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.

Hi, Tim. Good morning. Just two questions on my side. The first one is a midterm strategic one regarding the positioning of some candidates with the central bank. You know, given that, you know, we now have a bit more visibility on what they are intending to do with the central bank, should we expect any reduction in your exposure before the election? And if you could, you know, share any call or on your conversation that you've had with any approaches on the candidates' things, it would be great. And I'll do my second question afterwards. Thank you.

Okay. Hi, Brian. Well, when you were asking, the first idea that came to my mind is a statement made by a former congressman saying that when you are far from becoming a president, meaning you have a low percentage of votes, you can have extreme statements. And when you come closer to becoming a president because you are having more votes, you become more cautious. So many of the statements actually made by Millet, that was a surprise with 30% of the votes, were made when he was very far from becoming president. Still today, I think the the environment or the situation is very open because first the difference was very small between the three main candidates, 30% of Millet, 28% of the Juntos por el Cambio, basically Macri's party, and 27% the Peronism with the Kirchnerism. So between the three, 85% with very small difference, with 70% of the voters actually voting. This is usual that in the primaries there is a small or smaller percentage of voters. So when we come to the elections in October, we think that there perhaps will be more than, I don't know, 2 million voters adding to this. small difference. So really, we are in an open situation. But what we think as a clear message is that almost two-thirds of the population want some kind of change of regime. As with this change of regime, really it's very difficult to make forecasts. Some, well, Millet in particular is speaking about the authorization. Some of his Advisors are saying that it's not really a full dollarization that will take some time in a second wave of measures. Others speak about the monetary economy, meaning that we could have contracts in dollars. But everybody is thinking that the key measures balance or improve the economy is to reduce the fiscal deficit. And we are happy with that. That would mean there will be less monetary expansion and less going forward. So in the midterm strategy, as you said, we are happy with the exposure to the central bank and with the government. basically because we are seeing deposits growing in line with inflation and loans growing around 10 to 15 percentage points below inflation. So that gap is invested in both 28 days, central bank paper, and in government paper that basically are tied to inflation and allow us to hedge against inflation. Sorry if the answer was too long, but I wanted to include the political environment, not only the potential measures of the candidates.

No worries, Pablo. That's perfect. And my second question is a bit on asset quality. I just wanted to understand, what are you seeing there? Because as you mentioned, loan growth is still below deposits and inflation growth. So just willing to understand a bit more, what are you seeing there on asset quality and if this is a concern going forward when you decide to finally reaccelerate longer? Thank you.

Well, asset quality has been deteriorating slightly, really from very low levels. In the case of the bank, it became from 216 to 2.65, the NPLs, so really very, very low. If you think in an economy that is not growing, this high level of inflation, economic and political uncertainty, one could think of much higher ratios of NPLs. Also, coverage is very healthy, above 160%. We could expect some slight deterioration going forward for the second half of the year, but really nothing dramatic. As I many times repeat, and sorry if I'm becoming a lot of, or I repeat a lot this concept, as inflation is very high, and many of the loans were granted very short term with fixed interest rates, really the installments become diluted and it's easy for both companies and individuals to pay back their loans. The other side of the coin is that with this high of inflation, we have a negative impact on the in Spanish or the monetary loss due to inflation. So we could see some slight deterioration but nothing really dramatic. If I had to say, less than 3% NPLs at the bank level at the end of the year.

Perfect, Pablo. And just if I can, just a final question. With these circumstances and this very strong quarter, are you revising your ROE guidance for 2023?

Well, this high ROE quarter gives us I would say that around 15% for the full year. The original estimates were around 10%, so in the area of 15, 14 perhaps or so. We have to see, of course, how the pass-through of this devaluation goes to inflation. And while inflation has a direct impact on this item that I mentioned, the monetary loss due to inflation, but also it has impacts on interest rates, loan demand, deposits, fees, administrative expenses, but thinking in a, I would say, in the base case scenario, we should have an increase of the order I mentioned.

Thank you very much.

You're welcome, Brian.

Next, we'll hear from Ernesto Galindo of Bank of America.

Thank you. Hi, good morning, Pablo and Etienne, and thanks for taking my call. I have three questions from my side. The first one will be on the political outlook. How much power does a president have in Argentina to make decisions related to IMF negotiations or to dollarize the country or to make changes to the central bank. I think some of the decisions need to pass through Congress, but some decisions can be taken by himself, no? Then my second question will be on your investment strategy. So we continue to see high inflation levels, high interest rates, further depreciation of the currency. So how is Galicia positioning to navigate under this volatility? I don't know, how are you positions in terms of bonds related to inflation or investments related to FX? It will be interesting. And then my last question is on how should we think about the long road under these economic variables, and how should we think about the ROE next year, considering that this year you have been benefiting because of the gains on investment securities and FX. But once we start to see a normalization, once we start to see lower rates, how should we think about the ROE? Thank you.

Hi, Ernesto. First, from regarding the political power of the president, I guess you are thinking in if Millet comes to office, if he will be able to put together certain reforms that he would like to have, or at least he's saying that. Most of the changes must be done by law in Congress. He will not, if he repeats the election of the primaries, he will not have any, I would say, important presence in Congress, so he will need to have agreements or alliances. The most rational type of alliance would be Macri's party, Junto por el Cambio. Between the two, they could have a quorum and have laws that they can make reforms. In terms of investments, sorry, I don't know if you have a comment on that.

In that question, so we know that Millet will need to have in order to make structural changes, but what are the things that he can do? What can he do?

Well, first, in my opinion, it's not clear if his advisors fully agree with certain species. The main idea, economic idea he has been saying is dollarization. From a practical standpoint, many even orthodox economists are saying that it's impossible, not only in the short term, but in the medium term too. Others are saying that in order to get to a dollarization, you have to make a lot of homework, basically reducing the fiscal deficit and actual becoming a superavit, not a deficit or surplus. And so this type of economy say if you do the homework, why dollarize? It makes no sense. Others are saying that they would like to have two currencies so that we can have contracts in dollars. But any big reform must be, I would say, approved by Congress. And that's why I'm saying that he must negotiate and have alliances. Even as I mentioned in the past or earlier in this call, when you have, I don't know, 20% of the votes, you can say I will close I will go from 20 plus ministers to eight and fire off all the people. Now that he got 30, he's saying, well, I will close certain ministers. I will create secretaries, not ministers, and I will not fire the people. Again, the ones that are political people that were put there as a favor. So I think he will have to become part of what he is, I would say, criticizing. He keeps speaking about the political caste or group of people with a lot of power that take decisions for themselves, but he will have to have this support and alliances in Congress. So in my opinion, many of the, ideas or projects will take time and they will need some kind of support. Well, going to the second question. Sorry, yes.

In the central bank, can he do some changes or he doesn't have the power to do that?

Well, typically all the members of the board of the central bank must have the approval of the Senate, of the senators. We are now with some kind of anomaly that some members of the central bank are not yet approved, but they are working. But the rule of law, what the law says is that the senators must approve the members of the board of directors of the central bank.

Okay, excellent.

In terms of investment, first I will mention the dollar position. We cannot belong in dollars in the spot. the net position must be zero. We can go long in dollars through forward contracts that could be up to 5% of the regulatory capital. Sometimes we are longer than shorter depending on the situation, what are the interest rates, the yield, on different financial instruments. I would say that the risk appetite is to have this type of government exposure, meaning the national treasury, not the central bank, around 13% of total assets, and basically instruments tied to inflation that protect us against inflation. With a two months lag, So it's not a perfect coverage, but in the medium term, it covers your liquid network. And the third question was regarding loan growth. With this level of inflation that implies a high level of interest rates, we are not seeing recovery in loan demand in real terms. So we need definitely a change in the economic regime that will attack inflation and in a virtual cycle, interest rates going down. We don't need inflation to go to levels of, I don't know, 10, 20% to have real long road. actually with 50% inflation in the past, some quarters or years, we have positive loan growth. But definitely with three-digit inflation, it's not possible. So ROEs going forward in this scenario of virtual cycle, in my opinion, should be better for banks. because loan demand will expand. Right now, loan to GDP is very, very low, around 9%, so really very low. So if inflation goes down, interest rates go down, and volume expands significantly, and it helps us to make projections and better projections, decisions to invest and to grow, not only as a bank, as a holding company, Grupo Financiero Galicia already invested in an insurance company, and also our clients can have a clear horizon in order to invest. There are lots of projects in oil and gas, mining, agricultural sector, digital economy. So there is a lot of of possibilities out there, but we need definitely a much healthier microeconomy.

Perfect. Thank you. So just on the last one, so once we have better economic outlook and stronger long road, do you think that will be enough this year? The banks are benefiting a lot from the investment securities positions and FX. I think that is likely not to continue next year. So do you think that with a stronger loan growth should be able to offset a lower yield from the securities portfolio?

Well, we have to see the speed of that. Many times the speed of changes in Argentina surprise everybody. But I would say yes, the compression in margin should be similar let's say to the increasing volume in loans and with lower inflation, the monetary loss due to inflation will be lower. So ROEs should be, I would say around 15%, that would be a target, medium term target, and perhaps with a much healthier mix, not just from or mainly due to a high interest from the leaks and government paper.

Excellent. Super helpful, Pablo. Thank you very much.

You're welcome.

And next we'll hear from Yuri Fernandez of JPMorgan.

Hey, Pablo. I have just on effects. if you can comment on the deval of August and your base case for the currents during the year. And like if you are calling for a further deval or not, what is your base case? You discussed your effects gap, how it increased this quarter. So I guess you are being prepared for that. But I would like to understand, you know, like the moving parts, how this impacts you, and what is your base case for a potential deval in Argentina? Thank you.

Sorry, I couldn't hear you very properly. You said a potential default?

No, devaluation of the currency, right? The peso devaluated maybe 20% now in August. I guess there are some economies that they are calling for further devaluations after elections. So I would like to hear your base case, what Galicia is calling for potential devalues.

and the impact for you because it seems our balance sheet is being more prepared like you're increasing your effects gap so also you know how a potential devolve impact you thank you okay well um as i mentioned we we cannot belong in dollars in in the spots so the the other position must be zero we we can go in dollars up to 5% of our regulatory capital with forward contracts. We have one I would say waiver or different instrument that are the dual bonds that with the evaluation we get that benefit and it's not within the zero position in the spot. In August, after this devaluation, you could see a benefit for next quarter of that devaluation. But in theory, if we sell or we have no dual bonds, there is no instant impact on devaluation. Of course, we have to look at our clients. Really, what happens in most of the cases is that The private sector in Argentina is very long in dollars and the public sector is the one that is short in dollars. So really there is a kind of wealth effect with the devaluation. What is hard to forecast right now is what will be the pass through to inflation of the devaluation of the official exchange rate because as imports have been controlled or restricted, many importers have been pricing their products at different exchange rates, not the official one that is allowed for importers. But I would say that in general, the impact for banks of revaluation is not a direct one. It comes from the impact of our clients and, again, could be, I would say, and one other thing is that most of the economists are saying that the financial dollars are too expensive and the official one perhaps is too cheap so something but with this 20% increase to 350 we are getting closer to a more I would say rational or dollar or effects of equilibrium we don't need to go to 650 or 700 the the good exchange rate must be a much lower than that got it so basically you make more money on financial income on the deval but also high inflation hurts your

results from net monetary, like the inflation results. So one offsets the other, but maybe your clients, they make more money, you have more deposits. So net-net maybe is more positive if there are further devaluations in Argentina, right? Is that correct?

Yes, yes. And one thing, if there is a normalization of the FX market, let's say instead of having so many the one that would be at the end in the market perhaps being much lower than the current financial dollars could imply that the conversion of our numbers from peso to dollars will be done at a lower exchange rate and we could have an improvement in valuations because right now the blue chip swap appears to be very high.

Okay, no, thank you. And Pablo, just returning to the previous discussions about Lelix, Millet, and the dollarization of the economy, I guess Ocampo has been a little bit more, you know, well, it may take some time, as you said, 10 months, two years. But how to do that? Like, how to replace the Lelix and how to, you know, implement some dollarization? Do you have any guess on how to do it?

Well, there were some interviews in which he said that he would create a trust in which the government or the central bank will include all the government paper they have. Even they say what the public pension fund has in different financial assets. equity bonds and so on and they will get dollars and this fund in this virtuous cycle will be able to be revalued. But the second question would be if there is a dollarization what the government would do with the government bonds in pesos and the leaks. Many times this type of projects are easy to comment in an Excel or in a PowerPoint, but again, it's very difficult to implement. And again, I heard many of the MLA advisors that are not or don't agree really with all the ideas or procedures. So really, it's not very certain to comment on that. No, it's like more than a rumor, but it's not a fact to comment on this type of idea.

No, super clear. Thank you very much, Paulo.

You're welcome, Yuri.

Next, we are from Carlos Gomez of HSBC.

Hello, good morning, and congratulations on a very strong result. I have two questions. The first one refers to your margin. I mean, this is the reason why your interest income is so high. You went from a NIM as reported by you from 19 to 28%. Is this just the result of interest rates going up, or is there something else, perhaps some timing differences or some particular instruments that killed the extraordinary gains? Is this a normal interest rate, interest income that you would receive for as long as interest rates stay at the current levels, or actually they're higher than they were when you had this? So essentially, how much of this interest income is your ordinary interest income, and how much could be special for some reason or another? And the second question, totally unrelated, is what's happening with Naranja? You have been almost at break-even for two quarters. Is there anything that is happening at the consumer subsidiary, and what can we expect for it going forward? Thank you.

Well, hi, Carlos. As you said, there was a margin expansion. I would say that the main reason are the and the government paper, there were very high, not only high interest rates and yields, there were also some sales of certain instruments at good prices. So if I had to, well, it's very volatile and we have to see if the interest rate keeps at this level of 119%, but actually, this new level was established after the close or actually in August. We are not seeing those numbers in the second quarter release we are discussing. So perhaps there could be some contraction, but 200 basic points or so, because we are in a very high due to the high inflation. In the case of Naranja, if you look at Naranja X, as it was called, when you look at the net operating income or operating income, you see a growth, actually the operating income has a 40% growth compared to the second quarter of the previous year. The thing is that the results from the monetary position have a big impact, and also they have a much higher income tax. They are very sensitive to high inflation, so the bottom line is subject to this impact on high inflation. from an operational standpoint is doing very well, growing not only with the traditional business of credit cards, but also with the newer business of taking deposits in order to have a cheaper funding and having more merchants and becoming a full digital company. Basically, from an operational standpoint, no problem, very sensitive to high inflation.

Okay. Okay. Going back to the margin, so again, you say that, I mean, as you said, the latest increase in interest rate, 218%, came after the end of the quarter. All else being equal, should we expect, therefore, your interest income and your margin to be higher in the third quarter than in the second quarter?

The thing is that we had some sales of some instruments with a gain. That's why I'm saying that perhaps we will see some kind of compression. Okay. Yes, taking out that with higher interest rates, typically we have higher margins. Although, as you can see, the breakdown of deposits have been changing, and each time we have a higher percentage of deposits with cost. If I have one year ago, perhaps if you look at deposits in pesos, They used to be 50% time deposits, 50% transactional accounts. Now it's closer to 75-25. 75 would cost. That's why you are seeing lower balances of checking accounts or saving accounts and growing balances of time deposits and other remunerated deposits.

Okay.

So final thing. So your interest income this quarter was $199,000. How much of that would be represented by these gains from the sales of instruments?

I would say 10 billion or so.

So that's not much.

Well, the thing is that there are many moving parts if you forecast next quarter financial income. For example, what I mentioned regarding the bonds tied to inflation, the government paper, the LECER or Bonser, the ones that are just by CPI, they have a lag of two months. So if inflation grows in the third quarter, despite us being hedged, We will get part of that in the fourth quarter. That's why it's not so direct, the impact.

Okay. All right. So, no, it's not a straightforward, but again, everything indicates, and even that inflation is still on the way up, that you might continue to have higher interest income in the third and in the fourth quarter. I'm trying to reconcile that with the fact that you are saying you may have a 15% ROE for the year. everything would seem to indicate that that's a very modest goal and that you may very well be at a higher level than that.

Well, depending on the assumptions you have on monthly inflation from now on, that's very sensitive. And again, if you have, let's say, a 10% monthly inflation in August, you will get the benefits of the CPI-adjusted bonds two months later. So with these big volumes or stocks of bonds tied to inflation, it has an important impact, this two-month delay.

Thank you so much.

You're welcome, Carlos.

And next we'll hear from Nicolas Riva of Bank of America.

Thanks, Pablo, for taking my question. I just have a follow-up on what you were discussing with Yuri, your net position in dollars. You mentioned, if I understood correctly, that you cannot be net long dollars in the spot market and only up to 5% of your equity in forward positions. Now, if I look at the disclosure you have on your FX position, there you mentioned the assets the liabilities in dollars and I do see a net long position of about at the official exchange rate so I'm seeing essentially 1.2 billion 1.2 billion dollars net long at the end of June and your position in forwards is very very small so I wanted to reconcile that with your comment saying that you cannot be net long in the spot market yes there is what I kind of mentioned in some other

question and answer that the dual bonds are classified as a dollar in that chart or in these numbers that you mentioned. And the same with levits. Levits are in our assets, both the dual bonds and the levits are in dollars in that position. but they are both not considered in dollars for the regulatory net position. So you will have to deduct almost exactly the same number, $1.2 billion are levied plus dual bonds at the official exchange rate of at the end of June, right? I don't know if I was, clear. Basically, you have to deduct these two amounts.

Okay. But I guess, Pablo... It's a kind of waiver of the central bank. Let's say that in the fourth quarter, you know, changing government and they lift all the restrictions in FX and the official FX jumps basically two times to the level of the blue effects. In that case, would you have big paper gains, like gains in your income statement because of that or not?

If we have, for example, the dual bonds, yes. If we have forward contracts, yes. For the rest, it should be neutral because we must have a zero position. And again, we have to see other type of things of not only our clients, but also if we have what percentage of our expenses are in dollars, our subordinated bond is $250 million, but there are many other byproducts of that. But again, I would like to say that in our opinion, if there is going to be an evaluation with the next government, it shouldn't be that high. The financial dollars today are too high. The blue chip swap, the blue dollar in the street. So most of the economies are saying that should be something in the middle or even lower than in the middle.

Okay. Thanks very much, Paulo.

You're welcome, Nicolas.

And it appears there are no further questions at this time. I'd like to turn the call back over to our presenter for any additional or closing comments.

Okay. Thank you all for attending this call. If you have any further questions, please do not hesitate to contact us. Good morning. Bye-bye.

That does conclude today's call. Thank you all for your participation. You may now disconnect.