Good morning, ladies and gentlemen. Welcome to Grupo Financiero Galicia 2nd Quarter 2025 Earnings Call. This conference is being recorded and the replay will be available at the company's website at gfgsa.com. We would like to inform that all attendees will only be listening to the conference during the presentation, and then we will start the question and answer section when further instructions will be provided. Some of the statements made during this conference call will be forward-looking statements within the meaning of the safe harbor provisions of the U.S. Federal Securities Law and are subject to risks and uncertainty that could cause actual results to differ materially from those expressed. Investors should be aware of events related to the macroeconomic scenario, the financial industry and other factors that could cause results to differ materially from those expressed in their respective forward-looking statements. Now I will turn the conference over to Mr. Pablo Firvida, Head of Investor Relations. You may begin your conference.

Thank you, Sofia. Good morning and welcome to this conference call. I will make a quick speech. I'm here with Gonzalo Fernandez-Covaro, CFO of Grupo and of the bank. Later, he will make some additional comments, and of course, we will be both available for Q&A. According to the Monthly Indicator for Economic Activity, EMAE, the Argentine economy recorded a 6.4% year-over-year increase during June, reaching an expansion of 6.2% during the first half of 2025. During the second quarter, the primary surplus reached 0.4% of GDP and the overall surplus was 0.2% of GDP, explained by primary revenues increasing 37.7% year-over-year, whereas primary spending rose 42.1%. During the first seven months of 2025, the primary balance stood at 1.1% of GDP, while the financial balance amounted to 0.3% of GDP. The National Consumer Price Index accumulated a 6% increase during the second quarter of 2025, and a 17.3% year-to-date increase as of July. Between May and July, monthly inflation slipped below 2% threshold. In July, monthly inflation stood at 1.9% and accumulating 36.6% in year-over-year terms. The monetary base increased by 6.6 trillion pesos in the quarter, recording an 84.2% increase in year-over-year terms. On April 11, 2025, the central bank implemented a foreign exchange band system within which the exchange rate may fluctuate freely. These bands were initially set between 1,000 peso per dollar and 1,400 peso per dollar and are adjusted monthly at a rate of minus 1% for the lower bound and plus 1% for the upper bound. The exchange rate averaged 1,181 peso per dollar in June 2025, a 23.5% devaluation in year-over-year terms. During the first half of 2025, the benchmark interest rate was set by the central bank. However, on July 10th, the Monetary Authority ceased offering LEFIs and the interest rate is currently determined endogenously by the market, in line with a regime focused on monetary aggregates. In June 2025, the average rate on PISO-denominated private sector time deposits for up to 59 days stood at 32.2%, 1.1 percentage points below the June 2024 average. Following the change in monetary policy, in mid-July, interest rates increased and ended the month at 37.4%. Private sector deposits in pesos averaged 89.1 trillion pesos in June, increasing by 10.6% during the quarter and 69.1% in the last 12 months. Time deposits in pesos rose 5.3% during the quarter and 93% in the year, while peso-denominated transactional deposits increased 16.4% during the second quarter and 49.6% in year-over-year times. Private sector dollar-denominated deposits amounted to $30.4 billion in June 2025, increasing 2.5% during the quarter and 71.8% in the last 12 months. Peso-denominated loans to the private sector averaged P72.3 trillion in June, showing a 19% quarterly increase and a 181.7% year-over-year expansion. Private sector dollar-denominated loans amounted to $15.8 billion, recording a 12.1% quarterly growth and a 147.3% annual increase. Turning now to Grupo Financiero Galicia, I would like to mention that at the end of June, we successfully finished the merger with Galicia Mas, former HSBC in Argentina. we unified the banking unit with Banco Galicia, the mutual fund management with Galicia Asset Management and the insurance companies with Galicia Seguros. The change for the clients was very smooth with no frictions and we grew around 2.5% in market share of both loans and deposits. For comparison purposes, figures for the first quarter of 2025 include the balances of the merged companies, while the figures of the second quarter of 2024 are not fully comparable as they do not include any HSBC figures. Going now to the results for the quarter, their income amounted to 173 billion pesos, 70% lower from the year-ago quarter. The result comes from profits from Banco Alicia for 98 billion pesos, from Naranja X for 32 billion pesos, from Galicia Asset Management for 27 billion pesos, and from Galicia Seguros for 13 billion pesos. This profit represented a 1.9% annualized return on average assets and a 9.5% return on average shareholders' equity. The result from Banco Galicia was negatively affected by the increase in the cost of risk associated with the growth of the loan book and the increase in the non-performing loans in the retail segment, particularly in personal loans and credit card financing. The net income for the quarter was 76% lower than in the same quarter of 2024, due to a 67% lower operating result. This was primarily a consequence of a 40% decrease of net operating income. As net interest income decreased 36%, net results from financial instruments were down 37%, and long-loss provisions increased 192%, which were partially offset by a 30% growth of net fee income. Average interest in assets reached 17.3 trillion pesos, 38% higher than in the same quarter of 2024, primarily due to 117% increase of the average portfolio of loans in pesos and a 262% higher dollar-denominated loan portfolio, partially offset by a 94% reduction in the average balance of other interest earning assets in pesos. In the same period, its yield decreased 35 percentage points, reaching 37.4%. Interest-bearing liabilities increased 74% from June 2024, amounting to 14.8 trillion pesos, primarily due to the increase of time deposits in pesos and of saving accounts in dollars. During this period, its cost decreased 15 percentage points to 15.6 percent. Net interest income decreased 36 percent when compared to the second quarter of 2024. This was the result of a 29 percent decrease in interest income because of a 62 percent lower interest on government securities and a 99 percent lower interest on repo transactions together with a 13% decrease in interest expenses due to a 6% lower interest on time deposits and a 27% lower interest on other deposits. Net fee income increased 30% from June 2024 due to a 51% higher income from credit card fees and a 28% from fees from on-deposits. Net income from financial instruments decreased 37% due to a 53% lower result from government securities. Gains from FX quotation difference were 12% lower from the year-ago quarter, including the results from foreign currency trading. It is worth to mention that during April, many regulations that limited the access to the FX market were removed, mainly for individuals, and thus FX trading increased significantly, growing 153% when compared to the first quarter of this year. Other operating income increased 150% in the quarter, mainly due to the 290% increase in other adjustments and interest on miscellaneous of receivables and of 145% in other operating income. Provision for loan losses increased 192% because of the growth of the financing portfolio and to an increase in delinquency that is circumscribed to the portfolio of personal loans and credit card financing to individuals. Personal expenses were 3% lower than a year before. It is worth to mention that in the first quarter we began to use the provision for restructuring expenses established in the fourth quarter of last year. Administrative expenses increased 35% due to a 77% increase of expenses for maintenance and repairment of goods and IT, and to a 62% increase of higher administrative services. Other operating expenses increased 13% due to a 12% higher turnover tax related to financial operations. Results from the monetary position decreased 56% year-over-year following the declining evolution of inflation. The income tax charge was 75% lower than in the year-ago quarter due to lower operating results. The bank's financing to the private sector reached 16.9 trillion pesos at the end of the quarter, up 123% in the last 12 months, with peso financing increasing 106% and dollar-denominated financing growing 181%. While by credit line, promissory notes increased 92%, credit card financing 66%, and personal loans 201%. Net exposure to the public sector decreased 33% year-over-year, primarily due to the 39% decrease in government securities adjusted by CPI at amortized costs, and to the 99% reduction of repo transactions with the central bank. This exposure represented 19% of total assets as of the end of the quarter compared to 42% of the year before. Deposits reached 19.9 trillion pesos, 72% higher than a year before, mainly due to a 162% increase in saving accounts in dollars, a 76% increase in time deposits in pesos, and a 47% increase in peso-denominated checking accounts. The bank's estimated market share of loans to the private sector was 14.5%, 260 basic points higher than at the end of a year-ago quarter, and the market share of deposits from the private sector was 16%, 550 basic points higher than in the same quarter of 2024. The bank's liquid assets represented 94.3% of transactional deposits and 65.2% of total deposits, compared to 147.7% and 101.5%, respectively, from a year before. As regards asset quality, the ratio of non-performing loans to total financing ended the quarter at 4.4%, recording a 240 basis points deterioration as compared to the 2% of the second quarter of the prior year. And as I mentioned before, the deterioration is limited to the personal loans and credit card financing portfolios. At the same time, the coverage with allowances reached 117.9%, down 42.4 percentage points from the 160.3% recorded a year ago. As of the end of June 2025, the bank's total regulatory capital ratio reached 23.7%, decreasing 510 basic points from the end of the same quarter of 2024, while the Tier 1 ratio was 23.2%, down 460 basic points during the same period. In summary, in a challenging and volatile political and macro environment, Grupo Financiero Galicia was able to keep liquidity, solvency, and profitability metrics at healthy levels, adapted its strategy for credit granting to the new context in order to prioritize lower risk segments and to revert the trend of deterioration in asset quality, and completed a very fast and successful integration with GaliciaMAS. Lastly, on August 6th, the Board of Directors of Banco Galicia elected Diego Rivas as CEO of the bank, while Fabian Kohn will remain as the CEO of Grupo Galicia. This will be implemented as of September 1st. Now I would like to give the word to Gonzalo Fernández Covaro for additional remarks.

Thanks, Pablo. Hi, everyone. Well, regarding how we see the rest of the year, as you know, government has tightened its monetary policy, increasing minimum liquidity requirements, and that has generated a significant increase in short-term interest rates, together with high volatility. The TAMAR rate has increased from 30% level to 60% levels in a very short period of time. These changes in interest rates are impacting the local financial system as our funding is very short term so the price is very fast but assets are taking more time to reprise as now we have more loans in our asset composition we are seeing a margin compression in the third quarter that is expected to be temporal and could finish after elections once the political side is clear but it's something that we cannot define when when they will this will stabilize and change again of course it is something we didn't expect a couple of months ago and we are still evaluating the impact as the rate is very volatile and changed significantly from one day to the other. And also, we have been having new regulations and changes in minimal liquidity requirements in a short period of time. On the other hand, as we have been explaining in prior calls, the portfolio performance of the consumer lending in Argentina has deteriorated. It's a market issue as people need to get used to manage credit in low inflation environment coming from negative interest rates to very positive interest rates. Also, the effect of having lower disposable income as utility prices went up. We are expecting stabilization of the NPLs on the consumer lending by the end of third quarter. We started to see a lower or a slower deterioration and start stabilization end of third quarter, beginning of the fourth quarter. As we also have told in prior calls, we have implemented many changes in our loan origination, in collections, in changing grade limits that are being successful but takes some time to fully impact the portfolios. Consider these effects. We expect our ROE to be in the range of 9% to 11% for 2025. to give also more context this guidance does not include any additional restructuring cost one time that we may have in the second half as we have been anticipating in all the calls and presentation we have implemented the voluntary redundancy program that we implemented to achieve the structure right sizing after the HSBC acquisition and it's been very successful As you can see in our press release, we already made a significant headcount reduction from first quarter to second quarter. If this continues, it could imply additional one-time expenses in the second half of the year as the provision that we booked at last year may not be enough. We expect that the impact could go up to two points of ROE that are not included in the guidance that I just mentioned if all eligible people sign up for the program. If this happens, of course, it's excellent news for us. we will achieve our right sizing by year end much better than what we expected at the beginning of the year with a one-time P&L impact that will not repeat in the future. So as we said, so that's something that we don't know if it will happen, but the pace that the program is happening may infer that that could happen. As we said in prior also calls, we consider this year a transition year where we finish the HABC integration, we right-size the structure, grow and stabilize portfolio performance, we can start 2026 with all our potential and deliver our sustainable ROEs. But that were the remarks I wanted to make, so open for questions if you want.

Yes, thank you Gonzalo. We are now ready to answer the questions that you may have.

Thank you. We are going to start the question and answer section for investors and analysts. If you wish to ask a question, please click on raise hand. If your question has already been answered, you can leave the queue by clicking on put hand down. Our first question comes from Brian Flores with Cici.

Hi, good morning, Gonzalo, Pablo. Thank you for the presentation. Gonzalo, a follow-up on the comments you made on the guidance. So, 9 to 11, is this representing any adjustments on the previously guided ranges for long growth and deposits? I think that's maybe the first question. If I may, I'll ask the second one after that one.

Yeah, I mean, long growth would be, we were talking about 50% before. We are now seeing it more closer to 40%. in part of lack of, with all this volatility, you know, demand is sort of accelerating plus the measures we took to, you know, stabilize consumer lending, also to reduce the mortgage space because of lack of securitization in the market.

So we see more large 30%, 40% growing in lending and deposits around 35 percent 30 35 percent you know perfect super clear and then wanted to ask you a bit on the on capital right because you saw an improvement a quarter over quarter just wanted to understand uh gonzalo where is this mostly come from because you your pace of growth is still very relevant um and then maybe connecting to that question it seems that for roe to improve going forward you might need to relever your your balance sheet so it's at some

point the discussion on paying more dividends in the cards going forward sorry pay more dividends in the car i couldn't understand that that last sentence i know that with the capital that you have uh is is a deep more dividends uh at some point uh to reduce capital you mean yes yes okay okay i mean they think hybrid and the the increase on capital ratio is just the merger of the two banks i mean before as you see that the the ratio that we have last quarter was just banco galicia a we didn't adjust it we didn't restate that in the press release because a as is a regulatory metric we didn't want to you know combine something that was not presented for regulatory purposes so So when combined the two banks, the new capital ratio is close to 24. I think we also mentioned that in prior course that our estimation for the capital ratio after integration was going to be 24. Galicia-MAS, HABC has a stronger, even stronger capital ratio. So after the merger, that's a new capital ratio. And the reason of the jump is that before in first quarter, it was just Banco-Galicia, the one that you have there in the press release. Talking about the future, I mean, about, yeah, I mean, pivoting policy is something that we always analyze and assess, and we will do that after closer to year-end for next year. We believe that there are still a lot of efficiencies that we can make that can benefit our ROE. I mean, even those margins may go down if Argentina stabilize, but NPL should also stabilize at lower levels. And our expenses, I mean, we still, we are seeing that this year, if everything goes as expected, we may only take from the former HBC a third of the cost for next year. I mean, next year, our run rate next year will be using only 30% of what HABC used to have on a yearly basis. So, that's another thing that is not counted this year because all the savings are being done on a monthly basis and most of them may be in the second half of the year. So we want to find the best, you know, balance between net income growth and dividends also considering that we believe Argentina has a lot of potential for lending growth and we want to have the sufficient capital to be able to face that growth. no so but that is something that of course we will continue looking at and and and change it if we think that is the best way to to proceed no thank you gonzalo that was super helpful on if i may just very quickly on this hsbc integration you mentioned two points of roe would still be pending so it is this if i understand it correctly not considered within guidance but could be um let's say an upside uh what i said is is again it's up to because we don't know but if we if if we have all the eligible people sign in to the program that could generate one-time expense that a could be up to two points of roe on a negative side because it will be an expense but again it's a one-timer so it's something that i wouldn't consider recurring income will be in the reported pnl but if it happens again but uh but not will not be recurring for future years but we will have all the savings for future years so if it happens it's a negative one because it's an additional expense one time super clear thank you next question from Yurif Ednandes with JP Morgan.

Thank you, Gonçalo, Pablo, Etienne, everybody. I would like to explore a little bit more the asset quality discussion here because given there is very low leverage, right? Argentina is still a growth story, a penetration on credit GDP. It calls my attention, like the pace of the worsening in the retail NPL. I know this is industry. It was clear on the explanation, like on the disposable income, or people getting used to the real rates. But still, I struggle a little bit. So if you can comment a little bit what you saw, like if there is any kind of income classes that are suffering the most, if you are, you know, I don't know, shifting the strategy to maybe, I don't know, ask for more collateral. I know it's credit card and personal loan, so this can be tricky. But my point of concern here is that we have challenges on the funding side, as you mentioned. And on the asset quality side, if you slow down personal loans everybody will try to move to the commercial side right so you can have like an additional pressure on margins because like commercial is the maybe the only healthy loan so if you can explain a little bit an outlook the products the clients what you can do to improve npls i think that would be important and also comment on coverage the coverage ratio are getting below 120 yeah i think it's overall a low number so if you can comment a little bit on How should we think about the NPL coverage ratio going forward? I think it can be important. Thank you, guys.

I mean, yeah, talking about NPLs, I mean, the main impact, as you said, is credit cards and personal loans. We have grown personal loans faster than the market last, between March 24 to March 25, faster than the market, and that's of course is the product with higher npls even though credit cards has deteriorated but that personal loans is worst um after march 25 last march we started making changes to origination policy that we are still we are still refining but that that generated the the the pace of uh of deterioration because of course in order to grow a capture market share and capture argentina opportunity, we went to segments that are a bit riskier than the ones that we were going in the past. That's something that we changed. But the mix of the growth was a bit worse than prior years because there was lack of demand, et cetera. So this year, this 12 months between March 24 to March 25, we saw a higher composition of the mix of, let's say, lower segments or a bit riskier segments. That's something that we already changed and we are focusing more in, we already make changes to scorecard and limits in credit cards, but in personal loss in scorecards and now focusing more in more safer segments, which are still providing healthier volume. I mean, even though we are disaccelerating the volume, but not a, we are finding that But with better risks, we still can disburse loans without going to the riskier segment. So that's our strategy now. I mean, of course, we will go to all the segments, but with a different strategy where, you know, start with very, very low disbursements, wait, don't have customers, new customers that just join the bank if they are higher risks to get a loan. So let's have them as clients for a while. So those are all the strategies that we are putting there. But again, I mean, we still see our retail banking growing with better segments without sacrificing much the volume, let's say. Of course, that commercial side and mainly SMEs, it's a focus that we are increasing. Of course, we're cautious because depending on how the economy evolves, that would also be another sector that may have problems depending which sector you are but it's it's something that that we started to focus um if argentina stabilized after the the elections and we start see growth i mean activity growth as we have been seeing the last month we believe that in the commercial lending and also not just not corporates but also coming to medium corporates there is room for growth and for for everyone i mean as you said lending is has a very low penetration in argentina so we believe that that we can uh grow there without a lot of margin compression because there are still a lot of demand non-satisfied this couple of months with the race volatility and and you know pre-elections it's it's kind of uh something that that we need to put away but after that after elections uh with markets being leaving aside the political factor we believe that and that then the company will start thinking doing business again and and we can benefit all the financial system can benefit from that and we may have a space to grow also in the commercial segment without sacrificing much much margins. We believe that it's key for us to stabilize the consumer NPLs and that's something that we are focusing on and we are seeing the first signs. Of course, we still have a stock because first was the personal lending then we started making personal lending but then credit cards came after so that's why we're seeing a bit of the delay of the stabilization and credit cards were not new customers. was the old customers that started to have problems because of what we mentioned. So the approach was different, was, okay, let's reduce limits to existing customers where we see more risk. Let's increase focus in collections and refinancing programs, et cetera. And that's what we are doing also. so i would say that's a that's how we see it and in terms of i mean we are expecting to end i mean of research over as the merger with hc also makes some a because we need to do some a recalibration between the two you know a situation for the same customer sometimes we have shared customers that's how one bank was performing well and the other has a problem so So now we need to align that and that has an impact also and impacted also the COVEDAS ratio. We see for ERN around, yeah, I would say a bit above 120, between 120 and 130%. That's what we see for ERN more or less.

No, super clear, Gonzalo. So just making sure I got everything worsening. You had like higher appetite. You're growing faster. Yes, personal loans, a little bit of new customers that maybe they were riskier. Credit cards, a little bit of everything. You are reducing your limits, improving collections and coverage 120, 130. Just on the credit, a debate we had in other markets was regarding principality, right? Like, oh, which is the, let's say, the favorite bank of the clients? And I guess in Argentina, people discuss a lot Mercado Pago, Mercado Livre and, you know, like some fintechs. Do you have any perceptions that principality matters at some degree here or not really? It's really a matter of people, you know, having disposable income and, you know, maybe higher limits out of the blue. And now people are not behaving the way you thought they would behave. So just trying to understand the principality, if principality could be a debate also happening here in Argentina.

I would say that principality, yeah, of course, is something that is important. I don't think that that impacts NPLs or not, or performance. I don't know if that was, for me, they are not related. It's more on a profitability thing. We all want to have the principality of the customer because they do more business with us, regardless their performance. I think that the customer that is not performing, it's not because it has not the principality with you, it's just because they're having problems. in argentina again it's it's something that that we all look at but a customer got used to get many banks you know in their in their with all the promotions in the past after after you know 2001 and discounts where customers used to open a lot of credit cards because they have different discounts in one on mondays with one bank on tuesday with the other so they got used to get many banks many accounts or many credit cards and now mercado pago it's it's also another another competitor there so it's something that is not as easy to to achieve for for banks but it's something that for us is very important so that's why we what we call the everyday banking no we want to be the the everyday bank for our customers so we invest in the in the app for example giving to them all the functionalities for them to do. We, you know, for example, now with dollars, we started paying interest in the dollar deposit account, so they bank in dollars with us. We have the best market share in foreign effects, buying and sell on dollars for people, for consumers now that the effect restrictions have gone away for people. So So it's important for us, but mainly considered from a profitability perspective, and we do a lot of things to get it. In Argentina, it's something that, from what I said, sometimes it's not that easy because customers are used to have many banks in their wallet.

No, perfect. That's super clear. Thank you very much, Gonzalo and Pablo. Thank you.

Our next question comes from Pedro Leduc with Itaubba.

Thanks so much, guys, for the call and taking the question. Very quick follow-up on the NPLs. When you say stabilize, you mean like stabilize, rise less, or be flat, or maybe falling towards the end of 3Q or 4Q. That's just a quick follow-up. And then the real question is on financial margins. We saw it actually increasing a bit Q&Q. And a lot of it is coming from funding cost efficiency that we're seeing. But I also want to look ahead a bit. on the NIMS. We're seeing the government issue higher rate bonds. We're seeing you probably price up a little bit more and these funding savings seem sustainable. So I want to maybe get a sense from you if we can expect financial margins now growing in the second half of the year after slightly upticking in 2Q. Thank you.

Yeah, no, thank you. So talking NPS, We see a slight increase and stabilize at the end of the third quarter, but still a slight increase in the third quarter with a stabilization by the end of the quarter. Talking about margins, margins, yeah, we have a healthy second quarter, better funding costs, also better government bonds performance yielding in the inflation-linked bonds that we have because of the spike in inflation. I think we have, it was in March, but we got two months lag in the bond, so that's affected the second quarter for the market. I mean, I would say we will have a third quarter, which kind of something, an outlier on the year, I think is what I tried to explain at the beginning. I mean, all these volatility interest rates and increasing funding costs will be negative for the system, I would say, in the third quarter. so we will have a deterioration in the third quarter of the margins which due to this you know interest rate volatility and interest rate in huge increase i mean as i as i said tamar rate was 30 percent and now it's 60 percent in a month and that increasing our short-term funding which is as you know banks in argentina the our funding is is really short term time deposits are 30 days maximum in general in average and the assets now that we are having more lending takes a bit more to reprise so for the short term third quarter we will see a margin deterioration because of the funding cost increase for this volatility this this new monetary policy of the government try to tighten and take pesos out of the of the market um you know by increasing minimal liquidity requirements and all the things that that that you you know that are happening so that will be negative for the third quarter and then we expect of course after a elections once political side gets a out of the way we we believe that that things should stabilize again and embrace go back to the what we used to have in the second quarter and we can go back to those margins the ones that we had in the second quarter when that will happen is very difficult because i mean we are in the middle of volatility we you know political noise we all expect that and with very very high real interest rates i mean i would say record interest real interest rates meaning about inflation so that's something that some point should should stabilize we expect that this to be after the elections. It's very difficult to predict when exactly, but according to the results of the elections, that should stabilize. But third quarter will be worse than, I just explained, then we should come back to second quarter levels, but at some point in the fourth quarter, I would say.

That's very clear. Thanks for being so transparent. time.

Next question from Alonso Aremburu with BTG.

Yes, hi, good morning and thank you for the call. Yeah, I was going to ask also about margins, maybe if you can provide what is the level of impact you're seeing in 3Q. Is it 100 basis points, 200 basis points? I mean, how much of an impact do you think you can have because of this higher funding cost? And related to monetary policy, Obviously, I think there's little visibility, but banks have met with the central bank. Do you think the central bank is receptive maybe to some comments from the banks? Is there some leeway to potentially flexibilize some of these monetary policies to provide a little bit more liquidity to the banks in the short term? Thank you.

No, thank you. So, talking about impacts, it's really not that easy to calculate because we are having the one-day rate is changing every day with big swings from one day to the other. So, we are trying to capture that, but it could be a couple of hundred basis points. But again, we also don't know exactly how long, no? So, this is August, but still need to see how it evolves. I mean, we always have conversations with Central Bank and they are always very receptive of our comments and we explain the situation, they understand it and we don't know what they are going to do with future regulations. This is what we have and we will, of course, comply with all regulations. So they know the situation, they understand it, but they also have a superior goal which is, you know, inflation and economy stabilization. So I can answer what they're going to do. What I can say is that we explain the situation that, of course, they understand it.

Okay, great. Maybe a follow-up on asset quality and on cost of risk. I mean, what do you think would be your level of cost of risk? So 3Q should be similar to 2Q, or do you expect some improvement, or not yet until the fourth quarter?

No, I would say 3Q is a bit higher than 2Q, sorry. total portfolio, I would say a bit higher than 2Q, and then stabilizing closer, I would say, last four, today's 4.4, so we could say, cost of risk cost of risk we are in the range of 8% we believe that of the second half slightly higher than we are seeing now not dramatically higher, slightly higher

great, thank you very much next question from Marina Varadji with 9fin hi, thanks for taking my question So, I wanted to go back to NPLs. You provided some color on the consumer portfolio, but I was wondering about the corporate segment. Do you see any deterioration there? And also a second question. What do you think will be the level by your end? Thank you.

I mean, in the corporate segment, we are not seeing really, really big changes. I mean, we are coming at 0.7% today, and we see somewhere the same amount, but slightly up between 0.7% to 1%, but really at very low levels. SMEs also I mean as the lending growth some slight increase but nothing I mean normal behavior due to the increasing lending but not a systemic problem as we are seeing in the consumer and the other question was where do you see the level of NPLs by the end of the year? The level of NPLs Yeah, closer to total book, closer to 5%.

Okay, thank you. Very clear.

Next question from George Birch with Argentin Advisors.

Hello there. Thanks for the question. Very quick one, just again on the NPLs. I think you mentioned that there was a trend in terms of NPL formation from new customers. Can you just confirm that? And also, in terms of when the bulk of these MPLs were originated, are these mostly loans that were originated last year when you had that above average loans growth? Or are we looking at maturities dating back to before then? Roughly, you know, if you could describe the split, that would be very helpful. Thank you.

I mean, we couldn't hear very well, so I will answer what I heard, and then otherwise you can repeat it. I would say that for the personal lending, the worst bulk came between March 24 to March 25, which is where we grew faster. And then we started taking actions on the credit card portfolio, which is not new customer, that was existing customers that started to have performance issues we start seeing that more first quarter of this year and second quarter but those are more again existing customers start struggling because of you know less disposable income etc so it's different the answer you talking up if we talk about personal loans and credit cards uh and yeah i don't know there was no question but i couldn't hear that that's great thank you thank you next question

from santiago petri with franklin templeton yes hi hi guys thanks thanks for the the presentation i just want to understand the the way of reasoning here because it gives me the impression from your comments that you expect that the volatility in rates is going to diminish once the uncertainty of elections is over. However, I have the impression that the volatility in race was well before of the political developments and the political events. So I just want to get a clarification if you are allowed to give so on these developments. Thank you.

Well, I mean, this of course we are doing futurology so if that word exists so it's you know it's just it's an opinion i mean i would say that yeah i understand this started a bit before but in an election in an election year uh i mean what we believe is that this kind of positive real interest rates meaning above inflation very very high compared with the inflation we have cannot stay here from from much long because if we start producing you know impacts in the in the economy so meaning companies or borrowers etc so and and and we so our expectation again talking about our research department is more or less after elections if the elections is what market expects that could help stabilizing the market and also you know reduce it to go back to to trust more in the peso etc because it means that that the government will be able to make all the changes that they want and i mean that that that's what we expect but again this is i mean this can change from one to the other and it's It's something, it's the base case we have built with our research department, but it's not nothing that we can assure.

Sorry, Gonzalo. Hi, Santiago. I would like to add that once both elections are over, the government, meaning the Ministry of Economy and the Central Bank, will be more perhaps receptive to change regulations. Because right now, they want to get to the elections with stability in terms of inflation, effects, volatility. So, there could be some changes after that. Okay, thanks.

I understand. Thanks.

Thank you. The question and answer section is over. We would like to hand the floor back to Mr. Pablo Firvida for the company's final remarks.

Okay, thank you. Thank you all for attending this call. if you have any further questions, please do not hesitate to contact us. Good morning. Bye-bye. Bye-bye.

Grupo Financiero Galicia Conference is now closed. We thank you for your participation and wish you a nice day.