Banco Macro S.A.

Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to the Banco Macro's 2Q2024 earnings conference call. We would like to inform you that the 2Q2024 press release is available to download at the Investor Relations website of Banco Macro at www.macro.com.ar. 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 Menriquez, Chief Executive Officer, Mr. Jorge Scalinci, Chief Financial Officer, and Mr. Nicolas Torres, IR. Now, I will turn the conference over to Mr. Nicolas Torres. You may begin your conference.

Thank you, Nico. Good morning, and welcome to Banco Macro's second quarter 2024 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. Second quarter 2024 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 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 IES 29 to reflect the accumulated effect of the inflation adjustment for each period through June 30, 2024. I will now briefly comment on the bank's second quarter 2024 financial results. In the six months ended June 30, 2024, Bank of Macro's net income totaled 93.1 billion pesos. This result was 55% or 115.9 billion pesos lower than in the six months of 2023. As of the second quarter of 2024, the accumulated annualized return on average equity and the accumulated annualized return on average assets were 5.4 and 1.7% respectively. In the six months ended June 30, 2024, operating income before general administrative and personal expenses totaled 2.38 trillion pesos, 36% or 628.2 billion pesos higher than in the six months of 2023. Net operating income before general and personal expenses for the first half of 2024 were 1.59 trillion pesos, increasing 41% or 464.7 billion pesos when compared to the first half of 2023. Bank of America's second quarter 2024 net income total at 233.2 billion pesos loss, which was 559.6 billion pesos lower than the previous quarter, and 397.3 billion pesos lower year-on-year, mainly due to the mark-to-market of government securities, financial assets at fair value to profit or loss, and lower FX gains registered in the quarter. It is important to notice that if government securities, including financial assets at fair value to profit or loss, namely Inflation-adjusted bonds due in 2027 have been valued instead at amortized cost to second quarter 2024 net income would have been 605.5 billion pesos higher. Furthermore, as it is probably known, Banco Macro recently exercised about half of some of the put options that it held on certain inflation-adjusted securities. Given the current breakdown of our government securities portfolio, the bank estimates that net income could have been around 300 billion pesos higher had the remaining inflation-adjusted securities been valued at amortized cost. In the second quarter of 2024, provision for loan losses totaled 16.5 billion pesos, 26% or 5.9 billion pesos lower than in the first quarter of 2024. On a yearly basis, provision for loan losses decreased 20% of operating income after general and personal expenses were $99.1 billion in the second quarter of 2024, 93% or $1.4 trillion lower than in the first quarter of 2024, and 85% or $544 billion lower than a year ago. In the quarter, net interest income totaled $188 billion, 6% or 12.7 billion pesos lower than the first quarter of 2024 and 53% or 213.1 billion pesos lower year-on-year. Interest income decreased 27% while interest expenses decreased 33%. In the second quarter of 2024, interest income totaled 619.7 billion pesos 27% or 229.8 billion pesos lower than in the first quarter of 2024, and 46% or 521.4 billion pesos lower than in the second quarter of 2023. Income from interest on loans and other financing totaled 410.2 billion pesos, 26% or 142.7 billion pesos lower compared with the previous quarter, mainly due to a 25.9 percentage point decrease in the average lending rate, which was partially upset by a 9% increase in the average volume of private sector loans. On a yearly basis, income from interest on loans decreased 10% of 45.2 billion pesos. In the second quarter of 2024, interest on loans represented 66% of total interest income. In the second quarter of 2024, income from government and private securities increased 40% of 4.7 billion pesos quarter-on-quarter, and decreased 74% of 157.2 billion pesos compared with the same period of last year. In the second quarter of 2024, income from prepos totaled 48.7 billion pesos, 73% or 131.4 billion pesos lower than the previous quarter, and 29% or 19.5 billion pesos lower than a year ago. In the second quarter of 2024, FX income totaled 25.6 billion pesos, 73% or 69.9 billion pesos lower than the previous quarter, and 91% or 256.1 billion pesos lower than a year ago. FX income gain was due to the 6.3% 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 average long dollar position decreased 59% during the quarter. In the second quarter of 2024, interest expense totaled 431.7 billion pesos, decreasing 33% of 217.1 billion pesos compared to the previous quarter, and 42% or 308.3 billion pesos lower when compared to the second quarter of 2023. Within interest expense, interest on deposits decreased 33% of 208.8 billion pesos quarter on quarter, due to a 25.4 percentage points decrease in the average rate paid on deposits, while the average volume of deposits from the private sector increased 16%. On a yearly basis, interest on deposits decreased 42% of 304.5 billion pesos. In the second quarter of 2024, the bank's net interest margin, including effects, was 19.9%, lower than the 26.2% posted in the first quarter of 2024 and the 38.3% posted in the second quarter of 2023. In the second quarter of 2024, Bank of America's net credit income totaled 95.7 billion pesos, 8% or 6.8 billion pesos higher than the first quarter of 2024, and was 2% or 2.1 billion pesos lower than the same period of last year. In the second quarter of 2024, net income from financial assets and liabilities at fair value to profit or loss totaled 121.2 billion pesos gain, decreasing 92% or 1.39 trillion pesos in the quarter. This gain was smaller due to the negative marked market of some government securities. Basically, inflation adjusted bonds in the amount of 1.41 trillion pesos. In the quarter, other operating income totaled 46.2 billion pesos, 7% or 3.3 billion pesos lower than the first quarter of 2024. On a yearly basis, other operating income increased 62% or 17.8 billion pesos. In the second quarter of 2024, Bank of Macro's administrative expenses plus employee benefits totaled 203.5 billion pesos, 15% or 35.3 billion pesos lower than in the previous quarter, due to lower employee benefits, which decreased 14%, and lower administrative expenses, which decreased 17%. On a yearly basis, administrative expenses plus employee benefits increased 14% or 25.6 billion pesos. As of the second quarter of 2024, the accumulated efficiency ratio, which 22.2%, deteriorating from the 14.7% posted in the first quarter of 2024 and the 22.2% posted one year ago. In the second quarter of 2024, expenses decreased 14% when net interest income plus net fee income plus other operating income decreased 77% compared to the first quarter of 2024. In the second quarter of 2024, The result from the net monetary position totaled 462.7 billion pesos loss, 56% or 591.3 billion pesos lower than the lowest posted in the first quarter of 2024, and 14% 56.1 billion pesos higher than the lowest posted a year ago. The result is a consequence of lower inflation during the quarter. Inflation was 18.6%. in the second quarter of 2024 compared to the 51.6% registered in the first quarter of 2024, while the net monetary position remained unchanged. In the second quarter of 2024, given MACOS-negative net income for the quarter, no income tax charge was recorded. Part of that information is provided in Note 21 to our financial statements. In terms of loan growth, the bank's total finances reached 3.47 trillion pesos, increasing 17% or 504.1 billion pesos quarter-and-quarter and 5% or 154.5 billion pesos higher year-on-year. Within commercial loans, documents stand out with a 7% or 43.6 billion pesos increase when others increase 27% or 158.3 billion pesos. Within consumer lending, personal loans increased 29% or 111.9 billion pesos while credit card loans increased 11% or 77.8 billion pesos. Peso financing increased 20% or 563.8 billion pesos in the quarter, while U.S. dollar financing increased $2 million. It is important to mention that Banco Macro's market share over private sector loans as of June 2024 reached 9.1%. On the funding side, total deposits increased 13% or 769.5 billion pesos quarter-on-quarter, totaling 6.74 trillion pesos, and decreased 5% of 329.3 billion pesos year-on-year. Private sector deposits increased 11% of 591.5 billion pesos quarter-on-quarter, while public sector deposits increased 30% of 181.9 billion pesos quarter-on-quarter. The increase in private sector deposits was led by D-1 deposits, which increased 23% of 583 81.5 billion pesos, while 10 deposits decreased 2% of 54.5 billion pesos quarter-on-quarter. Within private sector deposits, pesos deposits increased 17% or 774.6 billion pesos, while U.S. dollar deposits decreased 6% or 97 million dollars. As of June 2024, Bank of America's transactional accounts represented approximately 52% of total deposits. Bank of Macros market share over private sector deposits as of June 2024 totaled 8.1%. In terms of asset quality, Bank of Macros non-performing to total financial ratio reached 1.23%. The coverage ratio measured as total allowances under expected credit losses over non-performing loans under central bank rules reached 181.4%. Consumer portfolio non-performing loans deteriorated five basis points, up to 152% from 147% in the previous quarter, while commercial portfolio non-performing loans deteriorated one basis point in the second quarter of 2024. In terms of capitalization, Banco Macros accounted an excess capital of 2.36 trillion pesos, which represented a capital adequacy ratio of 35.7% and a tier one ratio of 34%. The bank's aim is to make the best use of this excess capital. Long-term liquidity remained more than appropriate. Liquid assets to total deposit ratio reached 98% in the second quarter of 2024. Overall, we have accounted for a positive first half of 2024. We continue showing 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.

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 then 1 on your touchtone phone. To withdraw your question, please press star then 2. One moment, please, while we poll for the first question. And our first question today will come from Ernesto Gabriando with Bank of America. Please go ahead.