Q2 2025 Banco Macro SA Earnings Call

Speaker #2: Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to Banco Macro S.A. Q4 2025 earnings conference call.

Operator: Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to Banco Macro S.A.'s second quarter 2025 earnings conference call. We would like to inform you that the Q2 2025 press release is available to download at the investor relations website of Banco Macro S.A., www.macro.com.ar/relaciones-inversores. Also, this event is being recorded, and all participants will be in a listen-only mode during the company's presentation. After the company's remarks are completed, there will be a question and answer session. At that time, further instructions will be given. It is now my pleasure to introduce our speakers. Joining us from Argentina are Mr. Jorge Francisco Scarinci, Chief Financial Officer, and Mr. Nicolas Torres, Investor Relations. Now, I will turn the conference over to Mr. Nicolas Torres. You may begin your conference.

Speaker #2: We would like to inform you that the second Q2 2025 press release is available to download at the Investor Relations website of Banco Macro: www.macro.com.ar/relaciones-inversores.

Speaker #2: Also, this event is being recorded and all participants will be in a listen-only mode. During the company's presentation, after the company's remarks, there will be a question and answer session.

Speaker #2: At that time, further instructions will be given. It is now my pleasure to introduce our speakers. Joining us from Argentina are Mr. Jorge Scarincy, Chief Financial Officer, and Mr. Nicolas Torres, IR.

Speaker #2: Now, I will turn the conference over to Mr. Nicolas Torres. You may begin your conference.

Speaker #3: Thank you. Good morning and welcome to Banco Macro S.A. Q4 2025 conference call. Any comment we may make today may include forward-looking statements, which are subject to various conditions, and these are outlined in our 20-F, which was filed with the SEC and is available on our website.

Nicolas Torres: Thank you. Good morning and welcome to Banco Macro S.A.'s second quarter 2025 conference call. Any comment we may make today may include forward-looking statements which are subject to various conditions, and these are outlined in our 20-F, which was filed to the SEC, and it's available at our website. The second quarter 2025 press release was distributed yesterday, and it's available at our website. All figures are in Argentine pesos and have been restated in terms of the measuring unit print at the end of the reporting period. As of 2020, the bank began reporting results applying hyperinflation accounting in accordance with IFRS IAS 29, as established by the Central Bank of Argentina. For ease of comparison, figures of previous quarters have been restated applying IFRS IAS 29 to reflect the simulated effect of the inflation adjustment for each period through June 30, 2025.

Speaker #3: Banco Macro's Q4 2025 press release was distributed yesterday and is available on our website. All figures are in Argentine pesos and have been restated in terms of the measuring unit current at the end of the reporting period.

Speaker #3: As of 2020, the bank began reporting results applying hyperinferential accounting, in accordance with IFRS IAS 29, as established by the Central Bank of Argentina.

Speaker #3: For ease of comparison, figures of previous quarters have been restated applying IAS 29 to reflect the accumulated effect of the inflation adjustment for each period through June 30, 2025.

Speaker #3: I will now briefly comment on the bank's SA Q4 2025 financial results. In the second quarter of 2025, Banco Macro's net income totaled $149.5 billion pesos, which was 209% or $101.1 billion higher than in the previous quarter.

Nicolas Torres: I will now briefly comment on the bank's second quarter 2025 financial results. In the second quarter of 2025, Banco Macro S.A.'s net income totaled ARS 149.5 billion, which was 209% or ARS 101.1 billion higher than in the previous quarter. This result was mainly due to higher net interest income, as well as higher net fee income, higher net income from financial assets and liabilities at fair value to profit or loss, higher FX income, and the lower loss related to the result from the net monetary position, as lower inflation was registered in the quarter, which was partially offset by lower other operating income, higher loan loss provisions, and higher income tax. This result represented an annualized ROE and ROA of 12% and 3.5% respectively.

Speaker #3: This result was mainly due to higher net interest income, as well as higher net fee income. Higher net income from financial assets and liabilities at fair value to profit or loss, and higher FX income.

Speaker #3: And the lower loss related to the result from the net monetary position, as lower inflation was registered in the quarter. This was partially offset by lower other operating income, higher loan loss provisions, and higher income tax.

Speaker #3: These results represented an annualized ROE and ROA of 12% and 3.5%, respectively. Total comprehensive income for the quarter totaled $157.1 billion pesos, 241% or $111 billion pesos higher than the result posted in the previous quarter.

Nicolas Torres: Total comprehensive income for the quarter totaled ARS 157.1 billion, 241% or ARS 111 billion higher than the result posted in the previous quarter. Net operating income before general and personal expenses was ARS 926.2 billion in the second quarter of 2025, 13% or ARS 107 billion higher compared to the first quarter of 2025, due to higher income from interest on loans and higher income from government securities. On a yearly basis, net operating income before general and personal expenses increased 49% or ARS 314.6 billion. Provision for loan losses totaled ARS 103 billion, 47% or ARS 33.1 billion higher than the first quarter of 2025, given the loan growth experienced in the quarter. On a yearly basis, provision for loan losses increased 349% or ARS 80.1 billion.

Speaker #3: Net operating income before general administrative and personal expenses was $96.2 billion pesos in the second quarter of 2025, which is 13%, or $107 billion pesos, higher compared to the first quarter of 2025.

Speaker #3: Due to higher income from interest on loans and higher income from government securities, net operating income before general administrative and personal expenses increased by 49%, or $344.6 billion pesos, on a yearly basis.

Speaker #3: Provision for loan losses totaled $103 billion pesos, which is 47%, or $33.1 billion pesos, higher than in the first quarter of 2025. Given the loan growth experienced in the quarter, on a yearly basis, provision for loan losses increased 349%, or $80.1 billion pesos.

Speaker #3: In the quarter, net interest income totaled $696.9 billion pesos, 14% or $82.9 billion pesos higher than in the first quarter of 2025, and 163% or $432 billion pesos higher year on year.

Nicolas Torres: In the quarter, net interest income totaled ARS 696.9 billion, 14% or ARS 82.9 billion higher than in the first quarter of 2025, and 163% or ARS 432 billion higher year on year. This result was due to an ARS 169.2 billion increase in interest income and an ARS 86.3 billion increase in interest expense. In the second quarter of 2025, interest income totaled ARS 1.1 trillion, 18% or ARS 169.2 billion higher than in the first quarter of 2025, and 26% or ARS 221.3 billion higher than in the second quarter of 2024. Income from interest on loans and other financing totaled ARS 746.1 billion, 19% or ARS 118.2 billion higher compared with the previous quarter, mainly due to a 17% increase in the average volume of private sector loans and by a 43 basis points increase in the average lending rate.

Speaker #3: This result was due to a $169.2 billion pesos increase in interest income and an $86.3 billion pesos increase in interest expense. In the second quarter of 2025, interest income totaled $1.1 trillion pesos, 18% or $169.2 billion pesos higher than the first quarter of 2025, and 26% or $221.3 billion pesos higher than in the second quarter of 2024.

Speaker #3: Income from interest on loans and other financing totaled $746.1 billion pesos, 19% or $118.2 billion pesos higher compared with the previous quarter. This increase was mainly due to a 17% rise in the average volume of private sector loans and a 43 basis points increase in the average lending rate.

Speaker #3: On a yearly basis, income from interest on loans increased by 30%, or $171.3 billion pesos. In the second quarter of 2025, interest on loans represented 69% of total interest income.

Nicolas Torres: On a yearly basis, income from interest on loans increased 30% or ARS 171.3 billion. In the second quarter of 2025, interest on loans represented 69% of total interest income. In the second quarter of 2025, income from government and private securities increased 18% or ARS 50.8 billion quarter on quarter, mainly due to the caps and inflation-adjusted bonds sell and increased 54% or ARS 118.8 billion compared with the same period of last year. This result is explained 94% by income from government and private securities at a mortgage price cost, and the remaining 6% is explained by income from government securities valued at fair value to profit through other comprehensive income. In the second quarter of 2025, income from repos totaled ARS 1 billion, 10% or ARS 92 million higher than the previous quarter, and 99% or ARS 67 billion lower than a year ago.

Speaker #3: In the second quarter of 2025, income from government private securities increased 18% or $50.8 billion pesos quarter on quarter, mainly due to LECAPS and inflation-adjusted bond setup.

Speaker #3: An increase of 54%, or $118.8 billion pesos, compared with the same period last year. This result is explained 94% by income from government and private securities advertised at cost, while the remaining 6% is explained by income from government securities valued at fair value to profit through other comprehensive income.

Speaker #3: In the second quarter of 2025, income from repos totaled $1 billion pesos, which is 10%, or $92 million pesos, higher than the previous quarter, and 99%, or $67 billion pesos, lower than a year ago.

Speaker #3: It is worth noting that, as of July 22, 2024, the Central Bank decided to terminate repos and replace them with LEFIs, which were then terminated on July 10, 2025.

Nicolas Torres: It is worth noting that as of July 22, 2024, the Central Bank decided to terminate repos and replace them with LEFIs, which were then terminated on July 10, 2025. In the second quarter of 2025, FX income totaled ARS 22.4 billion gain, 229% or ARS 15.6 billion higher than the first quarter of 2025, mainly due to income from foreign currency exchange, which increased ARS 12.5 billion. On a yearly basis, FX income decreased 37% or ARS 13.1 billion. In the quarter, the Argentine peso depreciated 11.2% against the U.S. dollar after the Central Bank of Argentina replaced the 1% crowding peg, allowing the Argentine peso to fall freely between 1,000 and 1,400.

Speaker #3: In the second quarter of 2025, FX income totaled $22.4 billion pesos, a gain of 229% or $15.6 billion pesos higher than the first quarter of 2025.

Speaker #3: Mainly due to income from foreign currency exchange, which increased 12.5 billion pesos. On a yearly basis, FX income decreased 37%, or $13.1 billion pesos.

Speaker #3: In the quarter, the Argentine peso depreciated 11.2% against the US dollar after the Central Bank of Argentina replaced the 1% currency peg, allowing the Argentine peso to float freely between $1,000 and $1,400.

Speaker #3: In the second quarter of 2025, interest expense totaled $391.2 billion pesos, increasing 28% or $86.3 billion pesos compared to the previous quarter, and decreased 35% to $210.7 billion pesos compared to the second quarter of 2024.

Nicolas Torres: In the second quarter of 2025, interest expense totaled ARS 391.2 billion, increasing 28% or ARS 86.3 billion compared to the previous quarter, and decreased 35% to ARS 110.7 billion compared to the second quarter of 2024. Within interest expenses, interest on deposits represented 96% of the bank's total interest expense, increasing 30% or ARS 86.6 billion quarter on quarter due to a 228 basis points increase in the average rate paid on deposits, while the average volume of private sector deposits increased 14%. On a yearly basis, interest on deposits decreased 35% or ARS 205.1 billion. In the second quarter of 2025, the bank's net interest margin, including FX, was 23.5%, higher than the 23.2% posted in the first quarter of 2025 and the 19.9% posted in the second quarter of 2024.

Speaker #3: Within interest expenses, interest on deposits represented 96% of the bank's total interest expense, increasing 30% or $86.6 billion quarter on quarter due to a 228 basis points increase in the average rate paid on deposits, while the average volume of private sector deposits increased 14%.

Speaker #3: On a yearly basis, interest on deposits decreased 35% or $205.1 billion pesos. In the second quarter of 2025, the bank's net interest margin, including FX, was 23.5% higher than the 23.2% posted in the first quarter of 2025, and the 19.9% posted in the second quarter of 2024.

Speaker #3: In the second quarter of 2025, Banco Macro's net fee income totaled $108.4 billion pesos, which is 16% or $25.1 billion pesos higher than in the first quarter of 2025.

Nicolas Torres: In the second quarter of 2025, Banco Macro S.A.'s net fee income totaled ARS 108.4 billion, 16% or ARS 25.1 billion higher than the first quarter of 2025. In the quarter, credit card fees stand out with a 90% or ARS 28.6 billion increase, followed by fees charged on deposit accounts and credit-related fees, which increased 4% or ARS 2.9 billion and 33% or ARS 2.8 billion respectively, which were partially offset by a 30% or ARS 2.3 billion decrease in mutual funds and securities fees. On a yearly basis, fee income increased 34% or ARS 45.3 billion. In the second quarter of 2025, net income from financial assets and liabilities for a value to profit or loss totaled ARS 113.7 billion gain, increasing 61% or ARS 43.3 billion compared to the first quarter of 2025. This result is mainly due to higher income from government securities.

Speaker #3: In the quarter, credit card fees stand out, with a 90% or $28.6 billion pesos increase, followed by fees charged on deposit accounts and credit-related fees, which increased 4% or $2.9 billion pesos and 33% or $2.8 billion pesos, respectively.

Speaker #3: which were partially offset by a 30% or $2.3 billion peso decrease in mutual funds and securities fees. On a yearly basis, fee income increased 34% or $45.3 billion pesos.

Speaker #3: In the second quarter of 2025, net income from financial assets and liabilities fair value to profit or loss totaled $113.7 billion pesos, a gain that increased 61% or $43.3 billion pesos compared to the first quarter of 2025.

Speaker #3: This result is mainly due to higher income from government securities. On a yearly basis, net income from financial assets and liabilities at fair value through profit or loss decreased 33% or $55.3 billion pesos.

Nicolas Torres: On a yearly basis, net income from financial assets and liabilities for a value to profit or loss decreased 33% or ARS 55.3 billion. In the quarter, other operating income totaled ARS 45.8 billion, 37% or ARS 26.8 billion lower than the first quarter of 2025 due to lower credit and debit card income. On a yearly basis, other operating income decreased 24% or ARS 14.3 billion. In the second quarter of 2025, Banco Macro S.A.'s administrative expenses plus employee benefits totaled ARS 279.7 billion, 3% or ARS 7.3 billion higher than the previous quarter due to higher administrative expenses, which increased 8%. Meanwhile, employee benefits were practically unchanged. On a yearly basis, administrative expenses plus employee benefits decreased 1% or ARS 2.6 billion.

Speaker #3: In the quarter, other operating income totaled $45.8 billion pesos, which is 37% or $26.8 billion pesos lower than in the first quarter of 2025, due to lower credit and debit card income.

Speaker #3: On a yearly basis, other operating income decreased 24%, or $14.3 billion pesos. In the second quarter of 2025, Banco Macro's administrative expenses plus employee benefits totaled $279.7 billion pesos, which is 3%, or $7.3 billion pesos, higher than the previous quarter due to higher administrative expenses, which increased by 8%.

Nicolas Torres: In the second quarter of 2025, deficiency rates have reached 33.9%, improving from the 38.2% posted in the first quarter of 2025 and from the 55.6% posted a year ago. In the second quarter of 2025, expenses for employee benefits plus general and administrative expenses, depreciation and improvement of assets increased 2%, while income, net interest income, net fee income, plus difference in quarter prices of goals and foreign currency, plus other operating income, and net income from financial assets for a value to profit or loss increased 15% compared to the first quarter of 2025. In the second quarter of 2025, the result from the net monetary position totaled ARS 303.9 billion lost, 28% or ARS 79.3 billion lower than the loss posted in the first quarter of 2025, and 68% or ARS 439.9 billion lower than the loss posted one year ago.

Nicolas Torres: Nowhere inflation was observed during the quarter, 256 basis points below the first quarter of 2025, down 6.1% to 8.27% in the first quarter of 2025. In the second quarter of 2025, Banco Macro S.A.'s effective income tax rate was 39% lower than the one registered in the first quarter of 2025. Further information is provided in notes 21 to our financial statement. In terms of loan growth, the bank's total financials reached ARS 9.24 trillion, increasing 14% or ARS 1.1 trillion quarter on quarter, and increasing 91% or ARS 4.4 trillion year on year. In the second quarter of 2025, private sector loans increased 13% or ARS 1.1 trillion. On a yearly basis, private sector loans increased 91% or ARS 4.3 trillion.

Nicolas Torres: Within commercial loans, overdrafts, documents, and others stand out with a 29% or ARS 369.8 billion increase, a 19% or ARS 243.5 billion, and a 14% or ARS 200.6 billion increase, respectively. Similar lending, almost all product lines increased during the second quarter of 2025, except for credit card loans. Personal loans and mortgage loans stand out with a 12% or ARS 206.8 billion and a 13% or ARS 82.2 billion increase, respectively. In the second quarter of 2025, peso financing increased 13% or ARS 846.1 billion, while U.S. dollar financing increased 4% or $65 million. It is important to mention that Banco Macro S.A.'s market share over private sector loans as of June 2025 reached 9.2%. On the funding side, total deposits increased 4% or ARS 406.2 billion quarter on quarter, totaling ARS 62.5 trillion, and increased 13% or ARS 1.2 trillion year on year.

In terms of long-term growth, the bank's total financial reach is 9.24 trillion pesos, increasing 14% or 1.1 trillion pesos per quarter, and increasing 91% or 4.4 trillion pesos year-on-year. In the second quarter of 2025, private sector loans increased 13% or 1.1 trillion pesos on a yearly basis. Private sector loans increased 91% or 4.3 trillion pesos.

And others, with a ?29 billion or ?303.69 billion increase at ?19 billion or ?243.5 billion, and a ?14 billion or ?200.6 billion increase, respectively.

Similar lending, almost operating lines, increased during the second quarter of 2025, except for credit card loans, personal loans, and mortgage loans, which stand out with a 12% or $206.8 billion increase and a 13% or $82.2 billion increase, respectively.

In the second quarter of 2025, peso financing increased by 13% or 846.1 billion pesos, while dollar financing increased by 4% or $65 million.

It is important to mention.

That Bank's market share over private sector loans, as of June 2025, reached 942 basis points.

Nicolas Torres: Private sector deposits increased 4% or ARS 414 billion quarter on quarter, while public sector deposits decreased 1% or ARS 8.3 billion quarter on quarter. The increase in private sector deposits was led by time deposits, which increased 12% or ARS 514.6 billion, while demand deposits increased 5% or ARS 209.9 billion quarter on quarter. Within the private sector deposits, peso deposits increased 1% or ARS 45.9 billion, while U.S. dollar deposits increased 2% or $45 million. As of June 2025, Banco Macro S.A.'s transactional accounts represented approximately 48% of total deposits. Banco Macro S.A.'s market share over private sector deposits as of June 2025 totaled 7.3%. In terms of asset quality, Banco Macro S.A.'s non-performing loan (NPL) ratio reached 2.06%. The coverage ratio, measured as total allowances under expected credit losses over non-performing loans, reached 140.37%.

On the funding side total deposits increased 4% or 406.2 billion pesos. Quarter on quarter total 62 trillion pesos and increase, 13%, or 1.2 trillion pesos year on year.

Private sector deposits increased by 4% or $414 billion for the quarter. What about public sector deposits? They decreased by 1% or $8.3 billion quarter on quarter.

The increase in private sector deposits was led by time deposits, which increased 12% to 514.6 billion pesos, while demand deposits increased 5% or 209.99 billion pesos quarter on quarter. Within the private sector deposit, special deposits increased 1% to 45.9 billion pesos. Meanwhile, U.S. dollar deposits increased 2% or $45 million. As of June 2025, bank micro transactional accounts represent approximately 48% of total deposits.

Bank of America's market share over private sector deposits, as of June 2025, totals 7.3%.

Nicolas Torres: Consumer portfolio non-performing loans deteriorated 100 basis points, up to 2.81% from 1.81% in the previous quarter, while commercial portfolio non-performing loans improved 14 basis points in the second quarter of 2025, down to 0.52% from 0.66% in the previous quarter. In terms of capitalization, Banco Macro S.A. has an excess capital of ARS 3.13 trillion, which represented a capital adequacy ratio of 30.5% and a tier one ratio of 19%. The bank's aim is to make the best use of this excess capital. The bank's liquidity remains more than appropriate. Liquid assets to total deposit ratio reached 67%. Overall, we have accounted for another positive quarter. We continue to show a solid financial position. We keep a well-optimized deposit base, asset quality remains under control, and closed margin. We keep on working to improve more our efficiency standards.

Which 144 37%?

Consumer portfolio non-performing loans deteriorated 100 basis points to 2.81%, up from 1.81% in the previous quarter, while the commercial portfolio non-performing loans improved 14 basis points in the second quarter, down to 6.52% from 6.66% in the previous loan.

In terms of capitalization and excess capital, 3.13 pesos, which represented a capital deposition of 30.5% and a Tier 1 ratio of 2.9%.

The bank claims it aims to make the best use of this excess capital.

Nicolas Torres: At this time, we would like to take the questions you may have.

The bank's liquidity remains more than appropriate, with liquid assets to deposits at 67% overall. We have accounted for another positive quarter, continuing to demonstrate our solid financial position. We maintain a well-optimized deposit base, asset quality remains under control and orderly, and we are continually working to further improve our efficiency standards. At this time, we would like to take any questions you may have.

Operator: Thank you. At this time, we are going to open it up for questions and answers. If you would like to ask a question, please press the Q&A button at the bottom of the screen. To ask questions on audio, click on raise hand. You will then receive a request to activate your microphone. One moment, please, for the first question. Our first question comes from Ernesto Gabilondo with Bank of America Merrill Lynch.

Thank you.

For your question.

If you would like to ask a question, please press the Q&A button at the bottom of the screen, or to ask questions on audio, click on raise hand.

You will then receive a request to activate your microphone.

1 moment, please for the first question.

Our first question comes from Ernesto, Gabby with Bank of America.

Ernesto Gabilondo: Thank you. Hi, good morning, Jorge, and Nicolas, and thanks for taking my call. I have a couple of questions from my side. The first one will be on what could be the potential impact on names and asset quality from the recent volatility on interest rates and debt auctions. Should we continue to expect volatility in the next weeks? Yesterday, we saw the renewal of peso debt maturities, but still at high rates. My understanding is that you are participating in the debt auctions, which are coming with a high cost of funding. At the same time, you are lending personal loans with three-year maturity and high fixed rates. I just want to understand if this should help to compensate the temporary higher cost of funding.

Thank you. Hi. Good morning. Jorge. And Nicholas and and and thanks for taking my call. Um, I have a couple of questions from my side, the first 1 will be on, what could be the potential impact on means an asset quality from the recent volatility on interest rates and depth auctions. Um, should we continue to expect volatility in the next weeks? Um, yesterday we saw the renewal of peso death maturities but still at high rates.

Ernesto Gabilondo: On the other hand, my question is, if we have these high fixed rates, I don't know if at some point this could create asset quality deterioration on your client base. I know a lot of questions in this first one, but I will appreciate your thoughts. My second question is on your ROE expectations. Looking to the first half, it came at the low end of the guidance range of 8 to 10%. We have seen other peers reducing guidance because of the temporary macro backdrop. How are you thinking about your ROE in the second half and full year? Thank you.

Uh, my understanding is that you are participating in the depth auctions, which are coming with a high cost of funding. Uh, but at the same time, you are lending personal loans with 3-year maturity and high fixed rates. So, um, just want to understand if this should help to compensate the temporary higher cost of funding.

Uh, and on the other hand, my question is, if we have these high fixed rates, I don't know if at some point this could create asset quality duration on your client base. I know a lot of questions in this first one, but I would appreciate your thoughts.

Uh, and my second question is on your ROI expectations. So, looking to the first half, it came at the low end of the guidance range of 8% to 10%. Uh, we have seen all other peers reducing guidance because of the temporary macro backdrop. Um, so how are you thinking about your ROI in the second half and full year? Thank you.

Jorge Francisco Scarinci: Good morning, Ernesto. This is Jorge Francisco Scarinci. Thanks for your questions. The first one, yes, we are in an environment with a higher volatility than the one that we experienced, at least in the first quarter of this year. I would say that the government is trying to reach the midterm elections with some peace on FX expectations and also on inflation expectations. To have these two macro variables under control, I think that the work or the consequences of this is basically what the government is looking for because inflation is under control, below 2% on a monthly basis, and also the FX is also under control in the current spot market. Yes, of course, also we are seeing an increase in the funding costs, basically on time deposits. We are seeing interest rates going up.

Good morning. I'd like to. This is Jorge Karini. Thanks for your questions. Um, the first one. Yes, we are in an environment with a higher volatility than that which we experienced, at least in the first quarter of this year.

Um, I would say that the government is trying to reach.

The midterm elections brought some peace on FX expectations and also on inflation expectations.

Uh, to have these 2 micro variables and the control.

I think that, uh,

The work or the consequences of this is basically what the government is looking for because inflation is under control below 2% on a monthly basis, and also the effects.

Is also, um, under control in the current spot market.

Jorge Francisco Scarinci: It is also true that in time deposits, we have a well-optimized deposit base and with a big standing in the interior of the country. In those deposits, we can relatively pay lower interest rates compared to our competitors that are more based in the Buenos Aires area. Even though we are seeing an increase in the funding cost, it is also true what you mentioned about the debt auctions, that we are going to these auctions in order to comply with the reserve requirements that have been increased a lot in the last 30 to 45 days. It is also true what you mentioned, that we are extending loans on personal lending with high interest fixed rates.

Also uh we are foreseeing. Sorry. We are seeing an increase in the funding costs. Basically on on time deposits, uh we are seeing interest rates going up.

Uh, it is also true that, in time deposits, we have a well-optimized deposit base and with a.

Big standing in the interior of the country. And in those deposits, we can, uh, relatively pay lower interest rates compared to other competitors that are more based in bonus areas. But even though we are seeing an increase in the funding cost.

It is also true what you mentioned about the.

Debt options that we are going to this auction in order to comply with the reserve requirements that have been increased a lot in the last 3 to 5 days.

Jorge Francisco Scarinci: I would say that even though if you have a look at the NIMs in the second quarter and also in the first half of 2025, we have been able to increase or to enlarge or to widen these net interest margins. What we are forecasting for the third quarter is when you put all the combination of the increase in funding costs and what we are doing on the asset side, we expect some timid reduction in the NIMs in the third quarter, basically due to this volatility and to the increasing reserve requirements and the auctions that we are complying with, with some fixed rates that are not that high as we have been expecting. Bottom line, the third quarter NIMs should be timidly below the second quarter net interest margin. On your second question, sorry, and you also asked about NPLs.

Um, and it is also true what you mentioned that we are extending loans on personal lending. We have high-interest fixed rates.

I would say that even though, if you have a look at the names in the second quarter,

And also in the first half of 2025, we have been able to increase.

Or to enlarge or to widen this net interest margin, what we are forecasting for the third quarter is that, when you put all the combination of the increasing funding costs and what we are doing on the asset side, we expect to see some timid reduction in the names in the third quarter.

Basically due to this, uh, volatility and to the increasing referral requirements, and the options that we are complying with, with some fixed rate, that are not that high as we have been expecting. So bottom line, uh the third quarter name, should be timely below the second quarter uh 19th margin.

Jorge Francisco Scarinci: Yes, we are seeing NPLs across the board. I mean, in the system going up, even though Banco Macro S.A. has the best asset quality standards among our peers, we are doing a great job there. It is also true that with the current high real interest rate environment, we are foreseeing or we are showing an increase in NPLs. Consider that with a monthly inflation of 2% and now real interest rates, at least in these personal loans, are close to 6% or 7% positive in real terms, it becomes a bit more difficult for maybe debtors to pay. Even though we have to say also that the economic program of this government has been focused on trying to maintain the salaries of the people rolling below inflation, that is also affecting.

On your second question, um, sorry. And you also asked about, um, MPLS. Yes, we are seeing MPLS across the board. I mean, in the system going up.

Uh, even though Banco Macro has the best, uh,

Asset quality standards, among our peers, we are doing a great job there. But it's also true that...

With the current High real interest rate environment, uh, we are, uh, forcing or we are, uh, showing an increase in npls, consider that with a, a monthly inflation of 2%. And now real interest rates at least in this personal loans are close to 6 or 7% positive in real terms. It becomes a bit more difficult for maybe doors to to pay even though we have to say also that

Jorge Francisco Scarinci: Therefore, we are forecasting for the third and fourth quarter of this year some additional deterioration in asset quality going to level of maybe between 2.5% to 3% of NPLs as a percentage of total loans. Finally, on your second question, in terms of ROE expectations, for the moment, we are maintaining the range of between 8% to 10% ROE in 2025 in real terms. In that sense, we are keeping our expectations and our guidance there.

The economic program of this government has been focused on trying to maintain the salaries of the people below inflation. That is also affecting, um, and so therefore, we are forecasting for the third and fourth quarters of this year some additional deterioration in asset quality, going to a level of maybe between 2% to 2.5% to 3% of NPLs as a percentage of total loans.

And finally, on your second question, in terms of our expectations, for the moment, we are maintaining the range of between 28% to 10% ROE H in 2025 in real terms. So, in that sense, we are keeping our expectations and our guidance there.

Ernesto Gabilondo: Now, excellent. Thank you so much. Just to follow up in terms of the asset quality, you mentioned your expectations for the NPL in the second half. How should we think about the cost of risk?

No, excellent. Thank you so much. Just to follow up in terms of the asset quality, you mentioned your expectations for the MPL in the second half. How should we think about cost of risk?

Jorge Francisco Scarinci: I would assume Ernesto, cost of risk is similar to the one that we saw maybe in the first half of 2025. In the year of four, I would say 4% would be something reasonable to forecast for the second half.

I would assume Ernesto cost of risk.

Similar to the one that we saw, maybe.

In the first half of 2025, in the year, in the year of 4, I would say 4 would be 4%.

Something reasonable to forecast for the second half.

Ernesto Gabilondo: Okay, perfect. Thank you very much, Jorge.

Jorge Francisco Scarinci: You're welcome, Ernesto.

Okay, perfect. Thank you very much for.

you're welcome.

Operator: Our next question comes from Brian Flores with Citibank.

Our next question comes from Brian Flores with SI.

Brian Flores: Hello, hello, Nicolas. Thank you for picking my question. I have only one question. What do you estimate for the year-to-year tier one ratio would be?

Hello, hello, Nicolas. Thank you for becoming a question. And I have only one question.

Um, how much did you guys make for the year, then the Tier 1 ratio would be.

Jorge Francisco Scarinci: Good morning. In terms of the tier one ratio, considering the increase in loans and the installments that we are paying, our cash dividends announced in May of this year, we are forecasting to end 2025 with a tier one ratio in the area of 28.75%.

Good morning.

So, of the Tier 1 ratio, considering the increase in loans and the installments that we are paying our cash dividends announced in May of this year, we are forecasting to end 2025 with a Tier 1 ratio in the area of.

uh, 28 and 3/4.

Brian Flores: Thank you. Thank you very much. Thinking on another question, what are your thoughts on the quality of the retail loan portfolio for the system?

Thank you. Thank you very much. And I think in another question, what are your thoughts on the equality of the retail portfolio for the system?

Jorge Francisco Scarinci: Sorry, can you repeat that?

Sorry, can you repeat that? Sorry.

Brian Flores: What are your thoughts on the quality of the retail loan portfolio for the system?

oh, uh

What are your thoughts on the quality of the retail lawn portfolio for the system?

Jorge Francisco Scarinci: Sorry. Yes. I mean, as I was commenting in the previous question, we are seeing some deterioration in asset quality. Basically, the increase in nominal and real interest rate is also impacting the rhythm of the economic growth. What we are forecasting is that it should be maintained at least in the third quarter. We could see some relaxation of these interest rates in the fourth quarter. In terms of delinquency rate, as I mentioned before, we are forecasting to have continued deterioration. In our case, maybe to level up to 3% of total loans by the end of the year. I would say that across the board is going to be similar or might be a bit worse in other banks, Brian.

Sorry. Uh, yes. Uh

I mean, as I was commenting in the previous question, we are seeing a sanity duration in asset quality. Basically, the increase in nominal and real interest rates is also impacting in the...

The rhythm of the economic growth, and what we are forecasting, is that it should be maintained at least in the third quarter. We could see some relaxation of this interest rate in the fourth quarter. But in terms of the delinquency rate, as I mentioned before, we are forecasting a continued deterioration in our case, maybe leveling up to 3% of total loans by the end of the year. I would say that across the board it is going to be...

Similar or might be a bit worse in other banks.

Brian.

Brian Flores: Okay, thank you very much.

Jorge Francisco Scarinci: You're welcome.

Okay, thank you very much.

You're welcome.

Operator: Next question from Yuri Fernandez with JP Morgan.

Next question from Jan.

Yuri Fernandez: Thank you, Nicolas, and thank you, Jorge. I have one regarding the funding growth, especially in pesos. I know all the cost debate, but we also have a volume debate, right? We are seeing our LDR in local currency approach to 100%. This is not only macro, this is in the industry, it's the lack of pesos. We get it. What is the strategy for the funding, Jorge? What could Macro do? Should we see loan growth acceleration because funding, if you guess, is getting too expensive and too difficult to find? If you can comment a little bit on your funding strategy, maybe some guidance on deposits, and also comment a little bit on your loan growth guidance, I would appreciate it. I can ask a second question. Thank you.

Thank you, Nicholas. And thank you. I I have 1 regarding, uh, the the funding role particularly basil. I know all the cost debate, but we also have a, a volume debate, right? Like we are seeing your ldr in local currency approach. 100%. This is not only Mark, so this is in the industry. The lack of we, we get it, but what is the strategy for the funding? What could McCoo, do, you know, uh, or should we see long block deceleration? Because like money, if you guessing is getting too expensive and too, too difficult to find. So if you can comment a little bit on your funding strategy, maybe some guidance on the positives and also comment a little bit on your, your long growth guidance. I would appreciate it and then I cannot check on questions. Thank you.

Jorge Francisco Scarinci: Okay, Yuri, good morning. In terms of what we are doing in terms of funding, ideally, we are trying to pay a higher cost, but as far as we can, a relatively lower higher cost compared to our peers. As I mentioned in the first question, basically because of the deposit base, more focused on the interior of the country and more retail than other peers. Of course, the idea is to continue growing in both in pesos deposits and dollar deposits. To give you an idea, in dollar deposits, we have the very competitive interest rates among the market, even though we have to say that we were able to issue a corporate bond in the second quarter. That was, of course, also helping the funding in dollars. We raised $530 million. It was a great transaction. In that sense, we feel really comfortable and pretty liquid.

Okay, you good morning. Um,

I mean, in terms of,

What we are doing in terms of funding is ideal. We are trying to pay a higher cost, but as far as we can, a relatively lower higher cost compared to our peers. As I mentioned in the first question, basically, because of the deposit base, we are more focused on the interior of the country and more retail than other peers. But of course,

The idea is to continue growing in both peso deposits and dollar deposits. To give you an idea of the deposit growth, we have the...

the very competitive interest rates among the market, even though we have to say that we were able to issue.

Jorge Francisco Scarinci: When you look at the liquidity standards in Macro, you can see that we have the highest levels among our peers, both in pesos and in dollars. Going back into pesos, also remember that we have been mentioning this in previous calls, that in order to fuel the increase in loans, we not only look at the increase in deposit, but also the portfolio of securities that we have that we can also change or transform into loans. The idea is to keep on growing in both deposit in pesos and in dollars and also in loans. To give you the guidance that we have, when you look at loans, for example, in the first half of 2025, we grew 36% in real terms of our loans. The idea is to maintain the 60% loan growth guidance that we have been giving the previous quarter.

I'm going back into pesos.

Also remember that.

We have been mentioned in this in previous calls that in order to H fuel the increase in loans. We not only look at the increasing deposit but also the, the the portfolio of security that we have that we can also, uh, change or transform into into loans. So, but the idea is to keep on growing in, in both depositing pesos.

Jorge Francisco Scarinci: 60% is maintained as a guidance for 2025 for loans. Deposits, in the first half of 2025, we grew our deposit base by 15%. The idea is to keep the 30% guidance for 2025 for the moment.

And in dollars, and also in loans, to give you the guidance that we have. When you look at loans, for example, in the first half of 2025, we grew 36% in real terms. Our loans— the idea is to maintain the 60% loan growth guidance that we have been giving since the previous quarter. So, 60% is maintained as guidance for 2025 for loans.

Deposits.

In the first half of 2025, we grew our deposit base by 15%. So the idea is to keep the 30% guidance for 2025 for the moment.

Yuri Fernandez: Super clear, Jorge. Just to follow up here, do you think the government may change reserve requirements post-elections? Is this a hope from the industry here to help on this?

Super clear. Just to follow up here: do you think the government may change reserve requirements for the elections? Is this a hope from the industry here to help on this?

Jorge Francisco Scarinci: I mean, Yuri, the government, at least what they have been saying is that at least in August, we are finishing August this weekend. Next Monday, we are starting September. At least in August, they didn't want to see spare liquidity in pesos that could be fueling an increase in inflation on the FX. That was the main reason behind the increase in reserve requirements. Honestly, I don't know what will happen in September. I think that we have to focus on what could be going on in the Buenos Aires province election that is taking place on Sunday, the 7th of September. I would say that if the government can have a good performance in that election, all the liquidity and FX and inflation, everything is going to be more relaxed after that. Honestly, it is very difficult for me to answer that question right now, Yuri.

I mean, you, um, the government, at least what they have been saying is that, at least in August—we are finishing August this weekend—so next Monday, we are starting September. So, at least in August, they didn't want to see spare liquidity in pesos.

That could be fueling an increase in inflation effects. So that was the main reason behind increasing reserve requirements.

honestly, uh,

don't know.

What's happening?

You have to focus on what could be going on in the Buenos Aires Province election. That is taking place on Sunday, the 7th of October.

September, I would say that if the government

Yuri Fernandez: Thank you. I know it's a difficult one. Just a final one here, Jorge, on my side. Going back to Ernesto's questions on the margin pressure for the third quarter, you mentioned a marginal pressure. Can you quantify or explain the moving parts? Where I struggle is the funding, right? When you go to the time deposits, like if you go to the bottler, the bottler is, I don't know, running around 60%. This is something that starts in July. When we go to the asset side, I know you can reprice some loan, but we see an increase in rates for commercial papers, right? Adelantos and those other things. When we go to the personal loans, we don't see a major repricing. When I think about your, I don't know, mortgage book that will not reprice as quickly, I struggle with like a marginal pressure.

Can have a good performance in that election. I would say that, uh, all the the, the liquidity and effects and inflation, everything is going to be more relaxed after that. Um, but honestly, it is very difficult for me to answer that question right now. You know. No, no, thank you. I know it's, it's a difficult 1. Just just a final 1 here. Jorge on my side, are going back to to Ernesto's questions on on, on the margin. Pressure for the third quarter, you mentioned a a marginal, a marginal pressure. Can you quantify or or, or explain the move

We’re moving parts where I struggle is the fun. Right? When you go to the time, the pause is like, you go to the bottler, the butler is, I don’t know, running around 60%, and this is something that started in July. When we go to the asset side, I know you can replace the loan.

Um, but we see increasing rates for commercial papers, right? They learn to then those other things, but when we go to personal loans, we don't see a major repricing. And then when I think about your, I don't know, mortgage book, that will not reprice as quickly.

Yuri Fernandez: I would expect like a bigger pressure for the third quarter. If you can help us understand a little bit, I know it's a quarterly thing, so it should not change our story, but just to understand a little bit the third quarter margin pressure here, how to quantify this. Thank you.

I struggle with like a marginal pressure. I would expect a bigger pressure for the third quarter, so that you can help us understand a little bit. I know it's a quarterly thing, so it should not change your story. But just to understand a little bit, the third quarter margin pressure here, how to quantify this? Thank you.

Jorge Francisco Scarinci: Yuri, we are in the middle of the third quarter. With this volatile scenario, it's not easy to forecast. For the moment, what we are doing is what you have been mentioning. The increase that we are seeing in the time deposits, of course, is translated in short-term lending. Also, we are, or we have been repricing a little bit our personal loans. Remember that the interest rate that we have in personal loans were in the area of 73%. Nominal, we are, or we have been moving those rates to low 80s. Basically, the big impact is on the short-term liquidity that we are charging to big corporates in short-term financing and also maybe in some short-term discount documents.

Well, Yuri, we are in the middle of the third quarter. So, um, with this volatile scenario, it is not easy to forecast for the moment. What we are doing is...

What you have been mentioning uh the increase that we are seeing in in the time deposits. Uh of course is translated in short term lending. Also we are or which have been repricing a little bit, our personal loans. Remember that interest rate that we have in personal loans were in the area of 30 73

Jorge Francisco Scarinci: If I have to say, I would say that the compression that we could be foreseeing in the third quarter again should be in the area of 100 basis points for the moment. This could change, but for the moment, that is what we are seeing.

Uh, nominal we are or we have been moving those rates in it to low 80s. But basically the big impact is on on the short-term liquidity that we are charging to uh big corporates in in short-term financing and also in maybe in some uh short-term uh discount documents.

Yuri Fernandez: Late August, and that's your best guess. Not super clear, Jorge. Thanks and congrats on your asset quality. I know a congrats to Flores is not good, but as I said, it will be a little bit better than most peers. Good on that. Thank you.

Jorge Francisco Scarinci: Thank you very much, Yuri.

Not super. Super. Clear, Jorge. And thanks, and congrats on your asset quality. I know congrats is not good, but as you said, it's a little bit better than most years, so we don't on that. Thank you, thank you very much, Yuri.

Operator: Next question from Matthias Cattaruzzi with Adcap Securities.

Next question from Matias, Qatari, with ADCAP Securities.

Brian Flores: Hi, Jorge. Hi, Nicolas. How are you? Yes, I have a question about the expected loan growth and deposit growth for 2025. The guidance was 60% on loans and as well 45% on deposits. We've seen 25% on the first quarter on loans and then 14%. There's still room to grow in loans, and deposits are on the only half, a 5% and a 4% growth in prior quarters. How do you see this tendency, especially with the third quarter expected to be a little bit more illiquid than prior expectations?

Hi, Nicholas. How are you?

Yes, I have a question about the, uh, expected long-term growth. Uh,

And deposit growth for 2025. The guidance was 60% on loans and as well, uh, 45% on deposits, we've seen 25% on the first quarter on loans and then 14%. So uh, there are still, uh, Room to Grow. Uh, in loans and deposits are, are on the only had a 5 and a 4% growth in Prior quarters. How do you see these tendency? Uh, especially with the third quarter, uh, expected to be, uh, are are a little bit more liquid than prior expectations.

Jorge Francisco Scarinci: Hi, Matthias. Yes, what we are seeing is that in the third quarter, at least in terms of lending, there should be a number maybe not that high. What we are forecasting is that in the fourth quarter, macroeconomic conditions should be more relaxed and there could be some pickup there in demand in order to get to the 60% guidance in loans. Also, in terms of the guidance in deposits that I mentioned that is 30% for 2025, it's similar. I would say that some volatility in the third quarter and more normalized scenario in the fourth quarter.

Brian Flores: Another question on your strong capital position. Do you still consider M&A activity, acquiring a mid-sized peer, or given valuations right now are more hurt than before? What is your outlook on that field?

All right Matias. Yes. What we are seeing is that in the third quarter in at least in terms of lending erh there should be a number maybe not that high but what we are forecasting is that the fourth quarter macroeconomic conditions should be more relaxed and there could be some pickup there in demand uh in order to get to the 60% uh guidance in loans. Um, and also in terms of the guidance in deposits that I mentioned at this 30% for 2025, uh, it's similar, I would say that some volatility in the third quarter and more normalized scenario in the fourth quarter.

And then, uh, another question on your strong capital position. Do you still consider M&A activity, acquiring and, uh, mid-sized beer companies, or, uh, given valuations right now are, uh, more?

Hurt than before. Uh, or what? What are your, what is your outlook on that field?

Jorge Francisco Scarinci: I mean, when you look at Banco Macro S.A. and our track record, we always are trying to find opportunities in the markets. Of course, if there is an opportunity, we are going to analyze it. Of course, price is very important. The physical presence of branches, type of businesses, overlapping of branches, we consider all that. For the moment, there's nothing on the table, but we are open to analyze any potential target as always, as we have been doing the last 22 years.

I mean, when you look at Banco Macro and our track record, we always are, uh, trying to find opportunities in the markets. Um, so of course, if there is an opportunity, we are going to analyze it.

Of course, price is very important. H, the physical presence of branches, type of businesses, overlapping of branches—we consider all that. So, for the moment, there’s nothing on the table.

Brian Flores: Great. On loan growth opportunities going forward, which should be the mix going forward? We've seen some rising NPLs on consumer lending. Are you shifting to corporates and small and medium enterprises, or what's your outlook?

But we are open to to analyze any potential Target. As always, as we have been doing the last 22 years, great. And then on Long growth, uh, opportunities going forward, uh, which should be the mix going forward. We've seen some Rising mpls on uh, consumer lending. Are you shifting uh, to corporates and small and medium Enterprises or what's your outlook?

Jorge Francisco Scarinci: No, we maintain our policy of being a universal bank and tackling commercial and consumer lending with the same appetite. Of course, in this volatile scenario, we are a bit more conservative in some requirements for both types of loans, commercial and consumer, and of course, with the higher interest rates. We are not stopping one in order to focus into the other. No.

No, we we maintain our policy of of being a universal bank and tackling commercial and consumer lending. Uh with the same appetites of course, in this volatile scenario, we are a bit more conservative in some requirements for h, both type of of loans commercial and and consumer and of course with the higher interest rates, but that we are not

Brian Flores: Okay, thank you so much.

Not stopping one in order to focus on the other. No.

Jorge Francisco Scarinci: You're welcome, Matthias.

Okay, thank you so much.

You're welcome Matias.

Operator: Our next question comes from Shamely Vanderporten. What is the inflation adjustment item in the P&L? Is it due to inflation accounting?

Our next question comes from Shamaly Vander Porton.

What is the inflation adjustment item in the P&L? Is it due to inflation accounting?

Jorge Francisco Scarinci: Yes, it's due to hyperinflation accounting.

Yes, it's due to inflation accounting.

Operator: Next question from Jonty Fish. What real growth for loans can we expect for 2025 and 2026?

Next question from jonty, fish.

What real growth can we expect for loans in 2025 and 2026?

Jorge Francisco Scarinci: In terms of loan growth for 2025, I have been commenting that 60%. For 2026, for the moment, we are forecasting a 45% real loan growth.

19 dots 60%.

And for, uh, 2026, for the moment, we are forecasting a 45% real loan growth.

Operator: There are no more questions at this time. This concludes the question and answer session. I will now turn over to Mr. Nicolas Torres for final considerations.

There are no more questions at this time. This concludes the question and answer session. I will now turn over to Mr. Nicolás Torres for final considerations.

Nicolas Torres: Thank you for your interest in Banco Macro S.A. We appreciate your time and look forward to speaking with you again. Have a good day.

Thank you for your interest in Bangkok. We appreciate your time and look forward to speaking with you again. Have a good day.

Operator: This concludes Banco Macro S.A.'s conference. Thank you.

This concludes the phone call for the Marcos conference. Thank you.