Banco BBVA Argentina S.A. ADS

Good morning everyone and welcome to BBVA Argentina's first quarter 2025 results conference call. Today with us are Mr. Diego Cesarini, Head of ALM and Investor Relations, Mrs. Belen Forcade, Investor Relations Manager and Mrs. Carmen Murillo Arroyo, CFO, who will be available for the Q&A session. This presentation and the first quarter 2025 earnings release are available on BBVA's Investor Relations website, ir.bbva.com.ar, and will also be available for download in the chat. 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 security 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. Additional information concerning these factors is contained in BBVA Argentina's annual report on Form 20-F for the fiscal year 2024, filed with the U.S. Securities and Exchange Commission. During the company's presentation, all microphones will be disabled. At that time, we are going to open it up for questions and answers. If you have a question, please write it down in the Q&A section or click on Raise Hand for audio questions. You will then receive a request to activate your microphone. Please activate it and pick up your headset to provide optimum sound quality when posing your question. I will now turn the call over to Mrs. Belen Forquet. Please, go ahead.

Good morning and thank you all for joining us today. The notable fiscal consolidation, monetary stringency and relative exchange rate stability have contributed to a moderation process of inflation throughout 2024, which has continued at the beginning of 2025. Likewise, there are increasing signs of recovery in economic activity, which after falling 1.7% in 2024, would expand by around 5.5% in 2025, according to BBA research. The prospects for inflation reduction have strengthened, and the forecast is that it will converge to around 35% by the end of 2025. Recently, we, in the framework of a new agreement with the International Monetary Fund, the lifting of a large part of the exchange controls and implementation of a floating exchange rate scheme with wide banks were announced, which could contribute to the macroeconomic normalization process. Regarding the external environment, although the direct impact of US tariffs could be relatively limited, the economy could be affected by a less favorable global context. Before moving on to this quarter's business dynamics and results, I would like to comment on the new global strategy of the BBA Group for the 2025-2029 cycle. This has been launched arising from an institutional reflection after the closing of the 2020-2024 strategic plan, which was successful in terms of growth and profitability. This redesign responds to a new global context characterized by macroeconomic stabilization, geopolitical transformation, and population aging, which poses challenges and opportunities in credit and deposit management. In this context, the strategic priorities for 2025-2029 are focused on three main pillars. One, a radical customer-centric perspective. Two, value and capital generation and growth in a changing environment. And three, leveraging accelerators such as artificial intelligence for efficient data processing. These priorities are articulated with an evolution in cultural values towards behaviors with greater empathy and demand and a renewed purpose. Support your desire to go further, which reinforces the active role of the customer as a central character of flow. Now moving on to business dynamics, as you can see on slide four of our webcast presentation, our service offering has evolved in such a way that by the end of March, 2025, new customer acquisition through digital channels reached 86% versus 81% a year ago. Retail digital sales measured in units reached 93% in the first quarter of 2025 and represent 86% of the bank's total sales measured in monetary value. Digitalization, which was previously a competitive advantage, has now become a market standard, while new unregulated players and disruptive technologies such as artificial intelligence demand a redefinition of the differential value of the company's proposition. Moving on to slide five and six, I will now comment on the bank's first quarter 2025 financial results. BV Argentina's inflation adjusted net income in the first quarter of 2025 was 81.6 billion pesos, increasing 16.2% quarter over quarter. This implied a quarterly ROE of 11.5% and a quarterly ROE of 2%. The 56.9% increase in quarterly operating results was explained by higher income and lower operating expenses. Higher income was mainly due to, one, a substantial improvement in income from fees, and two, better net interest income. On the side of expenses, there was an improvement in all expenses lines, in particular benefits to personal and other operating incomes. It should be noted that the income tax line in the first quarter of 2024 reflects a positive result derived from a change in accounting exposure that implied a reclassification of the income tax calculation from other comprehensive income to the income statement. Net income from the net monetary position was 10.7% lower quarter over quarter, thanks to a lower net monetary position, which offset the increase in quarter inflation, which was 8.57% versus 8.03% in the fourth quarter of 2024. Turning into a P&L lines in slide six, net interest income was 541.3 billion pesos, increasing 3.3% quarter over quarter. In the first quarter of 2025, net interest income decreased less than interest in expenses in monetary terms. The former decreased due to lower income from public securities, especially CPI-linked bonds. Expenses decreased due to lower 10 deposit expenses, mainly due to lower rates and interest bearing checking accounts expenses as the rates of this product have also declined. Interest from time deposits explain 74.4% of interest expenses versus 67.9% the previous quarter. Net income as of the first quarter of 2025 totaled 99.8 billion pesos, increasing 48.3% quarter over quarter. Free income totaled 180.1 billion pesos, increasing 20.7% quarter over quarter. Higher income is mainly explained by credit card fees, considering a revision of provisions linked to the MISA's BBVA loyalty program. It is important to note the increase in fees linked to loans, fees from insurance, and fees linked to loan commitments, the latter related to income from structuring of syndicated loans. On the side of expenses, these total 80.8 billion pesos, decreasing 1.9% quarter over quarter. This is mainly explained by lower expenses on payroll promotion campaigns, followed by lower expenses from foreign trade transactions. In the first quarter of 2025, loan loss allowances increased 4.9%, explained by the real growth of the loan book in the quarter, which implied higher provisioning. During the first quarter of 2025, total operating expenses were 423.8 billion pesos, decreasing 13.8% quarter over quarter, of which 29% were personal benefit costs. Personal benefits decreased 23% quarter over quarter. In spite of wages increasing in line with inflation, the fourth quarter of 2024 was highly impacted by severance expenses and the adjustment of provisions recorded for stock of vacation days and variable remuneration, which were not present in the first quarter of 2025, reducing overall expenses. Administrative expenses decreased 4.3% quarter over quarter. This is mainly explained by one, taxes, two, software, and three, rent. Rent and software are related to expenses of software licenses and services contracted with the parent company. In the case of taxes, the fault is mainly explained by an accounting reclassification of taxes linked to the health and safety which as of this quarter are now recorded in the turnover tax line in other operating expenses pursuant to the nature of expense. The accumulated efficiency ratio as of the first quarter of 2025 was 56.3%, below the 62.2% reported in the fourth quarter of 2024, and the 65.4% reported in the first quarter of 2024. The decrease in this ratio is due to a decrease in expenses and an increase in income, especially fee income and lower result from the net monetary position. Private loans as of the first quarter of 2025 totaled 9.2 trillion pesos, increasing 11.2% quarter over quarter. Loans to the private sector in pesos increased 8.3% in the first quarter of 2025. During the quarter, growth is observed in most lines, but was specially driven by one, a 22.9% increase in consumer loans, followed by two, an 18.4% increase in overdrafts, and three, a 16.2% increase in other loans. A 23.1% growth in mortgages is to be noted considering the continuous progress in this product, which was relaunched by mid-2024. In all cases, the increment is boosted by genuine growth in real terms of the portfolio, levered on relative stability of market interest rates. Loans to the private sector denominated in foreign currency increased 25.4% quarter over quarter. Quarterly increase is mainly explained by a 21.4% growth in financing and pre-financing of exports and a 53.7% growth in other loans. The latter linked to financing of investment projects. During the quarter, the commercial portfolio grew 12.5% and the retail portfolio increased 9.5%. The commercial portfolio represents 57.1% of the total portfolio from 52.5% a year ago. In nominal terms, BBA Argentina managed to increase the retail, commercial and total loan portfolio by 19, 22 and 23% respectively during the quarter, surpassing quarterly inflation levels in all cases. As of the first quarter of 2025, the total gross loans and other financing over deposit ratio was 84.7%, above the 77.5% recorded in the first quarter of 2024, and above the 55.9% in the first quarter of 2024. Participation of total loans over assets is 56% versus 51% in the fourth quarter of 2024 and 32% in the fourth quarter of 2024, evidencing a lower exposure to the public sector in line with the real growth of credit demand. BABA Argentina's consolidated market share of private sector loans reached 11.28% as of the first quarter of 2025, improving from 10.10% a year ago and sustaining the two-digit figure. As of the first quarter of 2025, asset quality ratio keeps a good performance at 1.38%, increasing quarter over quarter, mainly due to seasonal errors in credit cards. Commercial MPLs remain with a very good behavior. On the funding side, as of the first quarter of 2025, total deposits reached 11 trillion pesos, increasing 1.8% quarter over quarter. The bank's consolidated market share of private deposits as of the first quarter of 2025 reached 9.15% compared to 7.37% a year ago. Private non-financial sector deposits in pesos totaled 7.4 trillion pesos, increasing 7.8% compared to the fourth quarter of 2024. The quarterly change is mainly affected by a 163.1% increase in investment accounts and a 2.5% increase in checking accounts, mainly explained by higher funding. Private non-financial sector deposits in foreign currency expressed in pesos increased 0.8% quarter over quarter. This is mainly explained by a 20.9% increase in time deposits, partially offset by an 0.4% fall in saving accounts. BV Argentina continues to show strong solvency indicators on the first quarter of 2025. Capital ratio reached 21.5%. Capital excess over regulatory requirement was 1.5 trillion pesos, or 161.3%. In spite of the genuine growth in the loan book, which generated greater requirements, this effect was largely offset by a central bank regulation, which changed operational risk requirements, now aligned to Basel IV regulations. These requirements fell considerably by 94.4%, improving the capital ratio by 202 basis points. The first quarter and 2025 total public sector exposure, excluding central bank, totaled 2.8 trillion pesos, decreasing 2.9% quarter over quarter. The annual increase is mainly explained by a greater increment of public exposure to the treasury in detriment of central bank risk exposure. Exposure to the public sector, excluding central bank exposure, represents 17.1% of total assets, below the 17.9% in the fourth quarter of 2024, in line with real loan growth demand. In the quarter, liquid assets were 5.4 trillion pesos, decreasing 13.3% quarter over quarter. This was mainly driven by a 20.1% decline in cash and deposits in banks and a 12.5% fall in public securities. As of the date of this report, the bank has announced the payment of dividends in cash or in kind. The total amount to be paid will be 89.4 billion pesos expressed in homogeneous currency as of December 31st, 2024. And according to central bank regulations, it must be updated by inflation on the payment date. This concludes our prepared remarks. We will now take your questions. Operator, please open the line for questions.

Thank you. We are going to open it up for questions and answers. If you have a question, please click on raise hand for audio questions. You will then receive a request to activate your microphone. Please activate it and pick up your headset to provide optimum sound quality when posing your question. Our first question comes from Brian Flores with City.