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 fourth quarter 2022 earnings conference call. We would like to inform you that the 4Q22 press release is available to download at the Investor Relations website of Banco Macro, www.macro.com.ar slash Relaciones Inverseos. 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 Manriquez, Chief Executive Officer, Mr. Jorge Scurence, 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, Gary. Good morning, and welcome to Banco Macro's fourth quarter 2022 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 it's available at our website. Fourth quarter 2022 press release was distributed yesterday, and it's available at 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, 2022. I will now briefly comment on the bank's fourth quarter 2022 financial results. Banco Macros net income for the quarter was 16.6 billion pesos, 59% higher than the third quarter of 2022 and 19% lower than the result posted a year ago. The bank's fourth quarter 2022 ROE and ROA of 16.9% and 3.3% respectively remained healthy and showed the bank's earnings potential. In fiscal year 2022, total comprehensive income totaled 37.5 billion pesos, which was 32% lower than the result posted in fiscal year 2021. Net operating income before general administrative and personal expenses for the fourth quarter of 2022 was 131.3 billion pesos, decreasing 8% or 11.3 billion pesos quarter on quarter due to lower income from financial instruments at fair value to profit or loss. On a yearly basis, net income before general administrative and personal expenses increased 36% or 34 billion pesos. In fiscal year 2022, net operating income before general administrative and personal expenses totaled 498.2 billion pesos, which was 36% higher than the previous year. In the fourth quarter of 2022, provision for loan losses totaled 2.5 billion pesos, which was 861 million pesos higher than in the previous quarter. On a yearly basis, provision for loan losses decreased 34% to 1.3 billion pesos. Operating income after general administrative and personal expenses was 78.2 billion pesos, 11% or 10 billion pesos lower than the third quarter of 2022, and 79% or 34.5 billion pesos higher than the fourth quarter of 2021. In the quarter, net interest income totaled 83.6 billion pesos, 12% or 9.1 billion pesos higher than the result posted in the third quarter of 2022, and 20% or 14 billion pesos higher than the result posted one year ago. In fiscal year 2022, net interest income was 20% higher than in fiscal year 2021 as a result of different regulations adopted by the central bank that set caps on lending rates and flow on deposit rates. In the fourth quarter of 2022, interest income totaled 198.6 billion pesos, 23% of 37.7 billion pesos higher than in the third quarter of 2022 due to higher income from government securities and was 79% or 87.8 billion pesos higher than the previous year. Within interest income, interest and loans increased 7% or 4.5 billion pesos quarter-on-quarter due to a 570 basis points increase in the average lending rate. On a yearly basis, income from interest and loans was 21% or 12 billion higher. In the fourth quarter of 2022, interest and loans represented 35% of total interest income. In fiscal year 2022, interest and loans totaled 251 billion pesos and increased 12% compared to fiscal year 2021. Net income from government and private securities increased 34% or 30.7 billion pesos quarter on quarter due to higher income from government securities. Compared to the fourth quarter of 2021, net income from government and private securities increased 144% or 71.9 billion pesos. In the fourth quarter of 2022, FX gains, including investments in their equity financing, totaled a 30.6 billion pesos gain due to a 20% Argentine peso depreciation against the U.S. dollar and the bank's long dollar position. In the fourth quarter of 2022, interest expense totaled 115 billion pesos, which was 33% or 28.6 billion pesos higher compared to the third quarter of 2022. and 179% or 73.8 billion pesos higher on a yearly basis. Within interest expenses, interest on deposits increased 34% or 28.5 billion pesos or a quarter, mainly driven by a 10% increase in the average volume of private sector deposits, while the average interest rates paid on deposits increased 860 basis points. On a yearly basis, interest on deposits increased 187% or 73.8 billion pesos. In the fourth quarter of 2022, interest on deposits represented 98% of the bank's financial expenses. In fiscal year 2022, interest expense increased 67% compared to fiscal year 2021. In the fourth quarter of 2022, the bank's net interest margin, including FX, was 32.7%, which was higher than the 28% 0.1% posted in the third quarter of 2022, and the 21.2% registered in the fourth quarter of 2021. In fourth quarter 2022, net fee income totaled $17 billion, 2% or $361 million higher than in third quarter of 2022. On a yearly basis, net fee income was unchanged from a year ago. In fiscal year 2022, net fee income was 4% higher than in the previous year. In the fourth quarter of 2022, net income from financial assets and liabilities for value to profit or loss totaled 3.3 billion pesos loss, which was 32 billion lower than the previous quarter, mainly due to dual bonds. In fiscal year 2022, net income from financial assets and liabilities for value to profit or loss was 24% higher than the fiscal year 2021, mainly due to higher income from government securities. In the quarter 2021, other operating income totaled 5.7 billion pesos, increasing 31% compared to the third quarter of 2022. On a yearly basis, other operating income decreased 49% or 1.9 billion pesos. In the fourth quarter of 2022, Banco Macro's personal administrative expenses totaled 29.2 billion pesos, 4% or 1.2 billion pesos lower than the previous quarter, due to lower employee benefits, which were partially offset by higher administrative expenses. On a yearly basis, personal and administrative expenses decreased 4% for 1.2 billion pesos. In fiscal year 2022, administrative expenses plus employee benefits increased 1% compared to fiscal year 2021, showing the strict cost control policies adopted by the bank's senior management. As of the fourth quarter of 2022, the efficiency ratio reached 28.6% improvement from the 29.1% posted in third quarter of 2022, And in the fourth quarter of 2022, expenses increased 3% when net interest income plus net fee income plus other operating income increased 33%. In the fourth quarter of 2022, the results from the net monetary position totaled 56.9 billion pesos loss, which was 17% or 11.4 billion pesos lower than the loss posted in the third quarter of 2022 as a consequence of lower inflation. It was 468 basis points below the third quarter of 2022. Inflation in the quarter was 17.3% compared to 22% in the third quarter of 2022. In fiscal year 2022, Banco Macro's effective tax rate was 31.1%, higher than the 5.8% tax rate registered during fiscal year 2021. It should be noted that in fiscal year 2021, effective tax rate was affected by the implications of inflation adjustment on accounting and tax balances and the determination of the income tax due and deferred income tax. More information is provided in note 25 to our financial statements. In terms of loan growth, the bank's financing to the private sector totaled $596.4 billion, increasing $2 billion quarter-on-quarter and decreasing 12% or 83.3%. billion pesos year on year. Within commercial loans, overdrafts stand out with a 2% or 1.1 billion pesos decrease quarter on quarter. On the consumer side, credit card loans increase 6% or 10 billion pesos in the quarter, while personal loans and mortgages decrease 7% and 4% respectively. In fiscal year 2022, credit card loans stand out with a 3% increase, while personal loans decrease 25%. It is important to mention that Banco Macro's market share over private sector loans as of December 2022 reached 7.4%. On the funding side, total deposits decreased 2% or 23.5 billion pesos quarter-on-quarter and increased 13% or 148.3 billion pesos year-on-year. Private sector deposits increased 2% quarter-on-quarter, while private sector deposits decreased 30% quarter-on-quarter. The increase in private sector deposits was led by demand deposits, which increased 5% or 27.6 million pesos per quarter, while prime deposits decreased 2% or 9 billion pesos. Within private sector deposits, peso deposits decreased 4% or 41.7 billion pesos, while U.S. dollar deposits decreased 7% or $72 million. As of December 2022, Banco Macro's transactional accounts represented approximately 45% of total deposits. Bank of America's market share with private sector deposits as of December 2022 totaled 6.3 percent. In terms of asset quality, Bank of America's non-performing total financial ratio reached 1.25 percent. The coverage ratio measured as total allowances under expected credit losses over non-performing loans under the central bank rules improved a total 151.7 percent. Consumer portfolio non-performing loans improved 14 basis points down to 1.1 from 1.23 in the previous quarter, while commercial portfolio non-performing loans deteriorated 52 basis points in the fourth quarter of 2022, which was up to 95% from 1.43 in the previous quarter. In terms of capitalization, Banco Macro accounted an excess capital of 410 billion pesos, which represented a total regulatory capital ratio of 39.9%, and a tier one ratio of 36.6%. The bank's aim is to make the best use of this excess capital. The bank's liquidity remained more than appropriate, liquid assets to total deposit ratio reached 95%. Overall, we have accounted for another positive quarter. We continue showing a solid financial position. Asset quality remain 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 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. Our first question is from Ernesto Gabilondo with Bank of America. Please go ahead.