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 4Q21 earnings conference call. We would like to inform you that the 4Q21 press release is available to download at the Investor Relations website of Banco Macro, www.macro.com, AR, forward slash, Relaciones, hyphen, Inversal Race, forward slash. Also, this event is being recorded and all participants will be enabled to know me 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 Enriquez, Chief Executive Officer, Mr. Jorge Scarinzi, Chief Financial Officer, and Mr. Nicholas Torres, IR. Now, I will turn the conference over to Mr. Nicholas Torres. You may begin your conference.

Thank you, Chad. Good morning, and welcome to Banco Macro for 2021 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. Fourth quarter 2021 press release was distributed yesterday and is available on our website. All figures are in Argentine pesos and have been restated in terms of the measuring unit current at the end of the reporting period. As of the first quarter of 2020, the bank began reporting results applying hyperinflation accounting in accordance with IFRS IAS 29, as established by the Central Bank of Argentina. For ease of comparison, figures of previous quarters have been restated applying IAS 29 to reflect the accumulated effect of the inflation adjustment for each period through December 31st, 2021. I will now briefly comment on the bank's fourth quarter 2021 financial results. Bank of America's net income for the quarter was 10.5 billion pesos, 30% higher than the third quarter of 2021 and 120% higher than the results posted a year ago. The bank's fourth quarter 2021 accumulated ROE and ROA of 12.2% and 2.8% respectively remain healthy and show the bank's earnings potential. In fiscal year 2021, total comprehensive income total 27.1 billion pesos, 26% lower than the result posted in fiscal year 2020. Net operating income before general administrative and personal expenses in the fourth quarter of 2021 was 49.7 billion pesos, increasing 4% or 2.1 billion pesos quarter on quarter due to higher net interest income and higher effects gains which were partially offset by higher loan loss provisions. On a yearly basis, net operating income before general administrative and personal expenses increased 5% or 2.4 billion pesos. In fiscal year 2021, net operating income before general administrative and personal expenses totaled 194.5 billion pesos, 3% lower than the previous year. In the fourth quarter of 2021, provision for loan losses for 2 billion pesos, 1.7 billion pesos higher than in the previous quarter. The bank decided to increase loan loss provisions given the uncertainty and probably adverse macroeconomic scenario arising from a non-agreement with the IMF regarding the restructuring of Argentina's debt. On a yearly basis, provision for loan losses decreased 40% for 1.3 billion pesos. Operating income after general and administrative expenses was 32.2%. 4 billion pesos, 1% or 167 million pesos lower than in the third quarter of 2021, and 2% or 511 million pesos higher than the fourth quarter of 2020. In the quarter, net interest income totaled 35.7 billion pesos, 9% or 2.9 billion pesos higher than the result posted in the third quarter of 2021, and 9% or 2.8 billion pesos higher than the result posted one year ago. In fiscal year 2021, net interest income was 10% lower than fiscal year 2020 as a result of different regulations adopted by the central bank to affect caps on lending rates and floors on deposit plans. In the fourth quarter of 2021, interest income totaled 56.9 billion pesos, 3% of 1.9 billion pesos higher than in third quarter of 2021, due to higher income from government securities and 9% of 5.9 billion pesos lower than the previous year. Within interest income, interest on loans increased 8% or 2.1 billion pesos quarter on quarter due to a 5% increase in the average volume of private sector loans and 93 basis points increase in the average lending rate. On a yearly basis, income from interest on loans was practically unchanged with a 17 million pesos decrease. In the fourth quarter of 2021, interest on loans represented 52% of total interest income. In fiscal year 2021, interest on loans totaled 114.8 billion pesos and decreased 11% compared to fiscal year 2020. Net income from government and private securities increased 2% of 520 million pesos quarter on quarter due to higher income from government securities. Compared to the fourth quarter of 2020, net income from government and private securities decreased 13% of 3.8 billion pesos. In the fourth quarter of 2021, FX gains, including investments in direct financing, total a 1.6 billion pesos gain due to the 4% Argentine peso depreciation against the US dollar and the bank's long spot position. In the fourth quarter of 2021, interest expense totaled 20.3 billion pesos, a 4% or 1 billion pesos increase compared to the third quarter of 2021, and 29% or 8.7 billion pesos higher on a yearly basis. Within interest expenses, interest on deposits decreased 4% or 894 million pesos one quarter, mainly driven by a 3% decrease in the average volume of private sector deposits, while the average interest rate paid on deposits was unchanged. On a yearly basis, interest on deposits increased 28% or 8 billion pesos. In the fourth quarter of 2021, interest on deposits represented 96% of the bank's financial expenses. fiscal year 2021 interest expense increased three percent compared with fiscal year 2020. in the fourth quarter of 2021 the bank's net interest margin including the tax was 21.2 percent higher than the 19.1 posted in the third quarter of 2021 and then the 16.3 percent registered in the fourth quarter of 2020. in the fourth quarter of 2021 net fee income total 8.8 billion pesos, 2% or 136 million pesos higher than third quarter of 2021. On a yearly basis, net fee income increased 3% or 217 million pesos. In fiscal year 2021, net fee income was 2% lower than the previous year. In the fourth quarter of 2021, net income from financial assets and liabilities at fair value department are lost, total of 3.5 billion pesos gain. 7% or $268 million lower than the previous quarter. On a yearly basis, net income from financial assets and liabilities at fair value and profit or loss decreased 29% or 1.4 billion pesos. In fiscal year 2021, net income from financial assets and liabilities at fair value and profit or loss was 18% higher than the fiscal year 2020, mainly due to higher income from government securities. In the quarter, other operating income totaled 2 billion pesos, increasing 2% compared to the third quarter of 2021. On a yearly basis, other operating income decreased 6% or 116 million pesos. In the fourth quarter of 2021, bank matters personal and administrative expenses totaled 15.6 billion pesos, 5% or 727 million pesos higher than the previous quarter due to higher administrative expenses. On a yearly basis, personal and administrative expenses decreased 4% for 608 million pesos. In fiscal year 2021, administrative expenses plus employee benefits decreased 4% compared to fiscal year 2020, showing the strict cost of policies adopted by the bank's senior management. As of the fourth quarter of 2021, the efficiency ratio reached 37.5%, improving from the 37.6% posted in the third quarter of 2021. Expenses decreased 3% when net interest income plus net fee income plus other operating income decreased 8%. In the fourth quarter of 2021, the results from the net monetary position totaled a 15.2 billion pesos loss, 7% or 1.1 billion pesos higher than the loss in the third quarter of 2021, as a consequence of higher inflation observed in the quarter, which was 93 basis points above the third quarter level as inflation was 10.21% in the fourth quarter up from 9.28 in the third quarter of 2021. In fiscal year 2021, Franco-Macro's expected tax rate was 5.8%, lower than the 33.1% tax rate registered during fiscal year 2020. It should be noted that in fiscal year 2021, the expected tax rate was affected by the implications of inflation adjustment and accruing and tax balances and the determination of the income tax deal and deferred income tax. Further information is provided in Note 23 to our financial statements. In terms of loan growth, the banks financing to the private sector totaled $349 billion, increasing 4% or $11.9 billion per quarter, and decreasing 8% or $32.1 billion year-on-year. Within commercial loans, Overdraft stand out with an 8% or 1.8 billion pesos increase quarter on quarter mostly due to loans extended to SMEs. On the consumer side, mortgages increased 13% or 2.6 million pesos while credit card loans increased 9% or 8 billion pesos in the quarter. In fiscal year 2021, pledge loans stand out with a 49% increase while other loans decreased 41% as loans extended to SMEs as part of the COVID-19 relief package started to become due. It is important to mention that Banco Madras market share over private sector loans as of December 2021 reached 6.9%. On the funding side, total deposits decreased 1% or 8.7 billion pesos quarter on quarter and decreased 20% or 148.9 billion pesos year on year. Private sector deposits decreased 1% quarter on quarter while private sector deposits decreased 5% in the quarter. The increase in private sector deposits was led by 10 deposits, which decreased 8% or 19.8 billion pesos quarter-in-quarter, while given deposits increased 5% or 14.6 billion pesos. Within private sector deposits, personal deposits increased 1% or 5.6 billion pesos, while U.S. dollar deposits decreased 16% or 182 million dollars. As of December 2021, Banco Macro's transactional accounts represented approximately 55% of total deposits, Bank of America's market share over five sectors as of December 2021 totaled 5.4%. In terms of asset quality, Bank of America's non-performing total financial ratio reached 1.3%. The current ratio measured as total allowances under expected credit losses over non-performing loans under central bank rules improved significantly and totaled 209.61%. Consumer portfolio non-performing loans improved 65 basis points down to 1.4% from 2.5% in the previous quarter, while commercial non-performing loans deteriorated 43 basis points in the fourth quarter of 2021, up to 0.99% from 0.57 in the previous quarter. The improvement in commercial non-performing loans can be traced to the sale of part of the consumer loan portfolio. In terms of capitalization, Banco Macro counted an excess capital of 197.8 billion pesos which represented a total regulatory capital ratio of 36.1% and a tier one ratio of 30.9%. The bank's aim is to make the best use of this sector's capital. The bank's liquidity remained more than appropriate. Liquid assets stolen ratio reached 19%. Overall, we have accounted for another positive quarter. We continue showing a solid financial position. Asset quality remained under control and closely monitored. We keep on working to improve for our efficiency standards and we keep a well-atomized deposit base. At this time, we would like to take the questions you may have.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star then 1 on your telephone keypad. One moment, please, for our first question. And the first question will come from Ernesto Gaviondo with Bank of America. Please go ahead.