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 2023 earnings conference call. We would like to inform you that the 3Q23 press release is available to download at the Investor Relations website of Banco Macro, www.macro.com.ar slash Relaciones hyphen Inversores. 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 Scorinci, Chief Financial Officer, and Mr. Nicolas Torres, Investor Relations. Now, I will turn the conference over to Mr. Nicolas Torres. You may begin your conference.

Thank you, Gary. Good morning, and welcome to Banco Macros' third quarter 2023 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. Top quarter 2023 press release was distributed last Wednesday, and it's available at our website. All figures are in urgent and have been restated in terms of the measure and unit current at the end of the reporting period. As of 2020, the bank began reporting results applying hyperinflation accountings. 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 effects of inflation adjustment for each period through September 30, 2023. I will now briefly comment on the bank's quarter 2023 financial results. Bank of Macro's net income for the quarter was 7.5 billion pesos, 87% lower than in the second quarter of 2023. and 55% lower than the year ago. The bank's accumulated ROE and ROA of 11.3 and 2.8% respectively remain healthy and show the bank's earnings potential. Net operating income before general admission and personal expenses for the third quarter of 2023 was 356.5 billion pesos, increasing 364 million pesos quarter-and-a-quarter. On a yearly basis, net operating income before general and personal expenses increased 23% or 66.7 billion pesos. In the fourth quarter of 2023, provision for loan losses totaled 4.9 billion pesos, 35% or 2.6 billion pesos lower than in the previous quarter. On a yearly basis, provision for loan losses increased 43% or 1.5 billion pesos. Operating income after general administrative and personal expenses was 235 billion pesos or 1% 1% or 1.7 billion pesos higher than in the second quarter of 2023, and 31% or 56.1 billion pesos higher than in the third quarter of 2022. In the quarter, net interest income totaled 112.7 billion pesos, 23% or 32.8 billion pesos lower than the result posted in the second quarter of 2023, and 26% or 38.6 billion pesos lower than the result posted one year ago. In the third quarter of 2023, interest income totaled 429.1 billion pesos, 4% or 15.1 billion pesos higher than in the second quarter of 2023, and 31% or 102.3 billion pesos higher than the previous year. Within interest income, interest on loans increased 11% or 18.1 billion pesos quarter-on-quarter due to a 574 basis points increase in the average lending rate, while the average volume of private sector loans was practically unchanged. On a yearly basis, income from interest on loans was 36% or 47.5 billion higher. In the third quarter of 2023, interest on loans represented 42% of total interest income. Net income from government and private securities decreased 7% or 16 billion pesos quarter on quarter due to lower income from government securities. Compared to the third quarter of 2022, net income from government and private securities increased 12% or 21.8 billion pesos. In the third quarter of 2023, income from repos totaled $37.6 billion, 52% or $12.8 billion higher than the previous quarter, and 304% or $28.3 billion higher than the same period of last year. In the third quarter of 2023, FX gains, including investment in the U of T financing, totaled $238.1 billion gain, $135.8 billion higher than the previous quarter, and $200 billion higher than a year ago. This result is mainly due to the 36.4% Argentine peso depreciation against the U.S. dollar and the bank's long dollar position, including dollar linked and dual bonds. In the first quarter of 2023, interest expense totaled 316.4 billion pesos, an 18% of 47.9 billion pesos increase compared to the second quarter of 2023, and 80% or 140.9 billion pesos higher on a yearly basis. Within interest expenses, interest on deposits increased 19% for the $8.7 billion quarter-on-quarter, mainly driven by a 1,017 basis points increase in the average interest rate paid on deposits, while the average volume of private sector deposits increased 3%. On a yearly basis, interest on deposits increased 80% or $138.2 billion. In the third quarter of 2023, interest on deposits represented 98% of the bank's financial expenses. In the third quarter of 2023, the bank's net interest margin, including FX, was 58.7 percent, higher than the 38.3 percent posted in the second quarter of 2023, and higher than the 28.1 percent posted in the third quarter of 2022. In the fourth quarter of 2023, net income, net fee income totaled 35.5 billion pesos, 20 million pesos lower than the second quarter of 2023, and on a yearly basis, net fee income was 5 percent, or 1.6 billion pesos higher. In the third quarter of 2023, net income from financial assets and liabilities of fair value to profit or loss totaled a $36.4 billion loss, mainly due to the marked market of government securities. On a yearly basis, net income from financial assets and liabilities of fair value to profit or loss decreased $97.2 billion. In the quarter, other operating income totaled $11.3 billion, increasing 9 percent or $1 billion compared to the second quarter of 2023. On a yearly basis, other operating income increased 26 percent, or 2.4 billion pesos. In the fourth quarter of 2023, Bank of Macro's personal and administrative expenses totaled 56.2 billion pesos, 3 percent, or 1.6 billion pesos higher than the previous quarter due to higher employee benefits, which were partially offset by a 102 million pesos decrease in administrative expenses. On a yearly basis, personal and administrative expenses increased 7 percent, or 4.4 billion pesos. In the fourth quarter of 2023, the efficiency ratio reached 22.4%, deteriorating from the 21.7% posted in the second quarter of 2023. In the third quarter of 2023, expenses increased 3%, while net interest income, net fee income, plus other operating income decreased 1%. In the fourth quarter of 2023, the results on the net monetary position totaled a $215.9 billion loss, considerably higher than the loss posted in the second quarter of 2023, as a consequence of higher inflation observed in the quarter, which was 1,104 basis points higher than the second quarter of 2023. Inflation in the third quarter of 2023 was 34.8%, compared to 23.8% in the second quarter of 2023. In the third quarter of 2023, Banco Macro's effective tax rate was 60.5%, and further information is provided in No. 22 to our financial statements. In terms of loan growth, the bank's total finance totaled 1.2 trillion pesos, decreasing 4% of 50.8 billion pesos quarter-on-quarter and 5% 57.8 billion pesos lower year-on-year. Within commercial loans, overdrafts stand out with a 5% or 5.9 billion pesos decrease, while documents increase 16% of 30.2 billion pesos. It is important to mention that Banco Macro's market share over past sector loans, as of September 2023, reached 7.7 percent. On the funding side, total deposits decreased 22 percent, or $526 billion, quarter-on-quarter, totaling $2 trillion, and decreased 25 percent, or $670 billion, year-on-year. Private sector deposits decreased 23% for 554.8 billion pesos quarter-and-quarter, while private sector deposits decreased 875 million pesos quarter-and-quarter. The decrease in private sector deposits was led by CAM deposits, which decreased 30% for 374.2 billion pesos quarter-and-quarter, while demand deposits decreased 16% for 174.3 billion pesos. Within private sector deposits, pesos deposits decreased 24% or 549.7 million pesos, while U.S. dollar deposits decreased 28% or 351 million. As of September 2023, Banco Macro's transactional accounts represented approximately 46% of total deposits. Banco Macro's market share with private sector deposits as of September 2023 totaled 5.3%. In terms of asset quality, Banco Macro's non-performing total financial ratio reached 1.39 percent. The coverage ratio measured at total allowance under expected credit losses over non-performing loans under central bank rules remained stable at 133.93 percent. Consumer portfolio non-performing loans deteriorated five basis points, up to 148 from 143 percent in the previous quarter, while commercial portfolio non-performing loans improved four basis points in the second quarter of 2023, down to 1.14 percent from 1.18 percent in the previous quarter. In terms of capitalization, Banco Madras accounted an excess capital of 788.3 billion pesos, which represented a total regulatory capital ratio of 37.9 percent and a tier one ratio of 34.8 percent. 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 99 percent. 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 pitching standards, and we keep a well-atomized deposit base. Finally, on November 2nd, 2023, the Central Bank of Argentina approved the sale of Itaú Argentina, now Banco BMA, to Banco Magro. Banco Magro has now acquired 100% of the shares and votes of Banco Itaú Argentina and its subsidiaries. Itaú African Management and Itaú Valores. The price of the agreement was set at 50 million U.S. dollars, which was paid on November 3. An additional amount resulted from a potential adjustment that will be eventually set based on the results obtained by Bank of Itaú Argentina and subsidiaries between April 1, 2023, and the closing date will be determined at a future date. At this time, we would like to take questions that 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 touchtone phone. If you are using a speakerphone, 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 today is from Ernesto Gabilanto with Bank of America. Please go ahead.