Alejandro Berney: We will give it a couple of minutes for more of the registered persons to get into the webinar. One second, please. Well, thank you, everyone, for joining. This is Alejandro Berney, IRO for BYMA. Thank you for joining our Q3 earnings presentation. As usual, please take down your notes and wait till the end, so that we do the Q&A after the presentation. With that, let's begin. Basically, this quarter, we continue to see the same trends as in the previous quarters, with the depository growing faster than the exchange. We will go into the reasons below that trend in the next couple of pages. We did see volume growth on the exchange, but there was an adjustment that we will explain later on as well.
Alejandro Berney: Here in the summary, you will see that the exchange was practically flat with the same quarter of last year, and actually revenues did grow, but the adjustment that we will explain later on caused the total revenue to be flat to previous year in historical terms. Obviously, adjusted by inflation, that was a drop. Expenses were slightly higher than last year. We will go over that as well. There were some one-offs in the quarter that raised that. Gross margin grew 12% in historical terms, and adjusted by inflation, we saw a drop. But we had a good quarter on the other operating income line compared to last year. Net-net, the operating result, the net operating result grew in line with inflation, as you can see, both in the historical numbers as well as the adjusted by inflation numbers.
Alejandro Berney: The hit this quarter that we had was on financial income exclusively. You can see that we both in historical terms as well as adjusted by inflation, the historical numbers dropped quite significantly. We will go into the reasons below that later on, but it has to do mostly with very flat FX during the quarter. There was practically no devaluation during this Q3. As a result of all of this, net income in historical terms dropped 8%, and in adjusted by inflation, the drop was lower, obviously, due to the inflation. We still maintain relatively high EBITDA margins, it is dropping slightly from 74% to 71%. Let's go into all of the reasons below this summary. The central securities depository still has very healthy growth in terms of assets under custody. We continue to see all asset classes grow.
Alejandro Berney: This quarter in particular, we saw what happened with the Q1, or the same as what happened in the Q1, which was that the T-bills on the local debt grew much more than the public debt. Once again, T-bills reached 10% of total assets, whereas it had dropped the percentage in the Q2. Although they are smaller in terms of size, we continue to see good growth at the CEDEARs level as well as the corporate debt level year on year. The revenues grew faster than the AuCs at 96%, basically due to the fact that we were charging differently for equity last year than this year. The Q3 of last year was the last quarter in which we were charging equity on nominal values. We started in the Q4 on market values.
Alejandro Berney: That explains the large difference, or the larger difference in growth, actually, compared to the AuCs. In terms of the exchange, as you can see in the breakout, the trading, clearing, and settlement fees grew 5% year-on-year. It was a small growth. This also takes into account that equity was charged differently. In the Q3 of last year, we were charging seven basis points. In the Q4 of last year, we reduced that to five basis points on trading. If you make it comparable to the same results of last year, equity, which is the highest portion of total revenues, would have grown 24% instead of the 5% year-on-year. In these numbers, it is quite a significant difference, and we will start seeing that normalization going forward from the Q4 onwards.
Alejandro Berney: Market data, as you may recall, most of the contracts are in dollars, so again, the small FX variation implies a very small growth on that line. Finally, in other fees, this merits some explanation. You can see the drop of 33%, ARS 2.3 billion. Most of that was due to the fact that we made an arrangement with Vantek, who was our provider of the OMS, the order management system. Previously, we would charge the clients, and Vantek would charge us for maintaining that platform. Going forward, the arrangement that we have done is that we became a shareholder of Vantek. They took on the OMS services, and we will be receiving a profit sharing on the revenues, on the profit, actually, that they make. This line specifically on the technology side had very thin margins.
Alejandro Berney: As you know, typically, technology services have smaller margins, and therefore, we decided to get into this arrangement with Vantek because it was not contributing much to our bottom line. We preferred to focus on our business and outsource this to Vantek, where we became a shareholder. This adjustment in other fees is mostly caused by Vantek. There was a smaller impact on penalties that we had charged, that we had invoiced in the Q2. As you may recall, we introduced BYMA Clearing, a new clearing system. Based on that, or together with the implementation of the new system, we started charging higher fees for fails.
Alejandro Berney: We decided in the Q3 to reduce those amounts that we had charged in the Q2 because we wanted to give clients the opportunity to start clearing via DVP, which was not the case before, and that required adjustments to their back office. At the end of the day, the penalties that we had charged in the Q2, we gave them back to the clients as part, clients meaning the local brokers, as part of their adjustment into this new type of clearing. The ARS 2 billion of the ARS 2.3 billion was related to Vantek, and the other ARS 300 million was related to reducing the fines that we had charged in the Q2. Going into equity also, we can see that, sorry, one second.
Alejandro Berney: Going into equity, we can see that also, as similar trends in the past quarters, the CEDEAR segment is the one that is growing much more significantly. You can see on this page that the total volume growth in ADTV was higher than the revenue growth because of the comment I mentioned about charging differently last quarter. Sorry, the same quarter of last year compared to this quarter. If it weren't for that, we would have made ARS 24 billion instead of ARS 19 billion in equity. Fixed income trading shows a negative year-over-year movement. We had an exceptional quarter in Q3 of last year. You may recall that the central bank was very active in our market, making different types of trading practices in order to reduce total rates and to influence also the implied FX, the dollar MEP, as we call it.
Alejandro Berney: Year over year, it shows a negative growth. Quarter over quarter, it is a much better comparison. The volumes did grow, but they grew mostly in bills where we charge a tenth of what we charge on bonds. So, the same effect on T-bills growing did impact slightly the revenue growth quarter on quarter. On exchange repo continues to be a very good business line. We mentioned in the last earnings call that the volumes were dropping because of changes to leverage, allowed leverage on the broker-dealer side. We have seen that volume come back again, so we continue to see a good year-over-year growth in this business line. Market data, as I mentioned in the summary, growing at a low rate, basically due to small FX differences in the quarter. On the expenses line, most of the lines were below inflation.
Alejandro Berney: The only one which had impact was the compensation line. We had a headcount reduction in Q3. 50 people, roughly 10% of the workforce, left the company in part across all different areas. Also, it was related to the Vantek change that we mentioned before. So, we have in Q3 the severance, which was roughly ARS 2 billion, and we didn't see any of the savings in that quarter because this happened towards the end of September. Financial income, as we saw in the summary, had quite a significant reduction. In this graph, we show in light blue the gains on FX difference, and in dark blue, we have the interest and mark-to-market. You can see a couple of things.
Alejandro Berney: First of all, that we practically did not make any money on our own investments due to FX differences this quarter, so that was a significant reduction. When you compare it to last year, that Q3, we had seen very sizable gains because of the market volatility. The presidential election. The elections at the national level, actually, the midterms were in October, so running up to that point, there was a lot of nervousness in the markets, and the FX had risen quite considerably, as you can see from the graph. On the interest and mark-to-market, there we had some of our investments had a sizable reduction in the value. The most notable one is our investment in A3, where we hold a little bit over 3% of their capital.
Alejandro Berney: That markdown was close to ARS 4 billion, so quite significant, a large reason why the interest and mark-to-market is lower than last year. Considering the growth in revenue and the growth also in expenses, and in spite of that, we still are growing, or we still have an EBITDA margin very close to where we were. Our operating margin falling a little bit, but probably will improve with the Q4 results based on what I mentioned on the expenses line. These are our historical numbers, which you can also find the Excel in our web page in case you want to download them. In summary then, a good growth year-over-year for the central securities depository and relatively strong also quarter-over-quarter.
Alejandro Berney: The exchange flat with last year, but again, due mostly to the difference in how we charge for equity plus the adjustment on the Vantek service that we provided for the OMS for the local brokers. In terms of efficiency, still close to all-time highs. In terms of updates, we launched the first local ETF this week on Tuesday. It has been working very well, and we reached a new record this week based on volatility. We had a record from October of last year in terms of offers. We were at that point at 26 million offers. We stood with that record for a long time until last month, where we reached 31 million, and this week we reached 41 million offers. So, quite sizable in terms of the algorithmic traders that we have. That also was related to a record in trading.
Alejandro Berney: We had $545 million traded in equity. Most of that CEDEARs, as you saw from the graphs, although this is data related to October, but still we are seeing the global volatility going into the local prices, and so we are seeing more activity based on that. Just a picture from this is our new bell, which we have to commemorate events like the launching of the ETF. Last Tuesday was the first time we inaugurated this space, and hopefully, when the markets improve, we will start seeing some IPOs come through and therefore use this space a lot more. With that, I will turn it over to questions. I see, Pedro, you have your hand up. Why don't you go ahead with your question?
[Analyst 1]: Alejandro, thank you very much. Good morning, everybody. Question on the financial results.
[Analyst 1]: A bit more volatile. I know you commented already some on it, but if you can give us a little more detail what drove the volatility. We know markets haven't been easier in Q4, so maybe a glimpse of what we can expect there. If you can maybe remind us of what the main drivers here are, what the investment policy allocation is from the company. Thank you.
Alejandro Berney: Absolutely, Pedro. It's interesting, and you will see this breakdown in our financial results. The numbers are inflation adjusted, but you can still see the effects. It has not been our public debt, the one that took the mark-to-market. It was really on the private instruments that we hold. Again, when you look at the detail, most of the reduction, most of the negative mark-to-market was related to the markdown of our strategic portfolio in A3. We consider that as part of our total investments, even though it's strategic, so you will see it on the same line. This is Note 13 in our financial statements. So, when you analyze the breakdown, public debt, we made nearly the same amount of money that we did last year in terms of interest and mark-to-market. It was the private instruments, that one that took the hit.
Alejandro Berney: But when you look at the total, it is really the fact that we had no FX difference this quarter, and we had very sizable FX difference last quarter. If you look at the consolidated results for the year, the 9 months, you will see similar things. You will not see a negative markdown on the private instruments, so there, on a year-to-date basis, you will see it flat. But you will see that last year, we made almost double what we have made this year in our own cash, in our portfolio, due to FX differences. So, it really comes down to the FX being very, very stable this year. In terms of, you asked about the investment policy. That continues to be as we have always done. So, this quarter, we ended at 65% in pesos, 35% in dollars, roughly. We are expecting more volatility.
Alejandro Berney: There's still a long time until elections next year, so we have a conservative portfolio. Our average maturity is 1.2 years, for example. So even in the portfolio that we have abroad in treasuries, we always keep it very short. In our local portfolio, we also keep it very short due to the moment which we expect a lot of volatility in October of last year. So, if I remember correctly, almost 90% of our investments locally mature before October of next year.
[Analyst 1]: All right. Thank you.
Alejandro Berney: Pedro Offenhenden.
Pedro Offenhenden: Hi, Alejandro. How are you?
Alejandro Berney: Very well, thanks.
Pedro Offenhenden: For the call, I have a couple of questions. Maybe the first one on the severance payments you mentioned. Were those departures complete in September, or should we expect more of these extra charges in the last quarter?
Alejandro Berney: There were a couple during the beginning of October, but much smaller scale. 80% to 90% of the severance happened in the Q3, towards the end of September, as I mentioned.
Pedro Offenhenden: Perfect. I have one more, if I can.
Alejandro Berney: Yeah, absolutely.
Pedro Offenhenden: On the other operating income, how can we think this line maybe in the difference with the own cash income? I was a bit surprised that it is mainly dollarized, but it fell like half from last quarter. Is it FX difference, mark-to-market? How can we think this line?
Alejandro Berney: Yes, it is not FX difference. It has to do with how it is invested. First of all, there is no FX difference because we have it both on the asset and the liability side. The other operating income is client cash, so we account for the cash on the liability side, and we do not take FX risk on those type of investments. What is in dollars as a liability is in dollars as an asset, right? So, that line does not benefit, nor does it take a hit when there are FX differences. It is all interest rate driven. Most of it, as you said, is in dollars, a large portion.
Alejandro Berney: But because Argentine interest rates are so much higher than dollar interest rates, therefore, when you look at the returns, they are much more, almost half and half between the dollar assets, the dollar cash, and the Argentine cash. Peso volatility and rates will affect the returns on other operating income.
Pedro Offenhenden: Okay. Okay, perfect. Thank you, Alejandro.
Alejandro Berney: You are welcome. Pedro Gonzaga?
Pedro Gonzaga: Hi, Alejandro. How are you? Thanks for taking my question.
Alejandro Berney: Sure.
Pedro Gonzaga: Again, on the financial income. You already answered that the policy is consistent, but I was just wondering, you do have the flexibility to change at least the proportion of pesos and dollars.
Alejandro Berney: Yes
Pedro Gonzaga: In the last quarter, it was the other way around. You had more pesos than dollars. So, two questions on that. This flexibility will stay the same, and why change it so much? Does it not make more sense maybe for the company to always have more dollars in very low duration, to have very low market risk on investments, considering all the other changing, moving parts in its business? Regardless of that, maybe that concept, historically, how the company has changed its investments quarter to quarter, month to month, has that generated positive outcomes? Maybe this quarter was not so good, but do you track that? If historically, how you change the allocation, if that was positive for shareholders? Thanks.
Alejandro Berney: Sure. I will go from the top down. First of all, we have an investment committee that obviously looks at the investments versus the approved investment policy that we have. That investment committee meets at least monthly. If there is a lot of volatility, it may meet in a shorter term. That investment committee is the one that takes the decision on how much we will have in pesos and how much we will have in dollars. All of this always for our own cash, right? As I mentioned before, the other operating income, there is no cross FX that is taken, and therefore, whatever is in pesos is invested in pesos, and whatever is in dollars is invested in dollars. But for our own cash, the investment committee does take the view, and therefore, the proportion of pesos and dollars will change.
Alejandro Berney: In the last 7 years, we have seen situations where we were 70% in pesos, then we moved to 100% in dollars. Actually, that proved to be a very good foresight because we moved 100% to dollars around November 2017, as I may recall. So, when Macri's devaluation starts to gain speed in April of 2018, we were already 100% dollarized, and therefore, the entire period from there onwards to 2023, as I recall, was practically 100% dollars. In 2022, I think we began to change that a little bit. So, in general, we have taken, I would say, a more conservative view than a view around gaining, looking to outperform the market. In the last couple of years, with FX being very, very stable and with inflation being high, we moved more to the peso side, especially after the two large dividends that we paid in dollars, right?
Alejandro Berney: You may recall the last year's dividend of $177 million and this year's dividend of $126 million. All of that was paid in dollars, and therefore, our dollar portion reduced very significantly. So since then, we reached a 65% peso, as I mentioned, in Q2, at the end of Q2. This Q3, we ended at 55% peso. So, we had already started moving a bit based on the outlook that the investment committee has.
Pedro Gonzaga: You ended Q3 55% in pesos because in the presentation, it is actually lower. So that is a more current view after the end of the quarter?
Alejandro Berney: I'm going off my memory. Let me see. One second. Sorry. I think it is 55% in pesos. I think there's a typo there, but we will confirm.
Pedro Gonzaga: Okay, thanks. I'll follow up on that one later. Thanks, Alejandro.
Alejandro Berney: Thank you, Marcos.
[Analyst 2]: Hi. Thank you for taking my question. It is about the shareholder structure. Bolsa de Comercio still holds about 31% of the stock. I wanted to know if there are any timeline to make the divestment of that portion exceeding the 20% regulatory cap, and do you see that happening in the short term? Thank you.
Alejandro Berney: You are welcome. Yes, correct. Bolsa de Comercio de Buenos Aires still holds almost 31%. It is 30.9% of total capital. By law, as you mentioned, any entity that is not another exchange can hold maximum 20%. However, there is no mandate as to when the existing parts that are over 20% need to be sold. It does not happen only at BYMA. At A3, something similar happens with Bolsa de Comercio de Rosario as well, and none of them have dates by when they need to sell their portion. I know of no mandate, as we were saying, so at this point, there is no timeline for that to change.
[Analyst 2]: Perfect. Thank you.
Alejandro Berney: You are welcome. Very well. Any other questions? Apparently not. So, again, just as a reminder, you can always reach us at ri@byma.com.ar with your questions. We will be uploading, we have already uploaded the presentation and our financial results. We will be uploading the video and the audio, actually, of this call. So, thank you again for joining. Lisandro, I think you have a question. Is that correct?
[Analyst 3]: Yes, Alejandro. I have a quick question here on if you can give us, or you have guidance for next year, maybe EBITDA or the revenues for 2027.
Alejandro Berney: No, we do not provide guidance. It would be very difficult based on the volatility that we have. What we are saying is that we expect that volatility to continue to grow. In general, when we see volatility, we see more business, so we are estimating that we will have a volatile and good year for us next year. That is as much as we comment.
[Analyst 3]: Okay, perfect. Thanks.
Alejandro Berney: Okay. Thank you very much. Also here with us is, you may have seen Maura. She is part of the team. She has been with us for a couple of months now, and Mario as well. The generic email that I mentioned will reach all three of us, so that is typically the best way to reach us if you have any questions, and we can always set up another call to go down into more detail on anything that you wish. So thank you again, and have a great weekend.
