Grupo Financiero Galicia S.A.
Q2 2013 Earnings Call Transcript

Published:

  • Operator:
    Please standby, we are about to begin. Welcome to the Grupo Financiero Galicia Second Quarter 2013 Earnings Release Conference Call. This call is being recorded. At this time, I would like to turn the conference over to Mr. Pablo Firvida. Please go ahead, sir.
  • Pablo Firvida:
    Thank you, [Nikki]. Good morning, ladies and gentlemen. Welcome to the Grupo Financiero Galicia second quarter of fiscal year 2013 conference call. I’m Pablo Firvida, Head of Investor Relations. With me today are some members of the management of the Bank and Grupo. We want to thank you for attending this call. I will make a short introduction in order to explain the operating conditions under which the reported results have occurred and summarize the Bank’s performance during the quarter. Then we will take your questions. 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 laws. 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. According to private estimates, the Argentinean economy showed a strong recovery of 5.5% annual growth for the second quarter of 2013 as compared to the same period of 2012, and to a 0.1% year-over-year contraction in the first quarter of 2013. In the first two months of the second quarter, national fiscal revenues increased 33% year-over-year, while primary expenditures grew 35% year-over-year. The primary surplus amounted to 3.1 billion pesos and after interest payments of 6.8 billion pesos. The global balance for that period was 3.7 billion pesos deficit. Consumer prices expanded 2.3% in the quarter as measured by the official index and 4.9% according to private estimates, while annual inflation rates as of the end of June reached 10.5% on 23%, respectively. On the monetary front, the Argentine Central Bank expanded the monetary base by 5.3 billion pesos in the second quarter and the exchange rate increased from 5.08 pesos to 5.33 pesos per dollar, representing a depreciation of 4.8%. In June, the average rate on pesos-denominated private sector bank deposits for up to 59 days increased to 16% from 14.6% in March 2013, while the average rate on overdraft increased 344 basis points to 22.8%. Private sector deposits at the end of June amounted to 474 billion pesos growing 7.4% during the quarter with peso-denominated deposits increasing 8.1% and dollar denominated deposits increasing 0.2%. In the last 12 months, deposits in pesos grew 35% while deposits in dollars decreased 8%. In the quarter, transactional deposits increased 10.8% and time deposits 3.5%. At the end of the quarter, total loans for private sector amounted to 422 billion pesos, recording a 7.7% increase from March 2013 and a 32.6% inter-annual increase. Turning now to Grupo Financiero Galicia, net income for the quarter amounted to 361.8 million pesos, mainly due to profits from its interest in the Bank for 363.6 million pesos and Sudamericana Holding for 41.2 million pesos and due to a deferred tax adjustments for 15.1 million pesos, partially offset by the administrative and financial expenses for 59.2 million pesos. Banco Galicia recorded 383 million pesos net income in the quarter, 16.3% higher than the profit reported in the second quarter of fiscal year 2012, mainly as a result of the increase in the volume of activity with the private sector. The bank's credit exposure to private sector reached 57.9 billion pesos, up 41.1% during the last 12 months and deposits reached 44.6 billion pesos, up 33.3% during the same period. At the end of the quarter, the bank's estimated market share of loans to private sector was 9.10% growing 56 basis points from a year before and the market share of deposits from the private sector was 8.98% growing 28 basis points in the year. The net financial income increased 20% year-over-year due to higher volume and despite net 32 basis points decrease in the financial margin. And the average interest earning assets grew by 9.8 billion pesos year-over-year and its yield increased 179 basis points, where interest-bearing liabilities grew by 7.6 million pesos during the same period and its costs increased to 177 basis points. Net income from services increased 41.8% year-over-year explained by the growth in credit related fees, deposit accounts fees, insurance fees and fees related to credit cards. Provisions for loan losses for the quarter amounted to 434.7 million pesos, 24.7% higher than in the same quarter of the prior year, mainly focused in individual’s portfolio. As regards to asset quality, the NPL ratio ended the quarter at 3.93% growing 51 basis points year-over-year. The coverage of NPLs with allowances reached 104.5% down from 128.2% from a year before as the bank has been using the excess provisioning bill during 2011. Administrative expenses were 31.2% higher year-over-year with personal expenses growing 30.4% as a consequence of the salary increase agreements and the remaining administrative expenses grew 31.1% due to higher level of activity and to the cost increase of different services provided to the bank. As of June 30, 2013, the bank’s consolidated computable capital exceeded by 1.5 million pesos, the 4.9 million pesos minimum capital requirement or 30% and the total capital ratio reached 14.06% growing 105 basis points in the year. The Bank's liquid assets at the end of the quarter represented 53% of the Bank's transactional deposits and 26% of its total deposits, both ratios lower than a year ago as the credit demand grew more than the deposit base as in the whole financial statement. We are now ready to answer the questions that you may have. Thank you.
  • Operator:
    (Operator Instructions) And we’ll take our first question from Santiago Ruiz with Raymond James.
  • Santiago Ruiz:
    Hello Pablo. My question is how do you see the loan book evolving by the end of the year? Thank you.
  • Pablo Firvida:
    Okay. Hi Santiago. We are forecasting loans growing around 33% for all 2013. The breakdown between individuals and corporate is similar to the second quarter breakdown, so no changes.
  • Santiago Ruiz:
    Perfect. Thank you.
  • Pablo Firvida:
    You’re welcome.
  • Operator:
    And as I see, we have no further questions in the queue at this time.
  • Pablo Firvida:
    Okay. Thank you everybody for attending this call. If you have any questions, please do not hesitate to contact us. Good morning.
  • Operator:
    This concludes today's conference. We thank you for your participation.

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