Speaker 2
Thank you, Belen, and thank you all for joining us today. In the third quarter of 2024, the significant fiscal consolidation and the relative exchange rate stability have been contributing to our process of moderation of inflation throughout 2024. Furthermore, after a sharp contraction in the first half of the year, there are incipient signs of recovery in economic activity, mostly in line with BBVA research expectations, which continues to forecast a 4% decline in GDP in 2024, followed by an expansion of 6% in 2025. As for inflation, expectations of further reduction have improved; 125% inflation is estimated by year-end versus the 211% in the same period of 2023. BBVA research continues to expect, within its base scenario, gradual easing of FX market restrictions during the fourth quarter of 2024 and in the third quarter of 2025, combined with the final decline in the PAIS tax announced for December. Additionally, some signs of recovery have started to appear, such as industrial activity, which has increased 12% between June and September of 2024. Now, moving into business dynamics, as you can see on Slide 3 of our webcast presentation, our service offering has evolved in such a way that by the end of September 2024, new customer acquisition through digital channels reached 83% versus 80% a year ago. The response from customers has been satisfactory, and we are convinced this is the path to pursue in the aim of sustaining and expanding our competitive position in the financial system. Retail digital sales measured in units reached 92.6% in the third quarter of 2024, representing 73.7% of the bank's total sales measured in monetary value. Moving to Slide 4, I will now comment on the bank's third quarter 2024 financial results. BBVA Argentina's inflation adjusted net income in the third quarter of 2024 was ARS99.2 billion, decreasing 21.6% quarter-over-quarter. This implied a quarterly ROE of 16.9% and quarterly ROA of 2.9%. The 41.3% fall in the quarterly operating results was explained by a lower operating income, mainly due to lower interest income, especially due to lower average market rates as a result of a lower average monetary policy rate; lower interest from CPI-linked bonds; and lower FX results, mainly due to the dual bond having matured. This was positively offset by a decrease in operating expenses, mostly driven by lower other operating expenses mainly due to lower turnover tax and less personal benefits. Net income for the period was highly impacted by income from net monetary position, although with lower impact than the prior quarter. The income from the net monetary position line recorded a 43.9% lower loss than the previous quarter, positively impacting the quarter-over-quarter net income comparison. Turning into the P&L lines, on Slide 5, net interest income in the third quarter of 2024 was ARS460.3 billion, falling 39.5% quarter-over-quarter. In the third quarter of 2024, interest income decreased more than interest expenses, both in monetary and percentage terms. The former fall was due to a lower income from REPOs and CPI-linked bonds due to lower inflation, additionally driven by a fall in income from loans. Expenses are explained by lower expenses on CER/UVA clause adjustments and interest on investment accounts. In the third quarter of 2024, interest income totaled ARS760.2 billion, falling 30.3% compared to the previous quarter. The quarterly decrease is mainly driven by lower income from REPOs and lower income from loans, both explained by a decline in the quarterly average monetary policy rate. Also, the decline in quarterly inflation caused a decrease in income from CPI-linked bonds. Interest expenses totaled ARS299.9 billion, showing a decrease of 9.3% quarter-over-quarter. The quarterly decline is attributed to lower investment account expenses and lower CER/UVA adjusted expenses, the latter due to lower quarterly inflation. Interest from time deposits explained 71% of interest expenses versus 64.6% the previous quarter. Net fee income as of the third quarter of 2024 totaled ARS71.1 billion, increasing by 7.9% quarter-over-quarter. The increase is explained by an increase in income and a greater fall in expenses in monetary terms. In the third quarter of 2024, fee income totaled ARS133.2 billion, increasing 1% quarter-over-quarter. The improvement in fee income is mainly explained by greater fee income linked to liabilities; higher other fees, mainly account maintenance and bundles; and fees linked to securities. These improvements are mainly explained by price updates and more activity. On the side of fee expenses, these totaled ARS62.1 billion, falling 6% quarter-over-quarter, explained by lower expenses on fees and promotions with debit and credit cards in addition to lower expenses from foreign trade transactions. In the third quarter of 2024, loan loss allowances decreased by 11.5%, in line with the growth in real time of the performing loan portfolio. During the third quarter of 2024, total operating expenses were ARS316.6 billion, decreasing 17.6% quarter-over-quarter in real terms, of which 32% were personnel benefits cost, consistent with past quarters. Personnel benefits decreased by 18.1% quarter-over-quarter despite wages increasing in line with inflation. As of the third quarter of 2024, administrative expenses fell by 6.1% quarter-over-quarter. This is mainly explained by lower rent, taxes, and software costs. Rent and software costs are related to less expense on software licenses and services contracted with the parent company. The tax line fell due to a contrast with the second quarter of 2024, in which income tax was paid in relation to the banking transaction tax, primarily as a result of dividend distribution. The quarterly efficiency ratio as of the third quarter of 2024 was 59.2%, above the 55.3% reported in the second quarter of 2024. Despite expenses decreasing, income considering monetary position results had a greater fall, especially due to a decrease in net interest income. In terms of activity, on Slide 6 private sector loans as of the third quarter of 2024 totaled ARS5.5 trillion, increasing 26.5% quarter-over-quarter in real terms. Loans to the private sector in pesos increased by 23% in the third quarter of 2024. During the quarter, growth was especially driven by a 48% increase in discounted instruments; followed by a 51% increase in consumer loans; a 14.2% increase in credit cards; and an increase in other loans, mainly commercial loans and floorplan. In all cases, the increase is boosted by genuine growth in real terms of the portfolio, leveraged on the lower market interest rate and greater commercial efforts. Loans to the private sector denominated in foreign currency increased by 50%. The quarterly increase is mainly explained by a 15.8% growth in financing and prefinancing of exports and a 270.3% growth in discounted instruments. During the quarter, the commercial portfolio grew by 30.2% and the retail portfolio increased by 22.6%. The commercial portfolio represents 55.7% of the total portfolio compared to 47.3% a year ago. As observed in previous quarters, the loan portfolio was impacted by the effect of inflation during the third quarter of 2024, which reached 12.1%. In nominal terms, BBVA Argentina managed to increase the retail, commercial, and total loan portfolio by 38.6%, 44.5%, and 42.1%, respectively, during the quarter, surpassing quarterly inflation levels in all cases. As of the third quarter of 2024, the total loans and other financing over deposits ratio was 64.9%, below the 67% recorded in the second quarter of 2024 and above the 53.6% in the third quarter of 2023. Total loans participation over total assets reached 43% compared to 40% in the second quarter of 2024 and 35% in the third quarter of 2023, evidencing lower exposure to the public sector, in line with real loan growth demand. BBVA's Argentina consolidated market share of private sector loans reached 10.35% as of the third quarter of 2024, improving from 9.35% a year ago and sustaining double-digit figures. As of the third quarter of 2024, the asset quality ratio maintains a very good performance at 1.18%, with nonperforming loans growing in line with the total portfolio. On the funding side, as of the third quarter of 2024, total deposits reached ARS8.5 trillion, increasing 30.9% quarter-over-quarter, with the bank's consolidated market share of private deposits reaching 8.67%. Private nonfinancial sector deposits in pesos totaled ARS5.1 trillion, increasing 12.4% compared to the second quarter of 2024. The quarterly change is mainly affected by a 34.8% increase in time deposits and a 13.9% increase in checking accounts, offset by a 45.2% fall in investment accounts and a 7.3% fall in saving accounts. Private nonfinancial sector deposits in foreign currency expressed in pesos increased 84.9% quarter-over-quarter, mainly explained by an 88.6% increase in saving accounts directly affected by the fiscal amnesty promoted by the government. BBVA Argentina continues to show strong solvency indicators in the third quarter of 2024. The capital ratio reached 22.2%. Capital excess over regulatory requirements reached 172.4%. It is important to mention that the capital ratio was highly impacted in the second quarter of 2024 by dividend distribution, which was paid in three consecutive installments, in cash or in kind, for ARS264.2 billion expressed in December 31, 2023 currency, and that pursuant to Central Bank regulation, it has been adjusted for inflation as of the day of each payment. Furthermore, the fall in the capital ratio this quarter is particularly explained by the 14.9% increase in risk-weighted assets over the increase in ordinary capital level 1 of 1.1%. The increase in risk-weighted assets is linked to the real growth in the loan portfolio in line with the increase in market risk requirements. As of the third quarter of 2024, total public sector exposure, excluding the Central Bank, totaled ARS2.6 trillion, decreasing 6.4%. The quarterly decrease is mainly explained by the maturity of the dual bonds on June 30, 2024. As of July 2024, the market reference rate will be that of the new instrument created by the treasury, LeFis, which the bank ended the quarter with no position. As a result of the monetary policy adopted by the treasury and the Central Bank, Central Bank exposure fell by 87.3%, mainly due to the removal of REPOs with the Central Bank from the market. Exposure to the public sector, excluding Central Bank exposure, represents 21% of total assets, below the 26.3% in the second quarter of 2024, in line with real loan growth demand. In the quarter, liquid assets were ARS5.7 trillion, increasing 26.6% quarter-over-quarter, mainly driven by an increase in cash and deposits in banks, especially due to the fiscal amnesty. As of September 2024, the bank issued corporate bonds for ARS24.5 billion at face value, at BADLAR plus 5% rate, maturing in June 2025, with quarterly interest payments. BBVA Argentina's last corporate bond issuance was in 2019. This concludes our prepared remarks. We will now take your questions. Operator, please open the line for questions.
