Banco Macro S.A.

Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to Banco Macro's first quarter 2019 earnings conference call. We would like to inform you that the first quarter 2019 press release is available to download at the Investor Relations website of Banco Macro at www.ri-macro.com.ar. Also, this event is being recorded and all participants will be in listen-only mode during the company's presentations. After the company's remarks are completed, there will be a question and answer session. At that time, further instructions will be given. Should any participant need assistance during this call, please press star zero to signal the operator. It is now my pleasure to introduce our speakers today. Joining us from Argentina are Mr. Gustavo Manriquez, Chief Executive Officer, Mr. Jorge Scardinci, Chief Financial Officer, and Mr. Nicolas Torres, Investor Relations. Now I'd like to turn the conference over to Mr. Nicolas Torres, You may now begin your conference.

Good morning, and welcome to Bank of Macro's first quarter 19 conference call. Any comments we may make today may include forward-looking statements which are subject to various conditions, and these are outlined in our 20F, which was filed with the SEC, and it's available at our website. First quarter 19 press release was distributed yesterday, and it's also available at our website. I will now briefly comment on the bank's first quarter 19 financial results. Banco Macro's net income for the quarter was 7.3 billion pesos, 40% or 2.1 billion pesos higher than in first quarter 18, and 106% higher than the 3.5 billion pesos posted a year ago, based on an increased net interest income and net fee income. The bank's first quarter 19 ROE and ROA of 50% and 8.4% respectively remained healthy and showed the bank's earning potential. Net income for First quarter 2019 included a 1.9 billion pesos positive result related to the sale of the first 51% stake that macro had in Prisma and the market-to-market of the 49% remaining stake. Excluding Prisma's sale result, recurring ROE and ROA in the first quarter 2019 would have been 37.2% and 6.3% respectively. Net operating income For first quarter 2019, it was 19.1 billion pesos, increasing 18% or 2.9 billion pesos per quarter, and 78% or 8.5 billion pesos compared to the previous year. Operating income after general and administrative expenses was 10.5 billion pesos, 39% or 2.9 billion pesos higher than for quarter 2018, and 105% higher than a year ago. In the quarter, net interest income totaled 12.9 billion pesos, 5% or 643 million pesos higher than the result posted in 4Q18, and 63% or 5 billion pesos higher than the result posted one year ago. This performance can be traced to a 2% quarter-on-quarter increase in interest income and a 1% decrease in interest expenses. Within interest income, interest on loans increased 7% or 1.1 billion pesos quarter-on-quarter. On a yearly basis, interest on loans increased 59% or 5.4 billion pesos. In Q19, interest on loans represented 60% of total interest income. Net income from government and private securities increased 20% or 1.6 billion pesos quarter-on-quarter due to higher Linux volume and high interest rate. Compared to the first quarter of last year, net income from government and private securities increased 345% or 7.3 billion pesos. In 1Q19, differences in quoted prices of gold and foreign currency, including investment in derivative financing, totaled at 250 million pesos each. During the first quarter of 2019, the Bank of America's strategy was to sell U.S. dollars in the stock market and invest the resulting pesos in the leaks. while at the same time hedging the FX position with investment in the real estate. This strategy proved to be highly successful and profitable during the quarter. In the first quarter of 2019, interest expenses totaled $11.5 billion, 1% or $62 billion decreased compared to the first quarter of last year, and 238% or $8.1 billion higher on a yearly basis. Within interest expense, interest on deposits decreased 1% or 57 million pesos quarter on quarter, mainly driven by an increase in the average volume of time deposits and a decrease in the average time deposit interest rates. On a yearly basis, interest on deposits increased 252% or 7.6 billion pesos. In 2019, interest on deposits represented 92% of the bank financial expenses. Okay. In 2019, the bank's net interest margin, including effects, was 17.2%, higher than the 14.9% for Q18 and the 15.4% registered in 1Q18. In 2019, net fee income totaled 3.3 billion pesos, 2% higher than for Q18. On a year-end basis, net fee income increased 40% or 951 million pesos. In 2019, net income from financial assets and liabilities at fair value to profit or loss totaled 2 billion pesos, increasing 442% or 1.6 billion pesos compared with 4Q18. The positive result was driven by the market market of the remaining 49% stake that macro has in Prisma. In October, other operating income increased 2.5 billion pesos, Our income stands out with a 2.3 billion pesos increase compared to the fourth quarter of last year, related to the sale of the 51% stake that we had in Christmas. On a yearly basis, our operating income increased 423% for 2.5 billion pesos. In 2019, Bank of America's personal and admissible expenses totaled 5.2 billion pesos, unchanged from the previous quarter. Employee benefits were unchanged quarter over quarter, compared to the first quarter of Last year, general, administrative, and personal expenses increased 53%. As of March 2019, deficiencies ratio reached 28.6%, improving from the 39.7% posted in 4Q18 and 35.6% posted in 1Q18. This was the result of a 1% increase in expenses and a 28% increase in net interest income, net fee income, and other trading income as a whole from Q19. Banco Macro continues to be the most efficient bank in Argentina. If we exclude Christmas sale effects, the decision situation would have been 31.6% in first quarter 19. In first quarter 19, Banco Macro's expected income tax rate was 30.1% compared to 31% in first year 18. Its first period tax rate was cut in the latest tax reform bill, and as of January 2018, it stands at 30%. In terms of loan growth, the bank's financing for the private sector grew 1% quarter-on-quarter, 21% year-on-year. It is important to mention that Bank of America's market share over private sector loans as of March 2019 reached 7.7%. On the funding side, total deposits grew 15% quarter-on-quarter and 82% year-on-year. Private sector deposits grew 12% quarter-on-quarter and 80% compared to the first quarter of last year. private sector deposits increased 46% quarter-on-quarter and 104% year-on-year. As of March 2019, Bank of America's transactional accounts represented approximately 37% of total deposits. Bank of America's market share of private sector deposits, as of March 2019, totaled 6.9%. In terms of asset quality, Bank of America's nonconformance total financial ratio reached 2.03%, and the coverage ratio reached 119.23%. In terms of capitalization, Banco Macro accounted an excess capital of 52.1 billion pesos, which represented a total regulatory capital ratio of 27.7%, and a tier 1 ratio of 22.6%. In order to consider the upcoming cash dividend payment of 6.4 billion pesos, with the current integrated capital, The requirements of the capital ratio would be 25.3, and the tier one ratio would be 18.2%. The bank's aim is to make the best use of the sector's capital. The bank's liquidity remains more than appropriate. Liquid assets total deposit ratio reached 66%. Overall, we have accounted for another positive quarter. We continue to show a solid financial position. Assets still remain under control and closely monitored. We keep on working to improve our and we keep our work at a nice deposit base. At this time, we would like to take the questions you may have.

We will now begin the question and answer session. If you would like to ask a question, please press stars and one on your touch-tone phone. If you'd like to withdraw that question, please press stars and two. One moment, please, for the first question. And our first question comes from Gabriel Norbrega with Citi. Please go ahead.