Banco Macro S.A.

Good morning and welcome to Banco Macro's second quarter 2026 earnings conference call. Thank you all for joining us today. Banco Macro's second quarter earnings release was distributed yesterday and it's available on our investor-related website. For this quarter's call, we are also introducing an earnings call presentation which will be accompanied today's remark. The presentation will be available on our website following the call. Please note that this call may include forward-looking statements, and please refer to our SEC filings for further information. All figures discussed today are in our certain cases and have been restated in terms of the measuring unit current at the end of the reporting period, in accordance with central market regulations. With that, let me briefly introduce today's speakers. We have with us today Juan Parma, Chief Executive Officer of Banco Macro, Jorge Scarinci, Chief Financial Officer of Banco Macro, and myself, Nicolas Torres, Investor Relations from Banco Macro. I will now briefly comment on the second quarter 2026 macroeconomic context before moving on to the bank's second quarter 2026 financial performance. Economic activity moderated after the first quarter, with April and May economic activity averaging 0.8% below the first quarter of 2026. Agriculture and mining offset weakness in manufacturing and commerce. Inflation declined throughout the quarter, from 2.6% in April to 1.9% in June. On breaks, tomorrow declined from 26.3% at the end of March to 22.7% at the end of June. On the exchange rate, the pressure depreciated 7.3% during the quarter, remaining stable throughout April and May, before weakening in June. On credit, growth remained muted. Finally, systematic quality remained under pressure. System NPLs increased from 7.7% in March to 7.7% in May, which is the latest available data. with household adequacy at 12.8% versus 3.5% for corporates, while corporates declined from 19.1% to 86.3%. Turning to our main figures, starting on the left, second quarter net income totaled 206.8 billion pesos, increasing 39% quarter-on-quarter and 4% year-on-year. The improvement was mainly driven by higher results from financial instruments at fair value through P&L Lower loan loss provisions and a smaller loss from the net monetary position. Net operating income before administrative expenses reached 1.29 trillion pesos, down 2% quarter-on-quarter and up 1% year-on-year. Operating income after administrative expenses was 603.8 billion pesos, down 1% quarter-on-quarter and up 1% year-on-year. Moving to the left-hand side, adjusted net income reached 221 billion pesos, inclined and adjusted annualized ROE of 14.3%. This excludes 14.2 billion pesos in after-tax restructuring expenses, in line with the restructuring impact that we saw in the first war. On efficiency, our efficiency ratio was 33.9%, stable year-on-year, as we continue to execute on the bank's efficiency platformation. Finally, our reported NPL ratio was 6.25% as of June 2026. This remained below the 7.7% report for the season as of May 2026. While our coverage ratio stood at 95.4% above the market's 86.3% of May. For moving on to the detailed financial performance, let's review the main highlights of the quarter. First, reverse double-digit net income growth, with net income up 39% quarter-on-quarter to 206.8 billion pesos. This result represents an annual ROE of 13.4%, while adjusted ROE is still at 14.3%, up 4.4 percentage points from the last quarter. Second, margins remain stable, net interest income remains stable, while deposits continue to represent 76% of liabilities, as the average cost of interest per annum is below 20%. Third, we continue executing on efficiency, including another 18 branch closures during the quarter. The asset tax and settlement charges remain almost unchanged quarter over quarter at 14 billion pesos. Fourth, asset quality continued to outperform the system, with NPLs at 6.25% below the system's 7.7%, and moreover, coverage stood at 95.4% above the system's 86.3%. Fifth, lending growth remained challenging. Total lending increased 3% quarter-on-quarter, supported by commercial growth, while on a yearly basis, total financing decreased 5%. Our private sector loan market share remained stable at 8.2%. And sixth, our balance sheets who remain strong, with a Tier 1 ratio of 28% and adequate liquidity, both fundamental for percentage growth and strategic opportunities. Now, let's turn to the quarter-to-quarter P&L variations breakdown. Net income increased 57 billion pesos quarter-to-quarter due to higher income from government securities for value of profit or loss, lower low-nose provisions, and lower loss from the net monetary position. Net Interest Income decreased 1% of 7.4 billion pesos per quarter, as lower funding costs mostly offset lower loan yields and average lending volumes. Income from securities decreased 18% of 30.5 billion pesos per quarter, In the first quarter of 2026, 71 billion pesos one-off result from the sale of palms was recorded. Net income decreased 2% of 4.6 billion pesos in the quarter as high amounts of funds and securities fees were offset by lower credit and debit card fees as well as lower covered services fees. Loan loss provisions decreased 24% or 60.7 billion pesos in the quarter, mainly reflecting lower commercial delinquency while keeping coverage at an adequate level. Personal and administrative expenses increased 26.6 billion pesos, led by personal and marketing and publicity costs, while achieving extraordinary efficiency. The other major positive driver of the quarter was the result from the net monetary position. The loss was 102.1 billion pesos smaller than the first quarter, reflecting the decline in quarterly inflation. Finally, income tax and other items contributed 7 billion pesos to the quarter-on-quarter valuations. and other operating expenses more than offset the higher income tax rate registered in the quarter. Altogether, these factors explain the increase in reported ROE from 10% in the first quarter to 13.4% in the second quarter. Slide 8 shows the impact of the reserving program on reported profitability. Reporting net income was $206.8 billion. Thank you very much. Moving to our second quarter 2026 assets and liabilities performance, you can see the evolution of our balance sheet mix and pricing of both assets and liabilities. On the asset side, LOMOS increased 3% at quarter end and represents 45% of total assets, while government securities make up 25% of our assets. Assets yielded a decline of 208 basis points quarter on quarter, from 44% to 41% in the second quarter, reflecting a 327 basis points decline in the average lending rate, while the average volume of dollars decreased 3%. On the liability side, deposits continued to represent 76% of dollar assets, 300 deposits reached 14.7 trillion pesos, down 1% quarter-on-quarter and up 4% year-on-year. Funding costs declined 550 basis points quarter-on-quarter from 24% to 19% due to a 310 basis points decline in the average rate paid on deposits while the average volume of deposits decreased 3%. Funding costs declined faster than the asset yield, driven by lower private sector pressure deposit rates. Turning to slide 10, the gross credit portfolio shown on the left received growth until 12.6 trillion pesos, moving from 3% to 1.4%. Commercial lending was the main driver of the increase, while consumer lending grew more moderately and represented 71% of the gross portfolio at quarter end. compared with 29% for commercial loans. Loans and other financing reached 11.7 trillion pesos with private sector financing up 3% for one quarter, including 2% growth in personal lending and 1% growth in U.S. dollar lending, while our private sector loan market share remains stable at 8.2%. On the right-hand side, net interest income reached 1.03 trillion pesos, stable compared with the first quarter and 11% above the second quarter of last year. Net interest margin, including FX, declined from 25% to 24%, mainly due to a lower FX contribution. Excluding FX, net interest margin increased 30 basis points from 23.8% in the first quarter to 23.5% in the second quarter. Moving on to asset quality, the left-hand chart shows our reported NPR ratio, increasing from 5.4% in the first quarter of 2026 to 6.25% in the second quarter. As we explained last quarter, the reported NPR ratio is affected by mandatory customer representation that takes into account a customer's behavior across the financial system. Our Stage 3 loans ratio increased 30 basis points from 3.8% to 4.1%. Our coverage ratio stood at 95.4%, just remaining above the 86.3% level for the system as of May 2026. It is important to mention that coverage of Stage 3 loans reached 148.8% in the second quarter. The right-hand chart shows the different trend by segments. Commercial NPLs improved to 0.9% from 1.3% in the first quarter and remained well below the system's average of 3.5%. Consumer NPLs increased to 8.4% from 6.9% in the last quarter, but also remained below the 12.8% reported from the system. Turning to the efficiency, operating expenses shown on the left, which forecast The chart on the right shows the continuous streamlining of our operating model. We ended the quarter with 402 branches, 18 fewer than in March, and 89 fewer than one year ago. and the client to 8,180 employees, down 1% one-on-quarter and 8% year-on-year. These actions are part of the reserving problem with the objective of increasing efficiency and agility by preserving the reach and service capabilities of our franchise. Slide 13 shows the capital and liquidity remaining key strengths. On the left, our Tier 1 capital ratio stood at 28% compared with an 11.5 regulatory requirement. On the right, the amount of deposit ratio increased to 79% while liquid assets remained equivalent to 74% for our composites. Our capital and liquidity positions, therefore, continue to provide significant capacity to support growth and elevate strategy opportunities. Before opening the call, For questions, I would like to spend a few minutes discussing our long-term transformation.

So I will now let Juan Martin Parma, our CEO, to comment on strategy. Good morning, everyone. Pleased to be here with you. I'm going to cover quickly a couple of slides of our trajectory to 2030, basically the execution of our strategic plan that we presented back in December last year. So as a recap, our purpose is to be the leading bank for a thriving Argentina recognized for excellence in customer service and value proposition with four strategic pillars and four enablers. The four strategic pillars are simplicity, which means providing customers with simple, intuitive, and increasingly digital day-to-day Thank you very much. Thank you very much. More cross-sell with future-looking value propositions. And finally, what has to do with how do we service our customers, which has to do with the application of data, technology, artificial intelligence in our distribution models while keeping the human touch that's digital plus human. And of course, as enablers, take data and AI, Our talent efficiency to fund our investment in strategic areas. We need to reduce our physical structure, our less value adding expenses to fund our investment into the growth areas. And finally, risk management to make our results sustainable into the future. The good thing is that this is our first year of the execution of the five-year plan and it's under execution. We are moving ahead with the transformation of the bank following these four strategic pillars. For example, and this is just an example, this is not taxative. It's just some examples of the things that the bank has deployed across this second quarter of the year. With a pillar of simplicity, for example, we've almost completed the deployment of the new retail banking app with unified digital onboarding processes for retail customers. We've launched extended hours to operate through the weekends for commercial customers. and much more on Primacy. We've launched a first mover loyalty program. We're the first bank using loyalty programs as the ones that airlines or some well-advanced fintechs and digital banks use globally. were the first bank in Argentina to do this. This will help. This will create a platform for us to move at scale customers from non-primary to primary. We are moving also with a relationship pricing facility to be sure that we price each customer according to their profitability potential, their risk, and their loyalty. We are moving ahead Thank you very much. a driver of future fee income growth and we are preparing for the launch of Banco Macro private bank proposition and hiring but also preparing our talent with a cutting edge innovative wealth private banking academy for our people finally on digital plus human another Thank you very much. No other bank is doing this at this scale in Argentina, so this is also giving us a competitive differentiation using and making the use of AI in banking in Argentina real. We continue with the transformation of the physical network. Thank you very much. So this is basically what is going on. There's much more under execution. We expect to continue bringing to the skulls quarter by quarter the progress that we are making on our way to 2030. Of course, there are some variables in the macroeconomic context and the political context that are not in our control. We will continue navigating The situation in this pre-electoral year, but we remain confident of the future of Argentina and that's why we will continue building, doing our job in building the bank of the future for a thriving Argentina. Thank you, Agustin.

Thank you, Juan. This concludes our prepared remarks. At this time, we would like to take the questions you may have. Operator, please open the line for Q&A.