Grupo Financiero Galicia S.A.

Good morning, ladies and gentlemen. Welcome to Grupo Financeiro Galicia's fourth quarter 2024 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 our attendees will only be listening to the conference during the presentation, and then 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 u s federal securities laws and subject to risks and uncertainties that could cause actual results to differ maturely 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. Pablo Firvida, Head of Investor Relations. You may begin your conference, sir.

Thank you. Good morning and welcome to this conference call. I'm here today with Gonzalo Fernandez-Cobaro, the newly appointed CFO of Grupo Financiero Galicia and former CFO of HSBC Argentina. I will make a short introduction and then we will take your questions. According to the Monthly Economic Activity Indicator, EMAE, Argentina's economy recorded a year-over-year growth of 5.5% in December compared to December 2023. Meanwhile, the expansion during the fourth quarter reached 1.3% in seasonally adjusted terms. Latest EMAE figures indicate Argentina's economy contracted by 1.8% on average during 2024. In the fourth quarter of 2024, the primary surplus stood at 0.14% of GDP, contrasting with a primary deficit of 1.49% in the fourth quarter of 2023. In 2024, the primary surplus to that 1.8% of GDP and the overall fiscal surplus was of 0.3% of GDP. This implied a significant improvement against the 2.9% primary deficit for 2023, result that was explained by a 206% increase in revenues year over year, while primary spending rose by 134%. The National Consumer Price Index recorded an 8% increase during the fourth quarter of 2024 and reached 117.8% annual variation in 2024, down from 211.4% inflation in 2023. Monthly inflation has been decelerating, declining from 25.5% in December 2023 to 2.2% in January 2025. The central bank devalued the exchange rate by 54.2% on December 13, 2023, after which a 2% monthly crawling peg was maintained throughout 2024. In December 2024, the exchange rate averaged 1,020.7 pesos per dollar, reflecting a 45.5% year-over-year devaluation. As of February 1, 2025, the central bank reduced the exchange rate crawl to 1% per month. Since the administration took office, the central bank has reduced the policy interest rate eight times, from 133% to its current 29%. In December 2024, the average rate on peso-denominated private sector time deposits for up to 59 days stood at 33%, 89 percentage points below the December 2023 average. Private sector deposits in pesos averaged 74.3 trillion pesos in December, increasing by 20.9% during the quarter and 127.3% in the last 12 months. Time deposits rose 27% during the quarter and 176.2% in the year. Peso denominated transactional deposits increased 15.2% during the fourth quarter and 93.3% in year-over-year terms. Private sector dollar denominated deposits amounted to $31.8 billion in December 2024, increasing 35.6% during the quarter and 119.7% in the last 12 months. Peso-denominated loans to the private sector averaged 50.6 trillion pesos in December, showing a 31% quarterly increase and a 228.8% year-over-year rise. Private sector dollar-denominated loans amounted to $9.9 billion, recording a 37.4% quarterly growth and a 186% annual increase. Before going to the figures for the fourth quarter and for the fiscal year of 2024, it is worth to mention that on December 6, the closing of the acquisition of HSBC operations in Argentina took place, consolidating Grupo Financiero Galicia's position as the largest private sector financial group in Argentina. As a result of this transaction, 724.5 billion pesos gain was recorded, which corresponds to the difference between the fair value of the acquired companies and the amount paid. This result, net of adjustments and provisions related to the transaction totaled 485 billion pesos. Turning now to Grupo Financiero Galicia, net income for 2024 amounted to 1.6 trillion pesos, 121% higher than in the previous year, which represented a 7% return on average assets and a 34% return on average shareholders' equities. The result was mainly due to profits from Banco Alicia for 1.3 trillion pesos, from Naranja X for 228 billion pesos, and from Galicia Asset Management for 68 billion pesos, partially offset by an 8.1 billion pesos loss from Galicia Seguros. Going to the fourth quarter, net income attributable to Grupo Financiero Galicia amounted to 574 billion pesos, 203% higher from the year-ago quarter, mainly due to profits from Banco Galicia for 527 billion pesos, from Naranja X for 23 billion pesos, from Galicia Asset Management for 19 billion pesos, and 3.9 billion pesos from Galicia Seguros. This profit represented a 7.9% annualized return on average assets and a 45% return on average a holder's equity. Going to Banco Valencia, net income for the quarter was 527 billion pesos, profit 311% higher than in the same quarter of 2023, as a 575 billion pesos gain was recorded due to the acquisition of HSBC operations in Argentina. At the bank level, provisions for restructuring for almost 100 billion pesos were recorded. The operating result decreased 83% from the year-ago quarter, primarily due to a 58% lower net operating income, as net interest income decreased 56%, and results from gold and foreign currency quotation differences went down 97%. Average interest earning assets reach 11.7 trillion pesos, 7% higher than in the same quarter of 2023, primarily due to a 542% increase of the average portfolio of dollar denominated loans and of 26% in loans in pesos, partially offset by a 78% reduction in the average balance of other interest earning assets in pesos. In the same period, its yield decreased 52 percentage points, reaching 39.95%. Interest-bearing liabilities increased 47% from December 2023, amounting to 11.9 trillion pesos, primarily due to the increase of deposits in dollars. During this period, its cost decreased 58 percentage points to 15.4%. Net interest income decreased 56% when compared to the fourth quarter of 2023. This was the result of a 63% decrease in interest income because of lower interest on government securities, on repo transactions, and on loans to the private sector, together with a 69% decrease in interest expenses, mainly due to lower interest on time deposits. Net fee income increased 10% from December 2023 due to increases in most of the products and services. Net income from financial instruments increased 234% due to higher results from government securities. Gains from gold and FX quotation differences were 97% lower from the year-ago quarter, including the results from foreign currency trading. Other operating income decreased 30% in the quarter, while provision for loan losses increased 80% because of the growth of the financing portfolio. Personal expenses were 20% higher than in the fourth quarter of 2023, primarily due to the recording of a 100 billion pesos provision for restructuring expenses. Administrative expenses increased 15% due to higher expenses for maintenance and repairment of goods and IT, which were up 33%, to a 34% growth of fees and compensation for services, and to a 13% increase of higher administrative services. Other operating expenses decreased 36% due to a 52% lower turnover tax related to financial operation. The bank's financing to the private sector reached 10.5 trillion pesos at the end of the quarter, up 76% in the last 12 months, with dollar-denominated financing growing 157% and peso financing increasing 56%. By credit line, promissory notes increased 119%, personal loans 159%, and credit card financing 31%. Net exposure to the public sector decreased 40% year-over-year due to the reduction of report transactions and of government securities in pesos. This exposure represented 22% of total assets as of the end of the quarter, compared to 41% of the year before. Deposits reached 14.3 trillion pesos, 18% higher than a year before, mainly due to a 66% increase in dollar deposits, partially offset by a 5% decrease in deposits in pesos. The bank's estimated market share of loans to the private sector was 12.8%, 189 basic points higher than at the end of a year ago quarter, and the market share of deposits from the private sector was 13.8%, 396 basic points higher than in the same quarter of 2023. The bank's liquid assets represented 63.6% of transactional deposits and 44.5% of total deposits, compared to 96.9% and 67.7% respectively from a year before. As regards asset quality, the ratio of non-performing loans to total financing ended the quarter at 1.85%, recording a 49 basic points improvement as compared to the 2.34% of the fourth quarter of the prior year. At the same time, the coverage with allowances reached 186.3%, up 44.6 percentage points from the 141.6% recorded a year ago. As of the end of December 2024, the bank's total regulatory capital ratio reached 18.5%, decreasing 626 basic points from the end of the same quarter of 2023, mainly due to the deduction of the equity participation in Galicia Mass. This ratio, consolidated in accordance with the rules established by the central bank, amounted to 21.6%. In summary, Grupo Financiero Galicia was able to keep asset quality, liquidity, solvency, and profitability metrics at very healthy levels. We are now ready to answer the questions that you may have. Thank you.

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