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 2Q19 earnings conference call. We would like to inform you that the 2Q19 press release is available to download at the Investor Relations website of Banco Macro. www.macro.com.ar Also, this event is being recorded and all participants will be in listen-only mode during the company's presentation. 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 then zero to signal the operator it is now my pleasure to introduce our speakers joining us from argentina are mr gustavo manriquez chief executive officer mr jorge scarinci chief financial officer and mr nicolas torres ir Now I will turn the conference over to Mr. Nicolás Torres. You may begin your conference.

Good morning and welcome to Banco Macro QQ19 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 to the SEC, and it's available at our website. QQ19 press release was distributed yesterday, and it's also available at our website. I will now briefly comment on the bank's second quarter 19 financial results. Bank of Macro's net income for the quarter was 7 billion pesos, 4%, or 312 million pesos lower than in 1Q19, and 124% higher than the 3.9 billion pesos posted a year ago, based on an increase in net interest income and net fee income. The bank's 2Q19 accumulated ROE and ROA of 47 and 7.7%, respectively, remained healthy and showed the bank's earning potential. Recurring net income in the quarter totaled 7.8 billion pesos, 37% or 2.1 billion pesos higher than in the previous quarter. Recurring net operating income before general and administrative and personal expenses for 2019 was 20.6 billion pesos, increasing 24% or 4.1 billion pesos quarter-on-quarter. Recurring operating income after general and administrative expenses was 11.1 billion pesos, 39% or 3.1 billion pesos higher than in the previous quarter. In the quarter, net inverse income totaled 16.8 billion pesos, 30% or 3.9 billion pesos higher than the result posted in 2019, and 85% or 7.7 billion pesos higher than the result posted one year ago. This performance can be traced to a 28% quarter-on-quarter increase in interest income and a 27% increase in interest expenses. Within interest income, interest on loans increased 1% quarter-on-quarter and 42% year-on-year. In 2019, interest on loans represented 47% of total interest income. Net income from government and private securities increased 57% of 4.4 billion pesos. quarter-on-quarter due to higher leaks volume and higher interest rates. Compared to QQ18, net income from government and private securities increased 376%, or 11.8 billion pesos. In QQ19, FX gains, including investment in the rigid financing, totaled a 321 million pesos gain. In QQ19, interest expenses totaled 14.6 billion pesos, 27% or 3.1 billion pesos higher than in 1Q19, and 222% or 10 billion pesos higher on a yearly basis. Within interest expenses, interest on deposits increased 28% or 3 million pesos quarter on quarter, mainly driven by an increase in the average volume of time deposits and an increase in the average time deposit interest rates. On a yearly basis, interest on deposits increased 250% or 9.7 billion pesos. In 2Q19, interest on deposits represented 93% of the bank's financial expenses. As of 2Q19, the bank's accumulated net interest margin, including the effects, was 17.6%, higher than the 17.2% posted in 1Q19 and the 14.4% registered in 2Q18. In 2Q19, net fee income totaled 3.4 billion pesos, 2% higher than 1Q19. On a yearly basis, net fee income increased 26% or 710 million pesos. In 2019, net income from financial assets and liabilities for value to profit or loss totaled 133 million pesos, decreasing 93% compared with the first quarter of this year. It should be noted that 1Q19 includes the marked market of the remaining stake that we have in Prisma. In the quarter, other operating income decreased 68% or 2.1 billion pesos. One Q19 included a positive result from the sale of the 51% stake in Prisma. On a yearly basis, other operating income increased 64% or 383 billion pesos. In Q19, Bank of America's personal and administrative expenses totaled 7.2 billion pesos, 38% or 2 billion pesos higher than in the previous quarter. employee benefits increased 57% from 1.8 billion quarter of a quarter. The main drivers for the increases were higher social security contribution and salary increases agreed with the union. Compared to Q18, general administrative and personal expenses were 101% higher. As of June 2019, the accumulated efficiency ratio reached 33.5%, improving from the 38.7% posted in Q18. In 2019, Banco Macro's effective income tax rate was 29% compared to 30.1% in 2019. In terms of loan wealth, the bank's financing to the private sector grew $705 million quarter-on-quarter and 16% year-on-year. It is important to mention that Banco Macro's market share over private sector loans as of June 2019 reached 7.7%. On the funding side, total deposits grew 4% quarter-on-quarter and 58% year-on-year. Private sector deposits grew 7% quarter-on-quarter and 63% compared to Q18, while public sector deposits decreased 16% quarter-on-quarter but increased 21% year-on-year. As of June 2019, Bancomat's transactional accounts represent approximately 42% of total deposits. Bancomat's market share over private deposits as of June 2019 increased total 7%. In terms of asset quality, Banco Macro's non-performance total financial ratio reached 2.12%, and the coverage ratio reached 116.14%. In terms of capitalization, Banco Macro accounted an excess capital of 51 billion pesos, which represented a total regulatory capital ratio of 26.3%, and a tier one ratio of 19.6%. The bank's aim is to make the best use of this excess capital. The bank's liquidity remains more than appropriate, with assets to total deposit ratio with 66.4%. Overall, we have accounted for another positive quarter. We continue showing a solid financial position. Asset quality remains under control and closely monitored. We keep on working to improve more our efficiency standards, and we keep a well-atomized deposit base. At this time, we would like to take the questions you may have.

At this time, we're going to open it up for question and answers. If you would like to ask a question, please press star one on your touchtone phone. If you were using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question will come from Gabriel Nobrega of Citibank.