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 1Q23 earnings conference call. We would like to inform you that 1Q23 press release is available to download at the investor relations website of Banco Macro at www.macro.com.ar forward slash relaciones dash inversores forward slash. 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 Marriquez, Chief Executive Officer, and Mr. Jorge Carrinzi, Chief Financial Officer, and Mr. Nicolás Torres, IR. Now, I will turn the conference over to Mr. Nicolás Torres. You may begin your conference.

Thank you, Anthony. Good morning, and welcome to Banco Metro's first quarter 2023 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. First quarter 2023 press release was distributed yesterday, and it's available at our website. All figures are in our 29 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 March 31st, 2023. I will now briefly comment on the bank's first quarter 2023 financial results. Banco Macro's net income for the quarter was 9.8 billion pesos, 52% lower than the fourth quarter of 2022, and 20% lower than the results posted a year ago. The bank's first quarter 2023 ROE and ROA of 8.2% and 1.7% respectively remained healthy and showed the bank's earnings potential. Net operating income before general, administrative, and personal expenses for the first quarter of 2023 was 167.8 billion pesos, increasing 5% or 8 billion pesos quarter-on-quarter due to higher income from financial instruments at fair value to profit or loss, and higher net fee income. On a yearly basis, net operating income before general and administrative and personal expenses increased 28% or 36.8 billion pesos. In the first quarter of 2023, provision for loan losses totaled 3.5 billion pesos, 13% or 397 million pesos higher than in the previous quarter. On a yearly basis, provision for loan losses increased 129% or 1.9 billion pesos. Operating income after general administrative and personal expenses were 103.9 billion pesos, 9% or 8.8 billion pesos higher than the fourth quarter of 2022, and 39% or 29.3 billion pesos higher than the first quarter of 2022. In the quarter, net interest income totaled 97.7 billion pesos, 4% or 4.1 billion pesos lower than the result posted in the fourth quarter of 2022, and 14% or 12 billion pesos higher than the result posted one year ago. In the first quarter of 2023, interest income totaled 228.6 billion pesos, 5% or 13 billion pesos lower than the fourth quarter of 2022. Due to lower income from government securities, it was 63% or 88 billion pesos higher than the previous year. Within interest income, interest on loans increased 2% or 1.6 billion pesos quarter on quarter due to a 304 basis point increase in the average lending rate. On a yearly basis, income from interest on loans was 25% or 17.3 billion higher. In the first quarter of 2023, interest on loans represented 38% of total interest income. Net income from government and private securities decreased 9% or 13.1 billion pesos quarter on quarter due to lower income from government securities. Compared to the first quarter of 2022, net income from government and private securities increased 91% or 64.6 billion pesos. In the first quarter of 2023, FX gains, including investment in derivative financing, totaled a 36.7 billion pesos gain due to the 18% Argentine peso depreciation against the U.S. dollars and the bank's long dollar position. In the first quarter of 2023, interest expense totaled 130.9 billion pesos, a 6% or 9 billion pesos decrease compared to the fourth quarter of 2022, and a 138 or 75.9 billion pesos higher than on a yearly basis. Within interest expenses, interest on deposits decreased 7% or 10.1 billion pesos quarter on quarter, mainly driven by a 14% decrease in the average volume of private sector deposits, while the average interest rate paid on deposits increased 537 basis points. On a yearly basis, interest on deposits increased 143% or 75.1 billion pesos. In the first quarter of 2023, interest on deposits represented 98% of the bank's financial expenses. In the first quarter of 2023, the bank net interest margin, including FX, was 33.6%, higher than the 32.7% posted in the fourth quarter of 2022, and the 22.8% registered in the first quarter of 2022. In the first quarter of 2023, net fee income totaled 22 billion pesos, 6% or 1.3 billion pesos higher than the fourth quarter of 2022. On a yearly basis, net fee income was 6% higher. In the first quarter of 2023, net income from financial assets and liabilities for value to property or loss totaled at 9.2 billion pesos gain mainly due to the mark-to-market of dual bonds. In the quarter, other operating income totaled 5.7 billion pesos, decreasing 18% compared to the fourth quarter of 2022. On a yearly basis, other operating income decreased 16% or 1.1 billion pesos. In the first quarter of 2023, Banco Macro's personal administrative expenses totaled 35.1 billion pesos, 1% or 424 million pesos lower than the previous quarter. due to lower administrative expenses, which were partially upset by higher employee benefits. On a yearly basis, personal and administrative expenses increased 12% or 3.8 billion pesos. In the first quarter of 2023, the efficiency ratio reached 25.5%, improving from the 28.6% posted in the fourth quarter of 2022. In the first quarter of 2023, expenses decreased 1% while net interest income plus net fee income plus other operating income increased In the first quarter of 2023, the result from the net monetary position totaled 88.4 billion pesos loss, which was 27% or 19 billion pesos higher than the loss posted in the fourth quarter of 2022, as a consequence of higher inflation observed in the quarter, which was 444 basis points above the level registered in the fourth quarter of 2022. Inflation was 21.7% and was up from 17% from the previous quarter. In the first quarter of 2023, Banco Macro's effective tax rate was 36.3%. Further information is provided in Note 22 to our financial statements. In terms of loan growth, the bank's financing to the private sector totaled 694.5 billion pesos, decreasing 4% or 30.4 billion pesos quarter-on-quarter and increasing 8% or 63.5 billion pesos year-on-year. Within commercial loans, overdrafts stand out with a 10% or 6.2 billion pesos decrease quarter on quarter. On the consumer side, credit card loans decreased 7% or 16.1 billion pesos in the quarter, while personal loans and mortgages decreased 7%. It is important to mention that Banco Marcos market share over private sector loans as of March 2023 reached 7.3%. On the funding side, total deposits decreased 7% or 112.6 billion pesos quarter on quarter, and increased 6% or 8 billion pesos year on year. Private sector deposits decreased 6% or 89.7 billion pesos quarter on quarter, but private sector deposits decreased 17% quarter on quarter. The decrease in private sector deposits was led by demand deposits, which decreased 13% or 83.4 billion pesos quarter on quarter, while time deposits increased 4% or 27 billion pesos. Within private sector deposits, peso deposits decreased 8% or 109.1 billion pesos, while U.S. dollar deposits decreased 17% or 196 million. As of March 2023, Banco Macro's transactional accounts represented approximately 42% of total deposits. Banco Macro's market share over private sector deposits as of March 2023 totaled 6.1%. In terms of asset quality, Bancomat's non-performing to total financial ratio reached 1.41%. The coverage ratio measured as total allowance under expected trade losses over non-performing loans under central bank rules totaled 145.3%. Consumer portfolio non-performing loans deteriorated 24 basis points up to 1.34% from 1.1% in the previous quarter, while commercial portfolio non-performing loans improved 22 basis points in the first quarter of 2023. They were down to 173% from 195 in the previous quarter. In terms of capitalization, Banco Macro accounted an excess capital of 520 billion pesos, which represented a total regular capital ratio of 42.4% and a tier one ratio of 39.1%. The bank's aim is to make the best use of this excess capital. The bank's liquidity remained more than appropriate. Liquid assets total deposit ratio reached 97%. 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.

Okay, at this time, we are going to open it up for questions and answers. If you would like to ask a question, please press star then one on your touchstone phone. Please unmute your phone and record your name clearly when prompted. One moment please for the first question. Our first question will come from Brian Flores with Citibank. You may now go ahead.