand you haven't been approved, but you also don't do have an idea. I will talk in, you know, 20%, 50%, 70%.
Speaker Change: I would prefer not to tell you exact features, so yes, say that it will be a lower payout as it was.
Carlos Lopez: compared to last year. And do you expect to do this in a single payment? Or you will have to spread it out as in... It will depend on regulation, Carlos, so we have to wait until the center of unbefined.
How we we compete
All right, thank you very much for your answers.
Thank you.
Speaker Change: Just as a reminder, if you wish to ask a question, please use a raise and button or type it down on the Q&A feud. Wait while we'll pull four questions.
Speaker Change: Our next question comes from brand Aaron Sill from Portalis. Can you address asset quality, low on losses and reserves? Thank you.
Speaker Change: Okay, let's say for the quarter and for the whole year, NPLs have been very low, for BBVA has been like one of the lowest of the system, it's not the lowest at some point, with 1.13% of NPLs.
Speaker Change: The system is, I mean, just to talk about the Argentine system, NPS are very low. For December , the system's NBL was 1.56% around that.
Speaker Change: So, we don't see any concerns on the side of a number forming loans.
Speaker Change: We have seen an outstanding increase in loans for the fourth quarter. So, well, you can see that in our roundings release, we can have a great recovery time.
Speaker Change: and so I already commented on what expectations from long growth will be for 2025.
Speaker Change: Well, just I'm going on what I'm seeing on the question.
Sorry.
sort of disconnected on these.
Speaker Change: because the perpeturality is mainly explained by what we have seen on the dynamics of the state of the story of interest rates in the market.
Speaker Change: And also, you have to take a configuration that we started in 2024 with 100% nominal interest rates on the monetary policy rates, and this profitability came from securities, not from loans.
Speaker Change: So this year you had a transition from the participation of securities on your assets, on your total assets.
Speaker Change: That went down to around less than 20% in contrast with loans that went about 50% of your assets by the end of 2024.
Speaker Change: gone on M&A transactions in the past, so it's not really...
Speaker Change: comparable in that case. But the story of why memes are going down is what explains your profitability and not the growth in loans and inequality.
Speaker Change: Our next question comes from Adriano Mariani from Sejú Céptol. Please, Mr. Mariani, your microphone's open.
Adriano Mariani: Hello team and congratulations on results. I guess can you touch a bit on what you expect for funding in terms of kind of deposit growth, etc. I mean you guys are expecting a lot of growth in loans so if you can touch quickly on that and also kind of what level of kind of percentage of assets in securities should be expected kind of a long term, a long-term level. Thanks.
Adriano Mariani: Hi, Adriano. On the side of funding, we are not concerned about liquidity. We have the deposits growing. We see that they have grown 25%
In real terms, of course.
Adriano Mariani: and we are not expecting to have, we are expecting to match these long rows that we are focusing on what you have already seen in issuance of corporate bonds.
We have issues, I think five, no.
Speaker Change: Sorry, from class in the 90s to class 34, they are 5 or 1st.
Speaker Change: both in pesos and in US dollars and we still see that there is still plenty of space for going on to corporate bonds for funding.
Speaker Change: We don't see any need for additional capital at least, I don't know, at least 2026.
Speaker Change: This is a quick follow-up and these corporate bonds are they dollar denominated or paid for
Speaker Change: We have both, we have six, no, variable rate, pace of corporate bonds, and we have also issued the U.S.P. denominated bonds.
I need your book.
Speaker Change: Okay, thanks. And maybe a lot followed on the growth, how do you expect kind of the split to be between commercial and consumer and maybe within consumer where you expect to see the areas of largest growth? Thanks.
and Mara Fourcade.
Speaker Change: We have already seen that we have been focusing on the commercial segment and this has.
shifted the proportions of retail and commercial to around...
is more than 50% of the portfolio is commercial.
Uhhh
Speaker Change: But then we have to bear in mind that we have now mortgages going on since July and we see those retail segments growing mortgages and also personal loans, which we have focused on and we have grown a lot in terms of market share of personal loans.
but what? We are going on on both commercial and we can't date.
Speaker Change: but for the last few quarters the strategy has been a little bit more focused on commercial and that's why...
The mix changed from retail to multi-commercial.
Thanks for your helpful.
Speaker Change: Just as a reminder, if you use your ask question, please use the raise hand button or type it down on the Q&A feud. Wait while we pull four questions.
Speaker Change: Once again, if you wish to ask a question, please use the raise hand button, or tap it down on the given aid field. Wait, while we pull four questions.
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Speaker Change: used a racing button, or type it down on the guillotine field.