Macro Bank Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 24, 2024

Key Takeaways

  • Q1 net income was ARS 275.2 billion, down 61% quarter-on-quarter but up 626% year-on-year, delivering an annualized ROE of 37.0% and ROA of 11.9%.
  • Net interest income fell 40% quarter-on-quarter and 56% year-on-year, driven by lower interest income from private-sector loans amid decreasing loan volumes and lending rates.
  • The bank’s efficiency ratio improved to 14.7% from 18.6% in Q4 2023 and 25.5% a year ago, reflecting a 12% decline in administrative and personnel expenses.
  • A ARS 1.27 trillion gain from financial assets and liabilities at fair value, mainly on government and inflation-linked securities, significantly supported Q1 results.
  • Management forecasts 10–15% loan growth and a ~20% average ROE for FY 2024, expecting lending to pick up as inflation and interest rates normalize.
AI Generated. May Contain Errors.
Earnings Conference Call
Macro Bank Q1 2024
00:00 / 00:00

There are 8 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 First Quarter 2023 Earnings Conference Call. We would like to inform you that Q1 2023 press release is available to download at the Investor Relations website of bancomacro@www.macro.com dotarrelationesinversores. Also, this event is being recorded and all participants will be in a 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. Gustavo Manriquez, Chief Executive Officer Mr. Jorge Scarinci, Chief Financial Officer and Mr.

Operator

Nicholas Torres, IR. Now, I will turn the conference over to Mr. Nicholas Torres. You may begin.

Speaker 1

Thank you, Dave. Good morning, and welcome to Banco Macro's Q1 2024 Conference Call. Any comment we made 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. Q1 2024 press release was distributed on Wednesday and is available at our website. All figures are in Argentine pesos and have been restated in terms of the measurement unit current at the end of the reporting period.

Speaker 1

As of 2020, the bank began reporting results applying higher inflation accounting in accordance with IFRS IAS 29 as established by the Central Bank. For use of comparison, previous quarters have been restated applying IAS 29 to reflect the cumulative effect of the inflation adjustment for each period through March 31, 2024. I will now briefly comment on the bank's Q1 2024 financial results. Banco Macro's net income for the quarter was ARS 275,200,000,000, 61 percent or ARS422,000,000,000 lower than in the Q4 of 2023 and 6 26 percent or ARS 237.3 billion higher than the result posted a year ago. The bank's annualized ROE and ROA of 37 0.4% and 11.9%, respectively, remained healthy and showed the bank earnings potential.

Speaker 1

Net operating income before general, administrative and personnel expenses for the Q1 of 2024 was ARS 1,620,000,000,000, decreasing 19% or ARS 3 88,000,000,000 quarter on quarter. On a yearly basis, net operating income before general and administrative and personnel expenses increased 149 percent or MXN969 1,000,000,000.

Speaker 2

In the

Speaker 1

Q1 of 2024, provision for loan losses totaled ARS 18,900,000,000, 32 percent or ARS 8,700,000,000 lower than in the previous quarter. On a yearly basis, provision for laugnosis increased 40% or ARS 5,400,000,000 Operating income after general, administrative and personnel expenses was ARS 1,250,000,000, 20 percent or ARS 322,700,000,000 lower than the Q4 of 2023 and 211 percent or ARS 850,000,000,000 higher than the Q1 of 2023. In the quarter, net interest income totaled point 5 billion, 40 percent or MXN 111,000,000,000 lower than the result posted in the Q4 of 2023 56% or Ps. 211,300,000,000 lower than the result posted 1 year ago. Interest income decreased 18%, while interest expenses decreased 7%.

Speaker 1

In the Q1 of 2024, interest income totaled MXN714 800,000,000, 18 percent or MXN 154,500,000,000 lower than in the Q4 of 2023 and 19% ARS 172,000,000,000 lower than the previous year. Income from interest and loans and other financing totaled ARS462 1,000,000,000, 18 percent or ARS192,800,000,000 lower compared with the previous quarter, mainly due to a 16% decrease in the average volume of private sector loans and a 118 basis points decrease in the average lending rate. On a yearly basis, income from the interest and loans increased 39% or MXN 129,800,000,000. In the Q1 of 2024, interest of loans represented 65% of total interest income. In the Q1 of 2024, income from government and private securities decreased 42 percent or Ps.

Speaker 1

68,300,000,000 quarter on quarter due to the unwinding of our Delek portfolio and decreased 82% or MXN 429,300,000 compared to the same period of last year. In the first quarter of 2024, income from rebus totaled ARS151,900,000,000, 19 percent to ARS 24,300,000,000 higher than the previous quarter and 4 82 percent or ARS 125,800,000,000 higher than a year ago. In the Q1 of 2024, FX income totaled ARS80.6 billion, 71 percent or ARS196.5 billion lower than the previous quarter and 43 percent or MXN61,600,000,000 lower than a year ago. FX income gain was due to the 6.1 Argentine peso depreciation against the U. S.

Speaker 1

Dollar and the bank's long dollar position during the quarter. It is important to notice that the bank's long dollar position decreased 96% during the quarter. In the Q1 of 2024, interest expense totaled MXN 547,300,000,000, 7 percent or ARS 43,500,000,000 lower compared to the Q4 of 2023 and 8% or ARS 39,300,000,000 higher on a yearly basis. Within interest expenses, interest on deposits decreased 8 percent or Ps. 6,500,000,000 quarter on quarter, mainly driven by a 9 70 basis points decrease in the average interest rate paid on deposits, while the average volume of private sector deposits increased 5%.

Speaker 1

On a yearly basis, interest on deposits increased 6% or ARS 31,500,000,000. In the Q1 of 2024, interest and deposits represented 96% of the bank's financial expenses. In the Q1 of 2024, the bank's net interest margin including FX was 26% lower than the 52.1% posted in the Q4 of 2023 and the 33.6% posted in the Q1 of 2023. In the Q1 of 2024, Banco Macro's net fee income totaled ARS74,100,000,000, 12 percent or ARS 10,200,000,000 lower than in the Q4 of 2023 and was 13% or MXN 11,400,000,000 lower than the same period last year. In the Q1 of 2024, net income from financial assets and liabilities at fair value of the profit or loss totaled a MXN 1,270,000,000,000 gain mainly due to the market of some government securities, mainly in place on adjusted bonds.

Speaker 1

In the quarter, other operating income totaled ARS 44,400,000, increasing 16% or ARS 6,200,000,000 compared to the Q4 of 2023. On a yearly basis, other operating income increased 100 percent or ARS 22,200,000,000. In the Q1 of 2024, Bank of Macros administrative expenses plus employee benefits totaled ARS 202,300,000,000 12 percent or ARS 28,900,000,000 lower than the previous quarter due to lower employee benefits, which decreased 1% and lower administrative expenses, which decreased 28%. On a yearly basis, administrative expenses plus employee benefits increased 49 percent or ARS 66,100,000,000. As of the Q1 of 2024, the efficiency ratio reached 14.7 percent, improving substantially from the 18.6% posted in the Q4 of 2023 and the 25 point 5% posted 1 year ago.

Speaker 1

In the Q1 of 2024, expenses decreased 13%, while net interest income plus net fee income plus other operating income decreased 11% compared to the Q4 of 2023. In the Q1 of 2024, the result from the net monetary position totaled ARS889,000,000,000 loss, 12% or ARS92,000,000,000 higher than the loss posted in the Q4 of 2023 and 159 percent or ARS546,200,000,000 higher than the loss posted 1 year ago. Our net monetary position increased 84% during the quarter, while lower inflation was observed in the Q1 of 2024, 167 basis points below inflation registered in the Q4 of 2023. Inflation was 51.6% in the Q1 of 2024 compared to 53.3% in the Q4 of 2023. In the Q1 of 2024, Banco Madras' effective tax rate was 24.5 percent lower than the 31.4 percent registered in the Q4 of 2023.

Speaker 1

Further information is provided in Note 21 to our financial statements. In terms of loan growth, the bank's total financial reached ARS 2,500,000,000,000, equating 10% of ARS 279,600,000,000 quarter on quarter and 8% or COP205,900,000,000 lower year on year. Within commercial loans overdraft stand out with a 21% or COP92,600,000 decrease, documents decreased 21 percent or ARS10 1,000,000, while others increased 2% or ARS9,300,000,000. Within consumer lending, personal loans decreased 12 percent or ARS 44,800,000,000 while credit card loans decreased 18% or ARS 132,100,000,000. Pesa financing decreased 20 percent or ARS513,900,000,000 while U.

Speaker 1

S. Dollar financing increased 75% or $254,000,000 It is important to mention that Banco Macro's market share over private sector loans as of March 2024 reached 9.4%. On the funding side, total deposits decreased 1 percent or Ps.74,300,000,000 quarter on quarter, Ps. 205,000,000,000,000 and decreased 11% ARS644,000,000,000 year on year. Private sector deposits decreased 6% or ARS 291,200,000,000 quarter on quarter, while private sector deposits deposits increased 83 percent or ARS234,200,000,000 in the quarter.

Speaker 1

The decrease in private sector deposits was led by demand deposits, which decreased 26 percent or MXN 777,300,000,000 quarter on quarter, while time deposits increased 27 percent or MXN 4 ARS422,600,000,000. Within private sector deposits, peso deposits increased 10% or ARS365,200,000,000, while U. S. Dollar deposits decreased 32 percent or $622,000,000 As of March 20 24, Banco Macro's transaction and accounts represented approximately 46% of total deposits. Banco Macro's market share over private sector deposits as March 24 totaled 7.5%.

Speaker 1

In terms of asset quality, Banco Macro's non performing total financial ratio reached 1.14% and coverage ratio measured as total allowances under expected credit losses over non performing loans under certain bank rules reached 222.7%. Consumer portfolio non performing loans deteriorated 12 basis points up to 147 percent from 135% the previous quarter, while commercial portfolio non performing loans improved 49 basis points in the Q1 of 2024, down to 0.72% from 1.2% in the last quarter. In terms of capitalization, Banco Macro accounted an excess capital of ARS 2,590,000,000,000, which represented a capital adequacy ratio of 46.5 percent and a Tier 1 ratio of 44.5%. The bank's aim is to make the best use of this excess capital. The bank's liquidity remained more than appropriate.

Speaker 1

Liquid assets total deposit ratio reached 124%. Overall, we have accounted for another positive quarter. We continue to show a solid financial position, asset quality remained uncontrolled closing monitored and we keep on working to improve more our efficiency standards and we keep our atomized deposit base. At this time, we would like to take the questions you may have.

Operator

Okay. At this time, we're going to open it up for questions and answers. Our first question comes from Ernesto Gabilondo with Bank of America. Please go ahead.

Speaker 3

Thank you. Hi, good morning, Gustavo, Jorge and Nicolas and thanks for the opportunity. My first question will be on your longboard expectations and also if you can provide us what will be behind that in terms of GDP for this and this year, inflation levels and interest rates? And then my second question will be on your evolution of your loan to deposit ratio, given that the Argentine banks are starting to resume loan growth. How would you see this ratio in the next years?

Speaker 3

And finally, I would like to ask you about your ROE expectations. How you see the ROE for the year? And also if you can provide us some color on how should we see the evolution of the ROE during the year? 1st quarter was kind of high ROE. So how should we think about 2nd quarter and then the second half for the ROE?

Speaker 3

Thank you.

Speaker 2

Ernesto, how are you? This is Jorge Carinthi. Well, it's a bunch of questions. Let's start with the first one. In terms of loan growth, we're expecting some positive loan growth for this fiscal year 2024.

Speaker 2

What we are seeing is basically that the Q1 that is a seasonally lowest quarter in Argentina, we posted some negative growth in real terms. However, in the second quarter and we think that in the second half of the year, the trend of pickup in loan demand as a consequence of a decline in inflation, inflation expectations and of course, nominal interest rates, we're going to finish the year with approx a positive in the area of 10% to 15% loan growth. Inflation, according to the market consensus, is expected to keep on going in the downward trend. May is expected to be between 56. The market is expecting that the CPI index could reach 3 or below 3 monthly number for the last quarter of the year.

Speaker 2

And as a consequence of that, what we think is that we are going to start seeing positive real interest rates in the Q4 of this 2024. In terms of loans to deposit ratio, I think that, yes, we are in not only macro, but I think in Argentina banks are pretty under leveraged. This is a consequence of many quarters of sluggish loan demand. And of course, liquidity still went into the banking sector, and we have to find other sources of allocation of those funds. Going forward, we think that maybe not this year, we're not going to see a big change in the loans to deposit ratio this year.

Speaker 2

But if the trends continue, without any doubt, we could reach 60%, 65% of loans to deposit ratio in the next couple of years. ROE guidance, as you mentioned, yes, the Q1 ROE was pretty good, pretty high. We think that the trend is going to go a bit downwards in the coming quarters. Remember that what happened in the Q4 of last year and also in the Q1 of this year was a consequence of a good track record in bond prices. What we are seeing in the Q2 is that bond prices are not growing that much.

Speaker 2

Therefore, we think that we could be finishing this fiscal year 2024 with an approx of 20% ROE on average for the year.

Speaker 3

Excellent. Thank you very much.

Speaker 2

Yes, tell me.

Speaker 3

No, no. Thank you very much, Jorge. And just to follow-up on your macro expectation. So can you repeat again how you're expecting for GDP growth for this next year, inflation for this next year and rates for this next year?

Speaker 2

Well, GDP for this year is expected to be down between 2.8% and 3%. Of course, we're going to see a recovery in the second half of the year. And this would imply that for 2025, the market is expecting a positive real growth in GDP of around 6%. Inflation, the market is expecting between 150% to 170% inflation this year. For next year, of course, the trend is much downward between 35% 55% inflation for next year.

Speaker 2

Interest rate, I think this is not that easy to forecast. But again, let me not give you some nominal levels, but give you some real levels. We think that we are going to see in the area of 2 to 3 percentage point real interest rate on a monthly basis starting in the Q4 of this year.

Speaker 3

Excellent, excellent. And just one last macro assumption in terms of the FX, what are you expecting for this year?

Speaker 2

I mean, we think that the FX, of course, is going to keep on going with the crawling of 2%. We are seeing for the end of the year the FX reaching between $11.50 $1200 $1200 $100,000,000 approx. That is what we think that the FX could be by the end of the year, yes.

Speaker 3

Perfect. Excellent. Thank you very much.

Speaker 2

You're welcome, Alberto.

Operator

The next question comes from Brian Flores with Citibank. Please go ahead.

Speaker 4

Hi, Tim. Thank you for the opportunity to ask questions. I have 2. The first one is, I mean, we're already finishing May. Just wanted to get a sense on how are you sensing consumer and companies after this really strong shock, right?

Speaker 4

We have seen some improvements in fiscal accounts. The Middle East administration has been showing some positive signs. However, the trade off is a big shock to the economy, right? So I know we're talking about finishing the year on a strong note in real terms regarding growth. But can you talk a little bit on how are you sensing your clients both on the corporate side and the consumer side with regards to demand so far in this quarter?

Speaker 4

And where are you going to prioritize growth? Is it going to be with companies or with consumers? And then I'll ask my second question. Thank you.

Speaker 2

Hi, Brian. What we are seeing is that the commercial lending is starting to pick up earlier than consumer. What we think is that consumer lending is going to catch up the commercial lending growth maybe by the end of the year, more in 2025 when we expect to see some recovery in the real wages. So we think that companies are going what we are seeing right now is companies are starting to demand for new loans and more loans. We are going to focus we are a universal bank.

Speaker 2

Therefore, we focus in all the segments throughout the country. So if the demand is coming from the commercial, we are going there. When the demand comes from the consumer, we are ready to go for them also. So we have the liquidity, the excess capital to tackle any potential loan demand coming. So, the sooner that recovery, the better for us.

Speaker 4

Okay. I just wanted to ask, I mean, at the beginning of Millet's administration, we heard there were some meetings with banks, etcetera. I just wanted to get a sense on how are you sensing Middle East administration now? Are they receiving your feedback? Are they open?

Speaker 4

How technical these discussions have been? Just any color you can share with us, it would be very, very important. Thank you.

Speaker 2

Yes. What we are seeing is that the current administration on those areas that are related to our business, that is to say, the Central Bank and the Economy Ministry, both are very receptive and we have fluent communications with them. They want our feedback on how we are seeing the market in maybe regulations that should be erased, etcetera, etcetera. So I think that they are very receptive and we have a good communication with the 2 areas and I think that, that is very important for all the changes and the challenges that we have in France. So I think that is very positive.

Speaker 4

Perfect. And then maybe just a final one, and I promise this is the real final one. On dividends, I know you said capital is very strong. So do you think we should continue seeing, let's say, a dividend shareholder friendly policy going forward? Or are you going to prioritize growth and maybe limit dividends in the short term?

Speaker 4

Thank you.

Speaker 2

Well, the next dividend to be paid is going to happen next year in 1 year. So I would say that the Board is going to consider macroeconomic conditions at that time, future expectations on the economy and we are I think that the Board is going to evaluate the better dividend policy at that time in order to have a find an equilibrium on the dividend and the organic growth. And of course, going forward, we cannot say that another inorganic opportunities could be appearing in the horizon. So those conditions are going to be on the table in March, April next year. And with those elements, the Board is going to decide the dividend.

Speaker 4

Perfect. Thank you.

Speaker 2

You're welcome.

Operator

The next question comes from Marina Mertens with LatAm Securities. Please go ahead.

Speaker 5

Hi, good morning and thank you for the opportunity to ask a question. So the 4th and the first quarter results were mainly driven by gains from your security portfolio. You've been decreasing your exposure to the Central Bank instruments by shifting towards dual bonds and CPI linkers. With the treasury now issuing more fixed rate instruments, can we expect to see a change in your portfolio in the Q2 towards leg ups? And also, do you think these securities will continue to be the main earnings driver in the following quarters?

Speaker 5

Thank you.

Speaker 2

[SPEAKER DANIEL MARTINEZ VALLE:] Hi, Marina. We are evaluating on we have invested a bunch of money in some of the fixed rate leg ups. But something that is important to consider is that we have to care about the how we hedge the equity of the bank against inflation. And inflation is running for the moment at 9% according to April's numbers, 9% a month. That is still above the 3.5%, 3.7% of what the Delekab is delivering.

Speaker 2

So for the moment, we think that we have to cover the equity, we have to hedge the equity. And on the excess of that, we are evaluating where to allocate that excess on the amount of money that we are covering sorry, hedging the equity. So that is something that we are constantly monitoring the markets basically. So we haven't had a decision yet. Your second question is, I mean, for the moment, I think that second and third quarter, the bottom line is going to be highly affected by bond prices, basically because our bond portfolio is quite high.

Speaker 2

So I think that's unless the economic conditions change in a deeper way than what we are expecting, I think that second and third quarter at least bottom line are going to be governed by bond prices.

Speaker 5

Thank you.

Speaker 2

Welcome, Marina.

Operator

And the next question comes from Carlos Gomez with HSBC. Please go ahead.

Speaker 6

Hello, good afternoon and congratulations on the results. I want to ask you about whether you could give us an update on the integration of your Itau acquisition And whether you judge that you have the capacity to undertake another inorganic acquisition in the short or medium term? Thank you.

Speaker 2

Hi, Carlos. Good to hear you. We are finishing the legal integration with the local franchise of Itau by August of this year. And yes, going forward, I think that we're in a very good shape in order to undertake another local target if it is something on the horizon. I mean, for the moment, we are not working on any transaction.

Speaker 2

But if in the future something appears, of course, we are going to consider it without any problem.

Speaker 6

Okay. And then a follow-up, part of your personal loan portfolio has traditionally been payroll loans. We understand that real wages and pensions having under pressure in real terms with the high inflation. Has that had any effect on the asset quality so far or has that made you more cautious when it comes to lending in those segments?

Speaker 2

No, I think that well, the level of asset quality is extremely good. I mean, the ratio is at one of the lowest levels we've seen in the last, I don't know, 15 to 18 years. But in the Q2, we are not seeing honestly big changes on delinquency ratios. What we are seeing is that less demand coming from the consumers basically. And there was some of course, there were declines nominal interest rates, so that helps.

Speaker 2

And I mean, we continue to maintain the risk policy. We have not become more aggressive or more risk adverse for the moment on the consumer. We continue to maintain the same policy or lending policy.

Speaker 6

And you said that you are seeing some weakness in consumer demand, presumably that is offset by strength in

Speaker 1

corporate demand?

Speaker 2

Yes, yes. I mean, you compare both, corporate is more active than consumer.

Speaker 6

Thank you so much.

Speaker 2

Welcome Carlos.

Operator

And the next question comes from David Pardo with Pinto Germanas. Please go ahead.

Speaker 7

Well, Jorge and hello team. Congratulations Another strong quarter. I have just one question, maybe hypothetical. But let's say, consumer loan or rather loan demand starts to recover in the second half of the year. Supposedly, I mean, we should see a recovery of the economy first.

Speaker 7

But I'd like to maybe get a sense on maybe which lines or rather which segments are going to be like the triggers of long demand recovery, let's say corporate or commercial and which materials maybe it will be my assumption will be commercial and maybe maybe emerging capital as the economy recovers. But that 5 year, I would like to maybe if you could give us your view on how that recovery could look like? Thank you.

Speaker 2

Hi, David. Yes, as I mentioned before, we are seeing some pickup in commercial lending. I would say that the sectors that are starting to be more active are agribusiness, energy, mining, those are the 3 for the moment, most active sectors starting to pick up in loan demand. Again, as I mentioned before, we think that this might be the trend for the rest of the year. And for next year, we are going to start seeing a catch up in consumer loan demand.

Speaker 2

So that is for the moment how we are seeing the next quarters in terms of loan demand with the commercial or corporate demand in first than consumers.

Speaker 7

Perfect. Thank you.

Speaker 1

You're welcome.

Operator

There are no more questions at this time. This concludes the question and answer session. I will now turn over to Mr. Nicolas Torres for final consideration.

Speaker 4

[SPEAKER NICOLAS

Speaker 7

TURRESI:] Thank

Speaker 1

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

Powered by Quartr