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 third quarter 2019 earnings conference call. We would like to inform you that the 3Q19 press release is available to download at the Investor Relations website of Banco Macro. www.macro.com.ar slash Relaciones Investories. 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 zero to signal the operator. It is now my pleasure to introduce our speakers. Joining us from Argentina are Mr. Gustavo Monriquez, Chief Executive Officer, Mr. George Scorsini, Chief Financial Officer, and Mr. Nicholas Torres, IR. Now I will turn the conference over to Mr. Nicholas Torres. You may begin your conference.

Good morning and welcome to Banco Macro's third quarter and team conference call. Any comment 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 is available at our website. The 3.19 press release was distributed last Friday, and it's also available at our website. I will now briefly comment on the bank's 3.19 financial results. Banco Macro's net income for the quarter was 13.2 billion pesos, 87% or 6.2 billion pesos higher than in QQ19, and 243% higher than the 3.8 billion pesos posted a year ago, based on an increase in net interest income and in net fee income. The bank's 3Q19 accumulated ROE and ROA of 57.3% and 9.4% respectively remained healthy and showed the bank's earning potential. Recurring net income in the quarter totaled 15.5 billion pesos, 99% or 7.7 billion pesos higher than in the previous quarter. Recurring net operating income before general and personal expenses for Q3 2019 was 26.2 billion pesos, increasing 27% or 5.6 billion pesos quarter-on-quarter and 103% higher than a year ago. The current operating income after general administrative expenses and personal expenses was 14.3 billion pesos, 28% or 3.2 billion pesos higher than in QQ 2019 and 160% higher than in QQ 2018. In the quarter, Net interest income totaled 20.1 billion pesos, 19% or 3.3 billion pesos higher than the result posted in QQ19, and 94% or 9.7 billion pesos higher than the result posted one year ago. This performance comes with trace to a 14% quarter-on-quarter increase in interest income and a 7% increase in interest expenses. Within interest income, interest on loans increased 9% quarter-on-quarter and 30% year-on-year. In 3Q19, interest on loans represent 45% of total interest income. Net income from government and private securities increased 27%, or 4.1 billion pesos, quarter on quarter, due to higher Linux volume and higher interest rates. Compared to 3Q18, net income from government and private securities increased 334%, or 14.6 billion pesos. In 3Q19, FX gains, including investment in active financing, total 2.2 billion pesos gain. In 3Q19, interest expenses total 15.5 billion pesos, 7% or 1 billion pesos increase compared to 2Q19, and 139% or 9 billion pesos higher on a yearly basis. Within interest expenses, interest on deposits increase 5% or 640% 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 149% or 8.5 billion pesos. In 3Q19, interest on deposits represented 91% of the bank's financial expenses. As of 3Q19, the bank's accumulated net interest margin, including the FX, was 19.1%. higher than the 17.6% posted in QQ19 and the 14% registered in 3Q18. In 3Q19, net fee income totaled 3.8 billion pesos, 11% higher than in QQ19. On a yearly basis, net fee income increased 31% or 885 million pesos. In 3Q19, net income from financial assets and liabilities at fair value and profit or loss totaled 659 million pesos, increasing 395% or 526 million pesos compared to 2Q19. In the quarter, other operating income totaled 1.1 billion pesos, increasing 9% compared to 2Q19. On a yearly basis, other operating income decreased 11% or 131 million pesos. In 3Q19, Banco Macro's personal administrative expenses totaled 7.3 billion pesos, 2% or 114 million pesos higher than the previous quarter. Employee benefits decreased 10% or 500 million quarter-on-quarter. As of September 2019, the accumulated efficiency ratio reached 32.5%, improving from the 33.5% posted in QQ19 and the 37.6% registered a year ago. In QQ19, Banco Macro's income tax resulted in a 1.3 billion pesos gain during this quarter and in accordance with applicable income tax law and regulations and the evolution of consumer price index, the banks decided to adjust income tax by inflation. In terms of loan growth, the banks financing to the private sector grew 10%, or 18.1 billion pesos quarter-on-quarter, and 15%, or 24.5 billion pesos year-on-year. It is important to mention that Banco Madras market share over private sector loans as of September 2019 reached 7.7%. On the funding side, total deposits decreased 9% or 25.1 billion pesos quarter-on-quarter and increased 22% or 46.6 billion pesos year-on-year. Private sector deposits decreased 8% quarter-on-quarter, while public sector deposits decreased 13% quarter-on-quarter. The decrease in private sector deposits was led by CAM deposits, which decreased 19% or 28.4 billion pesos quarter-on-quarter. while demand deposits increased 4% or 4.4 billion pesos. Within private sector deposits, peso-denominated deposits decreased 6% or 9.8 billion pesos, while U.S. dollar deposits decreased 36% or 765 million. It is important to mention that this strategy of reducing the bank's daily exposure and peso deposit base was decided proactively in order to reallocate the excess liquidity in loans and other financial instruments. As of September 2019, Banco Macro's transactional accounts represented approximately 47% of total deposits. Banco Macro's market share over private sector deposits totaled 6.5% as of September 2019. In terms of asset quality, Banco Macro's non-performing to total financial ratio reached 1.9%. The coverage ratio reached 124.16%. In terms of capitalization, Banco Macro accounted an excess capital of 60.1 billion pesos, which represented a total recovery capital ratio of 26.5% and a Tier 1 ratio of 18.9%. The bank's aim is to make the best use of this excess capital. The bank's liquidity remained more than appropriate, making assets' total deposit ratio reach 61%. Overall, we have accounted for another positive quarter We continue to show 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 questions and answers. If you would like to ask a question, please press star then 1 on your touch-tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. One moment please for the first question. The first question comes from Gabrielle Nobregra with Citibank. Please go ahead.