Q3 2025 Grupo Financiero Galicia SA (Argentina) Earnings Call

Speaker #2: Good morning, ladies and gentlemen, and welcome to Grupo Financiero Galicia's third quarter 2025 earnings call. This conference is being recorded, and the replay will be available on the company's website at gfgsa.com.

Operator: Good morning, ladies and gentlemen, and welcome to Grupo Financiero Galicia Q4 2025 earnings call. This conference is being recorded, and the replay will be available at the company's website at gfgsa.com. We would like to inform you that all attendees will only be listening to the conference during the presentation, and we will start the Q&A section when further instructions will be provided. Some of the statements made during this conference call will be forward-looking statements within the meaning of the safe harbor provision of the US Federal Securities Law and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed. Investors should be aware of events related to the macroeconomic scenario, the financial industry, and other factors that could cause results to differ materially from those expressed in the respective forward-looking statements. Now, I'll turn the conference over to Mr.

Good morning, ladies and gentlemen, and welcome to Grupo Financiero Galicia Q4 2025 earnings call. This conference is being recorded, and the replay will be available at the company's website at gfgsa.com. We would like to inform you that all attendees will only be listening to the conference during the presentation, and we will start the Q&A section when further instructions will be provided. Some of the statements made during this conference call will be forward-looking statements within the meaning of the safe harbor provision of the US Federal Securities Law and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed. Investors should be aware of events related to the macroeconomic scenario, the financial industry, and other factors that could cause results to differ materially from those expressed in the respective forward-looking statements. Now, I'll turn the conference over to Mr.

Speaker #2: We would like to inform you that our attendees will only be listening to the conference during the presentation, and then we'll start the Q&A section when further instructions will be provided.

Speaker #2: Some of the statements made during this conference call will be forward-looking statements within the meaning of the safe harbor provision of the U.S. Federal Securities Law and are subject to risks and uncertainties that could actually result in differences from those expressed.

Speaker #2: Investors should be aware of events related to the macroeconomic scenario, the financial industry, and other factors that could cause results to differ materially from those expressed in their respective forward-looking statements.

Speaker #2: Now, I'll turn the conference over to Mr. Pablo Firvida, Head of Investor Relations, and Mr. Gonzalo Fernandez-Covaro, CFO. Please, Mr. Firvida, you may begin your conference.

Operator: Pablo Firvida, Head of Investor Relations, and Gonzalo Fernández Covado, CFO. Please, Mr. Firvida, you may begin your conference.

Pablo Firvida, Head of Investor Relations, and Gonzalo Fernández Covado, CFO. Please, Mr. Firvida, you may begin your conference.

Speaker #3: Thank you. Good morning and welcome to this conference call. According to the monthly indicator for economic activity, EMAE, the Argentine economy recorded a 5% year-over-year increase during September.

Pablo Firvida: Thank you. Good morning and welcome to this conference call. According to the monthly indicator for economic activity, EMAE, the Argentine economy recorded a 5% year-over-year increase during September. In year-to-date terms, the economic expansion reached 5.2%. During Q3 2025, the primary surplus reached 0.5% of GDP, and an overall surplus of 0.1% of GDP was reported. This result was explained by revenues increasing by 32.8% year-over-year, whereas primary spending rose 30.6%. During the first 10 months of 2025, the primary balance stood at 1.4%, while the financial balance amounted to 0.5% of GDP. The National Consumer Price Index accumulated a 6% increase during Q3 2025 and a 24.8% year-to-date increase as of October.

Pablo Firvida: Thank you. Good morning and welcome to this conference call. According to the monthly indicator for economic activity, EMAE, the Argentine economy recorded a 5% year-over-year increase during September. In year-to-date terms, the economic expansion reached 5.2%. During Q3 2025, the primary surplus reached 0.5% of GDP, and an overall surplus of 0.1% of GDP was reported. This result was explained by revenues increasing by 32.8% year-over-year, whereas primary spending rose 30.6%. During the first 10 months of 2025, the primary balance stood at 1.4%, while the financial balance amounted to 0.5% of GDP. The National Consumer Price Index accumulated a 6% increase during Q3 2025 and a 24.8% year-to-date increase as of October.

Speaker #3: In year-to-date terms, the economic expansion reached 5.2%. During the third quarter of 2025, the primary surplus reached 0.5% of GDP, and an overall surplus of 0.1% of GDP was recorded.

Speaker #3: These results were explained by revenues increasing by 32.8% year-over-year, whereas primary spending rose 30.6%. During the first 10 months of 2025, the primary balance stood at 1.4%, while the financial balance amounted to 0.5% of GDP.

Speaker #3: The National Consumer Price Index accumulated a 6% increase during the third quarter of 2025 and a 24.8% year-to-date increase as of October. After four consecutive months below the 2% mark, headline inflation was 2.1% in September and 2.3% in October, accumulating 31.3% in the last 12 months.

Pablo Firvida: After four consecutive months below the 2% mark, headline inflation was 2.1% in September and 2.3% in October, accumulating 31.3% in the last 12 months, the lowest level since July 2018. The third quarter was marked by high volatility in the months leading up to the midterm elections. The exchange rate came under pressure, at times nearing the upper limit of the floating band, which prompted the central bank to step in with foreign exchange sales. Nonetheless, the exchange rate averaged ARS 1,400 per dollar in September 2025, a 15.6% devaluation compared to June 2025. Meanwhile, peso-denominated interest rates saw sharp swings, reflecting increased uncertainty and liquidity shifts. In fact, the average rate on peso-denominated private sector time deposits for up to 59 days averaged 48.7% in September 2025, up 16.5 percentage points from June 2025 levels.

After four consecutive months below the 2% mark, headline inflation was 2.1% in September and 2.3% in October, accumulating 31.3% in the last 12 months, the lowest level since July 2018. The third quarter was marked by high volatility in the months leading up to the midterm elections. The exchange rate came under pressure, at times nearing the upper limit of the floating band, which prompted the central bank to step in with foreign exchange sales. Nonetheless, the exchange rate averaged ARS 1,400 per dollar in September 2025, a 15.6% devaluation compared to June 2025. Meanwhile, peso-denominated interest rates saw sharp swings, reflecting increased uncertainty and liquidity shifts. In fact, the average rate on peso-denominated private sector time deposits for up to 59 days averaged 48.7% in September 2025, up 16.5 percentage points from June 2025 levels.

Speaker #3: The lowest level since July 2018. The third quarter was marked by high volatility in the months leading up to the midterm elections. The exchange rate came under pressure at times, nearing the upper limit of the floating band, which prompted the central bank to step in with foreign exchange sales.

Speaker #3: Nonetheless, the exchange rate averaged 1,400 pesos per dollar in September 2025, a 15.6% devaluation compared to June 2025. Meanwhile, peso-denominated interest rates saw sharp swings, reflecting increased uncertainty and liquidity shifts.

Speaker #3: In fact, the average rate on peso-denominated private sector time deposits for up to 59 days averaged 48.7% in September 2025, up 16.5 percentage points from June 2025 levels.

Speaker #3: Private sector deposits in pesos averaged 94.1 trillion pesos in September, increasing by 5.6% during the quarter and 53% in the last 12 months. Time deposits in pesos rose 13.1% during the quarter and 76.3% in the year.

Pablo Firvida: Private sector deposits in ARS averaged ARS 94.1 trillion in September, increasing by 5.6% during the quarter and 53% in the last 12 months. Time deposits in ARS rose 13.1% during the quarter and 76.3% in the year. ARS-denominated transactional deposits decreased 2.4% during the third quarter, but increased 31.5% in year-over-year terms. Private sector USD-denominated deposits amounted to $32.6 billion in September 2025, increasing 7.2% during the quarter and rising 38.9% in the last 12 months. ARS-denominated loans to the private sector averaged ARS 79.3 trillion in September, showing a 9.7% quarterly increase and a 105.4% year-over-year. Private sector USD-denominated loans amounted to $18.3 billion, recording a 15.8% quarterly growth and a 153.4% annual increase.

Private sector deposits in ARS averaged ARS 94.1 trillion in September, increasing by 5.6% during the quarter and 53% in the last 12 months. Time deposits in ARS rose 13.1% during the quarter and 76.3% in the year. ARS-denominated transactional deposits decreased 2.4% during the third quarter, but increased 31.5% in year-over-year terms. Private sector USD-denominated deposits amounted to $32.6 billion in September 2025, increasing 7.2% during the quarter and rising 38.9% in the last 12 months. ARS-denominated loans to the private sector averaged ARS 79.3 trillion in September, showing a 9.7% quarterly increase and a 105.4% year-over-year. Private sector USD-denominated loans amounted to $18.3 billion, recording a 15.8% quarterly growth and a 153.4% annual increase.

Speaker #3: Peso-denominated transactional deposits decreased 2.4% during the third quarter but increased 31.5% in year-over-year terms. Private sector dollar-denominated deposits amounted to $32.6 billion in September 2025, increasing 7.2% during the quarter and rising 38.9% in the last 12 months.

Speaker #3: Peso-denominated loans to the private sector averaged 79.3 trillion pesos in September, showing a 9.7% quarterly increase and a 105.4% year-over-year increase. Private sector dollar-denominated loans amounted to $18.3 billion, recording a 15.8% quarterly growth and a 153.4% annual increase.

Speaker #3: Turning now to Grupo Financiero Galicia, the net loss for the quarter amounted to $87.7 billion pesos, due to losses from Banco Galicia of $104 billion pesos, from Naranja X of $6 billion pesos, and from Galicia Seguros of $12 billion pesos.

Pablo Firvida: Turning now to Grupo Financiero Galicia, net loss for the quarter amounted to ARS 87.7 billion due to losses from Banco Galicia for ARS 104 billion, from NaranjaX for ARS 6 billion, and from Galicia Seguros for ARS 12 billion, partially offset by the profits from Galicia Asset Management for ARS 25 billion. These losses represented a -0.8% annualized return on average assets and a -4.7% return on average shareholders' equity, while accumulated annualized figures for the fiscal year reached 0.9% and 4.7%, respectively. The quarter includes extraordinary restructuring expenses associated with the merger with HSBC for ARS 105.3 billion net of income tax. The quarter ROE without the extraordinary expenses would have been 1%, and the nine-month ROE 6.9%.

Turning now to Grupo Financiero Galicia, net loss for the quarter amounted to ARS 87.7 billion due to losses from Banco Galicia for ARS 104 billion, from NaranjaX for ARS 6 billion, and from Galicia Seguros for ARS 12 billion, partially offset by the profits from Galicia Asset Management for ARS 25 billion. These losses represented a -0.8% annualized return on average assets and a -4.7% return on average shareholders' equity, while accumulated annualized figures for the fiscal year reached 0.9% and 4.7%, respectively. The quarter includes extraordinary restructuring expenses associated with the merger with HSBC for ARS 105.3 billion net of income tax. The quarter ROE without the extraordinary expenses would have been 1%, and the nine-month ROE 6.9%.

Speaker #3: Partially offset by the profits from Galicia Asset Management for $25 billion pesos. This loss represented a minus 0.8% annualized return on average assets and a minus 4.7% return on average equity.

Speaker #3: While accumulated annualized figures for the fiscal year reached 0.9% and 4.7%, respectively, the quarter includes extraordinary restructuring expenses associated with the merger with HSBC for $105.3 billion pesos.

Speaker #3: Net of income tax, the quarterly ROE without the extraordinary expenses would have been 1%, and the nine-month ROE would be 6.9%. The result from Banco Galicia included 101.1 billion pesos of extraordinary expenses. Additionally, it was negatively affected by the increase in the cost of risk associated with the growth of the loan book and the rise in non-performing loans in the retail segment, particularly in personal loans and credit card financing.

Pablo Firvida: The result from Banco Galicia included ARS 101.1 billion of extraordinary expenses, and in addition, were negatively affected by the increase in the cost of risk associated with the growth of the loan book and the increase in the non-performing loans in the retail segment, particularly in personal loans and credit card financing, together with a decrease of financial margin associated to an environment of high interest rates and a regulatory increase of reserve requirements. It is also worth noting that most of the comparisons will be made against the second quarter of this fiscal year, as figures for the third quarter of 2024 do not include information about the acquired business of the former HSBC Argentina.

The result from Banco Galicia included ARS 101.1 billion of extraordinary expenses, and in addition, were negatively affected by the increase in the cost of risk associated with the growth of the loan book and the increase in the non-performing loans in the retail segment, particularly in personal loans and credit card financing, together with a decrease of financial margin associated to an environment of high interest rates and a regulatory increase of reserve requirements. It is also worth noting that most of the comparisons will be made against the second quarter of this fiscal year, as figures for the third quarter of 2024 do not include information about the acquired business of the former HSBC Argentina.

Speaker #3: Together with a decrease in financial margin associated with an environment of high interest rates and regulatory increases in reserve requirements, it is also worth noting that most comparisons will be made against the second quarter of this fiscal year, as figures for the third quarter of 2024 do not include information about the acquired business of the former HSBC Argentina.

Speaker #3: Net operating income decreased 23%, while net interest income decreased 10%. Net results from financial instruments were down 89%, and loan loss provisions increased 26%, which were partially offset by 9% growth in net fee income and a 12% increase in profits from gold and foreign exchange quotation differences.

Pablo Firvida: Net operating income decreased 23%, as net interest income decreased 10%, net results from financial instruments were down 89%, and loan loss provisions increased 26%, which were partially offset by a 9% growth of net fee income, and a 12% increase in profits from gold and FX quotation differences. Average interest-earning assets reached ARS 22.7 trillion, 8% higher than in the previous quarter, primarily due to the increase of the average portfolio of loans, 5% in pesos, and 27% in dollars. In the same period, its yield decreased 259 basis points, reaching 30.1%. Interest-bearing liabilities increased 27% from June 2025, amounting to ARS 19.9 trillion, primarily due to the increase of time deposits in pesos, and of saving accounts in foreign currency. During this period, its cost increased 88 basis points to 16.5%.

Net operating income decreased 23%, as net interest income decreased 10%, net results from financial instruments were down 89%, and loan loss provisions increased 26%, which were partially offset by a 9% growth of net fee income, and a 12% increase in profits from gold and FX quotation differences. Average interest-earning assets reached ARS 22.7 trillion, 8% higher than in the previous quarter, primarily due to the increase of the average portfolio of loans, 5% in pesos, and 27% in dollars. In the same period, its yield decreased 259 basis points, reaching 30.1%. Interest-bearing liabilities increased 27% from June 2025, amounting to ARS 19.9 trillion, primarily due to the increase of time deposits in pesos, and of saving accounts in foreign currency. During this period, its cost increased 88 basis points to 16.5%.

Speaker #3: Average interest-earning assets reached 22.7 trillion pesos, 8% higher than in the previous quarter, primarily due to the increase in the average portfolio of loans: 5% in pesos and 27% in dollars.

Speaker #3: In the same period, its yield decreased by 259 basis points, reaching 30.1%. Interest-bearing liabilities increased by 27% from June 2025, amounting to 19.9 trillion pesos, primarily due to the increase in time deposits in pesos and saving accounts in foreign currency.

Speaker #3: During this period, its cost increased by 88 basis points to 16.5%. Net interest income decreased by 10% compared to the second quarter due to a 35% increase in interest expenses, stemming from a 36% higher interest rate on time deposits. This was partially offset by a 7% increase in interest income, mainly due to a 12% rise in interest on loans and other financings to the private sector.

Pablo Firvida: Net interest income decreased 10% when compared to the second quarter because of a 35% increase in interest expenses due to a 36% higher interest rate on time deposits, partially offset by a 7% increase of interest income, mainly due to a 12% higher interest on loans and other financing to the private sector. Net fee income increased 9% from the previous quarter due to a 6% higher income from credit card fees, and 19% from fees on deposits. Net income from financial instruments decreased 89% due to an 88% lower result from government securities. Gains from FX quotation differences were 12% higher from the year-ago quarter, including the result from foreign currency trading following the lifting of exchange restrictions. Other operating income increased 11% in the quarter, mainly due to the 45% increase in other income, primarily corresponding to credits recovered.

Net interest income decreased 10% when compared to the second quarter because of a 35% increase in interest expenses due to a 36% higher interest rate on time deposits, partially offset by a 7% increase of interest income, mainly due to a 12% higher interest on loans and other financing to the private sector. Net fee income increased 9% from the previous quarter due to a 6% higher income from credit card fees, and 19% from fees on deposits. Net income from financial instruments decreased 89% due to an 88% lower result from government securities. Gains from FX quotation differences were 12% higher from the year-ago quarter, including the result from foreign currency trading following the lifting of exchange restrictions. Other operating income increased 11% in the quarter, mainly due to the 45% increase in other income, primarily corresponding to credits recovered.

Speaker #3: Net fee income increased 9% from the previous quarter, due to a 6% increase in income from credit card fees and a 19% rise in fees on deposits.

Speaker #3: Net income from financial instruments decreased 89%, due to an 88% lower result from government securities. Gains from exchange quotation differences were 12% higher than in the year-ago quarter, including the result from foreign currency trading following the lifting of exchange restrictions.

Speaker #3: Other operating income increased 11% in the quarter, mainly due to the 45% increase in other income, primarily corresponding to credits recovered. Provision for loan losses increased 26%, due to the growth of the financing portfolio and an increase in delinquency that is limited to personal loans and credit card financing to individuals in pesos.

Pablo Firvida: Provision for loan losses increased 26% due to the growth of the financing portfolio and to an increase in delinquency that is limited to personal loans and credit card financing to individuals in pesos. Personal expenses were 83% higher than in the second quarter due to the voluntary retirement program recorded in connection with the restructuring plan following the acquisition of HSBC's business in Argentina. Administrative expenses were 11% lower than in the previous quarter due to a 32% decrease of expenses for maintenance and repair of goods and IT, and to a 14% decrease of higher administrative services. Other operating expenses increased 5% due to a 7% higher turnover tax. Results from the net monetary position decreased 9% from the second quarter following the declining evolution of inflation. The income tax charge was positive, as the pre-tax net income was a loss.

Provision for loan losses increased 26% due to the growth of the financing portfolio and to an increase in delinquency that is limited to personal loans and credit card financing to individuals in pesos. Personal expenses were 83% higher than in the second quarter due to the voluntary retirement program recorded in connection with the restructuring plan following the acquisition of HSBC's business in Argentina. Administrative expenses were 11% lower than in the previous quarter due to a 32% decrease of expenses for maintenance and repair of goods and IT, and to a 14% decrease of higher administrative services. Other operating expenses increased 5% due to a 7% higher turnover tax. Results from the net monetary position decreased 9% from the second quarter following the declining evolution of inflation. The income tax charge was positive, as the pre-tax net income was a loss.

Speaker #3: Personal expenses were 83% higher than in Q2, due to the voluntary retirement program recorded in connection with the restructuring plan following the acquisition of HSBC's business in Argentina.

Speaker #3: Administrative expenses were 11% lower than in the previous quarter, due to a 32% decrease in expenses for maintenance and repair of goods and IT, and a 14% decrease in higher administrative services.

Speaker #3: Other operating expenses increased 5%, due to a 7% higher turnover tax. Results from the net monetary position decreased 9% from Q2, following the declining evolution of inflation.

Speaker #3: The income tax charge was positive, as the pre-tax net income was a loss. The bank's financing to the private sector reached 20.4 trillion pesos at the end of the quarter, up 14% in the last three months, with peso financing increasing by 5% and dollar-denominated financing growing by 35%.

Pablo Firvida: The bank's financing to the private sector reached ARS 20.4 trillion at the end of the quarter, up 14% in the last three months, with peso financing increasing by 5% and dollar-denominated financing growing 35%. Net exposure to the public sector was 3% down compared with the previous quarter, primarily due to a 38% decrease in government securities in pesos measured at fair value through OCI, offset by an increase in government securities in pesos at amortized cost. Deposits reached ARS 22.9 trillion, 8% higher than a quarter before, mainly due to a 26% increase in dollar-denominated deposits, mainly time deposits that were up 72%.

The bank's financing to the private sector reached ARS 20.4 trillion at the end of the quarter, up 14% in the last three months, with peso financing increasing by 5% and dollar-denominated financing growing 35%. Net exposure to the public sector was 3% down compared with the previous quarter, primarily due to a 38% decrease in government securities in pesos measured at fair value through OCI, offset by an increase in government securities in pesos at amortized cost. Deposits reached ARS 22.9 trillion, 8% higher than a quarter before, mainly due to a 26% increase in dollar-denominated deposits, mainly time deposits that were up 72%.

Speaker #3: Net exposure to the public sector was 3%, down from the previous quarter, primarily due to a 38% decrease in government securities in pesos, measured at fair value through OCI, offset by an increase in government securities in pesos at amortized cost.

Speaker #3: Deposits reached 22.9 trillion pesos, 8% higher than the previous quarter, mainly due to a 26% increase in dollar-denominated deposits, particularly time deposits, which increased by 72%.

Speaker #3: The bank's estimated market share of loans to the private sector was 14.8%, 30 basis points higher than at the end of the previous quarter. The market share of deposits from the private sector was 16.4%, 40 basis points higher than in the second quarter of 2025.

Pablo Firvida: The bank's estimated market share of loans to the private sector was 14.8%, 30 basis points higher than at the end of the previous quarter, and the market share of deposits from the private sector was 16.4%, 40 basis points higher than in the second quarter of 2025. The bank's liquid assets represented 94.5% of transactional deposits and 59.2% of total deposits, compared to 94.3% and 65.2%, respectively, from a quarter before. As regards asset quality, the ratio of non-performing loans to total financing ended the quarter at 5.8%, recording a 140 basis points deterioration as compared to the 4.4% of the second quarter. I mentioned before, the deterioration is limited to the personal loans and credit card financing portfolios. At the same time, the coverage with allowances reached 105%, down 16.4 percentage points from the 117.9% recorded a quarter ago.

The bank's estimated market share of loans to the private sector was 14.8%, 30 basis points higher than at the end of the previous quarter, and the market share of deposits from the private sector was 16.4%, 40 basis points higher than in the second quarter of 2025. The bank's liquid assets represented 94.5% of transactional deposits and 59.2% of total deposits, compared to 94.3% and 65.2%, respectively, from a quarter before. As regards asset quality, the ratio of non-performing loans to total financing ended the quarter at 5.8%, recording a 140 basis points deterioration as compared to the 4.4% of the second quarter. I mentioned before, the deterioration is limited to the personal loans and credit card financing portfolios. At the same time, the coverage with allowances reached 105%, down 16.4 percentage points from the 117.9% recorded a quarter ago.

Speaker #3: The bank's liquid assets represented 94.5% of transactional deposits and 59.2% of total deposits, compared to 94.3% and 65.2% respectively, from a quarter report.

Speaker #3: As regards asset quality, the ratio of non-performing loans to total financing ended the quarter at 5.8%, recording a 140 basis point deterioration compared to the 4.4% of the second quarter. As I mentioned before, the deterioration is limited to the personal loans and credit card financing portfolios.

Speaker #3: At the same time, the coverage with allowances reached 105%, down 16.4 percentage points from the 117.9% recorded a quarter ago. As of September 2025, the bank's total regulatory capital ratio reached 22.1%, decreasing 160 basis points from the end of the second quarter, while the Tier One ratio was 28.8%, down 140 basis points during the same period.

Pablo Firvida: As of September 2025, the bank's total regulatory capital ratio reached 22.1%, decreasing 160 basis points from the end of the second quarter, while the tier one ratio was 21.8%, down 140 basis points during the same period. In summary, the third quarter was marked by high political effects, monetary volatility, and negatively affected margins and asset quality. In addition, the results were affected by a very high one-time expense due to the restructuring of the merged banks. Despite this, Grupo Financiero Galicia was able to keep liquidity and solvency metrics at healthy levels, and we expect an improvement in profitability during the fourth quarter and next year. Now, Gonzalo Fernández Covado will make some additional remarks. Hi, everyone. Well, continue with what we see for the future.

As of September 2025, the bank's total regulatory capital ratio reached 22.1%, decreasing 160 basis points from the end of the second quarter, while the tier one ratio was 21.8%, down 140 basis points during the same period. In summary, the third quarter was marked by high political effects, monetary volatility, and negatively affected margins and asset quality. In addition, the results were affected by a very high one-time expense due to the restructuring of the merged banks. Despite this, Grupo Financiero Galicia was able to keep liquidity and solvency metrics at healthy levels, and we expect an improvement in profitability during the fourth quarter and next year. Now, Gonzalo Fernández Covado will make some additional remarks.

Speaker #3: In summary, the third quarter was marked by high political effects and monetary volatility, which negatively affected margins and asset quality. Additionally, the results were impacted by a very high one-time expense due to a restructuring of the merged banks.

Speaker #3: Despite this, Grupo Financiero Galicia was able to keep liquidity and solvency metrics at healthy levels, and we expect an improvement in profitability during the fourth quarter and next year.

Speaker #3: And now, Gonzalo Fernández Covaro will make some additional remarks.

Speaker #2: Hi, everyone. Well, continuing with what we see for the future, I mean, regarding how we see the rest of October, we expect to continue with low margins due to the high interest rates that we observed in the third quarter.

Gonzalo Fernández Covaro: Hi, everyone. Well, continue with what we see for the future.

Pablo Firvida: I mean, regarding how we see the rest of the year, October continued with low margins due to the high interest rate that we saw in the third quarter. We are already seeing a fast improvement in margins in November. We are already really seeing margins at the same level as the second quarter and the first half of the year on average in November, and we expect the same for December. Portfolio performance still needs some time to get back on track, so we'll still see a deterioration in the fourth quarter, a lower trend than before, but still some. Overall, the bank will be better and will improve returns, mainly due to the margins improvement. NaranjaX will have some headwinds in terms of portfolio performance. With this mix, we are seeing the ROE for the full year 2025 around 4%, the reported one.

I mean, regarding how we see the rest of the year, October continued with low margins due to the high interest rate that we saw in the third quarter. We are already seeing a fast improvement in margins in November. We are already really seeing margins at the same level as the second quarter and the first half of the year on average in November, and we expect the same for December. Portfolio performance still needs some time to get back on track, so we'll still see a deterioration in the fourth quarter, a lower trend than before, but still some. Overall, the bank will be better and will improve returns, mainly due to the margins improvement. NaranjaX will have some headwinds in terms of portfolio performance. With this mix, we are seeing the ROE for the full year 2025 around 4%, the reported one.

Speaker #2: But we are seeing improvement in margins in November. We are already seeing margins at the same level as in the second quarter and the first half of the year, on average, in November, and we expect the same for December.

Speaker #2: Portfolio performance still needs some time to get back on track, so we'll still see a deterioration in the fourth quarter at as low or lower than before, but still some.

Speaker #2: So overall, the bank will be better and will improve returns mainly due to margin improvements. However, Naranja X will face some headwinds in terms of portfolio performance. With this mix, we are projecting the ROE for the full year 2025 to be around 4%.

Speaker #2: The reported one, and if we exclude the non-recovering integration costs that we mainly booked in the third quarter, we should be around 6%. Talking about 2026, we are expecting an ROE in the low teens range; I would say between 11% and 12%.

Pablo Firvida: If we exclude the non-recovery integration cost that we mainly booked in the third quarter, we should be around 6%. Talking about 2026, we are expecting an ROE in the low teens range, I would say between 11% and 12%. Of course, a lot of moving targets for next year. We will be updating this guidance in future quarters, but this is our base case scenario to be around 11% to 12%. Margins, we'll see improving them in the first months of the year together with what we are seeing in November, December. Some kind of slight reduction as a consequence of the rate reduction, but not really high, the reduction. We still see healthy margins next year, I would say, in the levels of the second quarter.

If we exclude the non-recovery integration cost that we mainly booked in the third quarter, we should be around 6%. Talking about 2026, we are expecting an ROE in the low teens range, I would say between 11% and 12%. Of course, a lot of moving targets for next year. We will be updating this guidance in future quarters, but this is our base case scenario to be around 11% to 12%. Margins, we'll see improving them in the first months of the year together with what we are seeing in November, December. Some kind of slight reduction as a consequence of the rate reduction, but not really high, the reduction. We still see healthy margins next year, I would say, in the levels of the second quarter.

Speaker #2: Of course, a lot of moving targets for next year will be updating this guidance in future quarters, but this is our base case scenario to be around 11% to 12%.

Speaker #2: Margins will see improving them in the first months of the year together with what we are seeing in November, December. Then some kind of slight reduction as a consequence of the rate reduction, but not really high, the reduction.

Speaker #2: So, we still see healthy margins next year; I would say the levels of the second quarter. NPLs, we expect a peak in NPLs in March of next year, but then improving as the good portfolio that we are originating gains weight in our mix.

Pablo Firvida: NPLs, we expect a peak on NPLs in March of next year, but then improving as the good portfolio that we are originating is gaining weight in our mix. That will end the year with NPLs better than the runway that we are having now. Regarding costs, we are also seeing a reduction year-over-year in cost because of all the restructuring we have done. You saw the restructuring cost we booked in the third quarter, and that generated a 1,000 headcount reduction in the group quarter over quarter. If we add up all the year, we have a headcount reduction of 2,000 for the year. That is, of course, generating cost reduction for next year. We are seeing already fourth quarter of next year. Our projections show a fourth quarter of next year ROE run rate already at 15% level.

NPLs, we expect a peak on NPLs in March of next year, but then improving as the good portfolio that we are originating is gaining weight in our mix. That will end the year with NPLs better than the runway that we are having now. Regarding costs, we are also seeing a reduction year-over-year in cost because of all the restructuring we have done. You saw the restructuring cost we booked in the third quarter, and that generated a 1,000 headcount reduction in the group quarter over quarter. If we add up all the year, we have a headcount reduction of 2,000 for the year. That is, of course, generating cost reduction for next year. We are seeing already fourth quarter of next year. Our projections show a fourth quarter of next year ROE run rate already at 15% level.

Speaker #2: And that will, and we will end the year with NPLs better than the runway that we are having now. Regarding costs, we are also seeing a reduction year over year in costs because of all the restructuring we have done. You saw the restructuring costs we booked in the third quarter, and that generated a reduction of 1,000 heads in the group quarter over quarter. If we add up all the year, we have a healthcare reduction of 2,000 heads for the year.

Speaker #2: So that is, of course, generating a reduction in cost for next year. We are already seeing that our projections show a fourth quarter of next year ROE run rate at the 15% level.

Speaker #2: So that puts us with a solid base to start 27 and deliver ROEs of about 15, which is the target ROE that we are aiming for in the longer future.

Pablo Firvida: That put us with a solid base to start 2027 and deliver ROEs about 15%, as is the target ROE that we are aiming for the longer future. With that, I mean, we are also open for any questions you may have. Thank you. We are now going to start the Q&A section for investors and analysts. If you wish to ask a question, please press the raise hand button. If your question has already been answered, you can leave the queue by clicking on the same button. Wait while we pull for questions. Our first question comes from Danielle Vass from Safra. Please, Mr. Vass, your microphone is open. Hi, hi, Gonzalo. Hi, Pablo. First time being here. Thank you for the opportunity. I'm looking at your capital ratio of 21% at the group level, and it was down 120 basis points from the second quarter.

That put us with a solid base to start 2027 and deliver ROEs about 15%, as is the target ROE that we are aiming for the longer future. With that, I mean, we are also open for any questions you may have.

Speaker #2: So, with that, we are also open to any questions you may have.

Operator: Thank you. We are now going to start the Q&A section for investors and analysts. If you wish to ask a question, please press the raise hand button. If your question has already been answered, you can leave the queue by clicking on the same button. Wait while we pull for questions. Our first question comes from Danielle Vass from Safra. Please, Mr. Vass, your microphone is open.

Speaker #3: Thank you. We are now going to start the Q&A section for investors and analysts. If you wish to ask a question, please press the raise hand button.

Speaker #3: If a question has already been answered, you can leave the queue by clicking on the same button. Wait while we pull for questions. Our first question comes from Danielle Voss from Safra.

Speaker #3: Please, Mr. Voss, your microphone is.

Speaker #3: open. Hi, Gonzalo.

Daniel Vaz: Hi, hi, Gonzalo. Hi, Pablo. First time being here. Thank you for the opportunity. I'm looking at your capital ratio of 21% at the group level, and it was down 120 basis points from the second quarter.

Speaker #4: Hi, Pablo. It's my first time being here. Thank you for the opportunity. I'm looking at your capital ratio of 21% at the group level, and it was down 120 bps from Q2.

Speaker #4: I'm just wondering if you said that your cohorts, new cohorts of origination aren't getting better, so you expect a peak in NPL in March.

Pablo Firvida: I'm just wondering if you said that your new cohorts of origination aren't getting better, you expect a peak in NPL in March. Still, your ROE is super low compared to your targets, right? How do you expect that capital would be ranging in this scenario? What's your bottom of capital that you would like to work as a risk-taking level for the group or for the controller? Which is this bottom that you would like to limit your capital? If you need at some point to reduce your origination, how are you dealing with the new origination compared to your beginning of the year? Because at the beginning of the year, the longer duration, I think it hurts your margins, mainly your cost of risk. When we compare to other players, other fintechs, their duration is faster to adjust.

I'm just wondering if you said that your new cohorts of origination aren't getting better, you expect a peak in NPL in March. Still, your ROE is super low compared to your targets, right? How do you expect that capital would be ranging in this scenario? What's your bottom of capital that you would like to work as a risk-taking level for the group or for the controller? Which is this bottom that you would like to limit your capital? If you need at some point to reduce your origination, how are you dealing with the new origination compared to your beginning of the year? Because at the beginning of the year, the longer duration, I think it hurts your margins, mainly your cost of risk. When we compare to other players, other fintechs, their duration is faster to adjust.

Speaker #4: But still, your ROE is super low compared to your targets, right? So how do you expect that capital would be ranging in this scenario?

Speaker #4: What is your bottom of capital that you would like to work as a risk-taking level for the group or for the controller? What is this bottom that you would like to limit your capital?

Speaker #4: And if you need, at some point, to reduce your origination, how are you dealing with the new originations compared to the beginning of the year?

Speaker #4: Since the beginning of the year, the longer duration, I think, hurts your margins, mainly your cost of risk. However, when we compare to other players, other fintechs, their duration adjusts more quickly.

Speaker #4: So both these two questions here blend into each other. So for capital and how your origination compared to your duration in the beginning of the year going right now.

Pablo Firvida: Both these two questions here blend into each other. First, capital and how your origination compared to your duration in the beginning of the year going right now. Thank you. Regarding capital, our capital also was impacted by the reserve in OCI, the other comprehensive income with the bonds that are valuated at hold to collect and sale, that you have a reserve in equity that moves between the accrued income in the bonds and the mark-to-market. As you know, in the third quarter, there was a big reduction in bond prices. We had a ARS 160 billion negative reserve in equity due to those bonds that affect, of course, the equity ratio. In October, our tier one ratio in October is already at 24.5% in the talking about the bank. That's, of course, because now this OCI reserve is slightly positive.

Both these two questions here blend into each other. First, capital and how your origination compared to your duration in the beginning of the year going right now. Thank you.

Speaker #4: Thank you.

Gonzalo Fernández Covaro: Regarding capital, our capital also was impacted by the reserve in OCI, the other comprehensive income with the bonds that are valuated at hold to collect and sale, that you have a reserve in equity that moves between the accrued income in the bonds and the mark-to-market. As you know, in the third quarter, there was a big reduction in bond prices. We had a ARS 160 billion negative reserve in equity due to those bonds that affect, of course, the equity ratio. In October, our tier one ratio in October is already at 24.5% in the talking about the bank. That's, of course, because now this OCI reserve is slightly positive.

Speaker #2: Regarding capital, our capital was also impacted by the reserving OCI, the Other Comprehensive Income, with the bonds that are valued at Hold to Collect and Sell.

Speaker #2: You have a reserve in equity that moves between the accrued income in the bonds and the mark-to-market that, as you know, in the third quarter, there was a big reduction in bond prices.

Speaker #2: So, we had a negative reserve in equity of 160 billion pesos due to those bonds that affect, of course, the equity ratio. In October, our Tier One ratio was already at 24.5% when talking about the bank.

Speaker #2: And that's, of course, because now this OCI reserve is slightly positive. It has improved by 160 billion pesos in one month, due to, as you know, after the elections, the rally that all the bonds have.

Pablo Firvida: It has an improvement of ARS 160 billion in one month because of, as you know, after the elections, the rally that all the bonds have. Really, with these levels of capital, we are comfortable. I would say that our minimum appetite to operate is 13.5%, 13%, 13.5%. We do not expect to get close to that in the near future. We believe that with the projection we have, we have enough capital at least until the end of 2027, and without any limitation for growth. I would say that, of course, that is something that we monitor, and we will be updating regularly. With this, now that the reserves of the bonds are stabilized, we do not see really the need for capital or any restriction in the growth of our loan book, at least the whole next year and 2027.

It has an improvement of ARS 160 billion in one month because of, as you know, after the elections, the rally that all the bonds have. Really, with these levels of capital, we are comfortable. I would say that our minimum appetite to operate is 13.5%, 13%, 13.5%. We do not expect to get close to that in the near future. We believe that with the projection we have, we have enough capital at least until the end of 2027, and without any limitation for growth. I would say that, of course, that is something that we monitor, and we will be updating regularly. With this, now that the reserves of the bonds are stabilized, we do not see really the need for capital or any restriction in the growth of our loan book, at least the whole next year and 2027.

Speaker #2: So really, with this level of capital, we are comfortable. I would say that our minimum appetite to operate is 13.5%, 13%, 13.5%. But we don't expect to get close to that in the near future.

Speaker #2: We believe that with the projection we have, we have enough capital until at least the end of 2027, so there is no limitation for growth.

Speaker #2: So, I would say that's of course something that we monitor, and we'll be updating regularly. But with this, now that the reserves of the bonds are stabilized, we don't see really the need for capital or any restriction in the growth of our loan book.

Speaker #2: At least for the whole next year and 2027. Regarding the second question, I think I didn't get it very well.

Pablo Firvida: Regarding the second question, I think I didn't get it very well. Origination of loans and maturity of the loans. I mean, we continue to originate, I mean, both commercial and consumer lending. We have put some slowdown in the consumer lending due to the portfolio quality, as you have seen. First mortgages, we reduce significantly the origination of mortgages. In that case, not because of quality, but because there is not any securitization market. As you know, we cannot be putting very low lending without any securitization market where we can offload those loans. We continue in the consumer sector. We continue lending personal loans that may have a duration of two years, two years and a half. Now we are also increasing car loans or auto loans, that same duration. Talking about commercial financing, we are still originating very short duration.

Regarding the second question, I think I didn't get it very well. Origination of loans and maturity of the loans. I mean, we continue to originate, I mean, both commercial and consumer lending. We have put some slowdown in the consumer lending due to the portfolio quality, as you have seen. First mortgages, we reduce significantly the origination of mortgages. In that case, not because of quality, but because there is not any securitization market. As you know, we cannot be putting very low lending without any securitization market where we can offload those loans. We continue in the consumer sector. We continue lending personal loans that may have a duration of two years, two years and a half. Now we are also increasing car loans or auto loans, that same duration. Talking about commercial financing, we are still originating very short duration.

Speaker #1: Origination of loans and

Speaker #2: I mean, we continue to originate. I mean, both commercial and consumer lending. We have put some slowdown in the consumer lending due to the portfolio quality.

Speaker #2: As you have seen, first mortgages have significantly reduced the origination of mortgages. In that case, not because of quality, but because there is no securitization market.

Speaker #2: And, as you know, we cannot be putting pay or lending without any securitization market. We can offload those loans, but we continue in the consumer sector.

Speaker #2: We continue lending personal loans that may have a duration of two years or two and a half years. Now, we are also increasing car loans, or auto loans, with the same duration.

Speaker #2: Talking about commercial financing, we are still originating very short duration. Slightly, we are starting to increase duration because the demand was not there. Now, with our after elections, with Argentina stabilizing and with a lot of growth potential in the country, we are expecting to see more projects for our clients to finance longer terms.

Pablo Firvida: Slightly, we start to increase duration because the demand was not there. Now, after elections, with Argentina stabilizing, and with a lot of growth potential in the country, we are expecting to see more projects for our clients to finance longer terms. That is not yet happening. We are expecting that next year, the duration in the commercial lending should be getting longer than what we have today. Okay, thank you. Thank you for the answers. No problem. Thank you. Our next question comes from Ernesto Gabilondo from Bank of America. Please, Mr. Gabilondo, your microphone is open. Thank you. Hi, good morning, Gonzalo, Pablo, and Etienne. Thanks for the opportunity to ask questions. My first one is on your long-road expectations. What should we think for next year? If you can give us some color on the expectations per segment.

Slightly, we start to increase duration because the demand was not there. Now, after elections, with Argentina stabilizing, and with a lot of growth potential in the country, we are expecting to see more projects for our clients to finance longer terms. That is not yet happening. We are expecting that next year, the duration in the commercial lending should be getting longer than what we have today.

Speaker #2: But that's not yet happening. However, we are expecting that next year the duration of commercial lending should be getting longer than what we have.

Speaker #2: today.

Daniel Vaz: Okay, thank you. Thank you for the answers.

Speaker #4: Thank you for the

Speaker #4: answers. No problem.

Gonzalo Fernández Covaro: No problem. Thank you.

Speaker #2: Thank

Speaker #2: you. Our next

Operator: Our next question comes from Ernesto Gabilondo from Bank of America. Please, Mr. Gabilondo, your microphone is open.

Speaker #3: The question comes from Ernesto Gabilondo from Bank of America. Please, Mr. Gabilondo, your microphone is open.

Ernesto Gabilondo: Thank you. Hi, good morning, Gonzalo, Pablo, and Etienne. Thanks for the opportunity to ask questions. My first one is on your long-road expectations. What should we think for next year? If you can give us some color on the expectations per segment.

Speaker #5: Thank you. Hi, good morning, Gonzalo, Pablo, and Etienne. Thanks for the opportunity to ask questions. My first one is on your long-run expectations. What should we think for next year?

Speaker #5: If you can give us some color on the expectations per segment. And also, I believe there have been some announcements on private investments in Argentina.

Pablo Firvida: I believe there have been some announcements on private investments in Argentina. Have you quantified an amount, or can you give us some direction or color in which regions and sectors are you perceiving these new private investments? How would you be willing to participate through corporate loans, as you mentioned, SME loans? That will be very helpful. My second question is on asset quality. I believe, I'm just double-checking, you mentioned NPL ratio could be peaking by March next year. If that is correct, if you can provide any potential range, and if you are seeing the same trend on the cost of risk, if you're expecting cost of risk also to peak by March next year, and how should we think overall for the cost of risk next year? Thank you. No, thank you for the question.

I believe there have been some announcements on private investments in Argentina. Have you quantified an amount, or can you give us some direction or color in which regions and sectors are you perceiving these new private investments? How would you be willing to participate through corporate loans, as you mentioned, SME loans? That will be very helpful. My second question is on asset quality. I believe, I'm just double-checking, you mentioned NPL ratio could be peaking by March next year. If that is correct, if you can provide any potential range, and if you are seeing the same trend on the cost of risk, if you're expecting cost of risk also to peak by March next year, and how should we think overall for the cost of risk next year? Thank you.

Speaker #5: Have you quantified an amount, or can you give us some direction or color on which regions and sectors you are perceiving these new private investments?

Speaker #5: And how would you be willing to participate through corporate loans? As you mentioned, SME loans would be very helpful. Then my second question is on asset quality.

Speaker #5: I believe I'm just double-checking. You mentioned the MPL ratio could be picking up by March next year, and is that correct? If you could provide any potential range.

Speaker #5: And if you are seeing the same trend on the cost of risk, if you're expecting the cost of risk also to peak by March next year, how should we think overall for the cost of risk next year?

Speaker #5: Thank you.

Gonzalo Fernández Covaro: No, thank you for the question.

Speaker #2: No, thank you for the question. I mean, talking about the color of next year, we see, I mean, growing lending by 25%, more or less, in real terms.

Pablo Firvida: I mean, talking about, yeah, the color of next year, we see, I mean, growing lending in 25%, more or less, in real terms. I mean, we want to continue gaining market share. Of course, this number will be adjusting according to how the market grows. We see market growing around 20% to 22% in real terms, of course. In terms of sectors, yeah, we are growing. I mean, I think that the commercial lending will be capturing a lot of attention. I mean, as you said, there are a lot of projects and investments in the country that we have a lot of customers already starting to talk about it. We also want to continue growing the consumer lending with, of course, the new origination tools and the models adjusted in order to book better grades. We will start a bit slower in the first month.

I mean, talking about, yeah, the color of next year, we see, I mean, growing lending in 25%, more or less, in real terms. I mean, we want to continue gaining market share. Of course, this number will be adjusting according to how the market grows. We see market growing around 20% to 22% in real terms, of course. In terms of sectors, yeah, we are growing. I mean, I think that the commercial lending will be capturing a lot of attention. I mean, as you said, there are a lot of projects and investments in the country that we have a lot of customers already starting to talk about it. We also want to continue growing the consumer lending with, of course, the new origination tools and the models adjusted in order to book better grades. We will start a bit slower in the first month.

Speaker #2: I mean, we want to continue gaining market share. So, of course, this number will be adjusting according to how the market grows. We see the market growing around 20% to 22% in real terms, of course.

Speaker #2: We, in terms of sectors, yeah, we are growing. I mean, I think that the commercial lending will be capturing a lot of attention. I mean, as you said, there are a lot of projects and investments in the country.

Speaker #2: We have a lot of customers already starting to talk about it. We also want to continue growing consumer lending with, of course, the new origination tools and the models adjusted in order to book better credits.

Speaker #2: But we will start a bit slower in the first month. Not start, continue a bit slower as we are having this month and then restart the full growth as we see that the quality is improving.

Pablo Firvida: Not start, continue a bit slower as we are having this month, then restart the full growth as we see that the quality is improving. Talking about commercial lending, yeah, we are seeing a lot of investment mainly in the oil and gas sector. As you know, Vaca Muerta continues with a lot of attention in the mining segments, I mean, sector, sorry, copper, lithium, a lot of focus there also. We are also very present in the agribusiness. This year, the agribusiness is going to have a very good harvest. We are anticipating good investments for next year also in this sector that we will be also joining there.

Not start, continue a bit slower as we are having this month, then restart the full growth as we see that the quality is improving. Talking about commercial lending, yeah, we are seeing a lot of investment mainly in the oil and gas sector. As you know, Vaca Muerta continues with a lot of attention in the mining segments, I mean, sector, sorry, copper, lithium, a lot of focus there also. We are also very present in the agribusiness. This year, the agribusiness is going to have a very good harvest. We are anticipating good investments for next year also in this sector that we will be also joining there.

Speaker #2: Talking about commercial lending, we are seeing a lot of investment mainly in the oil and gas sector. As you know, Vaca Muerta continues to receive a lot of attention in the mining segments.

Speaker #2: I mean, sector, sorry, focus there. Copper, lithium— a lot of which are very present also. We are in the agribusiness, and this year, the agribusiness is going to have a very good harvest.

Speaker #2: And we are anticipating good investments for next year also in this sector, which we will be joining as well. Additionally, we are starting to see M&A activity beginning to move, particularly in local M&A.

Pablo Firvida: We are also starting to see M&A starting to move, local M&A, companies, some privatizations that may come close that we do not have yet the names, but we are starting to hear rumors that some may not be huge privatization, but, yeah, smaller companies that can come to the market. Of course, the idea for us is to be close to our customers there. Some of those projects are going to be too big for the local financial market to finance because when we talk about oil and gas, the amounts are huge. We will always be there to participate with smaller tickets or to be there in transactions that local balance sheets can afford. Again, we were very close to our commercial customers. Really, we see a sentiment on appetite for Argentina, on appetite for investing.

We are also starting to see M&A starting to move, local M&A, companies, some privatizations that may come close that we do not have yet the names, but we are starting to hear rumors that some may not be huge privatization, but, yeah, smaller companies that can come to the market. Of course, the idea for us is to be close to our customers there. Some of those projects are going to be too big for the local financial market to finance because when we talk about oil and gas, the amounts are huge. We will always be there to participate with smaller tickets or to be there in transactions that local balance sheets can afford. Again, we were very close to our commercial customers. Really, we see a sentiment on appetite for Argentina, on appetite for investing.

Speaker #2: Companies some privatizations that may come, close. That we don't have yet the names, but we starting to hear rumors that some may not be huge privatization, but yeah, smaller companies that can come to the market and of course, the idea for us is to be close to our customers there.

Speaker #2: Some of those projects are going to be too big for the local financial market to finance because, when we talk about oil and gas, the amounts are huge.

Speaker #2: But we will always be there to participate with smaller tickets or to be there in transactions that local balance. So again, we are very close to our commercial customers, and really, we see a sentiment on appetite for Argentina and appetite for investing.

Speaker #2: And that's where we are seeing that next year we are going to be growing faster than the market. That will also help to improve the returns year over year.

Pablo Firvida: That's where we are seeing that next year, we are going to be growing faster on the market. That will help also to improve the returns year over year. Talking about NPLs, yes, we are expecting our peak on NPLs around March next year. We are seeing that the peak would be around 7%, 6%, 7%. The cost of risk, yes, again, same thing. We are seeing also peaking next year in March. For the bank, I'm talking, and we'll see more or less cost of risk between 9% and 10% at the peak, then going down those both ratios to end the year at lower numbers. That is what we expect. I mean, we are already seeing the new harvest of consumer lending at much better behavior than the old ones.

That's where we are seeing that next year, we are going to be growing faster on the market. That will help also to improve the returns year over year. Talking about NPLs, yes, we are expecting our peak on NPLs around March next year. We are seeing that the peak would be around 7%, 6%, 7%. The cost of risk, yes, again, same thing. We are seeing also peaking next year in March. For the bank, I'm talking, and we'll see more or less cost of risk between 9% and 10% at the peak, then going down those both ratios to end the year at lower numbers. That is what we expect. I mean, we are already seeing the new harvest of consumer lending at much better behavior than the old ones.

Speaker #2: Talking about MPLs, yes, we are expecting our peak on MPLs around March next year. We are seeing that the peak could be around 6% to 7%.

Speaker #2: And the cost of risk, yes, again, same thing. We are seeing also peaking next year, in March, for the bank I'm talking about. And we'll see more or less cost of risk between 9% and 10% at the peak.

Speaker #2: Then going down, those both ratios will end the year at lower numbers. That is what we expect. I mean, we are already seeing the new harvest of consumer lending showing much better behavior than the old ones.

Speaker #2: We still need the time to digest the older portfolio and see the results that will come after, I would say, in the second, third, and fourth quarters of next year.

Pablo Firvida: We still need the time to digest the older portfolio and see the results that will come after, I would say, second, third, and fourth quarter of next year. No, thank you very much. Super helpful, Gonzalo. Just another question in terms of this potential growth that you can see for the loan book next year. Another competitor just mentioned the possibility to tap the markets next year. Is this something that you are also exploring? Bonds or equity? In bonds, bonds. Bonds or equity. I mean, financing or equity? Yes, financing. I mean, yes, of course, it's something that we have always in our alternatives. We need to see how the windows are starting to open. Really, we are not seeing now the need, but of course, that's something that we are always evaluating.

We still need the time to digest the older portfolio and see the results that will come after, I would say, second, third, and fourth quarter of next year.

Speaker #2: Year? No, thank you very much.

Ernesto Gabilondo: No, thank you very much. Super helpful, Gonzalo. Just another question in terms of this potential growth that you can see for the loan book next year. Another competitor just mentioned the possibility to tap the markets next year. Is this something that you are also exploring?

Speaker #3: Super helpful. Gonzalo, just another question. In terms of this potential growth that you can see for the loan book next year, another competitor just mentioned the possibility to tap the markets.

Speaker #3: Next year, is this something that you are also exploring?

Gonzalo Fernández Covaro: Bonds or equity?

Speaker #4: Bonsur Equity.

Ernesto Gabilondo: In bonds, bonds.

Speaker #3: In bonds, bonds.

Gonzalo Fernández Covaro: Bonds or equity. I mean, financing or equity?

Speaker #4: Bonsur Equity. I mean, the financing.

Speaker #4: or equity? Yes, yeah,

Ernesto Gabilondo: Yes, financing.

Speaker #3: the financing.

Gonzalo Fernández Covaro: I mean, yes, of course, it's something that we have always in our alternatives. We need to see how the windows are starting to open. Really, we are not seeing now the need, but of course, that's something that we are always evaluating.

Speaker #2: I mean, yes, of

Speaker #2: Of course, it's something that we have always in our alternatives. You need to see how the windows are starting to open. Really, we are not seeing the need now, but of course, that's something that we are always evaluating.

Speaker #2: And we need to see, of course, the equation—the profitability equation of the cost that the market could offer at some point. But yes, mainly considering larger tickets or these projects that may come, yes, definitely, it's an alternative that we consider very seriously.

Pablo Firvida: We need to see, of course, the equation, the profitability equation of the cost that the market could offer at some point. Yes, mainly considering larger tickets or this project that they may come, yes, definitely, it's an alternative that we consider very seriously. Perfect. Thank you very much. Thank you, Ernesto. Our next question comes from Brian Flores from CJ. Please, Mr. Flores, your microphone is open. Hi, Pablo. Hi, Gonzalo. Thank you very much for the opportunity. I just wanted the first question to be a clarification on the ROE trend because you mentioned the peaks of NPLs and asset quality, as you mentioned, cost of risk by March, right, of 2026. You mentioned 11% to 12% in terms of real ROE for 2026 with reaching the 15% in the fourth quarter.

We need to see, of course, the equation, the profitability equation of the cost that the market could offer at some point. Yes, mainly considering larger tickets or this project that they may come, yes, definitely, it's an alternative that we consider very seriously.

Ernesto Gabilondo: Perfect. Thank you very much.

Speaker #3: Perfect. Thank you very much.

Gonzalo Fernández Covaro: Thank you, Ernesto.

Speaker #2: Thank you. Ernesto.

Speaker #1: Our next question comes from Brian Flores from SICI. Please, Mr. Flores, you have the microphone open.

Operator: Our next question comes from Brian Flores from CJ. Please, Mr. Flores, your microphone is open.

Brian Flores: Hi, Pablo. Hi, Gonzalo. Thank you very much for the opportunity. I just wanted the first question to be a clarification on the ROE trend because you mentioned the peaks of NPLs and asset quality, as you mentioned, cost of risk by March, right, of 2026. You mentioned 11% to 12% in terms of real ROE for 2026 with reaching the 15% in the fourth quarter.

Speaker #5: Hi, Pablo. Hi, Gonzalo. Thank you very much for the opportunity. I just wanted the first question to be a clarification. On the ROE trend, because you mentioned the peaks of MPLs and asset quality as you mentioned cost of risk by March, right, of 2026.

Speaker #5: So you mentioned 11% to 12% in terms of real ROE for 2026, reaching 15% in the fourth quarter. So would that mean we should see a mid- to high single digit in the first half?

Pablo Firvida: Would that mean we should see a mid to high single digit in the first half? Just thinking about the speed of the recovery, right? Apparently, it seems to be a very gradual recovery. Just wanted to check on that trend, Gonzalo. My second question is perhaps a follow-up on Ernesto because I think we're all thinking about external funding, right? You have perhaps one of the best franchises in Argentina, meaning that deposits are very, very relevant. Just wanted to understand if the visible funding cost advantage that you have demonstrated in previous quarters should continue, or do you think, I would say, the funding cost war should, I would say, increase or deepen in 2026? Thank you. No, thank you. First question about ROE trend. I mean, yeah, I mean, we see first quarter slower.

Would that mean we should see a mid to high single digit in the first half? Just thinking about the speed of the recovery, right? Apparently, it seems to be a very gradual recovery. Just wanted to check on that trend, Gonzalo. My second question is perhaps a follow-up on Ernesto because I think we're all thinking about external funding, right? You have perhaps one of the best franchises in Argentina, meaning that deposits are very, very relevant. Just wanted to understand if the visible funding cost advantage that you have demonstrated in previous quarters should continue, or do you think, I would say, the funding cost war should, I would say, increase or deepen in 2026? Thank you.

Speaker #5: Just thinking about the speed of the recovery, right? Apparently, it seems to be a very gradual recovery. Just wanted to check on that trend, Gonzalo.

Speaker #5: And then my second question is perhaps a follow-up on Ernesto, because I think we're all thinking about external funding, right? But you have perhaps one of the best franchises in Argentina.

Speaker #5: Meaning that deposits are very, very relevant, no? I just wanted to understand if the visible funding cost advantage that you have demonstrated in previous quarters should continue, or do you think the funding cost war should, I would say, increase or deepen in 2026?

Speaker #5: Thank

Speaker #5: you. No, thank

Gonzalo Fernández Covaro: No, thank you. First question about ROE trend. I mean, yeah, I mean, we see first quarter slower.

Speaker #2: You. So, first question about the ROE trend. I mean, yeah, I see that the first quarter is slower. I would say that the numbers you mentioned could be right.

Pablo Firvida: I mean, I would say that the numbers you mentioned could be right. I mean, we see a recovery first quarter. We are still, I mean, margins, we are going to be already in the first quarter at good levels, but we will still have some kind of heavy burden of NPLs still the last months of that, and they're starting to recap in the third quarter. I would say that, yes, lower ROE in the first quarter, and then recapping the trend until the 15th in the fourth quarter, and continue with that in 2027. Yeah, your assumption is right in terms of ROE evolution. Remember that the group has also NaranjaX and the bank, and NaranjaX also needs to improve that portfolio performance.

I mean, I would say that the numbers you mentioned could be right. I mean, we see a recovery first quarter. We are still, I mean, margins, we are going to be already in the first quarter at good levels, but we will still have some kind of heavy burden of NPLs still the last months of that, and they're starting to recap in the third quarter. I would say that, yes, lower ROE in the first quarter, and then recapping the trend until the 15th in the fourth quarter, and continue with that in 2027. Yeah, your assumption is right in terms of ROE evolution. Remember that the group has also NaranjaX and the bank, and NaranjaX also needs to improve that portfolio performance.

Speaker #2: I mean, we see a recovery in the first quarter. We are still, I mean, margins are going to be at good levels already in the first quarter.

Speaker #2: But we will still have some kind of heavy burden of MPLs during the last months of that. And they're starting to recap in the third quarter.

Speaker #2: So I would say that, yes, lower ROE in the first quarter and then recapping the trend until the 15th in the fourth quarter. And continue with that in 2027.

Speaker #2: But yeah, your assumption is right in terms of ROE evolution. Remember that the group also has Aranja and the bank. Aranja also needs to improve its portfolio performance, and that's why we need a couple of months from next year in order to be able to just go up to two digits in ROE.

Pablo Firvida: That's why also we need a couple of months from next year in order to be able just to go about the two digits in ROE. Talking about the funding, what you want to know, yeah, funding. I would say that, yeah, that's why my question was, I mean, my answer before to Ernesto was, yes, we are analyzing potential debt in the market, but we always look first at our deposit base. We see some possibilities for next year. In deposit, we see that the market liquidity is coming back. With interest rate reduction, the market will be also more liquid. We see that there may be some changes in regulations for mutual funds that put some limitations for the banks to go to the market to place funds in the market. That liquidity should come back to banks.

That's why also we need a couple of months from next year in order to be able just to go about the two digits in ROE. Talking about the funding, what you want to know, yeah, funding. I would say that, yeah, that's why my question was, I mean, my answer before to Ernesto was, yes, we are analyzing potential debt in the market, but we always look first at our deposit base. We see some possibilities for next year. In deposit, we see that the market liquidity is coming back. With interest rate reduction, the market will be also more liquid. We see that there may be some changes in regulations for mutual funds that put some limitations for the banks to go to the market to place funds in the market. That liquidity should come back to banks.

Speaker #2: Talking about the funding, what we want, no? Yeah, funding. I would say that, yeah, that's why my question was, I mean, our idea is my answer before to Ernesto was, yes, we are analyzing potential debt in the market.

Speaker #2: But we always look first at our deposit base. We see some possibilities for next year in deposits. We see that the market liquidity is coming back with interest rate reductions, and the market will be more liquid.

Speaker #2: We see that there may be some changes in regulations for mutual funds that put some limitations on the ones who go to the market to place funds in the market.

Speaker #2: So they'll see that liquidity should come back to banks. As you know, the money markets are huge holders of funds from deposits from customers in Argentina.

Pablo Firvida: As you know, the money markets are huge holders of funds from deposits from customers in Argentina. They put part of their deposits in banks, but also they go to the market and place those funds in the market in cautions. According to next year, they should be able to put more money of those in the bank. That should also provide more liquidity to banks to lend. That would be another source of liquidity for banks. We are aiming to increase our deposits to gain market share in deposits. All our business lines have that mandate because we consider it the more stable funding, and the cheaper one, or the more cost-efficient one. Of course, depending on the speed of the credit growth, we may need to go to the market. If we need to do it, we'll do it.

As you know, the money markets are huge holders of funds from deposits from customers in Argentina. They put part of their deposits in banks, but also they go to the market and place those funds in the market in cautions. According to next year, they should be able to put more money of those in the bank. That should also provide more liquidity to banks to lend. That would be another source of liquidity for banks. We are aiming to increase our deposits to gain market share in deposits. All our business lines have that mandate because we consider it the more stable funding, and the cheaper one, or the more cost-efficient one. Of course, depending on the speed of the credit growth, we may need to go to the market. If we need to do it, we'll do it.

Speaker #2: And they put part of their deposits in banks, but they also go to the market and place those funds in a cautious manner.

Speaker #2: And according to next year, they should be able to put more money of those in the bank. That should also provide more liquidity to banks to lend.

Speaker #2: That would be another source of liquidity for banks. So we are aiming to increase our deposits to gain market share in deposits. All our business lines have that mandate.

Speaker #2: Because we consider it the more stable funding and the cheaper one, or the more cost-efficient one. But of course, depending on the speed of the credit growth, we may need to go to the market, and we need to do it; we'll do it.

Speaker #2: But our first priority is deposits. We really believe that deposits next year should start to grow better than this year. I wouldn't say at the same pace as lending, but better than this year.

Pablo Firvida: Our first priority is deposit. We really believe that deposit next year should start to grow better than this year. I wouldn't say same pace than lending, but better than this year. Perfect, Gonzalo. Thank you very much. I think the last guidance you mentioned in the second quarter on deposits growth was around 35% in real terms. I just wanted to check if you are revising this number. I understand, as you mentioned, the deposit growth for 2026 is going to be lower than the portfolio. Yeah, for this year, we are keeping, yes, those guidance for growth. For next year, we are seeing more like 20% in real terms deposits, 25% lending. Again, that's something, I mean, a lot of moving targets for next year.

Our first priority is deposit. We really believe that deposit next year should start to grow better than this year. I wouldn't say same pace than lending, but better than this year.

Brian Flores: Perfect, Gonzalo. Thank you very much. I think the last guidance you mentioned in the second quarter on deposits growth was around 35% in real terms. I just wanted to check if you are revising this number. I understand, as you mentioned, the deposit growth for 2026 is going to be lower than the portfolio.

Speaker #3: Perfect, Gonzalo. Thank you very much. I think the last guidance you mentioned in the second quarter on deposits growth was around 35% in real terms.

Speaker #3: So I just wanted to check if you are revising these numbers, and also I understand, as you mentioned, the deposit growth for 2026 is going to be lower than the portfolio, no?

Gonzalo Fernández Covaro: Yeah, for this year, we are keeping, yes, those guidance for growth. For next year, we are seeing more like 20% in real terms deposits, 25% lending. Again, that's something, I mean, a lot of moving targets for next year.

Speaker #2: Yeah, for this year, we are keeping those guidance figures for growth. For next year, we are seeing more like 20% in real terms for deposits and 25% for lending.

Speaker #2: But again, that's something, I mean, a lot of moving targets for next year. So we will be updating those guidance because we see how we need to see how the country is changing one month ago, we were with a lot of volatility.

Pablo Firvida: We will be updating those guidance because we need to see how the country is changing. One month ago, we were with a lot of volatility. Now, stabilizing interest rate reductions. We need to see how everything comes together. So far, it's our assumption around 20% for next year. Thank you, Gonzalo and Pablo. Thank you. Thank you. Our next question comes from Tito Labarta from Goldman Sachs. Please, Mr. Labarta, your microphone is open. Hi, good morning, Gonzalo and Pablo. Thank you for the call. Take my question. A couple of questions also, I guess, just on the Naranja you mentioned, Gonzalo, right, that needs to recover as well. Do you think NPLs peak there also in Q1, or how do you see the evolution of asset quality in Naranja and then also your ability to resume growth at Naranja?

Pablo Firvida: We will be updating those guidance because we need to see how the country is changing. One month ago, we were with a lot of volatility. Now, stabilizing interest rate reductions. We need to see how everything comes together. So far, it's our assumption around 20% for next year.

Speaker #2: Now, stabilizing interest rate reductions. So we need to see how everything comes together. But that's so far our assumption around 20% for next year.

Brian Flores: Thank you, Gonzalo and Pablo.

Speaker #3: Thank you, Gonzalo and

Pablo Firvida: Thank you.

Speaker #4: Thank you.

Gonzalo Fernández Covaro: Thank you.

Speaker #2: Thank Pablo.

Speaker #2: Thank you, Pablo. Our next question comes from...

Operator: Our next question comes from Tito Labarta from Goldman Sachs. Please, Mr. Labarta, your microphone is open.

Speaker #3: Chito Labarta from Goldman Sachs. Please, Mr. Labarta, your microphone's...

Speaker #3: Hi, good morning, Gonzalo and Pablo.

Tito Labarta: Hi, good morning, Gonzalo and Pablo. Thank you for the call. Take my question. A couple of questions also, I guess, just on the Naranja you mentioned, Gonzalo, right, that needs to recover as well. Do you think NPLs peak there also in Q1, or how do you see the evolution of asset quality in Naranja and then also your ability to resume growth at Naranja?

Speaker #5: Thank you for the call and for taking my question. I have a couple of questions as well. I guess just on the Aranja, you mentioned, Gonzalo, that it needs to recover as well.

Speaker #5: Do you think MPLs peaked there also in one quarter? Or how do you see the evolution of asset quality in Aranja? And then also your ability to resume growth at Aranja.

Speaker #5: And then a second question, just on margins: do you think we saw some pressure this quarter? I mean, given all the liquidity issues in the quarter, do you think this is the bottom?

Pablo Firvida: Second question, just on margins, do you think we saw some pressure this quarter, I mean, just given all the liquidity issues in the quarter? Do you think this is the bottom? Should that already begin to recover in Q4, or will that take a little bit longer until you start to get the loan growth and asset quality under control? Just to think about the evolution of margin in the short term and, I guess, thinking about 2026 as well. Thank you. Yeah, talking about NaranjaX, yeah, I would say that we are seeing the same, more or less same timing for the peaking. I mean, March, April, and next year, same. And they also doing a lot of things.

Second question, just on margins, do you think we saw some pressure this quarter, I mean, just given all the liquidity issues in the quarter? Do you think this is the bottom? Should that already begin to recover in Q4, or will that take a little bit longer until you start to get the loan growth and asset quality under control? Just to think about the evolution of margin in the short term and, I guess, thinking about 2026 as well. Thank you.

Speaker #5: Should that already begin to recover in Q4? Or will that take a little bit longer until you start to get the long growth and asset quality under control?

Speaker #5: Just to think about the evolution of margin in the short term and, I guess, thinking about 2026 as well. Thank you.

Speaker #5: you. Yeah,

Gonzalo Fernández Covaro: Yeah, talking about NaranjaX, yeah, I would say that we are seeing the same, more or less same timing for the peaking. I mean, March, April, and next year, same. And they also doing a lot of things.

Speaker #2: Talking about Aranja, yeah, I would say that we are seeing more or less the same amount and the same timing for the peaking. I mean, third quarter, March, April, and next year.

Speaker #2: Same. And they are also doing a lot of things. Their turnaround, I would say, has been significant, but they have a shorter duration in lending.

Pablo Firvida: Their turnaround, I would say that they were in things, but they have a shorter duration in lending, so they cure their portfolio faster than the bank. Yeah, I would say March should be also the peak for them. We are expecting also an improving on NPLs for NaranjaX for the rest of the year. Of course, as they go to a lower segment, they have bigger swings on the bad, but then on the good at the same time. Talking about margins, yes. Margins, yes, we saw the bottom was October. I mean, I would say fourth quarter still has October, which is one month with a low margin. In the quarter, you're still in the next quarter, you still see 1/3 of the month, I would say, with a bad margin.

Their turnaround, I would say that they were in things, but they have a shorter duration in lending, so they cure their portfolio faster than the bank. Yeah, I would say March should be also the peak for them. We are expecting also an improving on NPLs for NaranjaX for the rest of the year. Of course, as they go to a lower segment, they have bigger swings on the bad, but then on the good at the same time. Talking about margins, yes. Margins, yes, we saw the bottom was October. I mean, I would say fourth quarter still has October, which is one month with a low margin. In the quarter, you're still in the next quarter, you still see 1/3 of the month, I would say, with a bad margin.

Speaker #2: So, they cure their portfolio faster than the bank. So, yeah, I would say March should also be the peak for them. We are expecting also an improvement in MPLs for Aranja for the rest of the year.

Speaker #2: Of course, as they go to a lower segment, they have bigger swings. On the back, but then on the good, at the same time.

Speaker #2: Talking about NIMS, margins—yes, margins. We saw the bottom was in October. I mean, I would say Q4 still has October, which is one month with a low margin.

Speaker #2: So in the quarter, you're still in the next quarter. You still see one-third of the month, I would say, with a bad margin. I would say October was a bad margin because it was the worst month before the elections.

Pablo Firvida: I would say October was a bad margin because it was the worst month before the elections, the election month. Then November, really, we are seeing a quick, a fast turnaround, and a fast improving in the margin. December, I would say it would be 100% at the Q2 levels. Yeah, to your question, the bottom was, I would say, October, Q3 and October. November, December already recapping, December already at the same or three volatility levels, I would say. For next year, margins will be at good levels. Of course, after the second half, slightly reduction because with the continued rate reduction. Today, what we are seeing is our cost of funding reducing significantly now, and our lending starts to reduce the interest rates at a slower pace because we have already booked longer-term lending at a higher rate.

I would say October was a bad margin because it was the worst month before the elections, the election month. Then November, really, we are seeing a quick, a fast turnaround, and a fast improving in the margin. December, I would say it would be 100% at the Q2 levels. Yeah, to your question, the bottom was, I would say, October, Q3 and October. November, December already recapping, December already at the same or three volatility levels, I would say. For next year, margins will be at good levels. Of course, after the second half, slightly reduction because with the continued rate reduction. Today, what we are seeing is our cost of funding reducing significantly now, and our lending starts to reduce the interest rates at a slower pace because we have already booked longer-term lending at a higher rate.

Speaker #2: The election month. But then in November, really, we are seeing a quick turnaround and a fast improvement in the margin. And December, I would say, it would be 100% at the second quarter levels.

Speaker #2: So, yeah, to your question, the bottom was, I would say, October, third quarter, and October. But November and December are already recapping; December is already at the same or three volatility levels, I would say.

Speaker #2: So for next year, margins will be at good levels. Of course, then after the second half, there will be a slight reduction due to the continued rate reduction.

Speaker #2: Today, what we are seeing is our cost of funding reducing significantly now. Our lending starts to reduce the interest rates at a slower pace because we have already booked longer-term lending at higher rates.

Speaker #2: So, we will enjoy those higher margins in the first half of next year. Then, we may see some slight reduction, but not anything significant next year yet.

Pablo Firvida: We will enjoy those higher margins first half of next year, and then we may see some slight reduction, but nothing significantly next year yet. In summary, yeah, the bottom was third quarter and October. Okay, no, that's helpful, Gonzalo. Just on the reserve requirements, I mean, they've been reducing a little bit. Do you think it's enough now that liquidity is less of an issue? Do you think that they need to reduce the reserve requirements further from here, or how do you think about that and the impact on your liquidity? I would say so far, I mean, so far meaning this month, it's okay. The central bank, as you know, made some changes in liquidity requirements last week, and that were better, mainly in the daily calculation, but also they reduced 3.5% the cash encashments that are at zero interest.

We will enjoy those higher margins first half of next year, and then we may see some slight reduction, but nothing significantly next year yet. In summary, yeah, the bottom was third quarter and October.

Speaker #2: So, in summary, the bottom was the third quarter in October.

Tito Labarta: Okay, no, that's helpful, Gonzalo. Just on the reserve requirements, I mean, they've been reducing a little bit. Do you think it's enough now that liquidity is less of an issue? Do you think that they need to reduce the reserve requirements further from here, or how do you think about that and the impact on your liquidity?

Speaker #5: Okay. No, that's helpful, Gonzalo. And just on the reserve requirements, I mean, they've been reducing that a little bit. Do you think it's enough now that liquidity is less of an issue?

Speaker #5: Do you think that they need to reduce the reserve requirements further from here? How do you think about that and the impact on your...

Speaker #5: liquidity? I would say so

Gonzalo Fernández Covaro: I would say so far, I mean, so far meaning this month, it's okay. The central bank, as you know, made some changes in liquidity requirements last week, and that were better, mainly in the daily calculation, but also they reduced 3.5% the cash encashments that are at zero interest.

Speaker #2: far it's, I mean, so far meaning this month it's okay. The central bank, as you know, makes some changes in liquidity requirements, like last week.

Speaker #2: And that was better mainly in the calculating the daily calculation, but also they reduced 3.5% the cash in cashments that are zero interest. So that will also give some improve a bit the margins for banks going forward, starting December.

Pablo Firvida: That will also improve a bit the margins for banks going forward starting 1 December. This is starting 1 December. They reduced, so that's not significant for injecting liquidity to the market. I would say that at some point next year, that may be revisited again by central bank because at some point next year, it could be needed. It's something that I wouldn't say is needed now or the next three months, the next quarter, but at some point, depending on how the market behaves, could be there and there's an opportunity for a revision on that side. Okay, that's great. Thank you, Gonzalo. Our next question comes from Camila Azevedo from UBS. Please, Mrs. Azevedo, your microphone is open. Hi everyone. Thank you for taking my question. My question is a follow-up on Ernesto's question on asset quality.

That will also improve a bit the margins for banks going forward starting 1 December. This is starting 1 December. They reduced, so that's not significant for injecting liquidity to the market. I would say that at some point next year, that may be revisited again by central bank because at some point next year, it could be needed. It's something that I wouldn't say is needed now or the next three months, the next quarter, but at some point, depending on how the market behaves, could be there and there's an opportunity for a revision on that side.

Speaker #2: This is starting December 1st. But they reduced, so that's not significant for injecting liquidity into the market. However, I would say that at some point next year, that may be revisited again by the central bank because, at some point next year, it could be needed.

Speaker #2: So it's something that I wouldn't say is needed now or in the next three months, or the next quarter, but at some point, depending on how the market behaves, there could be an opportunity for a revision on that.

Speaker #2: side. Okay.

Tito Labarta: Okay, that's great. Thank you, Gonzalo.

Speaker #5: That's great. Thank you,

Speaker #5: That's great. Thank you, Gonzalo. Our next question comes from Pablo Firvida.

Operator: Our next question comes from Camila Azevedo from UBS. Please, Mrs. Azevedo, your microphone is open.

Speaker #3: From Camila Azevedo from UBS. Please, Mrs. Azevedo, your microphone's...

Speaker #3: open. Hi, everyone.

Camilla Azevedo: Hi everyone. Thank you for taking my question. My question is a follow-up on Ernesto's question on asset quality.

Speaker #6: Thank you for taking my question. My question is a follow-up on Ernesto's question on asset quality. I would like to get a better view of the asset quality dynamics during this quarter, mainly between segments.

Pablo Firvida: I would like to get a better view of the asset quality dynamics during this quarter, mainly between segments. You said we should end the year with better NPLs than current levels. Could you please share more details on that? It could be in general terms, what should we expect? With this, with which coverage ratios would you be comfortable going forward? Thank you. Sorry, Camila, there was a noise in the middle of the conversation. We could not get the first part. Yes, the part of the quarter, not the other part. Sorry. Sure. I will repeat the entire question. I would like to get a better view on the asset quality dynamics during this quarter, and which levels should we expect for the end of the year? You said that we should expect better NPLs. In general terms, at which levels?

I would like to get a better view of the asset quality dynamics during this quarter, mainly between segments. You said we should end the year with better NPLs than current levels. Could you please share more details on that? It could be in general terms, what should we expect? With this, with which coverage ratios would you be comfortable going forward? Thank you.

Speaker #6: And you said we should end the year with better MPLs than current levels. Could you please share more details on that so it could be in general terms?

Speaker #6: What should we expect? And with this, which coverage ratios would we be comfortable with going forward? Thank you.

Speaker #6: you. Sorry, Camila.

Gonzalo Fernández Covaro: Sorry, Camila, there was a noise in the middle of the conversation. We could not get the first part. Yes, the part of the quarter, not the other part.

Speaker #7: There was a noise in the middle of the conversation. We couldn't get the first part. Yes, the part of not the other part.

Camilla Azevedo: Sorry. Sure. I will repeat the entire question. I would like to get a better view on the asset quality dynamics during this quarter, and which levels should we expect for the end of the year? You said that we should expect better NPLs. In general terms, at which levels?

Speaker #6: Sorry. Sure. So I'll repeat the entire question. I would like to get a better view on the asset quality dynamics during this quarter and which levels should we expect for the end of the year.

Speaker #6: You said that we should expect better MPLs. So, in general terms, at which levels? And did you get the coverage ratio part?

Pablo Firvida: Did you get the coverage ratio part? Yes. Okay. Perfect. That's it. Thank you. I mean, when we talk about NPL better than the end of next year, not this year, right? I mean, this year, we still, as we said, the peak will be March next year. What we are seeing, and this is for the end of 2026, NPLs, I would say, in a range of 4.3% give or take, more or less, 4%, 4.3%, 4.5%. That could be the range of NPLs by the end of 2026. The coverage? I didn't get that. The coverage, the last number is 101.5%. Really, it comes from the model of expected losses. Talking with the credit department, they say that the coverage is beginning to grow, and it's likely that at the end of next year, it could end up at 110%.

Did you get the coverage ratio part?

Gonzalo Fernández Covaro: Yes.

Camilla Azevedo: Okay. Perfect. That's it. Thank you.

Speaker #7: Yes.

Speaker #6: Okay.

Speaker #6: Perfect. So that's it. Thank you.

Gonzalo Fernández Covaro: I mean, when we talk about NPL better than the end of next year, not this year, right? I mean, this year, we still, as we said, the peak will be March next year. What we are seeing, and this is for the end of 2026, NPLs, I would say, in a range of 4.3% give or take, more or less, 4%, 4.3%, 4.5%. That could be the range of NPLs by the end of 2026.

Speaker #2: I mean, when we talk about MPL, better than the end of next year, not this year, right? I mean, this year, we still, as we said at the peak, will be March next year.

Speaker #2: So what we are seeing, and this is for the end of 2026, MPLs I would say in a range of 4.3%, give or take, more or less 4, 4.3, 4.5.

Speaker #2: I mean, that could be the range of MPLs by the end of '26. I didn't.

Pablo Firvida: The coverage?

Speaker #7: And the coverage? And the

Gonzalo Fernández Covaro: I didn't get that.

Speaker #2: get that.

Pablo Firvida: The coverage, the last number is 101.5%. Really, it comes from the model of expected losses. Talking with the credit department, they say that the coverage is beginning to grow, and it's likely that at the end of next year, it could end up at 110%.

Speaker #7: Coverage, the last number is 101.5. Really, it comes from the model of expected losses talking with the credit department. They say that the coverage is beginning to grow, and it's likely that at the end of next year it could end up at 110%.

Speaker #7: But really, when you create, we grow your book; you create a lot of upfront reserves, and that increases your coverage. Then you start using those.

Pablo Firvida: Really, when you create a lending, you grow your book, you create a lot of upfront reserves, and that increases your coverage. You start using those, and that's where we are now. That's when it comes. Now we want to stabilize the portfolio, and that should start growing again. Now we are in the process of using the upfront reserves that were booked when the portfolio grew a lot. We are also decelerating the growth, so you do not have a lot of upfront books because of new loans, and you are using what you booked before. It's kind of a mathematical thing, but we are comfortable with the level we have. Okay. Thank you. Thank you. Our next question comes from Pedro Ofverhenden from Lachin Securities. Please, Mr. Ofverhenden, your microphone is open. Hi, Gonzalo. Hi, Pablo. Thank you for the call.

Really,

Gonzalo Fernández Covaro: when you create a lending, you grow your book, you create a lot of upfront reserves, and that increases your coverage. You start using those, and that's where we are now. That's when it comes. Now we want to stabilize the portfolio, and that should start growing again. Now we are in the process of using the upfront reserves that were booked when the portfolio grew a lot. We are also decelerating the growth, so you do not have a lot of upfront books because of new loans, and you are using what you booked before. It's kind of a mathematical thing, but we are comfortable with the level we have.

Speaker #7: And that's what we are now. And that when it comes, now we want to stabilize the portfolio. And that should start growing again. But now we are in the process of using the upfront reserves that were booked when the portfolio grew a lot.

Speaker #7: And now we are also disaccelerating the growth. So you don't have a lot of upfront books because of new loans, and you are using what you booked before.

Speaker #7: It's kind of a mathematical thing, but we are comfortable with the level we are at.

Speaker #7: have. Okay.

Camilla Azevedo: Okay. Thank you.

Speaker #6: Thank you.

Pablo Firvida: Thank you.

Speaker #7: Thank

Speaker #7: you. Our next question comes

Operator: Our next question comes from Pedro Ofverhenden from Lachin Securities. Please, Mr. Ofverhenden, your microphone is open.

Speaker #3: From Pedro of Henen from Latching Securities. Please, Mr. of Henen, your microphone's open.

Pedro Offenhenden: Hi, Gonzalo. Hi, Pablo. Thank you for the call.

Speaker #8: Hi, Gonzalo. Hi, Pablo. Thank you for the call. I wanted to ask if there are any remaining integration costs from the HSBC acquisition that could impact results in the coming quarters.

Pablo Firvida: Wanted to ask if there are any remaining integration costs from the HSBC acquisition that could impact results in the coming quarters. No, I mean, I would say the restructuring, nothing big. I mean, we may have some small thing in the fourth quarter, but regarding systems that we are shutting down, but not restructuring costs, which is the big portion. We booked everything in the third quarter, not just the people that left in the quarter, but also what we planned that the ones that are leaving till the end of the year. Everything is booked there. Something very small, not related to restructuring, may happen in the fourth quarter, related to system, but really small, nothing important. Okay. Thank you. You're welcome, Pedro. You're welcome. Our next question comes from Carlos Lopez from HSBC. Please, Mr. Lopez, your microphone is open.

Wanted to ask if there are any remaining integration costs from the HSBC acquisition that could impact results in the coming quarters.

Speaker #8: quarters. No.

Gonzalo Fernández Covaro: No, I mean, I would say the restructuring, nothing big. I mean, we may have some small thing in the fourth quarter, but regarding systems that we are shutting down, but not restructuring costs, which is the big portion. We booked everything in the third quarter, not just the people that left in the quarter, but also what we planned that the ones that are leaving till the end of the year. Everything is booked there. Something very small, not related to restructuring, may happen in the fourth quarter, related to system, but really small, nothing important.

Speaker #2: I mean, I would say the restructuring is nothing big. I mean, we may have some small things in the fourth quarter, but regarding systems that we are shutting down, there are no restructuring costs, which is the big portion.

Speaker #2: We booked everything in the third quarter, not just the people that left in the quarter, but also what we plan for the ones starting to leave until the end of the year.

Speaker #2: So, everything is booked there. Something very small, not related to restructuring, may happen in the fourth quarter. We need a system, but really small, nothing.

Speaker #2: important. Okay.

Pedro Offenhenden: Okay. Thank you.

Speaker #8: Thank

Speaker #8: Thank you. You're

Pablo Firvida: You're welcome, Pedro.

Speaker #7: welcome, Pedro. You're

Gonzalo Fernández Covaro: You're welcome.

Speaker #2: welcome. Our

Operator: Our next question comes from Carlos Lopez from HSBC. Please, Mr. Lopez, your microphone is open.

Speaker #3: Next question comes from Carlos Lopez from HSBC. Please, Mr. Lopez, your microphone's open.

Speaker #8: Hello. And thank you for taking the questions. First of all, congratulations on how brave you are because you are giving predictions for the ROE for the middle of the year and for the end of the year.

Pablo Firvida: Hello, and thank you for taking the questions. First of all, congratulations on how brave you are because you are giving predictions for the ROE for the middle of the year and for the end of the year. I hope that those forecasts are actually achieved. More concretely, I realized that we have gone through three conference calls, and I do not think anybody has told us what their economic assumptions are. What do you expect for inflation, interest rates, and the currency for the end of next year? Maybe you have said it, and I missed it. Sorry for that. Second, in terms of liquidity, your LDR in pesos is around the 100% level, and more partially because of NaranjaX. Is there an absolute level beyond which you would rather not go?

Carlos Lopez: Hello, and thank you for taking the questions. First of all, congratulations on how brave you are because you are giving predictions for the ROE for the middle of the year and for the end of the year. I hope that those forecasts are actually achieved. More concretely, I realized that we have gone through three conference calls, and I do not think anybody has told us what their economic assumptions are. What do you expect for inflation, interest rates, and the currency for the end of next year? Maybe you have said it, and I missed it. Sorry for that. Second, in terms of liquidity, your LDR in pesos is around the 100% level, and more partially because of NaranjaX. Is there an absolute level beyond which you would rather not go?

Speaker #8: And I hope that those forecasts are actually achieved. More concretely, I realize that we have gone through three conference calls, and I don't think anybody has told us what their economic assumptions are.

Speaker #8: What do you expect for inflation, interest rates, and the currency for the end of next year? Maybe you have said it, and I missed it.

Speaker #8: Sorry for that. And second, in terms of liquidity, your LDR in pesos is around 100% level and more partially because of Naranja. Is there an absolute level beyond which you would rather not go?

Speaker #8: And therefore, you might be able to, you might be willing to restrict your loan growth until deposits catch up. Thank you.

Pablo Firvida: You might be able to, you might be willing to restrict your loan growth until deposits catch up. Thank you. Hello, Carlos. How are you? In terms of macroeconomic assumptions, we have, I will tell you the last estimates from our chief economists for this year and next year. GDP growth, 4% for this year, 3.7% for next year. Inflation ending this year, 30%. Next year, inflation 18%. And FX 1,410 at the end of this year and 1,610 next year, end of next year. Thank you. Thank you. That's very useful. Yes. And LDR in pesos, loan-to-deposit ratio? Yeah. I mean, as you know, we're talking about the first LDR. We have our LPR, which is the liquidity-coverage ratio. We have more than 180%, so very, very liquid there. In loan-to-deposit ratio, we are, but we are at 99%, 100%, but we are comfortable.

You might be able to, you might be willing to restrict your loan growth until deposits catch up. Thank you.

Speaker #8: you. Hello,

Pablo Firvida: Hello, Carlos. How are you? In terms of macroeconomic assumptions, we have, I will tell you the last estimates from our chief economists for this year and next year. GDP growth, 4% for this year, 3.7% for next year. Inflation ending this year, 30%. Next year, inflation 18%. And FX 1,410 at the end of this year and 1,610 next year, end of next year.

Speaker #7: Carlos, how are you? In terms of macroeconomic assumptions, we have, I will tell you the last estimates from our Chief Economist for this year and next year.

Speaker #7: GDP growth 4% for this year, 3.7% for next year. Inflation ending this year, 30%. Next year, inflation 18. And effects, 1410 at the end of this year and 1610.

Speaker #2: Okay. 1610.

Speaker #7: Next

Speaker #7: year. End of next year.

Carlos Lopez: Thank you.

Speaker #8: Thank you. Thank you. That's very useful.

Pablo Firvida: Thank you.

Carlos Lopez: That's very useful.

Speaker #7: Yes. And LDR in pesos, loan to...

Pablo Firvida: Yes. And LDR in pesos, loan-to-deposit ratio?

Speaker #7: deposit ratio.

Gonzalo Fernández Covaro: Yeah. I mean, as you know, we're talking about the first LDR. We have our LPR, which is the liquidity-coverage ratio. We have more than 180%, so very, very liquid there. In loan-to-deposit ratio, we are, but we are at 99%, 100%, but we are comfortable.

Speaker #2: Yeah. I

Speaker #2: As you know, we're talking about the first LDR. Then we have our LTR, which is the liquidity coverage ratio that we have at more than 180%.

Speaker #2: So very, very liquid there. In loans to deposit ratio, we are but we are at 99, 100%, but we are comfortable. We are assuming that our deposits, peso deposit, will continue to grow and what happened also in the third quarter, and in October, it's a lot of a high dollarization happened in the economy because of what's happening in the elections, what's expected in the elections.

Pablo Firvida: We are assuming that our deposits, peso deposit, will continue to grow. What happened also in the third quarter and in October is a lot of high dollarization happening in the economy because of what's happening in the elections, what was expected in the elections. We saw depositing pesos to turn into dollars. Now we are starting to see some kind of reverse thing, that some of the actors selling the dollars and going back to pesos because they need to operate, and they are not expecting a devaluation in the near term at least. We believe that we have other means to grow deposits or to go to the market. Really, we do not see that as a, even though we monitor that and we want to, that's why we are putting a lot of focus in deposit growth.

We are assuming that our deposits, peso deposit, will continue to grow. What happened also in the third quarter and in October is a lot of high dollarization happening in the economy because of what's happening in the elections, what was expected in the elections. We saw depositing pesos to turn into dollars. Now we are starting to see some kind of reverse thing, that some of the actors selling the dollars and going back to pesos because they need to operate, and they are not expecting a devaluation in the near term at least. We believe that we have other means to grow deposits or to go to the market. Really, we do not see that as a, even though we monitor that and we want to, that's why we are putting a lot of focus in deposit growth.

Speaker #2: So we saw deposits in pesos turn into dollars. Now we are starting to see some kind of reverse trend, where some of the actors are saying that dollars are going back to pesos because they need to operate, and they are not expecting an devaluation in the near term, at least.

Speaker #2: So we believe that we have other means to grow deposits, so to go to the market. So really, we don't see that as a big issue. Even though we monitor that, and we want to, that's why we are putting a lot of focus on deposit growth.

Speaker #2: But we expect that deposit growth could come with us, and that will help us to continue growing the peso lending. We don't see a constraint in the growth because of that so far.

Pablo Firvida: We expect that deposit growth could come with us, and that will help us to continue growing the peso lending. We do not see a constraint in the growth because of that so far. You do not see that as a constraint? No. Okay. In terms of the dollarization, you are completely right. There has been a dollarization both of loans and deposits. You and the other banks are mentioning demand for dollar loans. Should we expect, therefore, further dollarizations of the banks on the asset side? Have you started to see or not yet a reduction in demand for dollars? Have you seen actual dollar sales back to pesos? I mean, lending in dollars, yes. We see in the commercial lending, high demand or higher, I would say, demand in dollar lending. That is continuing.

We expect that deposit growth could come with us, and that will help us to continue growing the peso lending. We do not see a constraint in the growth because of that so far.

Carlos Lopez: You do not see that as a constraint?

Speaker #8: You don't see that as a constraint?

Gonzalo Fernández Covaro: No.

Carlos Lopez: Okay. In terms of the dollarization, you are completely right. There has been a dollarization both of loans and deposits. You and the other banks are mentioning demand for dollar loans. Should we expect, therefore, further dollarizations of the banks on the asset side? Have you started to see or not yet a reduction in demand for dollars? Have you seen actual dollar sales back to pesos?

Speaker #8: Okay. No. In terms of dollarization, you are completely right. There has been a dollarization of both loans and deposits. You and the other banks are mentioning demand for dollar loans.

Speaker #8: Should we expect, therefore, further dollarizations of the banks on the asset side? And have you started to see, or not yet, a reduction in demand for dollars?

Speaker #8: Have you seen actual dollar sales back to pesos?

Gonzalo Fernández Covaro: I mean, lending in dollars, yes. We see in the commercial lending, high demand or higher, I would say, demand in dollar lending. That is continuing.

Speaker #2: I mean, lending in dollars, yes. We see high demand, or higher, I would say, demand in dollar lending in commercial lending.

Speaker #2: So that is continuing. Mainly what we are seeing in these projects that we are talking about, we expect that to continue. So yes, we have grown a lot in our deposits in dollars.

Pablo Firvida: Mainly what we are seeing in these projects that we are talking about, we expect that to continue. Yes, we have grown a lot of our deposits in dollars starting the tax amnesty that Milei put. After that, our share in deposits, dollar deposits, is higher than our fair share. We are taking advantage of that. Of course, with the limits, internal limits that we have to lend dollars, etc. We can also go to the market and get dollar debt, which the market is there also. We expect to continue growing dollar lending, of course, at a moderate rate considering the liquidity limits that we have internally to our dollar deposits. Dollarization, of course, the demand for dollars, I mean, from our customer base, talking about purchase of dollars after the election has gone down.

Mainly what we are seeing in these projects that we are talking about, we expect that to continue. Yes, we have grown a lot of our deposits in dollars starting the tax amnesty that Milei put. After that, our share in deposits, dollar deposits, is higher than our fair share. We are taking advantage of that. Of course, with the limits, internal limits that we have to lend dollars, etc. We can also go to the market and get dollar debt, which the market is there also. We expect to continue growing dollar lending, of course, at a moderate rate considering the liquidity limits that we have internally to our dollar deposits. Dollarization, of course, the demand for dollars, I mean, from our customer base, talking about purchase of dollars after the election has gone down.

Speaker #2: Starting the tax amnesty that Milei put in place, our share in dollar deposits is now higher than our fair share. We are taking advantage of that.

Speaker #2: And of course, with the internal limits that we have to lend dollars, etc., we can also go to the market and get dollar debt, which is also available.

Speaker #2: So, yeah, we expect to continue growing dollar lending. Of course, at a moderate rate, considering the liquidity limits that we have internally to our dollar deposits.

Speaker #2: Dollarization, of course, the demand for dollars— I mean, from our customer base— talking about the purchase of dollars has, after the election, gone down.

Speaker #2: But I mean, it was a very, very high level before the election. It has gone down to normal levels. In Argentina, you always have people buying dollars.

Pablo Firvida: I mean, it was a very, very high level before the election. It has gone down to normal levels. In Argentina, you always have people buying dollars. That is something that can come back again if there is any noise or any political uncertainty. So far, we expect this to be quiet in the next months, and not really. It's now at, I would say, first month of the year levels, and we expect this to continue at this stage. Can you give us an idea about the levels of your dollar purchases that you are seeing from your customers? I mean, other banks have told us they went from $5 million or $6 million to $30 million or so per week. Where are you, and where are you relative to, let's say, the second quarter or the first quarter? Yeah.

I mean, it was a very, very high level before the election. It has gone down to normal levels. In Argentina, you always have people buying dollars. That is something that can come back again if there is any noise or any political uncertainty. So far, we expect this to be quiet in the next months, and not really. It's now at, I would say, first month of the year levels, and we expect this to continue at this stage.

Speaker #2: But that is something that can come back again if there is any noise or any political uncertainty. But so far, we expect this to be quiet in the next months and not really. It's now at, I would say, first month of the year levels, and we expect this to continue.

Speaker #2: at this stage. Can

Carlos Lopez: Can you give us an idea about the levels of your dollar purchases that you are seeing from your customers? I mean, other banks have told us they went from $5 million or $6 million to $30 million or so per week. Where are you, and where are you relative to, let's say, the second quarter or the first quarter?

Speaker #8: Can you give us an idea about the levels of your dollar purchases that you are seeing from your customers? I mean, other banks have told us they went from $5 million or $6 million to $30 million or so per week.

Speaker #8: Where are you and where are you relative to, let's say, the second quarter or the first?

Speaker #8: quarter? Yeah.

Gonzalo Fernández Covaro: Yeah.

Speaker #2: I mean, we used to have like 50 million per day. Now we are at, I would say, 15, something like that. So, lower levels.

Pablo Firvida: I mean, we used to have like $50 million per day. We are now at, I would say, $15 million, something like that. Lower levels. Lower levels, I mean, it's daily levels, but same levels at the beginning of the year, I would say. That would be the level of the beginning of the year as well, the $15 million? Yeah, more or less. Yeah. Okay. Thank you. You're welcome. Our next question comes from Yuri Fernandez from JP Morgan. Please, Mr. Fernandez, your microphone is open. Thank you. Hi, Gonzalo, Pablo, Gianni. A quick follow-up. Most of my questions have been already asked, just on asset quality, and there were many questions about the peak and how you are seeing. What makes you confident that first quarter will be the peak? Because we heard before, right?

I mean, we used to have like $50 million per day. We are now at, I would say, $15 million, something like that. Lower levels. Lower levels, I mean, it's daily levels, but same levels at the beginning of the year, I would say.

Speaker #2: Lower levels, I mean, it's daily levels, but same levels at the beginning of the year.

Speaker #2: I would say. So that

Carlos Lopez: That would be the level of the beginning of the year as well, the $15 million?

Speaker #8: Would be the level at the beginning of the year as well, the $15 million. Okay. Thank you.

Gonzalo Fernández Covaro: Yeah, more or less. Yeah.

Speaker #2: Yeah. You're

Carlos Lopez: Okay. Thank you.

Gonzalo Fernández Covaro: You're welcome.

Operator: Our next question comes from Yuri Fernandez from JP Morgan. Please, Mr. Fernandez, your microphone is open.

Speaker #1: Our next question comes from

Speaker #1: Yuri Fernandez from JP Morgan. Welcome. Please, Mr. Fernandez, you have the microphone.

Speaker #1: open. Thank you.

Yuri Fernandes: Thank you. Hi, Gonzalo, Pablo, Gianni. A quick follow-up. Most of my questions have been already asked, just on asset quality, and there were many questions about the peak and how you are seeing. What makes you confident that first quarter will be the peak? Because we heard before, right?

Speaker #9: Hi, Gonzalo, Pablo Chien. A quick follow-up. Most of my questions have already been asked, but just on asset quality—there were many questions about the peak and how you are seeing.

Speaker #9: But what makes you confident that the first quarter will be the peak? Because we heard before, right? I think the second quarter was supposed to be the peak.

Pablo Firvida: I think second quarter was supposed to be the peak, then third quarter. Now we are talking about the first quarter 2026. I know it's hard, but what are the leading indicators you are looking for? Why do you think it should improve? Is asset, lower yields on loans moving lower? Is the economy improving? I don't know, any kind of underwriting lessons that you learned in this last year? Just trying to understand what drives the confidence for improved asset quality. Just a second one on this topic, how your expected loss model should work on this? Should we start to see lower provisions now because you are calling for improvement ahead? Or no, you still need to do some kind of incurred losses provisions? Help us to understand the difference between incurred losses and expected losses here for you. Thank you.

I think second quarter was supposed to be the peak, then third quarter. Now we are talking about the first quarter 2026. I know it's hard, but what are the leading indicators you are looking for? Why do you think it should improve? Is asset, lower yields on loans moving lower? Is the economy improving? I don't know, any kind of underwriting lessons that you learned in this last year? Just trying to understand what drives the confidence for improved asset quality. Just a second one on this topic, how your expected loss model should work on this? Should we start to see lower provisions now because you are calling for improvement ahead? Or no, you still need to do some kind of incurred losses provisions? Help us to understand the difference between incurred losses and expected losses here for you. Thank you.

Speaker #9: Then third quarter. Now we are talking about the first quarter 2026. And I know it's hard, but what are the leading indicators you are looking for?

Speaker #9: Why do you think it should improve? Is asset lower yields on loans moving lower? Is the economy improving? Is, I don't know, any kind of underwriting lessons that you learned in this last year?

Speaker #9: Just trying to understand what drives the confidence for improved asset quality. And just a second one on this topic: How should your expected loss model work on this?

Speaker #9: Should we start to see lower provisions now because you are calling for improvement ahead? Or no, do you still need to do some kind of incurred losses provisions?

Speaker #9: Help us understand the difference between incurred losses and expected losses here for you. Thank you.

Speaker #2: I mean, I would say that, of course, when you make an expectation for the future on MPLs, there are one or two things that play.

Pablo Firvida: I mean, I would say that, of course, when you make an expectation for the future on NPLs, there are one or two things that play. One thing is what you can control, and the other thing that you cannot control, which is the market and how the economy is doing for families and for people. Of course, what we always talk is about what we are doing and what we expect that will create a change. In the middle, you may have elections, you may have interest rates going up that you couldn't expect before. Many things living in a country, in a developing country that, I mean, one month ago was in the border of hyperinflation if the elections were with a different scenario.

Gonzalo Fernández Covaro: I mean, I would say that, of course, when you make an expectation for the future on NPLs, there are one or two things that play. One thing is what you can control, and the other thing that you cannot control, which is the market and how the economy is doing for families and for people. Of course, what we always talk is about what we are doing and what we expect that will create a change. In the middle, you may have elections, you may have interest rates going up that you couldn't expect before. Many things living in a country, in a developing country that, I mean, one month ago was in the border of hyperinflation if the elections were with a different scenario.

Speaker #2: One thing is what you can control, and the other thing is what you cannot control: the market and how the economy is doing for families and for people.

Speaker #2: Of course, what we always talk about is what we are doing and what we expect will create a change. Then, in the middle, you may have elections; you may have interest rates going up that you couldn't expect before.

Speaker #2: Many things living in a country in a developing country that, I mean, one month ago was in the border of a hyperinflation if the elections were with a different scenario, and now we are all again trusting that the but with a lot of volatility in the middle that you have a lot of interest rate going out and families being affected.

Pablo Firvida: We are all again trusting that, but with a lot of volatility in the middle, you have a lot of interest rates going out and families being affected. That's why it's not that easy to predict what's going to happen. It's our best estimate, considering what we can control. As you know, people do estimates. What we are doing is, of course, we change the score of the customers we are lending to. Our score now is a better score. It's a higher score. We cut a lot of the lower scores that we used to have. We reduce limits in some of the lending, and we, of course, monitor the roles. We see the roles by vintage and by harvest, and we are seeing that new origination is behaving before than the old one.

We are all again trusting that, but with a lot of volatility in the middle, you have a lot of interest rates going out and families being affected. That's why it's not that easy to predict what's going to happen. It's our best estimate, considering what we can control. As you know, people do estimates. What we are doing is, of course, we change the score of the customers we are lending to. Our score now is a better score. It's a higher score. We cut a lot of the lower scores that we used to have. We reduce limits in some of the lending, and we, of course, monitor the roles. We see the roles by vintage and by harvest, and we are seeing that new origination is behaving before than the old one.

Speaker #2: That's why it's not that easy to predict what's going to happen if our best estimate considers what we can control. As you know, people do estimates.

Speaker #2: So, what we are doing is, of course, we are changing the score of the customers we are lending to. Our score now is a better score.

Speaker #2: It's a higher score. We got a lot of the lower scores that we used to have. We reduced limits in some of the lending.

Speaker #2: And we, of course, monitor the roles, and we see the roles by vintage and by harvest. We are seeing that new origination is behaving better than the old one.

Speaker #2: Then, of course, you have in the middle credit cards, which is just that is not new origination. Credit cards that I'm talking about personal loans, the first thing.

Pablo Firvida: Of course, you have in the middle credit cards, which is just, that's not new origination. Credit cards, I'm talking about personal loans, the first thing. Now, when you go to credit cards, it's old customers that start to behave bad. That you didn't do anything, but they just started to behave different because of adjustments they had in the family economy, etc. In that sense, we are also seeing some slight improving in personal loans. I mean, we are talking about, we see personal loans improving, credit cards still having a heavy lifting. That's why we still see this going on in the third quarter, in March. If it's February or April or May, I mean, this is again, I think what Carlos was saying, well, you are predicting ROE, you are a magician. We are doing our estimate today, I mean, with what we have.

Of course, you have in the middle credit cards, which is just, that's not new origination. Credit cards, I'm talking about personal loans, the first thing. Now, when you go to credit cards, it's old customers that start to behave bad. That you didn't do anything, but they just started to behave different because of adjustments they had in the family economy, etc. In that sense, we are also seeing some slight improving in personal loans. I mean, we are talking about, we see personal loans improving, credit cards still having a heavy lifting. That's why we still see this going on in the third quarter, in March. If it's February or April or May, I mean, this is again, I think what Carlos was saying, well, you are predicting ROE, you are a magician. We are doing our estimate today, I mean, with what we have.

Speaker #2: Now we're going to discuss credit cards. It's old customers that have started to behave poorly, and we didn't do anything; they just began to behave differently due to adjustments in their family economy, etc.

Speaker #2: So, in that sense, we are also seeing some slight improvement in personal loans. I mean, we are talking about seeing personal loans improving, while credit cards still have heavy lifting. That’s why we're still seeing this going on in the third quarter, in March.

Speaker #2: If it's February, April, or May, I mean, this is again, I think what Carlos was saying: while you are predicting ROE, you are a magician.

Speaker #2: We are doing an ROE estimate today. I mean, with what we have, of course, that we cannot guarantee that the ROE will be 11. It's an estimation.

Pablo Firvida: Of course, we cannot guarantee that the ROE will be 11%. It's an estimation with the forecast we have of all banks in the world. This is the same. This is where, with the tools that we have, we made a lot of changes that we expect are going to produce changes. Again, going to better scores, cutting limits, and monitoring that roles of the new lending are coming better than the old ones. If there is something in March or February that happens that affects families' incomes again, well, we cannot predict that. With the assumptions and the economy as is today, we expect this to happen. No, no, super clear. I know it's hard. No, thank you. Good examples. I was just trying to understand what has changed right now. It was very good. We're talking also about the dynamic.

Of course, we cannot guarantee that the ROE will be 11%. It's an estimation with the forecast we have of all banks in the world. This is the same. This is where, with the tools that we have, we made a lot of changes that we expect are going to produce changes. Again, going to better scores, cutting limits, and monitoring that roles of the new lending are coming better than the old ones. If there is something in March or February that happens that affects families' incomes again, well, we cannot predict that. With the assumptions and the economy as is today, we expect this to happen.

Speaker #2: With the forecast we have, as all banks do in the world, this is the same. This is where, with the tools that we have, we made a lot of changes that we expect are going to reduce changes.

Speaker #2: Again, going to better scores, cutting limits, and monitoring that roles of the new lending are coming better than the old ones. Then, if there is something in March or February that happens that affects families' incomes again, well, we cannot predict that.

Speaker #2: But with the assumptions and the economic conditions today, we expect this to...

Speaker #2: happen. No, no, super clear.

Yuri Fernandes: No, no, super clear. I know it's hard. No, thank you. Good examples. I was just trying to understand what has changed right now.

Speaker #9: I know it's hard. And no, thank you. Good examples. I was just trying to understand what has changed right away. It was very good.

Gonzalo Fernández Covaro: It was very good. We're talking also about the dynamic.

Speaker #2: We're also talking about the dynamic. Sorry, I didn't answer that part. The dynamic of the models, I mean, the point is that when you're booking new lending, you are also accounting for new losses or new reserves for the new lending based on the behavior of the past lending.

Pablo Firvida: Sorry, I didn't answer that part. The dynamic of the models, I mean, the point is that when the new lending, you are booking new losses or new reserves for the new lending considering the behavior of the past lending. You still won't see a lot of reduction in the, I would say, the cost of risk in the first month because even though you are originating, we are originating better quality, you still need to book reserves considering the past performance of your portfolio. You cannot say, well, these guys are better, so I will book a better performance because you didn't see that in your book. That's why at the beginning, you will take some time in having a reduction in the cost of risk because the new lending is also booked considering the behavior of the past lending.

Sorry, I didn't answer that part. The dynamic of the models, I mean, the point is that when the new lending, you are booking new losses or new reserves for the new lending considering the behavior of the past lending. You still won't see a lot of reduction in the, I would say, the cost of risk in the first month because even though you are originating, we are originating better quality, you still need to book reserves considering the past performance of your portfolio. You cannot say, well, these guys are better, so I will book a better performance because you didn't see that in your book. That's why at the beginning, you will take some time in having a reduction in the cost of risk because the new lending is also booked considering the behavior of the past lending.

Speaker #2: So, you still won't see a lot of reduction in the, I would say, the cost of risk in the same in the first month because, even though you are originating or we are originating better quality, you still need to book reserves considering the past performance of your portfolio.

Speaker #2: You cannot say, "Well, these guys are better, so I will book a lower, a better performance," because you didn't see that in your book.

Speaker #2: So that's why, at the beginning, you will take some time in having a reduction in the cost of risk, because the new lending is also booked considering the behavior of the past lending.

Speaker #2: Then, when you start proving that those lendings or those customers are behaving better than the old ones, you start reducing your cost of risk.

Pablo Firvida: When you start proving that those lendings or those customers are behaving better than the old ones, you start reducing your cost of risk. That's something that is gradual. It's not that quick. That's why we see first quarter of next year still with higher provision. No, super clear, Gonzalo. Thank you for the examples and good luck. Thank you very much. Thank you. Our next question comes from Santiago Petri from Franklin Templeton. Please, Mr. Petri, your microphone is open. Hi, hi. Good afternoon. Thanks for the call. I understand you mentioned you're expecting return on equity by the mid-teens by 2027.

When you start proving that those lendings or those customers are behaving better than the old ones, you start reducing your cost of risk. That's something that is gradual. It's not that quick. That's why we see first quarter of next year still with higher provision.

Speaker #2: But that's something that is gradual; it's not that quick. That's why we see the first quarter of next year still with higher...

Speaker #2: provisions. No, no,

Yuri Fernandes: No, super clear, Gonzalo. Thank you for the examples and good luck. Thank you very much.

Speaker #9: Super clear, Gonzalo. Thank you for the examples.

Speaker #9: Super clear, Gonzalo. Thank you for the examples. And good luck. Thank you very much.

Gonzalo Fernández Covaro: Thank you.

Speaker #2: you. Our next

Operator: Our next question comes from Santiago Petri from Franklin Templeton. Please, Mr. Petri, your microphone is open.

Speaker #1: Question comes from Santiago Petri from Franklin Templeton. Please, Mr. Franklin, your microphone's open.

Speaker #10: Hi, hi, good afternoon. Thanks for the call. I understand you mentioned you're expecting a return on equity in the mid-teens by 2027. I would like to know what loans to GDP assumption you are making for this achievement and if this return on equity is the sustainable steady state that you are aiming at, or if you are aiming for a higher return on equity. What would be the steady state loan to GDP penetration in Argentina?

Santiago Petri: Hi, hi. Good afternoon. Thanks for the call. I understand you mentioned you're expecting return on equity by the mid-teens by 2027.

Pablo Firvida: I would like to know what loans-to-GDP assumption you are assuming for this achievement, and if this return on equity is the sustainable steady state that you are aiming at, or you are aiming at a higher return on equity, and what will be the steady state loan-to-GDP penetration in Argentina under this assumption. What we are seeing is, I mean, loan-to-GDP today is around 10%, 11%, more or less. I mean, we are expecting in our projections, if everything goes right, that this can improve 2% per year. Our aim is to be in a sustainable ROE between 15% and 20%, I would say. That's the aim. We expect, I mean, with everything going right with our assumptions, to be around 15% by the end of next year. Starting at 15%, I consider that by 2027, we could be in that range.

I would like to know what loans-to-GDP assumption you are assuming for this achievement, and if this return on equity is the sustainable steady state that you are aiming at, or you are aiming at a higher return on equity, and what will be the steady state loan-to-GDP penetration in Argentina under this assumption.

Speaker #10: Under this

Speaker #10: assumption. I

Gonzalo Fernández Covaro: What we are seeing is, I mean, loan-to-GDP today is around 10%, 11%, more or less. I mean, we are expecting in our projections, if everything goes right, that this can improve 2% per year. Our aim is to be in a sustainable ROE between 15% and 20%, I would say. That's the aim. We expect, I mean, with everything going right with our assumptions, to be around 15% by the end of next year. Starting at 15%, I consider that by 2027, we could be in that range.

Speaker #2: I mean, what we are seeing is, loan to GDP today is around 10% to 11%, more or less. I mean, we are expecting in our projections, if everything goes right, that this can improve 2% per year.

Speaker #2: Our aim is to be in a sustainable ROE between 15% and 20%, I would say. That's the aim. We expect, I mean, with everything going right, with our assumptions, to be around 15% by the end of next year.

Speaker #2: So, starting at 15, I consider that by 2027, we could be in that range. Still, we don't know what Argentina will find by that time.

Pablo Firvida: Still, we don't know what Argentina will find by that time. If everything continues to improve, loans-to-GDP continues to grow at least 2% per year, we believe that that could be the range in 2027 and onwards, maybe 2027 still at mid-teens and 2028 already at higher things. Our aim for the longer term with a country that is already stabilized with our changes in our operating model, we are also working in changing our operating model or how to serve our customers to reduce costs and compete with the fintechs, with Mercado Pago, that we know that they have a much lower cost to serve. With that already everything implemented, our aiming is to be between 15% and 20%, I would say. That should be after 2027. Thanks a lot. Thanks for the call and the reasoning. Thank you very much. Okay.

Still, we don't know what Argentina will find by that time. If everything continues to improve, loans-to-GDP continues to grow at least 2% per year, we believe that that could be the range in 2027 and onwards, maybe 2027 still at mid-teens and 2028 already at higher things. Our aim for the longer term with a country that is already stabilized with our changes in our operating model, we are also working in changing our operating model or how to serve our customers to reduce costs and compete with the fintechs, with Mercado Pago, that we know that they have a much lower cost to serve. With that already everything implemented, our aiming is to be between 15% and 20%, I would say. That should be after 2027.

Speaker #2: But if everything continues to improve, loan to GDP continues to grow at least 2% per year, we believe that that could be the range in 2027 and onwards, maybe 2027 still at mid-teens.

Speaker #2: And 2028 is already at higher levels. But our aim for the longer term, with a country that is already stabilized with our changes in our operating model, is that we are also working on changing our operating model and how to serve our customers to reduce costs and compete with the fintechs, like Mercado Pago, which we know has a much lower cost to serve.

Speaker #2: So with that already implemented, our aim is to be between 15 and 20, I would say. And that should be after.

Speaker #2: 2027.

Santiago Petri: Thanks a lot. Thanks for the call and the reasoning. Thank you very much. Okay.

Speaker #10: Thanks

Speaker #10: A lot. Thank you for the call and the reasoning. Thank you very much.

Speaker #10: much. Okay.

Speaker #3: I think

Pablo Firvida: I think that was the question answered. Right? Yeah. Right, Pablo. Okay. Well, thank you, everybody, for attending this call. If you have any further questions, please do not hesitate to contact us. Good morning, good afternoon. Bye-bye. Bye-bye. Grupo Financiero Galicia conference is now closed. We thank you for participation and wish you a very good day. Goodbye.

Operator: I think that was the question answered.

Speaker #3: That was the last question. Question answered, right?

Pablo Firvida: Right?

Operator: Yeah. Right, Pablo.

Speaker #1: Yeah. Right, Pablo.

Speaker #3: Okay, well, thank you, everybody, for attending this call. If you have any further questions, please do not hesitate to contact us. Good morning.

Pablo Firvida: Okay. Well, thank you, everybody, for attending this call. If you have any further questions, please do not hesitate to contact us. Good morning, good afternoon.

Speaker #3: Good afternoon.

Gonzalo Fernández Covaro: Bye-bye.

Pablo Firvida: Bye-bye.

Speaker #2: Bye-bye.

Operator: Grupo Financiero Galicia conference is now closed. We thank you for participation and wish you a very good day.

Speaker #1: Grupo Financiero Bye-bye. The Galicia conference is now closed. We thank you for your participation and wish you a very good day.

Goodbye.