Grupo Financiero Galicia S.A.

Hello, welcome to Grupo Financiero Galicia second quarter 2024 earnings release. My name is George. I'll be a coordinator for today's event. Please note that this conference is being recorded, and for the duration of the call, you're going to be in listen-only mode. However, you'll have the opportunity to ask questions towards the end of the presentation, and this can be done by pressing star 1 on your telephone keypad to answer your question. If your question is at any point, please press star zero and you will be connected to an operator. And I have the call with your host today, Mr. Pablo Filvita, Head of Investor Relations. Please go ahead, sir.

Thank you, George. 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, the Argentine economy recorded a 3.9% year-over-year contraction during June. In year-to-date terms, the economic downturn reached to 3.2%. During the second quarter, the primary surplus amounted to 0.5% of GDP, which compares to a 0.6% primary deficit in the second quarter of the previous year. This result was explained by a 257.6% year over year increase of revenues, whereas primary spending rose 165.2%. The financial surplus amounted to 0.2% during the second quarter. The National Consumer Price Index recorded a 79.8% increase during the first half of 2024 and kept its decreasing trend from monthly figures of 25.5% recorded in December 2023 to 4% in last July, accumulating 87% in the first seven months of 2024. The central bank devalued the exchange rate by 54.2% on December 13 last year, a 118.3% variation, after which the FX has maintained a 2% monthly crawling peg, which persists to this day. The exchange rate averaged 903.8 pesos per dollar in June, 2024, implying a 72.5% devaluation in year-over-year terms. The overnight repo rate remained the reference monetary policy interest rate during the second quarter of 2024, after having replaced the LELIC rate back in December 2023. So far this year, the monetary authority lowered the policy interest rate five times, from 133% to its current 40%. It is also worth mentioning that as of July 22nd, the Central Bank ceased overnight reverse RIP operations. The fiscal liquidity bills, or LEPIs, issued by the Treasury have been defined as the new liquidity regulation instrument. In June 2024, the average rate on peso-denominated private sector time deposits for up to 59 days stood at 33.4%, 59.5 percentage points below the average for June 2023. Currently, rates for time deposits stand at an average of around 38%. Private sector deposits in pesos averaged 52.7 trillion pesos in June, increasing 24.2% during the quarter and 141.3% in the last 12 months. Time deposits in pesos rose 23.3% during the quarter and 103.3% year over year, while peso-denominated transactional deposits increased 24.5% during the second quarter and 183.1% in year over year terms. Private sector dollar-denominated deposits averaged $17.7 billion in June increasing 6.5% during the quarter and 14.6% when compared to June, 2023. Peso denominated loans to private sector average 25.7 trillion pesos in June, increasing 38.6% in the quarter and 169.1% when compared to a year before. Private sector dollar denominated loans amounted to $6.4 billion recording a 47.7% expansion during the quarter and a 66.2% rise when compared to June 2023. Turning now to the results for the quarter, net income attributable to Grupo Financiero Galicia amounted to 409 billion pesos, 90% higher from the year-ago quarter, mainly due to profits from Banco Galicia for 296 billion pesos from Naranja X for 81 billion pesos, from Galicia Asset Management for 12 billion pesos, and from Galicia Seguros for 10 billion pesos. This profit represented a 9.7% annualized return on average assets and a 42.5% return on average shareholders' equity. Going to Banco Galicia, net income for the quarter was 54% higher than in the year-over-quarter, mainly due to a 34% increase of the operating income, partially offset by a 165% increase of the income tax. Net operating income increased 24%, primarily due to a 46% higher net interest income and a 72% higher net result from financial instruments. upset by a 69% decrease in the results from gold and foreign currency quotation differences. Average inter-selling assets reached 8.6 trillion pesos, 18% lower than in the same quarter of 2023, mainly due to a 42% decrease of the portfolio of governance securities in pesos and a 33% reduction in the average balance of loans in pesos. offset by 92% higher volume of other inter-selling assets in pesos. In the same period, its yield decreased 33 basis points, reaching 75.2%. Inter-varying liabilities decreased 29% from June 2023, amounting to 6.1 trillion pesos, mainly due to a 56% decrease in time deposits in pesos. During this period, its cost decreased 25.7 percentage points to 30.9%. Net interest income increased 46% from the second quarter of last year, although interest income fell 22% due to decreases of 31% of interest on government securities, 26% on loans and other financing, and 46% on promissory notes. This was more than offset by a 61% drop of interest expenses due to a 67% lower interest on time deposits. Net fee income decreased 6% from June 2023, mainly due to a 25% lower profit from fees on bundles of products and of 21% on deposit accounts, partially offset by a 78% increase of foreign trade fees. The income from financial instruments increased 72% due to a 414% higher result from government securities, offset by a 83% lower result from private sector securities. Gains from gold and effects quotation differences were 69% lower from the year-ago quarter, including the results from foreign currency trading. Other operating income decreased 23% in the quarter while provision for loan losses increased 49%. Personal expenses were 30% higher than in the second quarter of 2023 due to a 4% increase in staff, salary increase agreements with the union and an increase in provisions for personal compensations and rewards. Administrative expenses were 18% higher as a consequence of a 28% higher taxes and a 37% higher expenses for maintenance and repairment of goods and IT. Other operating expenses decreased 7% due to a 33% lower turnover tax and the income tax charge was 165% higher than in the second quarter of the previous year due to higher operating results. The bank's financing to the private sector reached 5.4 trillion pesos at the end of the quarter, down 7% in the last 12 months, with peso financing decreasing 20% and dollar denominated financing growing 103%. Net exposure to public sector decreased 15% year over year because of lower holding of LELICs, partially upset by an increase of securities adjusted by CER at amortized cost and of government securities in pesos at fair value through other comprehensive income. Excluding the exposure to the central bank, , net exposure represented 37% of total assets compared to 23% as of the end of the second quarter of 2023. Deposits reached 8.3 trillion pesos, 24% lower than a year before, mainly due to a 58% decrease on time deposits in pesos. The bank's estimated market share of loans to the private sector was 11.9%, 12 basis points higher than at the end of a year-end roll quarter. And the market share of deposits from the private sector was 10.5%, 57 basis points higher than in the same quarter of 2023. The bank's liquid assets represented 80.1% of transactional deposits and 55.7% of total deposits compared to 104.9% and 65.9% respectively from a year before. As regards asset quality, the ratio of non-performing loans to total financing ended the quarter at 1.98%, recording a 67 basic points improvement as compared to the 2.65% of the second quarter of the prior year. At the same time, the coverage with allowances reached 160.3%, down 48 basic points from the 160.8% reported a year ago. As of the end of June 2024, the bank's total regulatory capital ratio reached 28.8%, increasing 512% basic points from the end of the same quarter of 2023, while tier one ratio was 27.8%, up 600 basic points during the same period. In summary, in a challenging and volatile political and macro environment, Grupo Financiero Galicia was able to keep asset quality, liquidity, and solvency metrics at healthy levels and to improve the level of profitability. We are now ready to answer the questions that you may have. Thank you.

Thank you. Thank you very much, Mr. Fiorida. Ladies and gentlemen, once again, if you have any questions, please press star 1 on your telephone keypad. Please also ensure your mute function is not activated in order to let your signature equipment. So that's star 1 for questions. Our very first question today is coming from Ernesto Gabilondo of Bank of America. Please go ahead.