Macro Bank Q3 2024 Earnings Call Transcript

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December 2, 2024

Key Takeaways

  • Banco Macro reported Q3 2024 net income of ARS 91.3 billion, up 293% year-over-year and recovering from a prior-quarter loss.
  • Net interest income rose 167% quarter-over-quarter to ARS 569.1 billion, driven by a 23% increase in interest income and a 40% reduction in interest expenses.
  • The bank incurred a ARS 50 billion loss from exercising put options on inflation-adjusted securities, though it still holds options on the remaining bonds.
  • Provision for loan losses climbed 24% quarter-over-quarter and 53% year-over-year to ARS 23 billion, reflecting higher credit costs.
  • Total loans expanded 17% quarter-over-quarter and 28% year-over-year to ARS 4.55 trillion, underpinning guidance for real loan growth of 25–35% in 2024 and 40% in 2025.
AI Generated. May Contain Errors.
Earnings Conference Call
Macro Bank Q3 2024
00:00 / 00:00

There are 7 speakers on the call.

Operator

Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to Banco Macro's Third Quarter 2024 Earnings Conference Call. We would like to inform you that the Q3 2024 press release is available to download at the Investor Relations website at bancomacro@www.macro.com.arrelacionesinvestares. Also, this event is being recorded and all participants will be in listen only mode during the company's presentation. After the company's remarks are completed, there will be a question and answer session.

Operator

At that time, further instructions will be given. It is now my pleasure to introduce our speakers. Joining us from Argentina are Mr. Jorge Scarinci and Chief Financial Officer as well as Mr. Nicolas Torres, IR.

Operator

Now I will turn the conference over to Mr. Nicolas Torres. You may begin your conference.

Speaker 1

Thanks, Guaya. Good morning, and welcome to Banco Macro's Q3 2024 Conference Call. Any comments we may make today may include forward looking statements, which are subject to various conditions and these are outlined in our 20 F, which was filed to the SEC and is available at our website. Q3 2024 press release was distributed last Wednesday and is available at our website. All figures are in Argentine pesos and have been restated in terms of the measured in new current at the end of the reporting period.

Speaker 1

As of 2020, the bank began reporting results applying hyperinflation accounting in accordance with IFRS IAS 29 as established by the Central Bank. For ease of comparison, figures of previous quarters have been restated applying IAS 29 to reflect the accumulated effect of the inflation adjustment for each period through September 30, 2024. I will now briefly comment on the bank's Q3 2024 financial results. In the Q3 of 2024, Banco Macro's net income totaled MXN 91,300,000,000. This result was 293 percent or MXN 68,100,000,000 higher than in the third quarter of 2023.

Speaker 1

As of the Q3 of 2024, the accumulated annualized return on average equity and the accumulated annualized return on average assets were 6.8% and 2.1% respectively. In the Q3 of 2024, operating income before general, administrative and personnel expenses totaled ARS 829,200,000,000, 61 percent or ARS 313,000,000 higher than in the Q2 of 2024 and 25 percent or MXN272,300,000,000 lower than the same period of last year. Net operating income before general, administrative and personnel expenses in the Q3 of 2024 was ARS 403,700,000,000, increasing 2 63% or ARS 299,600,000,000 when compared to the previous quarter and 44 percent or ARS 322 500,000,000 lower on a yearly basis. Banco Macro's 3rd quarter 2024 net income totaled ARS 91,300,000,000 recovering from the loss posted in the previous quarter and 2 93 percent or 68 point 1,000,000,000 pesos higher than in the Q3 of 2023. This result is mainly due to higher net interest income and lower and a lower loss related to the net monetary position as inflation eased during the quarter.

Speaker 1

It is important to note that during the quarter, as it is probably known, Banco Macro exercised about half of some put options that held on certain inflation adjusted securities, leading to a COP 50,000,000,000 loss related to the exercise of said put options. It is also worth mentioning that the bank continues to hold options on the remaining position of those bonds. In the Q3 of 2024, provision for non losses totaled MXN 23,000,000,000, 24 percent or MXN 4,500,000,000 higher than in the Q2 of 2024. On a yearly basis, provision for loan losses increased 53 percent or MXN 7,900,000,000. In the quarter, net interest income totaled MXN 569,100,000,000, 167 percent or MXN 356,100,000,000 higher than in the Q2 of 2024 and 53 percent or MXN 220,900,000,000 higher year on year.

Speaker 1

Interest income increased 23%, while interest expenses decreased 40%. In the Q3 of 2024, interest income totaled COP 857,600,000,000, 23 percent or COP 160,400,000,000 higher than the Q2 of 2024 and 35 percent or ARS468,400,000,000 lower than in the Q3 of 2023. Income from interest on loans and other financing totaled ARS 408 point 4,000,000,000, 13 percent or MXN 56,900,000,000 lower compared with the previous quarter, mainly due to a 15.4 percentage points decrease in the average lending rate, which was partially offset by a 20% increase in the average volume of private sector loans. On a yearly basis, income from interest and loans decreased 28 percent or MXN161,100,000,000. In the Q3 of 2024, interest and loans represented 47% of total interest income.

Speaker 1

In Q3 of 2024, income from government and private securities increased 143 percent or COP253,000,000,000 quarter on quarter and decreased 33% or COP 210,100,000,000 compared with the same period of last year. In the Q3 of 2024, income from rebas totaled ARS 18,600,000, 66 percent or ARS 36,000,000 lower than the previous quarter and 84% or ARS 97,500,000 lower than a year ago. In the Q3 of 2024, FX income totaled MXN 16,300,000,000 gain, 43% or MXN 12,500,000,000 lower than the previous quarter and 98% or MXN 719,400,000,000 lower than a year ago. FX income gain was due to the 6.5 percent Argentine peso depreciation against the U. S.

Speaker 1

Dollar and the bank's long dollar position during the quarter. In the Q3 of 2024, interest expense totaled ARS288,400,000,000, decreasing 40 percent or ARS 195,700,000,000 compared to the previous quarter and 71 percent or ARS689,400,000,000 lower compared to the Q3 of 2023. Operating interest expenses, interest on deposits decreased 41 percent or MXN 191,300,000 quarter on quarter due to a 12.4 percentage points decrease in the average rate paid on deposits, while the average volume of deposits from the private sector decreased 11%. On a yearly basis, interest on deposits decreased 71 percent or Ps.682,400,000,000. In the Q3 of 2024, the bank's net interest margin, including FX, was 31.5%, higher than the 20% posted in the Q2 of 2024, but lower than the 60% posted in Q3 of 2023.

Speaker 1

In the Q3 of 2024, Banco Macro's net fee income totaled MXN 117,800,000,000, 8 percent or MXN 9,200,000,000 higher than the Q2 of 2024 and 7 percent or ARS8.1 billion higher than the same period last year. In the Q3 of 2024, net income from financial assets and liabilities at fair value to profit or loss totaled MXN 103,600,000,000 gain, decreasing 24% or MXN 32,300,000,000 in the quarter. The gain was mainly due to a 4% decrease in income from government securities and a 58% decrease in income from private securities. In the quarter, other operating income totaled MXN 45,000,000,000 7 percent or MXN 3,300,000,000 lower than in the Q2 of 2024. On a yearly basis, other operating income increased 29% or MXN 10,100,000,000.

Speaker 1

In the Q3 of 2024, ACRA's administrative expenses plus employee benefits totaled MXN 251,900,000,000, 11% or MXN 24,900,000,000 higher than the previous quarter due to higher employee benefits, which increased 6% and a 22% increase in administrative expenses. On a yearly basis, administrative expenses plus employee benefits increased 23% or MXN 47,400,000,000. As of the Q3 of 2024, the efficiency ratio reached 25.5 percent deteriorated from the 22.2% posted in the Q2 of 2024 and the 23% posted 1 year ago. In the Q3 of 2024, expenses increased 10% while net interest income plus net fee income plus other operating income increased 68% compared to the Q2 of 2024. In the Q3 of 2024, the results from the net monetary position totaled COP283,900,000,000 loss, 45 percent or COP 234,800,000,000 lower than the loss posted the Q2 of 2024 and 57 percent or $303,300,000,000 lower than the loss posted a year ago.

Speaker 1

This result is a consequence of lower inflation observed during the quarter. Inflation eased to 12.1% from 18.6% in the Q2 of 2024. In the Q3 of 2024, the macro's effective tax rate was 24.4% lower than the 60.5% versus in the Q3 of 2023. Further information is provided in Note 21 to our financial statements. In terms of loan growth, the bank's total financials reached ARS 4,550,000,000,000, including 17 percent or ARS657,900,000,000 quarter on quarter and 28 percent or ARS 988,000,000,000 higher year on year.

Speaker 1

Within commercial loans, overdrafts stand out with a 46 percent or ARS 212,500,000,000 increase, while estimates decreased 12 percent or ARS 83,500,000,000. Within consumer lending, personal loans increased 43% or ARS 235,500,000,000, while credit card loans increased 25 percent to ARS 227,100,000,000. Peso financing increased 19 percent or MXN616,700,000,000 while U. S. Dollar financing decreased $6,000,000 It is important to mention that Banco Macro's market share over private sector loans as of September 2024 reached 9.2%.

Speaker 1

On the funding side, total deposits increased 7% to ARS516,000,000,000 for the quarter, totaling ARS 8,100,000,000 and increased 30% or ARS 1,800,000,000 year on year. Private sector deposits increased 6% or ARS 101,700,000,000 quarter on quarter, while private sector deposits increased 12% or ARS 104,600,000,000 quarter on quarter. The increase in private sector deposits was led by demand deposits, which increased 28 percent or MXN 999,700,000,000 driven by the tax amnesty, while time deposits decreased 32% or MXN 829,500,000,000 quarter on quarter. Within private sector deposits, peso deposits decreased 15 percent or ARS 941,700,000,000 while U. S.

Speaker 1

Dollar deposits increased 87 percent or ARS 1,400,000,000 As of September 2024, Bank of America's transactional accounts represented approximately 62% of total deposits. Bank of America's market share over private sector deposits as of September 2024 totaled 7.4%. Terms of asset quality, Banco Macro's nonperforming total financial ratio reached 1.15% and the coverage ratio measured as total allowances under expected credit loss over nonperforming loans under central bank rules reached 177.6%. Consumer portfolio non performing loans improved 12 basis points down to 1.4% from 1.52% in the previous quarter, while commercial portfolio non performing loans improved 6 basis points in the Q3 of 2024. In terms of capitalization, Banco Macro accounted an excess capital of ARS 2,53,000,000,000, which represented a capital adequacy ratio of 32.8% and a Tier one ratio of 31.3%.

Speaker 1

The bank's aim is to make the best use of this excess capital. The bank's liquidity remained more than appropriate. Liquid assets total deposit ratio reached 91%. Overall, we have accounted for another positive quarter. We continue to show that financial position, asset quality remain under control and closely monitored.

Speaker 1

Keep on working to improve more efficiency standards and we keep a well atomized deposit base. At this time, we would like to take questions you may have.

Operator

Okay. At this time, we're going to open it up for questions and answers. And our first question will come from Brian Flores with Citibank. Please go ahead.

Speaker 2

Hi, Tim. Good afternoon. Thank you very much for the opportunity to ask questions. I have maybe one that is divided in 2 parts. So the first one is, if you have any updates on the prospects for loan growth in this year, we have seen some of your peers in the country maybe accelerating 2024 on different dynamics, right?

Speaker 2

You have maybe the same demand and the same appetite, but also better inflation dynamics helping you in the denominator. So just wanted to understand if you have any changes in the guidance for 2024, 2025 loan growth and also for ROE in both 2024 and 2025? And then if I may, and because I think it's linked, if you could also update us into how should we think in terms of capital consumption for to fuel this growth that we're discussing, right? Thank you.

Speaker 3

Hi, Brian, good morning. This is Jorge Carinthi answering. Thanks for your questions. The first one in terms of loan growth, yes, since May of this year, I would say that we started to see more loan demand coming. And of course, in the recent months, as a consequence of a decline in inflation and some stability in the FX.

Speaker 3

We are seeing loan demand pushing harder. So we think we are going to finish 2024 with a positive or a real positive rate of growth. This is going to be between 25% 35% in 2024. And I would say that it's going to be in the area of 40% positive real rate of growth in 2025. So that is what we are seeing in terms of loan growth that this is positive and I could say that is we are going to see also GDP growth according to local economies growing next year in real terms between 5% to 6%.

Speaker 3

In terms of your second question, in terms of ROE forecast this year, I would say as a consequence of a negative second quarter, we should be delivering in the area of 10% positive ROE this year. And next year, we should be more in the low to mid-ten, I would say, for next year. So that is guidance for the moment for 2024, 2025. According to capital consumption, 3rd question, I mean, we have the highest excess capital among RG Banks. Honestly, continue with these aggressive loan growth that we are forecasting for 2024, 2025.

Speaker 3

And if we move forward to 2026, we could be able to continue growing at high rates without any needs of additional capital here. So in that sense, we are we feel pretty comfortable there, Brian.

Speaker 2

Super clear, Jorge. Thank you very much.

Speaker 3

You're welcome.

Operator

Our next question will come from Ernesto Gabriela with Bank of America. Please go ahead.

Speaker 4

Thank you. Hi, good morning, Jorge and Nicolas. Thanks for taking my call. A couple of questions from my side. The first one is on your position on securities linked to inflation and to the dollar.

Speaker 4

Well, first, I would like to hear what would be your assumptions for inflation and FX for next year? And how should we think about your securities position linked to inflation on FX next year? I don't know, maybe you can tell us what is your current position to total assets today and how should we think about next year? And then my second question is on your NII growth expectations plus securities plus FX. So considering the shift of the asset mix and growing the loan book again, how should we think about the evolution of the NII growth as well as financial results in FX?

Speaker 4

It could give you an idea of what will play in terms of the profitability next year? Thank you.

Speaker 3

Hi, Ammetto. How are you? On the question on securities or bonds, I think there is a pretty clear table in the press release where we are stating there our position in bonds open in the different level of accountancy that we can take them or have them. As of today, we have a long position in bonds tied to inflation and we do not have any bonds linked to the evolution of the FX. Honestly, for next year, according to local economies, there is some wide range between inflation expectations.

Speaker 3

It goes from 25% to 40% inflation expectations for next year and a depreciation of the peso that is in the area of again, also economies, they have a range that goes between 15% to 25% depreciation of the effect for next year. In terms of second question, honestly, Amexa is not very easy to answer because it is very dynamic and we think that the net interest income is going to continue growing. Of course, we are switching little by little or quarter by quarter from securities into loan growth. However, this is very tough to forecast the combination between how that shift would result adding also the FX evolution, that we have a slightly positive or we are slightly positive assets on FX there. So my feeling is if you have to give you an answer here, next year we should be seeing NII growing also between 30% 35% in real terms.

Speaker 3

That is the answer I can give you right now. Of course, we could be fine tuning this in the coming quarters.

Speaker 4

Super helpful, Jorge. And just another question related to asset quality. So considering that you will be spending again the loan book, how should we think about the NPL ratio and the cost of rates for next year?

Speaker 3

Well, I mean, asset quality, I think it's quite under control, not only Banco Macro, but also in the average of the system. I think that we are going to see some slight deterioration going forward. But next year by December next year, we should have a NPL ratio for sure below 2%, if that is the question.

Speaker 4

Perfect, perfect. Thank you very much, Jorge.

Speaker 3

Welcome, Alberto.

Operator

The next question comes from Nicolas Riva with Bank of America. Please go ahead.

Speaker 5

Thanks very much, Jorge and Nico for taking my questions. Jorge, I have a question. If you have any plans to raise debt in international market, I mean, we have seen one of your large peers recently raise about $300,000,000 in international market of senior debt. You also have the maturity of your 2026 Tier 2 bond. Any plans at all really to tap international market for either senior or subordinated debt?

Speaker 5

Thanks.

Speaker 3

Hi, Nicolas. No, honestly, we do not have any plans to raise new debt in the international markets. The 2025 Tier 2 bond is due in by the end of 2026 sorry, of 2026. So no, for the moment, we do not have any plans on going into the markets on debt.

Speaker 1

Thanks very much, Jorge.

Speaker 3

Welcome.

Operator

Our next question comes from Yuri Fernandes with JPMorgan. Please go ahead.

Speaker 6

Hi, Jorge. I have a question here on your USD deposits. I know this quarter you had the Blanquao and maybe this will continue for the 4th Q. I think it was open until November, the beginning of November. So a lot of inflows of dollars.

Speaker 6

But when we look to the loans in dollars, they are not growing at the same pace. And your LDR it is a good problem, right? Your LDR is very low. How to deploy this money? What to do with those dollar deposits?

Speaker 6

How those deposits impact your margin? So just trying to understand this excess of U. S. Dollar deposits you have and how you are planning to work with this? Thank you.

Speaker 3

Hi, Yuri. Yes, this Blanco have a, I mean, stronger effect in the Q4. And of course, we are going to have numbers there by February next year. But to give you some ideas, yes, we not only macro, but also other peers receive many deposits in U. S.

Speaker 3

Dollar cash. We saw some pickup in loan demand in U. S. Dollars in the 4th quarter, But take into consideration that in this Blanco, if you were depositing below $100,000 you can or you could withdraw those dollars without paying any tax in the following month. So just to give you an idea, almost half of the deposits that we received under the figure of Blanquero were below $100,000 So therefore, we have to be careful in terms of the liquidity because half of those deposits could be withdrawn in the next month or so.

Speaker 3

But we saw some pickup in loan demand in U. S. Dollars in the Q4.

Speaker 6

Super clear. And just a final one on this topic. I see a big decrease in margins for you and all the other Argentine banks. You had the breakdown of margins in both pesos and dollars, right? And when we go to the dollar margin, this used to be a mid teens, like

Speaker 2

a 15% to 20% NIM.

Speaker 6

It is now running at 4%, 5%. Basically, you are charging 5%, 6%, 7% on the asset side and you are paying like 2% on the liabilities. Just trying to understand what is driving this compression in margins, Jorge? Is competition? Is all the banks landing at variable rates on the asset side?

Speaker 6

Like what explained the margin compression? And what is the outlook for your margins in USD? Trying to understand if this can be a tailwind for because like we are in the, I don't know, the worst point of the margins in dollars. This is becoming a bigger portion of your liabilities. So trying to understand if this can be a tailwind for the next quarters.

Speaker 6

Thank you.

Speaker 3

Yes. So basically competition is driving this compression in margins. It's only that, that most of our peers are in the same trend. I think that even though the dollar book is, let's say, only 15% to 17% of our total book, but yes, I think we are reaching the bottom part of the margins. I think that in the coming quarters, we are going to see stable U.

Speaker 3

S. Dollar margins and maybe some pickup in the second half of twenty twenty five. But I'm not seeing margins in U. S. Dollars keeping on going downwards.

Speaker 3

But it's basically competition, yes.

Speaker 6

Perfect. Thank you very much, Jorge.

Speaker 3

Welcome, Yuri.

Operator

There are no more questions at this time. And thus, this concludes the question and answer session. I'll now turn over to Mr. Nicolas Torres for the final considerations.

Speaker 1

Thank you all for your interest in Banco Macro. We appreciate your time and look forward to speaking with you again. Good day.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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