Banco BBVA Argentina S.A.
Q4 2022 Earnings Call Transcript

Published: 7 Mar 2023

[Operator:]

Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to BBVA Argentina's Fourth Quarter 2022 Fiscal Year Results Conference Call. We would like to inform you that this event is being recorded. [Operator Instructions] First of all, let me point out that some of the statements made during this conference call may be forward-looking statements within the meaning of the Safe Harbor provisions found in Section 27A of the Securities Act of 1933 under U.S. federal securities law. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Additional information concerning these factors is contained in BBVA Argentina's annual report on Form 20-F for the fiscal year 2021 filed with the U.S. Securities and Exchange Commission. Today with us, we have Mrs. Carmen Morillo Arroyo, CFO; Mrs. Ines Lanusse, IRO; and Ms. Belén Fourcade, Investor Relations. Ms. Fourcade, you may begin your conference.

[Belén Fourcade:]

Good morning, and welcome to BBVA Argentina's fourth quarter and 2022 fiscal year results conference call. Today's webinar will be supported by a slide presentation available on our Investor Relations website on the Financial Information section. Speaking during today's call will be Ines Lanusse, our Investor Relations Officer, and Carmen Morillo Arroyo, our Chief Financial Officer, who will be available for the Q&A session. Please note that starting January 1, 2020, as per Central Bank regulations, we have begun reporting results applying hyperinflation accounting pursuant to IFRS rule IAS 29. For ease of comparability, 2021 and 2022 figures have been restated to reflect the accumulated effect of the inflation adjustment for each period through December 31, 2022. Now let me turn the call over to Ines.

[Ines Lanusse:]

Thank you, Belén, and thank you all of you for joining us today. As we are all aware, in spite of a less favorable context and a local environment defined by the difficulty of correcting current macroeconomic distortions and meeting the established objectives in the loan agreement reached with the IMF, economic activity has shown dynamism in 2022. According to BBVA Research evidence suggests that GDP will increase 5% in 2022. Nonetheless, the global context, high local inflation, financial volatility, uncertainty about economic policy and the limited leeway to adopt new stimulus measures legitimate the expectations of a contraction of GDP in 2023. Referring to BBVA Argentina's performance, a better operating income in 2022 was the product of an improvement in interest income and interest from government securities. BBVA Argentina has a proper responsibility with society, characteristic of the bank's business model, which encourages inclusion, financial education and supports scientific research and culture. The bank works with the highest integrity, long-term vision and best practices and is present through the BBVA Group in the main sustainability indexes. Moving into business dynamics. As you can see on Slide 3 of the webcast presentation, our service offering has evolved in such a way that by the end of December 2022, retail digital client penetration reached 62%, remaining stable from a year back, while that of retail mobile clients reached 55% from 53% at the same period of the last year. The response on the side of customers has been satisfactory, and we are convinced this is path to pursue in the aim of sustaining and expanding our competitive position in the financial system. Retail digital sales have increased from 80% in the fourth quarter of 2022 to 83.9% of units and represent 56.9% of the bank total sales measured in monetary value versus 52.9% in the fourth quarter of 2021. New customer acquisition through digital channels reached 72% in the fourth quarter of 2022 from 66% in the fourth quarter of 2021. The bank actively monitors its business, financial conditions and operating results in the aim of keeping a competitive position to face contextual changes. Moving to Slide 4, I will now comment on the bank's fourth quarter 2022 and 2022 fiscal year financial results. BBVA Argentina's fourth quarter 2022 net income was ARS17.1 billion, increasing 50.9% quarter-over-quarter. This implied a quarterly ROE of 19.4% and a quarterly ROA of 3.6%. Operating income in fourth quarter 2022 was ARS61.7 billion, 8.6% above the ARS56.8 billion recorded in the third quarter of 2022. This is mainly explained by greater interest income driven by a higher monetary policy rate compared to the previous quarter, which allowed net operating income to increase more than operating expenses. This effect was partially offset by an increase in

[Operator:]

[Operator Instructions] Our first question is from Rodrigo Nistor with Latin Securities.

[Rodrigo Nistor:]

I have a few questions about your outlook for this year on the recently announced debt exchange. So in 2022, BBVA posted an ROE of 17.5%. Do you believe this level of profitability is sustainable in the long run? And then if you could provide some insights into the outlook for the current year, specifically, what are your expectations for loan and deposit growth?

[Carmen Morillo Arroyo:]

Hi, Rodrigo. Nice talking to you. Okay. Yes, as you mentioned, we posted an ROE of 17.5%. We believe this ROE is sustainable basically because we see the monetary policy rate increasing, particularly in the second half of 2023. According to research from the actual 75%, it could reach 85% by the end of 2023. So the extra expansion in margins could help us sustain the ROE at the actual levels. Our macroeconomic projections, to give you an idea, are mainly for GDP. We are seeing the 2022 ending around 5.2% growth. But for 2023, we have seen a contraction of 1%. Inflation, which, as you know, ended around 95%, a little bit less. We are projecting for 2023, 105%. And the official FX, we are projecting for the end of 2023, ARS355, that is official FX. Regarding loan growth, we had -- we ended the year with a negative growth of only minus 3%. We're decreasing in real terms less than the system. The system decreased 29%. So we were able to gain market share in the loan book. And for 2023, we are projecting loan growth a little bit below inflation, around minus 2%, similar levels to what was this year. We are growing our loan book in the -- particularly in the commercial lines now with SMEs. For deposits, we ended 2022 with minus 4%, a little bit more than the system that has ended in minus 2%. And for 2023, we are projecting also negative real growth, but in line with loans, also minus 2%.

[Rodrigo Nistor:]

Okay. And then a quick follow-up on -- with regards to the recently announced debt exchange for Treasury bonds, what is your intention if you're planning to participate? Or how do you think of this exchange?

[Carmen Morillo Arroyo:]

Yes. So basically, we have an exposure of around ARS195 billion of Treasury exposure that excludes LELIQ. From that more or less 45% -- ARS45 billion are reserve requirements. So we have ARS150 billion less. From that number, from that figure, less -- that we would go into the voluntary extent with less than ARS50 billion. And that includes all the bonds that mature between today and June 30. Just to give you a reference, basically, you have to take that, that ARS195 billion, I mentioned represent more or less 50% of our equity and compared that to the system, that for the system, it represents 80%; and for the private, only 60%. The debt in pesos is only at 7% to [DDP] and that's only 7% of the debt in pesos is in hands of private holders. So that is basically our view. Now we are going to go with less than ARS50 billion into the voluntary exchange.

[Operator:]

[Operator Instructions] Showing no further questions, this concludes the question-and-answer session. At this time, I would like to turn the floor back to Mrs. Lanusse for any closing remarks.

[Ines Lanusse:]

Okay. Thank you for your time and let us know if you have further questions. Have a good day.

[Operator:]

Thank you. This concludes today's presentation. You may disconnect your line at this time, and have a nice day.