Grupo Financiero Galicia S.A.

Good morning, ladies and gentlemen. Welcome to Grupo Financiero Galicia First Quarter 2025 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 that all attendees will only be listening the conference during the presentation, and then we will start the question and answer 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 provisions of the U.S. federal securities laws and are subject to risks and uncertainty that could cause actual results to differ materially from those expressed. Investors should be aware of events related to the macroeconomic scenario, the financial industry, and other factors that could result to differ materially from those expressed in their respective forward-looking statements. Now, I will turn the conference over to Mr. Gonzalo Fernandez Covaro, CFO, and Mr. Pablo Firvida, Head of Investor Relations. You may begin your conference.

Thank you, Sofia. Good morning and welcome to this conference call. I'm Pablo Firvida, together with me is Gonzalo Fernandez-Cobar. According to the Monthly Indicator for Economic Activity, EMAE, the Argentine economy recorded a 5.6% year-over-year increase during March, while in year-to-date terms, the economic expansion reached 6.1%. During the first quarter of 2025, the primary surplus reached 0.5% of GDP and the overall surplus 0.2% of GDP. This implied a slight deterioration compared to the first quarter of 2024 when primary surplus was 0.7% of GDP. The National Consumer Price Index accumulated an 8.6% increase during the first quarter of 2025 and an 11.6% rise as of the end of April, reaching a 47.3% annual variation from April 2024. On the monetary front, the monetary base increased by 0.8 trillion pesos in the first quarter, recording a 145% increase as compared to March 2024. The exchange rate maintained a 2% monthly crawl throughout 2024, and the Argentine Central Bank slowed the pace of adjustment to 1% per month starting February 1, 2025. The exchange rate averaged 1,069 pesos per dollar in March 2025, a 20.5% devaluation in year-over-year terms. On April 11, 2025, the central bank implemented a foreign exchange regime with a ban within which the exchange rate may fluctuate freely. These bans were initially set between 1,000 and 1,400 pesos per dollar, and will be adjusted monthly at a rate of minus 1% for the lower bound and plus 1% for the upper bound. The monetary policy rate started 2025 at 22%, but was reduced in late January to 29% and remained at this level until nowadays. In March 2025, the average rate on peso-denominated private sector time deposits for up to 59 days stood at 29.5%, 55.9 percentage points below the March 2024 average. Private sector deposits in pesos averaged 80.6 trillion pesos in March, increasing by 8.5% during the quarter and 89.9% in the last 12 months. Time deposits in pesos rose 16.5% during the quarter and 125.9% in the year, and peso-denominated transactional deposits increased 0.6% during the quarter and 60% in year-over-year terms. Private sector dollar denominated deposits amounted to $29.7 billion in March 2025, decreasing 6.6% during the quarter and rising 78.3% in the last 12 months. Peso-denominated loans to the private sector averaged 60.8 trillion pesos in March, showing a 20.1% quarterly increase and a 228.1% year-over-year rise. And private sector dollar-denominated loans amounted to $14.1 billion, increasing 42.1% and 225.8% respectively. Turning now to Grupo Financiero Galicia, net income for the first quarter amounted to 146 billion pesos, 63% lower from the year-ago quarter. The result comes from profits from Naranja X for 64 billion pesos, from Banco Galicia for 37 billion pesos, from Galicia Asset Management for 29 billion pesos, and from Galicia Seguros for 11 billion pesos. This profit represented a 1.7% annualized return on average assets and an 8.8% return on average shareholders' equity. Going to Banco Galicia, the result of the quarter was negatively affected by the reduction in the prices of the trading bond portfolio and the increase in the cost of risk associated with the growth of the loan book and the increase in the NPLs in the retail segment. The net income for the quarter was 90% lower than in the same quarter of 2024 due to an 84% lower operating result. This was primarily a consequence of a 68% decrease of net operating income as net interest income decreased 66%, mainly because during the first quarter of 2024, the bond portfolio adjusted by inflation had remarkably high yields. Net results from financial instruments fell 65% due to the reduction in the bond portfolio, and results from foreign currency quotation differences decreased 80%. The above-mentioned decreases were partially offset by a 26% growth of net fee income. Average interest earning assets reach 14.9 trillion pesos, 45% higher than in the same quarter of 2024, primarily due to a 97% increase of the average portfolio of loans in pesos and of 702% of dollar denominated loans, partially offset by an 88% reduction in the average balance of other interest earning assets in pesos. In the same period, its yield decreased 95 percentage points, reaching 31.9%. Interest-bearing liabilities increased 67% from March 2024, amounting to 13.6 trillion pesos, primarily due to the increase of time deposits in pesos and of saving accounts and other deposits in foreign currencies. During this period, its cost decreased 41 percentage points to 13.9%. Net interest income decreased 66% when compared to the first quarter of 2024. This was the result of a 63% decrease in interest income because of an 80% lower interest on government securities and a 99% lower interest on repo transactions, together with a 58% decrease in interest expenses. due to a 46% lower interest rate on time deposits and an 80% interest rate on other deposits. Net fee income increased 26% from March 2024 due to a 26% higher income from credit card fees and off 34% from fees on deposits. Net income from financial instruments decreased 65% due to a 67% lower results from government securities. Gains from FX quotation differences were 80% lower than the year-ago quarter, including the results from foreign currency trading. Other operating income decreased 39% in the quarter, while provisions for loan losses increased 193% because of the growth of the financing portfolio and to an increase in delinquency. Personal expenses were 19% lower than a year before, and it is worth to mention that during this quarter we began to use the provision for restructuring expenses established in the fourth quarter of 2024. Administrative expenses increased 25% due to a 57% increase of higher administrative services and a 20% increase of expenses for maintenance and repairment of goods and IT, and 187% higher publicity, promotions, and research expenses. Other operating expenses decreased 49% due to a 52% lower turnover tax related to financial operations and 97% lower charges for other provisions. Results from the net monetary position decreased 79% year over year following the downward evolution of the inflation. The income tax charge was 65% lower than in the year-ago quarter due to lower operating results. Finally, the other comprehensive income included a 75.1 billion loss, mainly due to Treasury bills' blackouts. The bank's financing to the private sector reached 12.6 trillion pesos at the end of the quarter, up 107% in the last 12 months, with peso financing increasing 88% and dollar denominated financing growing 177%. While by credit line, promissory notes increased 171%, credit card financing 66% and personal loans 221%. Net exposure to the public sector decreased 35% year-over-year, primarily due to the reduction of repo transactions. This exposure represented 19% of total assets as of the end of the quarter, compared to 40% of the year before. Deposits reached 15 trillion pesos, 48% higher than a year before, mainly due to 121% increase in saving accounts in dollars and a 69% increase in time deposits in pesos, partially offset by a 16% decrease in other deposits in pesos. The bank's estimated market share of loans to private sector was 13%, 78 basic points higher than at the end of the year ago quarter, and the market share of deposits from the private sector was 14.2%, 400 basic points higher than in the same quarter of 2024. The bank's liquid assets represented 62.4% of transactional deposits and 39.3% 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 2.75%, recording a 66 basic points deterioration as compared to the 2.09% of the first quarter of the prior year. At the same time, the coverage with allowances reached 153.3%, up 4.9 percentage points from the 148.4% recorded a year ago. As of the end of March 2025, the bank's total regulatory capital ratio reached 21.1%, decreasing 10.7 percentage points from the end of the same quarter of 2024, while the Tier 1 ratio was 20.8%, down 12.5 percentage points during the same period. Consolidated with Galicia Mas, the total capital ratio would have been 25.3%. In summary, in a challenging political and macro environment, Grupo Financiero Galicia was able to keep asset quality, liquidity, solvency and profitability metrics at healthy levels and at the same time continue to move forward with the integration with Galicia Mass, which would be completed before the end of next June. We are now ready to answer the questions that you may have. Thank you.

We are going to start the question and answer section for investors and analysts. If you wish to ask a question, please click on raise hand. If your question has already been answered, you can leave the queue by clicking on put hand down. Our first question comes from Brian Flores with Citi.