Banco BBVA Argentina Q1 2025 Earnings Report

Banco BBVA Argentina EPS Results

• Actual EPS: $0.28
• Consensus EPS: $0.26
• Beat/Miss: Beat by +$0.02
• One Year Ago EPS: N/A

Banco BBVA Argentina Revenue Results

• Actual Revenue: $667.94 million
• Expected Revenue: $751.69 billion
• Beat/Miss: Missed by -$751.02 billion
• YoY Revenue Growth: N/A

Banco BBVA Argentina Announcement Details

• Quarter: Q1 2025
• Date: 5/21/2025
• Time: After Market Closes
• Conference Call Date: Thursday, May 22, 2025
• Conference Call Time: 11:00AM ET

Banco BBVA Argentina (NYSE:BBAR) provides various banking products and services to individuals and companies in Argentina. The company provides retail banking products and services, such as checking and savings accounts, time deposits, credit cards financing, consumer and pledge loans, mortgages, insurance, and investment products to individuals; and small and medium-sized companies products and services, including financing products, factoring, checking accounts, time deposits, transactional and payroll services, insurance, and investment products to private-sector companies. It also provides corporate and investment banking products and services, such as global transaction services; global markets solutions comprising risk management and securities brokerage; long-term financing products, including project finance and syndicated loans; and corporate finance services comprising mergers and acquisitions, and capital markets advisory services to corporations and multinational companies. The company was formerly known as BBVA Banco Francés S.A. and changed its name to Banco BBVA Argentina S.A. in July 2019. Banco BBVA Argentina S.A. was incorporated in 1886 and is based in Buenos Aires, Argentina.

Banco BBVA Argentina Q1 2025 Earnings Call Transcript

Key Takeaways

• Macroeconomic stabilization: BBVA Argentina highlights moderated inflation expected to converge around 35% by year-end and projected 5.5% GDP growth in 2025 under a new IMF agreement and floating exchange rate regime.
• Strong Q1 earnings: Inflation-adjusted net income reached ARS 81.6 bn (+16.2% QoQ), delivering a quarterly ROE of 11.5% and a 56.9% rise in operating income driven by higher fees, net interest income, and expense control.
• Robust loan growth: Private sector loans rose 11.2% QoQ (pesos +8.3%, foreign currency +25.4%), with consumer loans +22.9% and mortgages +23.1%, driving the loans-to-deposits ratio to 84.7%.
• Improved efficiency: The efficiency ratio fell to 56.3% in Q1 from 62.2% in Q4 2024, reflecting lower operating expenses and higher income.
• Revised 2025 guidance: BBVA Argentina trimmed its real loan growth outlook to 45–50% (from 60–65%), deposit growth to ~25%, and maintained ROE guidance in the mid-to-low teens amid ongoing liquidity management challenges.

Presentation

[Operator]

Good morning, everyone, and welcome to BBVA Argentina's First Quarter twenty twenty five Results Conference Call. Today with us are Mr. Diego Cesarini, Head of ALM and Investor Relations Mrs. Belen Forcade, Investor Relations Manager and Mrs. Carmen Morillo Arroyo, CFO, who will be available for the Q and A session.

[Operator]

This presentation and the first quarter twenty twenty five earnings release are available on BBVA's Investor Relations website, ir.bbva.com.ar, and will also be available for download in the chat. 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 Security 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.

[Operator]

Additional information concerning these factors is contained in BBVA Argentina's Annual Report on Form 20 F for the fiscal year 2024 filed with the U. S. Securities and Exchange Commission. During the company's presentation, all microphones will be disabled. At that time, we are going to open it up for questions and answers.

[Operator]

If you have a question, please write it down in the Q and A section or click on raise hand for audio questions. You will then receive a request to activate your microphone. Please activate it and pick up your headset to provide optimum sound quality when posing your question. I will now turn the call over to Mrs. Bellen Forquet.

[Operator]

Please go ahead.

[Belén Fourcade, Investor Relations Manager at Banco BBVA Argentina]

Good morning, and thank you all for joining us today. The notable fiscal consolidation, monetary stringency and relative exchange rate stability have contributed to a moderation process of inflation throughout 2024, which has continued at the beginning of 2025. Likewise, there are increasing signs of recovery in economic activity, which after falling 1.7% in 2024, would expand by around 5.5% in 2025 according to BBA Research. The prospects for inflation reduction have strengthened, and the forecast is that it will converge to around 35% by the end of twenty twenty five. Recently, we in the framework of a new agreement with the International Monetary Fund, the lifting of a large part of the exchange controls and implementation of a floating exchange rate scheme with white banks were announced, which could contribute to the macroeconomic normalization process.

[Belén Fourcade, Investor Relations Manager at Banco BBVA Argentina]

Regarding the external environment, although the direct impact of US tariffs could be relatively limited, the economy could be affected by a less favorable global context. Before moving on to this quarter's business dynamics and results, I would like to comment on the new global strategy of the BBA group for the twenty twenty five, twenty twenty nine cycle. This has been launched arising from an institutional reflection after the closing of the twenty twenty, twenty twenty four strategic plan, which was successful in terms of growth and profitability. This redesign responds to a new global context characterized by macroeconomic stabilization, geopolitical transformation, and population aging, which poses challenges and opportunities in credit and deposit management. In this context, the strategic priorities for twenty twenty five, twenty twenty nine are focused on three main pillars.

[Belén Fourcade, Investor Relations Manager at Banco BBVA Argentina]

One, a radical customer centric perspective. Two, value and capital generation and growth in a changing environment. And three, leveraging accelerators such as artificial intelligence for efficient data processing. These priorities are articulated with an evolution in cultural values towards behaviors with greater empathy and demand and a renewed purpose. Support your desire to go further, which reinforces the active role of the customer as a central character of growth.

[Belén Fourcade, Investor Relations Manager at Banco BBVA Argentina]

Now moving on to business dynamics. As you can see on slide four of our webcast presentation, our service offering has evolved in such a way that by the March 2025, new customer acquisition through digital channels reached 86% versus 81% a year ago. Retail digital sales measured in units reached 93% in the first quarter of twenty twenty five and represent 86% of the bank's total sales measured in monetary value. Digitalization, which was previously a competitive advantage, has now become a market standard, while new unregulated players and disruptive technologies such as artificial intelligence demand a redefinition of the differential value of the company's proposition. Moving on to Slide five and six, I will now comment on the bank's first quarter twenty twenty five financial results.

[Belén Fourcade, Investor Relations Manager at Banco BBVA Argentina]

BB Argentina's inflation adjusted net income in the first quarter of twenty twenty five was ARS 81,600,000,000.0, increasing 16.2% quarter over quarter. This implied a quarterly ROE of 11.5% and and a quarterly ROA of 2%. The 56.9% increase in quarterly operating results was explained by higher income and lower operating expenses. Higher income was mainly due to one, a substantial improvement in income from fees and two, better net interest income. On the side of expenses, there was an improvement in all expenses lines, in particular benefits to personnel and other operating income.

[Belén Fourcade, Investor Relations Manager at Banco BBVA Argentina]

It should be noted that the income tax line in the fourth quarter of twenty twenty four reflects a positive result derived from a change in accounting exposure that implied a reclassification of the income tax calculation from other comprehensive income to the income statement. Net income from the net monetary position was 10.7% lower quarter over quarter, thanks to a lower net monetary position, which offset the increase in quarter inflation, which was 8.57% versus 8.03% in the fourth quarter of twenty twenty four. Turning into the P and L lines in Slide six. Net interest income was MXN 5 and 41,300,000,000.0, increasing 3.3% quarter over quarter. In the first quarter of twenty twenty five, net interest income decreased less than interest expenses in monetary terms.

[Belén Fourcade, Investor Relations Manager at Banco BBVA Argentina]

The former decreased due to lower income from public securities, especially CPI linked bonds. Expenses decreased due to lower 10 deposit expenses, mainly due to lower rates and interest bearing checking accounts expenses as the rates of this product have also declined. Interest from time deposits explained 74.4% of interest expenses versus 67.9% the previous quarter. Net income as of the first quarter of twenty twenty five totaled MXN 99,800,000,000.0, increasing 48.3% quarter over quarter. Fee income totaled MXN 180,100,000,000.0, increasing 20.7% quarter over quarter.

[Belén Fourcade, Investor Relations Manager at Banco BBVA Argentina]

Higher income is mainly explained by credit card fees, considering a revision of provisions linked to the Mishas Beovuea loyalty program. It is important to note the increase in fees linked to loans, fees from insurance and fees linked to loan commitments. The latter related to income from structuring of syndicated loans. On the side of fixed expenses, these totaled ARS 80,800,000,000.0, decreasing 1.9% quarter over quarter. This is mainly explained by lower expenses on payroll promotion campaigns, followed by lower expenses from foreign trade transactions.

[Belén Fourcade, Investor Relations Manager at Banco BBVA Argentina]

In the first quarter of twenty twenty five, loan loss allowances increased 4.9% explained by the real growth of the loan book in the quarter, which implied higher provisioning. During the first quarter of twenty twenty five, total operating expenses were MXN 4 and 23,800,000,000.0, decreasing 13.8% quarter over quarter, of which 29% were personnel benefit costs. Personnel benefits decreased 23% quarter over quarter. In spite of wages increasing in line with inflation, the fourth quarter of twenty twenty four was highly impacted by severance expenses and the adjustment of provisions recorded for stock of vacation days and variable remuneration, which were not present in the first quarter of twenty twenty five, reducing overall expenses. Administrative expenses decreased 4.3% quarter over quarter.

[Belén Fourcade, Investor Relations Manager at Banco BBVA Argentina]

This is mainly explained by, one, taxes two, software, and three, rent. Rent and software are related to expenses of software licenses and services contracted with the parent company. In the case of taxes, the fall is mainly explained by an accounting reclassification of taxes linked to the health and safety, which as of this quarter are now recorded in the turnover tax line in other operating expenses pursuant to the nature of expense. The accumulated efficiency ratio as of the first quarter of twenty twenty five was 56.3% below the 62.2% reported in the fourth quarter of twenty twenty four and the 65.4% reported in the first quarter of twenty twenty four. The decrease in this ratio is due to a decrease in expenses and an increase in income, fee income and lower result from the net monetary position.

[Belén Fourcade, Investor Relations Manager at Banco BBVA Argentina]

Private loans as of the first quarter of twenty twenty five totaled COP 9,200,000,000,000.0, increasing 11.2% quarter over quarter. Loans to the private sector in pesos increased 8.3% in the first quarter of twenty twenty five. During the quarter, growth is observed in most lines, but was especially driven by one, a 22.9% increase in consumer loans, followed by 18.4% increase in overdrafts and three, a 16.2% increase in other loans. A 23.1% growth in mortgages is to be noted considering the continuous progress in this product, which was relaunched by mid-twenty twenty four. In all cases, the increment is boosted by genuine growth in real terms of the portfolio levered on relative stability of market interest rates.

[Belén Fourcade, Investor Relations Manager at Banco BBVA Argentina]

Loans to the private sector denominated in foreign currency increased 25.4% quarter over quarter. Quarterly increase is mainly explained by a 21.4% growth in financing and pre financing of exports and a 53.7% growth in other loans. The latter linked to financing of investment projects. During the quarter, the commercial portfolio grew 12.5% and the retail portfolio increased 9.5%. The commercial portfolio represents 57.1% of the total portfolio from 52.5% a year ago.

[Belén Fourcade, Investor Relations Manager at Banco BBVA Argentina]

In nominal terms, BB Argentina managed to increase the retail commercial and total loan portfolio by 19%, twenty two % and twenty three % respectively during the quarter, surpassing quarterly inflation levels in all cases. As of the first quarter of twenty twenty five, the total gross loans and other financing over deposit ratio was 84.7%, above the 77.5% recorded in the fourth quarter of twenty twenty four and above the 55.9% in the first quarter of twenty twenty four. Participation of total loans over assets is 56% versus 51% in the fourth quarter of twenty twenty four and thirty two percent in the fourth quarter of twenty twenty four, evidencing a lower exposure to the public sector in line with the real growth of credit demand. BBVA Argentina's consolidated market share of private sector loans reached 11.28% as of the first quarter of twenty twenty five, improving from 10.1% a year ago and sustaining the two digit figure. As of the first quarter of twenty twenty five, asset quality ratio keeps a good performance at 1.38%, increasing quarter over quarter, mainly due to seasonal arrears in credit cards.

[Belén Fourcade, Investor Relations Manager at Banco BBVA Argentina]

Commercial NPLs remained with a very good behavior. On the funding side, as of the first quarter of twenty twenty five, total deposits reached COP 11,000,000,000,000, increasing 1.8% quarter over quarter. The bank's consolidated market share of private deposits as of the first quarter of twenty twenty five reached 9.15% compared to 7.37% a year ago. Private nonfinancial sector deposits in pesos totaled ARS 7,400,000,000,000.0, increasing 7.8% compared to the fourth quarter of twenty twenty four. The quarterly change is mainly affected by a 163.1% increase in investment accounts and a 2.5 increase in checking accounts, mainly explained by higher funding.

[Belén Fourcade, Investor Relations Manager at Banco BBVA Argentina]

Private nonfinancial sector deposits in foreign currency expressed in pesos increased 0.8% quarter over quarter. This is mainly explained by a 20.9% increase in time deposits, partially offset by an 0.4% fall in saving accounts. BB Argentina continues to show strong solvency indicators on the first quarter of twenty twenty five. Capital ratio reached 21.5%. Capital excess of our regulatory requirement was 1,500,000,000,000.0 or COP 1 hundred and 60 1 point 3 percent.

[Belén Fourcade, Investor Relations Manager at Banco BBVA Argentina]

In spite of the genuine growth in the loan book, which generated greater requirements, this effect was largely offset by a central bank regulation, which changed operational risk requirements, now aligned to Basel IV regulations. These requirements fell considerably by 94.4%, improving the capital ratio by two zero two basis points. The first quarter and twenty twenty five total public sector exposure, excluding Central Bank totaled MXN 2,800,000,000,000.0, decreasing 2.9% quarter over quarter. The annual increase is mainly explained by a greater increment of public exposure to the treasury in detriment of Central Bank risk exposure. Exposure to the public sector, excluding Central Bank exposure, represents 17.1% of total assets below the 17.9% in the fourth quarter of twenty twenty four, in line with real loan growth demand.

[Belén Fourcade, Investor Relations Manager at Banco BBVA Argentina]

In the quarter, liquid assets were 5,400,000,000,000, decreasing 13.3% quarter over quarter. This was mainly driven by a 20.1% decline in cash and deposits in banks and a 12.5% fall in public securities. As of the date of this report, the bank has announced the payment of dividends in cash or in kind. The total amount to be paid will be ARS 89,400,000,000.0 expressed in homogeneous currency as of 12/31/2024. And according to Central Bank regulations, it must be updated by inflation on the payment date.

[Belén Fourcade, Investor Relations Manager at Banco BBVA Argentina]

This concludes our prepared remarks. We will now take your questions. Operator, please open the line for questions.

[Operator]

Thank you. We are going to open it up for questions and answers. If you have a question, please click on raise hand for audio questions. You will then receive a request to activate your microphone. Please activate it and pick up your headset to provide optimum sound quality when posing your question.

[Operator]

Our first question comes from Brian Flores with Citi.

[Brian Flores, VP - Equity Research at Citi]

Hi, team. Good morning. Thank you for the opportunity to ask questions. I have I have a the first one is related to guidance. Right?

[Brian Flores, VP - Equity Research at Citi]

Because it seems that there were some moving pieces as you mentioned the implementation of the regulation in March. It seems that real loan growth is actually running well ahead of perhaps very optimistic expectations. So from what we remember that you mentioned in the last quarter, you were expecting to grow between 60%, sixty five % in real terms, Deposits growing around 40% in real terms. They seem to be maybe growing a bit less. And with and I don't know if your expectation of ROE has changed a bit.

[Brian Flores, VP - Equity Research at Citi]

But just wanted to hear from you, given the obviously very dynamic economic environment, if any of the guidance lines that I just mentioned is also changed. Also and then this is the second question, perhaps an extension of the first is on capital, right? Because you had a benefit above 200 bps due to the regulation. Just wanted to ask you if thinking about the 15% Tier one ratio by the end of the year that already incorporates this, let's say, benefit onetime benefit due to the regulation? Thank you.

[Diego Cesarini, Head - ALM & IR at Banco BBVA Argentina]

Yes. Hello, Brian. This is Diego Cesarini. I will address your questions. Well, to start with, regarding loans, we have revised a little downwards our provision.

[Diego Cesarini, Head - ALM & IR at Banco BBVA Argentina]

We think that we're thinking about growth in real terms of around 45% to 50% for for the year. That is in line with our 11% growth in the in the first quarter. Regarding deposits, we are also revising downwards. We are seeing around 25% in in real terms, and we are still keeping our ROE guidance in the between the mid teens to bias to to low teens. And regarding capital, yes, it it's true that we we have our our projection has has been improved a little.

[Diego Cesarini, Head - ALM & IR at Banco BBVA Argentina]

We we are now forecasting by December a ratio around in between sixteen and sixteen and a half percent. When we were talking about 15, we we had this operational risk improvement in our consideration, but well, the the the improvement that we are showing right now is regarding the the performance of loans, which we are revising down to 45% to 50%.

[Brian Flores, VP - Equity Research at Citi]

You, Diego. Very clear. If I can make a follow-up. So you're revising two lines in growth, right, deposits and loans by double digits. So just wanted to if you could expand a bit on the rationale behind it.

[Brian Flores, VP - Equity Research at Citi]

Is it more on maybe lower risk appetite? Is it more on perhaps your internal expectations of lower dynamism in the economy? Just wanted to understand a bit more on the nature of the revision. Thank you.

[Diego Cesarini, Head - ALM & IR at Banco BBVA Argentina]

Our risk appetite hasn't changed. What we are seeing is that probably liquidity could be a little concerned this year as the government is keeping a very restrictive monetary policy. It's just that.

[Diego Cesarini, Head - ALM & IR at Banco BBVA Argentina]

We we expect

[Diego Cesarini, Head - ALM & IR at Banco BBVA Argentina]

that policy to continue for for some months. We we have some excess of liquidity that we can still use, so we are not worried in the short term, probably for one or two quarters. We can keep growing even if deposits grow below loans. But then, of course, we we we are not certain when this this policy will change. So we are being a little more conservative on growth just for that.

[Brian Flores, VP - Equity Research at Citi]

Okay. Super clear. Thank you.

[Diego Cesarini, Head - ALM & IR at Banco BBVA Argentina]

Welcome.

[Operator]

Our next question comes from Pedro LeDuc with Itau BBA.

[Pedro Leduc, Equity Research Analyst at Itau BBA]

Hi, Belen. Diego, thank you very much for taking the question. Congratulations on the numbers. Okay. Two two quick ones.

[Pedro Leduc, Equity Research Analyst at Itau BBA]

First, on SG and A. We had a nice decline there in real terms year over year q on q. If you can help us see through the remainder of the year if this is a trend that's that's likely to continue. And then second, on your NIMs, well, they've been declining, obviously, but declined a lot less this quarter than they had in the last months. So if you if you're already seeing the end of the transition in in in names within your asset base, and maybe when can we expect this to start taking up again?

[Pedro Leduc, Equity Research Analyst at Itau BBA]

Thank you.

[Diego Cesarini, Head - ALM & IR at Banco BBVA Argentina]

Pedro. This is Diego again. Well, I I couldn't listen very well to your first question regarding your I will ask you to repeat. But regarding your your second question, NIMs have have fallen around 100 basis points this this quarter comparing with fourth quarter of last year. If you consider those NIMs in in both currency, they have fallen even less.

[Diego Cesarini, Head - ALM & IR at Banco BBVA Argentina]

We have some changes in the mix. Dollar activity is waiting a little more than the previous quarter. And also, if you consider that monetary policy rates have fallen around 600 basis points in average, we see that NIMs have not fallen so much. As we have, said before, NIMs at the beginning of last year were abnormally high. They have normalized.

[Diego Cesarini, Head - ALM & IR at Banco BBVA Argentina]

And you have to consider that part of these high NIMs have in account that we have inflation, high inflation rates are are high because of inflation mainly. And for the rest of the year, we well, if we consider that inflation should keep going down, we we we should expect some decrease, some more decrease in in in NIMs. But the the the the speed of that decrease will not be will not be, of course, the same as last year. We we are expecting some soft decrease in that in that in those figures.

[Pedro Leduc, Equity Research Analyst at Itau BBA]

That's very clear. Thank you. And the the first question was on SG and A. We should continue to see the the real term declines in in overall SG and A this year.

[Carmen Arroyo, Chief Financial Officer at Banco BBVA Argentina]

Hi, Pedro. Sorry. Could you repeat? Because we are not getting the the first part.

[Pedro Leduc, Equity Research Analyst at Itau BBA]

In regards to s g and a, so personnel and other admin expenses, if they should continue declining in real terms this year as we saw the first quarter.

[Carmen Arroyo, Chief Financial Officer at Banco BBVA Argentina]

You mean the the improvement in expenses, you say? Administrative expenses.

[Pedro Leduc, Equity Research Analyst at Itau BBA]

That's right.

[Carmen Arroyo, Chief Financial Officer at Banco BBVA Argentina]

Okay. Yeah. In benefits to the personnel, you know, the the main contrast has to do with severance costs that you had in the fourth quarter of twenty twenty four and in 2024 overall. I mean, you had rotation of c level employees, so that had a cost. And you're not going to see that during 2025.

[Carmen Arroyo, Chief Financial Officer at Banco BBVA Argentina]

That was the main moving line. And in the case of administrative expenses, we had a reclassification in the line of taxes that has to do with taxes related to healthy health and and safety. It's a a an specific tax here in Argentina. And because of the nature of that expense, we decided to request I mean, take it from that line onto other operating expenses in the line of turnover tax. So that was the main what moved the the quarter in terms of expenses.

[Carmen Arroyo, Chief Financial Officer at Banco BBVA Argentina]

Of course, this is a a one shot in the sense that this reclassification will already be set for the next quarters. And then you had you did have lower costs on the side of rent and software that has to do mainly with payments to the parent company, but that has to do with with lower provisions that we made on on on the FX exchange rate at which we value these costs.

[Operator]

Our next question comes from Carlos Gomez with HSBC.

[Carlos Gomez-Lopez, Analyst at HSBC]

Hello. Thank you for taking my questions. First one refers to the as you mentioned, the mix in the loan portfolio and the fact that you have been lending more in dollars. First, is that because there's more demand for dollars? There's actually more of funding for dollars?

[Carlos Gomez-Lopez, Analyst at HSBC]

And what do you expect the dollar portfolio to be this year and next year? Will it continue to grow as a percentage of the total? Second, I don't think you have told us your economic assumptions. Can you remind us what you expect for inflation and for the currency for this year and next year? Thank you.

[Diego Cesarini, Head - ALM & IR at Banco BBVA Argentina]

Hello, How are you? Well, regarding our mix of loans, well, as we said, we grew more in dollars. We grew 25% in the quarter in real terms, and we grew just 8% in real terms in the peso activity. We have seen more demand in this currency, in in dollars. But for for the coming months, what we we have to think is that the financial system as a whole and and even our bank has some strong and conservative policies regarding this currency.

[Diego Cesarini, Head - ALM & IR at Banco BBVA Argentina]

We have faced some runoffs of deposits in the past that were very, very heavy. So we are we we at the moment, we cannot expect the same speed of growth in dollar activity that we have seen in the first quarter. It will depend on on funding. We are ready to see what the government is going to announce regarding dollars that could benefit our funding. We we we don't know.

[Diego Cesarini, Head - ALM & IR at Banco BBVA Argentina]

We have heard just rumors, and they are just announcing this at this moment. But to to make it short, we we should not expect the same degree of growth in in this currency. And regarding our economic assumptions, we are our research department right now is expecting a fine 5.5 GDP growth this year and 35% inflation.

[Carlos Gomez-Lopez, Analyst at HSBC]

And the exchange rate?

[Diego Cesarini, Head - ALM & IR at Banco BBVA Argentina]

The exchange is a little below 1,400.

[Carlos Gomez-Lopez, Analyst at HSBC]

For this year and for next year? I know. Nobody knows, but what do you have?

[Diego Cesarini, Head - ALM & IR at Banco BBVA Argentina]

Probably, it will grow in line with inflation. It will be a little below 1,700.

[Carlos Gomez-Lopez, Analyst at HSBC]

Thank you so much.

[Diego Cesarini, Head - ALM & IR at Banco BBVA Argentina]

You're welcome.

[Operator]

Once again, if you would like to ask a question, please click on raise hand for audio questions. You will then receive a request to activate your microphone. Please activate it and pick up your headset to provide optimum sound quality. Please hold while we poll for questions. Our next question comes from Jorge Mauro with Fundamenta.

[Operator]

You can open your microphone.

[Jorge Mauro, Equity Analyst at Fundamenta Capital SA]

Hi. Yes. My question, is regarding the growth of credit by product. When you look at credit cards, it barely grew, this quarter in real terms. So I just wanted to understand, what's your view?

[Jorge Mauro, Equity Analyst at Fundamenta Capital SA]

I mean, do you think that there is potential for credit cards? Or because this is a product that has been mainstreamed for a longer period of time. Historically, there is much less growth than in other products. How how are you approaching that?

[Diego Cesarini, Head - ALM & IR at Banco BBVA Argentina]

Hi, Jorge. Well, regard you know that the financial system has been very small. It is still very small for many years and and very based on transactions in the past. In that context, credit card was the product bank used to to make contact with new customers. So and and people's decisions were also very short term based.

[Diego Cesarini, Head - ALM & IR at Banco BBVA Argentina]

So that's where we mainly grew credit cards, loans weighed around 40 or 45% of our balance sheet or or or loan base, two or three years ago. And that is changing for for good. People with stability, people are are taking more long term decisions. So we are seeing more growth in consumer loans, car loans, mortgages. And so we are not, we do not want to stop our growth on credit cards, but other products will grow more probably in the in the in the coming years.

[Diego Cesarini, Head - ALM & IR at Banco BBVA Argentina]

So that is our mainly our our our opinion on this subject.

[Jorge Mauro, Equity Analyst at Fundamenta Capital SA]

Okay. But do you think that credit cards still has potential, or we the the the level we have seen today is is the credit penetration of credit cards that Argentina may have? So very limited growth in a way.

[Diego Cesarini, Head - ALM & IR at Banco BBVA Argentina]

No. I think we think that we they they still have potential in but as I said before, mortgages are comes from from scratch. They they weigh nothing in in in balance in banks' balance sheets. The same happens with other, long term loans, so they should grow more. Credit cards will still we think that they will still be growing above inflation, but not as much as the other lines.

[Diego Cesarini, Head - ALM & IR at Banco BBVA Argentina]

In the case of our bank, we are strong on credit cards. We have a market share that is above our average market share. So we feel very comfortable with that level, and probably, we will we will keep that high market share in the future.

[Jorge Mauro, Equity Analyst at Fundamenta Capital SA]

Thank you very much.

[Operator]

Next question from Brian Flores with Citi.

[Brian Flores, VP - Equity Research at Citi]

Hi, Tim. Just a quick follow-up on the last question. I think it's a very interesting point. So just wanted to understand, are you seeing on average the duration of your portfolio already increasing, or is this something that should happen still? Just wanted to understand how quickly this could be happening or not.

[Brian Flores, VP - Equity Research at Citi]

Thank you.

[Diego Cesarini, Head - ALM & IR at Banco BBVA Argentina]

Hi, Brian. Yes. Yes. We see that our duration is increasing mainly because of of consumer loans. We have also grown last year and this year on on SMEs loans that have longer terms than than than we had in the past.

[Diego Cesarini, Head - ALM & IR at Banco BBVA Argentina]

We in the past, the the usual product for an SME was a discount of checks, documents, very short term, sixty days, ninety days. And and since February, we have seen more demand on investing lines. So, yes, it's definitely it is the duration is is growing. On average, we are still short in our in our presentation. We have some some figures or some charts regarding durations, and you can see that most of our loans still are below one year tenure.

[Diego Cesarini, Head - ALM & IR at Banco BBVA Argentina]

But, in the future, we we we can expect duration to go to go longer. We are also growing our mortgages. Still very it doesn't represent an important part of our loan portfolio, but in the future, we could also expect that line to weigh more.

[Brian Flores, VP - Equity Research at Citi]

Perfect. I'm sorry for the follow-up here. But on the last point, do you think securitization or the ability to do securitization is, I would say, a requirement for for us to see mortgages in your portfolio to really gain relevance or for the even for the system?

[Diego Cesarini, Head - ALM & IR at Banco BBVA Argentina]

Well, we think that you cannot keep this level of growth in in mortgages in in the long term if we do not have a long term funding. Securitization is one alternative, but could also could have a as in other countries, some long term bond market. We have that in Argentina, but it's it's still very shallow market with with with small small volume, short terms. For example, you you cannot issue a bond of more than a year and a half or two years in and and volumes could could still be very, very low. So, yes, definitely, we need some change in funding to keep this this trend in mortgages.

[Diego Cesarini, Head - ALM & IR at Banco BBVA Argentina]

At at this moment, we do not we cannot be sure that that will happen. But if if we if we think that Argentina is normalizing, our capital markets should should also get more complex, and and some long term investors should be able to to or to buy mortgages or to provide us with some long term funding. That that is our expectation in in the short term and midterm. We can still grow on these on these lines. But for for the long term, we need some some changes in our funding.

[Brian Flores, VP - Equity Research at Citi]

No. Thank you. Thank you very much.

[Operator]

We are showing no further questions at this time. This concludes the question and answer section. I would now like to turn it over to BBVA's team for closing remarks.

[Carmen Arroyo, Chief Financial Officer at Banco BBVA Argentina]

Well, thank you all for joining us today. And if you have any further questions, do not hesitate to reach out. Have a nice day. Have a nice a nice week. Thank you.

[Operator]

This concludes the presentation. You may disconnect now, and have a nice day.

Participants

Executives

• Belén Fourcade, Investor Relations Manager
• Diego Cesarini, Head - ALM & IR
• Carmen Arroyo, Chief Financial Officer

Analysts

• Brian Flores, VP - Equity Research at Citi
• Pedro Leduc, Equity Research Analyst at Itau BBA
• Carlos Gomez-Lopez, Analyst at HSBC
• Jorge Mauro, Equity Analyst at Fundamenta Capital SA