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 ¼-25 earnings conference call. We would like to inform you that the first quarter 2025 press release is available to download at the Investor Relations website of Banco Macro, www.macro.com.ar slash Relaciones dash Inversores. 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. It is now my pleasure to introduce our speakers. Joining us from Argentina, Mr. Jorge Scarinci, 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. Good morning and welcome to Banco Marco's first quarter 2025 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. The first quarter 2025 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. 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 33, 2025. I will now briefly comment on the bank's first quarter 2025 financial results. In the first quarter of 2025, Banco Macro's net income totaled 45.7 billion pesos. This result was 59% or 65.3 billion pesos lower than the fourth quarter of 2024. This result was mainly due to lower net income from financial assets and liabilities for value to profit or loss, and the bigger loss related to the result from the net monetary position. Higher inflation was observed in the quarter. which was partially offset by higher other operating income and lower employee benefits and administrative expenses. The annualized return on average equity and the accumulated annualized return on average assets were 3.8% and 1.2% respectively. In the first quarter of 2025, net operating income before general and administrative expenses was 801 billion pesos. 9% or 82.6 billion pesos lower compared to the fourth quarter of 2024 due to lower income from interest on government securities. On a yearly basis, net operating income before general and personal expenses decreased 68% or 1.7 trillion pesos. In the first quarter of 2025, provision for loan losses totaled 66 billion pesos, 62% or 25.3 billion pesos higher than the fourth quarter of 2024, given the loan growth experience in the quarter. On a yearly basis, provision for loan losses increased 124% or 36.6 billion pesos. In the quarter, net interest income totaled 579.2 billion pesos, 1 billion pesos higher than the fourth quarter of 2024, and 122% or 318 billion pesos higher year on year. This result is due to an 8% decrease in interest expense and a 3% decrease in interest income. In the quarter, a 21% decrease in income from interest on government securities stand up. In the first quarter of 2025, interest income totaled 866.7 billion pesos, 3% or 22.6 billion pesos lower than in the fourth quarter of 2024, and 22% or 247.8 billion pesos lower than in the first quarter of 2024. Income from interest on loans and other financing totaled 592.3 billion pesos, 9% or 49.6 billion pesos higher compared with the previous quarter, mainly due to an 18% increase in the average volume of private sector loans, which was partially offset by a 200 basis points decrease in the average lending rate. On a yearly basis, income from interest on loans decreased 18% or 132.2 billion pesos. In the first quarter of 2025, interest on loans represented 68% of total interest income. In the first quarter of 2025, income from government and private securities decreased 21% or 71.5 billion pesos quarter on quarter, mainly due to lower income from bonus del Tesoro Nacional and inflation-adjusted bonds. and increased 83% or 123 billion pesos compared with the same period of last year. This result is explained 93% by income from government and private securities at amortized cost, and the remaining 7% is explained by income from government securities valued at fair value rather than comprehensive income. In the first quarter of 2025, income from RIPOs totaled 864 million pesos, 79% or 382 million pesos higher than the previous quarter, and almost 100% or 236 billion pesos lower than a year ago. It is worth noting that as of July 22, 2024, the central bank decided to terminate RIPOs and replace them with LEFIs, which are now issued by the Treasury. In the first quarter of 2025, FX income totalled a 6.4 billion pesos gain, 95% or 118.7 billion pesos lower than a year ago. In the quarter, the Argentine peso depreciated 4% against the US dollar as the central bank for Argentina lowered the crawling peg from 2% per month to 1% per month, effective as of February 2025. In the first quarter of 2025, interest expense totaled 287.6 billion pesos, decreasing 8% or 23.5 billion pesos compared to the previous quarter, and 66% or 565.8 billion pesos lower compared to the first quarter of 2024. Within interest expenses, interest on deposits represent 95% of the bank's total interest expense, decreasing 8% or 22.3 billion pesos quarter on quarter due to a 274 basis points decrease in the average rate paid on deposits, while the average volume of private sector deposits increased 15%. On a yearly basis, interest on deposits decreased 67% or 547.9 billion pesos. In the first quarter of 2025, the bank's net interest margin, including FX, was 23.2%, lower than the 24.7% posted in the fourth quarter of 2024 and the 26.1% posted in the first quarter of 2024. In the quarter, fee income totaled 169.8 billion pesos, 1% or 943 million pesos lower than the fourth quarter of 2024. In the quarter, ATM transactions fees decreased 18% or 1.9 billion pesos and credit card fees decreased 2% or 635 million pesos, which were partially offset by a 3% or 1.7 billion pesos increase in fees charged on deposit accounts. On a yearly basis, fee income increased 29% or 38.5 billion pesos. In the first quarter of 2025, net income from financial assets and liabilities at fair value through profit or loss totaled 66.4 billion pesos gain, decreasing 55% or 80 billion pesos compared to the fourth quarter of 2024. This result is mainly due to lower income from government securities. On a yearly basis, net income from financial assets and liabilities at fair value through profit or loss decreased 97% or 1.9 trillion pesos. In the quarter, other operating income totaled 68.5 billion pesos, 29% or 15.5 billion pesos higher than the fourth quarter of 2024 due to higher other service-related fees, which increased 29% or 6.2 billion pesos, and higher income from credit and debit cards. On a yearly basis, other operating income decreased 2% or 1.4 billion pesos. In the first quarter of 2025, Banco Macro's administrative expenses plus employee benefits totaled 257 billion pesos, 10% or 27.3 pesos lower than the previous quarter, due to lower employees' benefits, which decreased 9%, and lower administrative expenses, which decreased 11%. On a yearly basis, administrative expenses plus employee benefits decreased 19% or 58.5 billion pesos. In the first quarter of 2025, deficiency ratio reached 38.2%, improving from the 39.4% posted in the fourth quarter of 2024 and deteriorating from the 14.7% posted a year ago. In the first quarter of 2025, expenses decreased 10%, while net interest income plus net fee income plus FX income and other operating income plus net income from financial assets for value of profit or loss decreased 7% compared to the fourth quarter of 2025. In the first quarter of 2025, the result from the net monetary position totaled 267.1 billion pesos loss, 11% or 27.1 billion pesos higher than the lows posted in the previous quarter, and 81% or 1.1 trillion pesos lower than the lows posted one year ago. Higher inflation was observed during the quarter, 54 basis points above the fourth quarter of 2024, up to 8.6% from 8% in the fourth quarter of 2024. In the first quarter of 2025, Banco Macro's effective income tax rate was 43% higher than the one registered in the fourth quarter of 2024. Further information is provided in note 21 to our financial statements. In terms of loan growth, the bank's total financing reached 7.7 trillion pesos, increasing 22% of 1.4 trillion pesos quarter on quarter, and increasing 97% of 3.8 trillion pesos year on year. In the first quarter of 2025, private sector loans increased 22% or 1.3 trillion pesos. On a yearly basis, private sector loans increased 94% or 3.6 trillion pesos. Within commercial loans, overdrafts and others stand out with a 107% or 628.7 billion pesos increase and a 16 or 188.4 billion pesos increase respectively. Within consumer lending, almost all product lines increased during the first quarter of 2025. Personal loans and credit card loans stand out with a 28% or 354.1 billion pesos increase and a 4% or 65.2 billion pesos increase, respectively. In the first quarter of 2025, peso financing increased 21% or 1 trillion pesos, where U.S. dollar financing increased 22% or 262 million dollars. It is important to mention that Banco Macro's market share over private sector loans as of March 2025 reached 9.5%. On the funding side, total deposits increased 5% or 485.4 billion pesos quarter-on-quarter, totaling 9.6 trillion pesos and increased 23% or 1.8 trillion pesos year-on-year. Private sector deposits increased 4% or 349.6 billion pesos quarter-on-quarter, but public sector deposits increased 20% or 136.6 billion pesos quarter-on-quarter. The increase in private sector deposits was led by time deposits, which increased 83% or 1.8 trillion pesos, while demand deposits decreased 22% or 1.2 trillion pesos quarter on quarter. Within private sector deposits, peso deposits increased 15% or 899.5 billion pesos, while U.S. dollar deposits decreased 17% or $497 million dollars. As of March 2025, Banco Macro's transactional accounts represented approximately 48% of total deposits. Banco Macro's market share over private deposits as of March 2025 totaled 7.8%. In terms of asset quality, Banco Macro's non-performing total financial ratio reached 1.44%. The coverage ratio measured as total allowances under expected credit losses over non-performing loans under central bank rules reached 163.34%. Consumer portfolio non-performing loans deteriorated 37 basis points up to 1.81% from 1.44% in the previous quarter, while commercial portfolio non-performing loans improved 22 basis points in the first quarter of 2025, down to 0.66% from 0.88% in the previous quarter. In terms of capitalization, Banco Macro accounted an excess capital of 3.2 trillion pesos, which represented a capital adequacy ratio of 34.3% and a tier one ratio of 33.6%. The bank's aim is to make the best use of this excess capital. The bank's liquidity remained more than appropriate. Liquid assets total deposit ratio reached 68%. Overall, we have accounted for another positive quarter. We continue showing a solid financial position. We keep a well-optimized deposit base. Asset quality remains under control and closed monitor. And we can keep on working to improve more our efficiency standards. At this time, we would like the questions that 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 the Q&A button at the bottom of the screen. Or to ask a question on audio, click on Raise Hand. You will then receive a request to activate your microphone. One moment please for the first question. Our first question comes from Brian Flores with Citi.