Grupo Financiero Galicia S.A.

Please stand by. We're about to begin. Good day, everyone, and welcome to the second quarter 2023 earnings release call. Today's call is being recorded, and now at this time, I'd like to turn the call over to Pablo Fidvida. Please go ahead.

Thank you. Good morning, and welcome to this conference call. I will make a concise introduction, and then we will take your questions. Some of the statements made during this conference call will be forward-looking statements within the meaning of the safe harbor provisions of the U.S. federal securities laws and are subject to risk and uncertainty that could cause actual results to differ materially from those expressed. According to the Monthly Indicator for Economic Activity, EMAE, the Argentine economy recorded a 5.5% year-over-year contraction during May. Near today terms, the economic downturn stood at minus 1.3%. During the first half of 2023, the primary deficit reached 1.1% of GDP. This implied an increase against the deficit of 1% accumulated during the same period of 2022. Result that was explained by revenues increasing by 90.4%, whereas primary spending rose 95.5%. The national CPI recorded a 50.7%, increasing during the first half of 2023. Including July, accumulated inflation for 2023 reached 60.2%, recording 113.4% annual variation in the last 12 months, which entails an acceleration against the 71% of July's 2022 12-month trading inflation, with inflation hitting its highest mark in 30 years. On the monetary front, the Argentine Central Bank expanded the monetary base by 516.3 billion pesos in the second quarter, recording a 47.8% increase from June 2022. The exchange rate averaged 248.8 pesos per dollar in June 2023, a 43.9% increase against the average of December, which implies a 30.5% peso devaluation. When compared to June 2022, the Argentine peso underwent a 50.7% devaluation. In June 2023, the average rate on peso-denominated private sector time deposits for 59 days stood at 92.9%, 44.5 percentage points above the average of June 2022. After the primary elections, the Argentine Central Bank devalued the peso by 17.9% to 350 pesos per dollar. Additionally, the monetary authority increased interest rates with the monetary policy rate and the minimum rate for 10 deposits under 30 million pesos currently standing at 118%. Private sector deposits in pesos averaged 21.9 trillion pesos in June, increasing 22.6% during the quarter and 115.5% in the last 12 months. Planned deposits in pesos rose 23.8% during the quarter and 125.8% in the year. Peso-denominated transactional deposits increased 21.2% during the second quarter and 106.9% in year-on-year terms. Private sector dollar-denominated deposits amounted to $15.5 billion at the end of the quarter decreasing 5.2% in the quarter and 0.6% in the last 12 months. During June, peso-denominated loans to the private sector averaged 9.5 trillion pesos, increasing 25.6% in the quarter and 86.5% when compared to June 2022. While private sector dollar-denominated loans amounted to $3.8 billion recording an expansion of 4.6% during the quarter and of 0.3% when compared to June 2022. Turning now to Grupo Financiero Galicia, their income for the second quarter amounted to 58 billion pesos, 425% higher from the year-ago quarter, mainly due to profits from Banco Galicia for 51.8 billion pesos from Galicia Asset Management, for 4.4 billion pesos, from Alicia Seguros for 894 million pesos, and from Naranja X for 185 million pesos. This profit represented a 4.9% annualized return on average assets and a 25.9% return on average shareholders' equity. Banco Alicia net income for the quarter was 555% higher than in the year-ago quarter. The net operating income increased 62%, mainly due to 196% increase in net interest income. Average interest in assets reached 2.68 trillion pesos, similar level to that of the same quarter of 2022, mainly due to a 14% decrease in the average volume of peso-denominated loans offset by 110% increase in the average volume of other interest-selling assets in pesos. In the same period, its yield increased almost 34.2 percentage points, reaching 79.1%. Interest-bearing liabilities increased 4% from June 2022 amounting to 2.31 trillion pesos. This growth was mainly due to a 12% increase in the average balance of 10 deposits in pesos, offset by a 20% decrease in the average balance of peso-denominated saving accounts. During this period, its cost increased 28.2 percentage points to 56.6%. Net interest income for the quarter increased 196% from the same quarter of 2022, with interest earning income growing 131% and interest expenses growing 108% in the same period. It is worth to remember the change in the valuation model of the Argentine Central Bank paper, LELIC, acquired from January 1st, 2023. These instruments used to be valued at fair value and the criteria was changed to amortize cost. Thus, its yield is being recorded as interest income instead of within results from financial instruments. Net fee income increased 15% from June 2022, mainly due to a 27% increase of fees related to bundle of products, a 44% increase of fees on collections, and a 19% higher fee income from deposit accounts. Net income from financial instruments decreased 73% as a consequence of the change in evaluation model of central bank paper I have just mentioned. Gains from gold and FX quotation differences were 586% higher from the year-ago quarter, including the results from foreign currency trading. Other operating income increased 109% in the quarter as a result of the 138% increase in other adjustments and interest on miscellaneous receivables as a consequence of devaluation of financial instruments granted in guarantees. As regard provision for loan losses, the amount for the quarter was 8% lower than those recorded in the year-ago quarter, reaching 14.8 billion pesos. Personal expenses were 4% higher than in the second quarter of 2022, in light with an increase of staff while administrative expenses were 3% higher due to a 24% increase of taxes. Other operating expenses increased 70% due to an 80% higher turnover tax due to an increase in the gross income tax from financial operations as a consequence of the increase in the holding of the leaks. And 57% higher charges for other provisions related to discounts on credit cards and payroll accounts. The income tax charge was 17.1 billion pesos higher than in the second quarter of 2022, with an effective tax rate of 25%. The bank's financing to the private sector reached 1.58 trillion pesos at the end of the quarter, down 13% in the last 12 months, with peso-denominated loans decreasing 13% and dollar-denominated loans 20%. Exposure to the public sector increased 22% year-over-year due to a 36% increase in the holding of LELICs. Excluding the exposure to a central bank, LELICs, LERICs, and repurchase agreement transactions, net exposure represented 13% of total assets, the same level as of the end of the second quarter of 2022. Deposits reached 2.95 trillion pesos, 1% lower than a year before, mainly due to a 34% decrease of checking accounts in pesos, partially offset by a 34% higher balance of other deposits in pesos. The bank's estimated market share of loans for private sector was 11.77%, 30 basic points lower than at the end of a year or quarter, and the market share of deposits from the period sector was 9.92%. 24 basic points lower than in the same quarter of last year. The bank's liquid assets represented 123% of transactional deposits and 58% of total deposits, up from 91% and 50% respectively from a year before. As regards asset quality, the ratio of non-performing loans to total financing ended the quarter at 2.65%, recording a 49 basic points deterioration as compared to the 2.16% of the second quarter of the prior year. At the same time, the coverage with allowances reached 161%, down 57 percentage points from the 218% recorded a year ago. As of the end of June, 2023, the bank's total regulatory capital reached 23.64%, decreasing 45 basis points from the end of the same quarter of 2022. In summary, in a particularly challenging and volatile macro environment, Grupo Financiero Galicia was able to keep asset quality, liquidity, and solvency metrics at healthy levels and to significantly improve its profitability in spite of the significant impact of the high inflation of the quarter. We are now ready to answer the questions that you may have. Thank you.

Thank you. If you would like to ask a question, simply press the star key followed by the digit 1 on your telephone keypad. Also, if you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach your equipment. Once again, press star 1 at this time. We'll pause for a moment. And we'll first hear from Brian Flores of Citibank.