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spk00: Good morning ladies and gentlemen and thank you for waiting. At this time, we would like to welcome everyone to BBVA Argentina's fourth quarter and fiscal year 2023 results conference call. We would like to inform you that this event is being recorded and all participants will be in listen-only mode during the company's presentation. After the company's prepared remarks are completed, there will be a question and answer section. At that time, further instructions will be given. Should any participant need assistance during this call, please press star zero to reach the operator. First of all, let me point out that some of the statements made during this conference call may be forward-looking statements within the meaning of the safe harbor provisions found in Section 27A of the Securities Act of 1933 under U.S. Federal Securities Law. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Additionally, information concerning these factors is contained in BBVA Argentina's annual report on Form 20F for the fiscal year 2022, filed with the U.S. Securities and Exchange Commission. Today with us, we have Ms. Carmen Morella Arroyo, CFO, Ms. Ines Lanuce, IRO, and Ms. Belen Forcada, Investor Relations. Ms. Forcada, you may begin your conference.
spk02: Good morning and welcome to BBA Argentina's Fourth Quarter and Fiscal Year 2023 Result Conference Call. Today's webinar will be supported by a slide presentation available on our investor relations website on the financial information section. Speaking during today's call will be Ines Lanusse, our investor relations officer, and Carmen Mauricio Arroyo, our chief financial officer, who will be available for the Q&A session. Please note that starting January 1st, 2020, as per central bank regulation, we have begun reporting results applying hyperinflation accounting pursuant to IFRS rule IAS 29. For ease of comparability, 2022 and 2023 figures have been restated to reflect the accumulated effect of inflation adjustment for each period through December 31st, 2023. Now, let me turn the call over to Ines.
spk01: Thank you, Belen, and thank you all for joining us today. 2023 ends with a new elected governing party, which has announced an adjustment plan to start correcting the strong macroeconomic distortions, which, among others, include a significant reduction of fiscal deficit and a depreciation of the local currency to ease FX restrictions. In a context where uncertainty remains high, BBDA research estimates an annual inflation near 175% by the end of 2024 and expect GDP to fall 4% this year as of the date of this report. It is expected that the most intense recession and inflationary acceleration should happen in the first semester, while expectations improve for the second part of the year. Inspite of its impact in the short term and high associated risks, these adjustments could state the basis for a sustained reduction in inflation and a recovery in a potential growth for the economy from the second half of 2024 onwards. Now, moving into business dynamics, as you can see on slide three of our webcast presentation, our service offering has evolved in such a way that by the end of December 2023, retail digital clients penetration reached 62%, while retail mobile clients reached 57%. The response on the side of the customers has been satisfactory and we are convinced this is a path to pursue in the aim of sustaining and expanding our competitive position in the financial system. Retail digital sales measured in units reached 93.2% in the fourth quarter of 2023, and represent 69.8% of the bank's total sales measured in monetary value. New customers acquisition through digital channels reach 75% in the fourth quarter of 2023, from 72% in the fourth quarter of 2022. The bank actively monitors its business, financial conditions and operating results in the aim of keeping a competitive position to face contextual challenges. Moving to slide four, I will now comment on the bank's fourth quarter 2023 and fiscal year 2023 financial results. BDA Argentina's inflation adjusted net income in the fourth quarter of 2023 was 48.6 billion pesos, 220.8% higher than the net income in the third quarter of 2023. This implied a quarterly ROE of 15.3% and a quarterly ROA of 3.2%. BBVA Argentina's inflation-adjusted net income for the 12 months of 2023 totaled 164.9 billion pesos, 8.6% lower than the 12 months in 2023. BBVA Argentina posted an inflation-adjusted ROA of 2.7%. and an inflation adjusted ROE of 13%. Operating income in the fourth quarter of 2023 was 477.9 billion pesos, 86.4% higher than in the third quarter of 2023. While in the year, the accumulated operating income reached 1.19 trillion pesos, 86.4% above the one recorded in 2022. Quarterly operating results are mainly explained by, one, better foreign exchange income, especially due to a greater position in dual national treasury bonds. Two, better net interest income results. Three, better net income from write-down of assets at a mortgage-sized cost and at fair value through OCI, mainly due to the sale of inflation-linked bonds. and for lower administrative expenses. Net income for the period was highly impacted by income from net monetary position as inflation in the third quarter of 2023 was lower than the fourth quarter of 2023, reaching 53.9% in the fourth quarter of 2023, compared to 34.8% in the third quarter of 2023. On an annual basis, the 86.4% increment in real terms of the bank's operating income is mainly explained by an increase in interest income, mostly due to an increase in the position and yield of central bank instruments and share bonds, as well as interest from loans. In 2023, what also stands out is the increase in the foreign exchange income due to the higher position in dollarized assets and net income from write-down of assets at fair value through OCI, mainly due to the sale of corporate bonds in the third quarter of 2023 and the exercise of a put option on inflation-linked bonds in the fourth quarter of 2023. Another factor to consider in the annual comparison is the income tax line. which represented only 1.2 million pesos lost in 2022, explained by the implication of fiscal inflation adjustment in the determination of payable taxes and tax deferrals. Last but not least, net income in 2023 is affected by income from net monetary position in a context of higher inflation, which reached 211.4% in 2023 versus 94.8% in 2022. Turning into the P&L lines in slide five, six, and seven, net interest income for the fourth quarter of 2023 was 495.7 million pesos, increasing 19.7% quarter over quarter. In the fourth quarter of 2023, interest income in monetary terms decreased more than interest expenses. mainly due to lower income from government securities. In the fourth quarter of 2023, the decrease in interest income is mainly driven by the fall in income from government securities, especially LEIC, which issuance was terminated by the central bank in December 2023, reducing its volume on year end. This was partially observed by better income from repo premiums and more income from inflation-linked bonds and loans. Interest expenses total 383.9 billion pesos, denoting a 20.9% decrease quarter over quarter. Quarterly decline is described by local time deposits and checking account expenses, in particular interest-bearing checking accounts. Interest from time deposits, including investment accounts, explained 71.2% of interest expenses versus 70.5% in the previous quarter. Net fee income as of the fourth quarter of 2023 totaled 35.6 billion pesos, increasing 36.9%. In the fourth quarter of 2023, the income totaled 70.7 billion pesos, increasing 18.8% quarter-over-quarter. The quarterly increase is mainly explained by a 41.9% growth in fee from credit cards due to lower expenses related to Punto de OEA loyalty program and higher activity, combined with an increase in prices. Regarding fee expenses, these total 35.2 billion pesos, increasing 4.7% quarter over quarter. Greater expenses are explained by fees paid in foreign exchange related to royalties affected by the devaluation of the local currency and payroll marketing campaigns. In the fourth quarter of 2023, loan loss allowances increased 74.9%. The increase is explained by the accounting re-expression of loan loss allowances in the foreign currency portfolio. During fourth quarter of 2023, total operating expenses were 211.7 million pesos, increasing 0.6% quarter over quarter, of which 32% were personal benefit costs. Personal benefits increased 2.6% quarter-over-quarter. The quarterly change is mainly explained by the inflation adjustment of vacation stock provisions and variable compensations. This adjustment is applied retroactively to the last 12 months. As of the fourth quarter of 2023, administrative expenses fell 29.5% quarter-over-quarter. These were explained by an increase in the amount of services contracted with the parent company, offset by the update of the provision of these expenses in land with the FX rate depreciation estimated at the quarter end. Being this said, the quarterly efficiency ratio as of the fourth quarter of 2023 was 46.4% improving compared to the 82.4% reported in the third quarter of 2023. The quarterly decrease is explained by a decrease in expenses and an increase in net income, especially due to an increase in results from income from foreign exchange, as well as income from write-down of assets at amortized costs and OCI. The accumulated efficiency ratio as of the fourth quarter of 2023 was 58.6%, improving compared to the 63.8% reported in the third quarter of 2023. The improvement in this ratio is due to a lower increase in expenses versus net income. This positive variation in the ratio is also due mainly to better income from write-down of assets and mortgages at cost and OCI and income from farm exchange. In terms of activity, on slide eight, private sector loans as of the fourth quarter of 2023 total two trillion pesos, decreasing 5.7% quarter over quarter and 12.3% year over year. Loans to the private sector in pesos fell 9% in the fourth quarter of 2023. During the quarter, the decrease was especially driven by a general decline in loans. The decrease was partially offset by a 1.6% increase in overdrafts driven by greater activity. Loans to the private sector denominated in foreign currency increased 41.1% quarter over quarter. Quarterly increase is mainly explained by a 54.7% growth in financial and pre-financing of exports. Loans to the private sector in foreign currency measured in U.S. dollars decreased 6.1% quarter over quarter. During the quarter, the retail portfolio fell 11.7% and the commercial portfolio increased 0.9%. As observed in the previous quarters, loans portfolio were impacted by the effect of inflation during the fourth quarter of 2023, which reached 53.3%. In nominal terms, BDA Argentina managed to increase the retail, commercial, and total loan portfolio by 35.3%, 54.7%, and 45.2% respectively, only surpassing quarterly inflation levels in the case of commercial loans. BVA Argentina's consolidated market share of private sector loans reached 9.85% as of the fourth quarter of 2023, improving from 9.10% a year ago. As of the fourth quarter of 2023, asset quality ratio keeps a very good performance at 1.29%, in line with the good behavior of both retail and commercial portfolios. The lower decrease of the total loan portfolio versus that of the non-performing portfolio is explained by a growth in commercial loans driven by a devaluation of the FX rate without significantly affecting clients' credit behavior. On the funding side, as seen on slide nine, private non-financial sector deposits in the fourth quarter of 2023 total 3.1 trillion pesos, decreasing 8.6% quarter over quarter. The bank's consolidated market share of private deposits reached 6.79% as of the fourth quarter of 2023. Private non-financial sector deposits in pesos decreased 26.1% compared to the third quarter of 2023. The quarterly change is mainly affected by a 40.9% decline in time deposits, a 37.1% fall in investment accounts, and a 22% fall in checking accounts. The later driven by the bank's strategy of reducing interest there in checking accounts. Private non-financial sector deposits in foreign currency expressed in pesos increased 63.4% quarter over quarter. This is mainly explained by seasonal factors. In terms of capitalization, BVA Argentina continues to show strong solvency indicators on the fourth quarter of 2023. Capital ratio reached 32.8%. Growth in the ratio was mainly driven by an increase in capital, mainly due to better OCI results in the fourth quarter of 2023. Exposure to the public sector in the fourth quarter of 2023, excluding central bank instruments, represented 15.9% of total assets, above the 12.7% in the third quarter of 2023, and below the 22.4% reported by the system as of December 2023. The bank's total liquidity ratio remained healthy at 91.2% of total deposits as of December 31, 2023. This concludes our prepared remarks. We will now take your questions. Operator, please open the line for questions.
spk00: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. Our first question comes from Walter Tiverzio with Santander. Please go ahead.
spk03: Hi. Good morning. Thank you for taking my question. I would like to understand what you are envisioning for the dynamic in the next 12 months are probably beyond that. Still, a large part of the profitability of the banks in Argentina comes from this position to the public sector, particularly treasury bonds now. But if the economic plan is successful, probably we will see lower inflation rates towards the second part of the year, and banks will start to shift their portfolio from the public sector to uh the private sector lending uh how do you envision that how do you think that uh what is your strategy what is the role of central bank with this put that you have to sell the bonds to the central bank in order to shift the portfolio uh to the private take the loans um what is the dynamic that you ambitious for the rest of the year thank you hi how are you doing
spk01: Okay, let me start by the first part of your question. I would highlight from the results we presented for 2023 that despite the scenario you have been describing, high inflation around 211 and still being high, although a little bit lower for 2024, we're projecting 175 inflation year-end. with what happened with the monetary policy rate that went up and then went down with the devaluation. And as you mentioned, with banks mainly acquiring bonds because of the lack of demand, BBVA in particular has been able to keep lending and increasing our market share. Our market share during 2023 increased 75 basic points, and that is something that I would like to highlight because we believe what the bank needs to do is, despite the context, keep lending. Going forward, we still see or we still project a contraction in real terms of the loan growth. For the system, we are projecting a 24% decrease in real terms. but the bank should be decreasing less, around 11%. So we still are aiming to keep increasing our market share and also, in parallel, increase our active players that, as you've seen in our presentation, have increased 10% from the figures of last year. So moving forward, we believe there are still a lot of moving parts to be able to define when this pick-up in lending will start, but the bank is committed to keep lending and increasing market share and start switching our positions in bonds and central bank instruments that we have in our assets by loans. That is the commitment and where we are aiming for the next years. But we need the macroeconomic scenario to start changing.
spk03: Okay, perfect. Thank you very much, Ines.
spk00: Again, if you have a question, please press star and then 1. This concludes our question and answer session. At this time, I would like to turn the floor back to Ms. Lanusa for any closing remarks.
spk01: Okay. Thank you very much for your time, and let us know if you have further questions. Have a good day.
spk00: Thank you. This concludes today's presentation. You may now disconnect your line at this time, and have a nice day.
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