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 first quarter 2023 earnings conference call. We would like to inform you that first quarter 2023 press release is available to download at the Investor Relations website of Banco Macro at www.macro.com.ar forward slash Relaciones-Macro. inversores, forward flash. Also, this event is being recorded and all participants will be in a 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 Scarinci, Chief Financial Officer, and Mr. Nicholas Torres, IR. Now, I will turn the conference over to Mr. Nicholas Torres. You may begin.

Thank you, Dave. Good morning, and welcome to Banco Macros First Quarter 2024 Conference Call. Any comment we make today may include forward-looking statements which are subject to various conditions, and these are applied in our 20F, which was filed to the SEC, and it's available at our website. First quarter 2024 press release was distributed on Wednesday, and it's available at our website. All figures are in Argentine pesos and have been restated in terms of the measurement unit current at the end of the reporting period. As of 2020, the bank began reporting results, applying hyperinflation accounting, in accordance with IFRS IAS 29, as established by the central bank. For ease of comparison, previous quarters have been restated applying IAS 29 to reflect the accumulated effect of the inflation adjustment for each period through March 31st, 2024. I will now briefly comment on the bank's first quarter 2024 financial results. Banco Macro's net income for the quarter was 275.2 billion pesos, 61% or 422 billion pesos lower than in the fourth quarter of 2023, and 626% or 237.3 billion pesos higher than the results posted a year ago. The banks analyzed ROE and ROA of 37.4% and 11.9% respectively, remained healthy, and showed the bank earnings potential. Net operating income before general administrative and personal expenses for the first quarter of 2024 was 1.62 trillion pesos. decreasing 19% of 388 billion pesos quarter on quarter. On a yearly basis, net operating income before general and personal expenses increased 149% or 969 billion pesos. In the first quarter of 2024, provision for loan losses totaled 18.9 billion pesos, 32% or 8.7 billion pesos lower than in the previous quarter. On a yearly basis, provision for loan losses increased 40% or 5.4 billion pesos. Operating income after general administered and personal expenses was 1.25 trillion pesos, 20% or 322.7 billion pesos lower than the fourth quarter of 2023, and 211% or 850 billion pesos higher than the first quarter of 2023. In the quarter, net interest income totaled 167.5 billion pesos, 40% or 111 billion pesos lower than the result posted in the fourth quarter of 2023, and 56% or 211.3 billion pesos lower than the result posted one year ago. Interest income decreased 18%, while interest expenses decreased 7%. In the first quarter of 2024, interest income totaled 714.8 billion pesos, 18% or 154.5 billion pesos lower than in the fourth quarter of 2023, and 19% or 172 billion pesos lower than the previous year. Income from interest on loans and other financing totaled 462 billion pesos, 18% or 192.8 billion pesos lower compared with the previous quarter, mainly due to a 16% decrease in the average volume of private sector loans and a 118 basis points decrease in the average lending rate. On a yearly basis, income from interest on loans increased 39% or 129.8 billion pesos. In the first quarter of 2024, interest on loans represented 65% of total interest income. In the first quarter of 2024, income from government and private securities decreased 42% or 68.3 billion pesos quarter on quarter due to the unwinding of our LELIC portfolio and decreased 82% or 429.3 billion pesos compared with the same period of last year. In the first quarter of 2024, income from RICOS totaled 151.9 billion pesos 19% to 24.3 billion pesos higher than the previous quarter, and 482% or 125.8 billion pesos higher than a year ago. In the first quarter of 2024, FX income totaled 80.6 billion pesos, 71% or 196.5 billion pesos lower than the previous quarter, and 43% or 61.6 billion pesos lower than a year ago. Effective income gain was due to the 6.1 Argentine peso depreciation against the U.S. dollar and the bank's long dollar position during the quarter. It is important to notice that the bank's long dollar position decreased 96% during the quarter. In the first quarter of 2024, interest expense totaled 547.3 billion pesos, 7% or 43.5 billion pesos lower compared to the fourth quarter of 2023, and 8% or 39.3 billion pesos higher on a yearly basis. Within interest expenses, interest on deposits decreased 8% of the 6.5 billion pesos quarter on quarter, mainly driven by a 970 basis points decrease in the average interest rate paid on deposits, while the average volume of private sector deposits increased 5%. On a yearly basis, interest on deposits increased 6% of 31.5 billion pesos. In the first quarter of 2024, interest on deposits represented 96% of the bank's financial expenses. In the first quarter of 2024, The bank's net interest margin, including a tax, was 26% lower than the 52.1% posted in the fourth quarter of 2023 and the 33.6% posted in the first quarter of 2023. In the first quarter of 2024, Bank of America's net fee income totaled 74.1 billion pesos, 12% or 10.2 billion pesos lower than the fourth quarter of 2023, and was 13% or 11.4 billion pesos lower than the same period of last year. The first quarter of 2024 net income from financial assets and liabilities at fair value to profit or loss totaled a 1.27 trillion pesos gain, mainly due to the market of some government securities, mainly inflation-adjusted bonds. In the quarter, other operating income totaled 44.4 billion pesos, increasing 16% or 6.2 billion pesos compared to the fourth quarter of 2023. On a yearly basis, other operating income increased 100% or 22.2 billion pesos. In the first quarter of 2024, Bank of Macro's administrative expenses plus employee benefits totaled 202.3 billion pesos, 12% or 28.9 billion pesos lower than the previous quarter due to lower employee benefits, which decreased 1%, and lower administrative expenses, which decreased 28%. On a yearly basis, administrative expenses plus employee benefits increased 49% or 66.1 billion pesos. As of the first quarter of 2024, the efficiency ratio reached 14.7%, improving substantially from the 18.6% posted in the fourth quarter of 2003 and the 25.5% posted one year ago. In the first quarter of 2024, expenses decreased 13% while net interest income plus net fee income plus other operating income decreased 11% compared to the fourth quarter of 2023. In the first quarter of 2024, the result from the net monetary position totaled $889 billion loss, 12% or 92 billion pesos higher than the loss posted in the fourth quarter of 2023, and 159% or 546.2 billion pesos higher than the loss posted one year ago. Our net monetary position increased 84% during the quarter, while low inflation was observed in the first quarter of 2024. 167 basis points below inflation registered in the fourth quarter of 2023. Inflation was 51.6 in the first quarter of 2023. compared to 53.3% in the fourth quarter of 2003. In the first quarter of 2024, Banco Madras' effective tax rate was 24.5%, lower than the 31.4% registered in the fourth quarter of 2003. Further information is provided in Note 21 to our financial statements. In terms of long-term, the bank's total financials reached 2.5 trillion pesos, increasing 10% at 279.6 billion pesos quarter-on-quarter and 8% at 205.9 billion pesos pesos lower year-on-year. Within commercial loans, overdraft standout would have 21% or 92.6 million pesos decrease. Documents decreased 21% or 10 million pesos, while others increased 2% or 9.3 billion pesos. Within consumer lending, personal loans decreased 4% or 44.8 billion pesos, while credit card loans decreased 18% or 132.1 billion pesos. Pesa financing decreased 20% or 513.9 billion pesos, while U.S. dollar financing increased 75% or $254 million. It is important to mention that Banco Macro's market share over private sector loans as of March 2024 reached 9.4%. On the funding side, total deposits decreased 1% or $74.3 billion quarter-on-quarter, $25 trillion, and decreased 11% or $644 billion year-on-year. Private sector deposits decreased 6% or $291.2 billion quarter-on-quarter, while private sector deposits increased 83% or 234.2 trillion pesos in the quarter. The decrease in private sector deposits was led by demand deposits, which decreased 26% or 777.3 billion pesos per quarter, while time deposits increased 27% or 422.6 billion pesos. Within private sector deposits, special deposits increased 10% or 365.2 billion pesos, while U.S. dollar deposits decreased 32% or $622 million. As of March 2024, Banco Macro's transactional accounts represented approximately 46% of total deposits. Banco Macro's market share over private sector deposits as of March 2024 totaled 7.5%. In terms of asset quality, Banco Macro's non-performing total financial ratio reached 1.14% and the coverage ratio measured as total allowances expected credit losses over non-performing loans under certain bank rules reached 222.7%. Consumer portfolio non-performing loans deteriorated 12 basis points, up to 147% from 135 the previous quarter, while commercial portfolio non-performing loans improved 49 basis points in the first quarter of 2024, down to 0.72% from 1.2% in the last quarter. In terms of capitalization, Banco Macros accounted an excess capital of 2.59 trillion pesos, which represents a capital adequacy ratio of 46.5% and a tier 1 ratio of 44.5%. The bank's aim is to make the best use of this excess capital. The bank's liquidity remains more than appropriate. Liquid assets total deposit ratio reached 124%. Overall, we have accounted for another positive quarter. We continue to show a solid financial position. Asset quality remains under control and closely monitored, and we keep on working to improve more RFG 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'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. Please unmute your phone and record your name clearly when prompted. One moment, please, for the first question. Our first question comes from Ernesto Gabilondo with Bank of America. Please go ahead.