BBVA Banco Frances Q1 Earnings Call Highlights

Key Points

• BBVA Banco Frances posted Q1 2026 inflation-adjusted net income of ARS 85.2 billion, up 31.2% sequentially, with return on equity improving to 8.3% as funding costs fell and margins widened.
• Management cut its 2026 loan growth forecast to 15%–20% from 25%–30%, citing weak peso loan demand and a slow recovery in private credit, though it expects conditions to improve in the second half of the year.
• Asset quality remains pressured, with the NPL ratio rising to 5.60%, but executives said they expect stabilization soon and see coverage levels and profitability beginning to recover.

BBVA Banco Frances NYSE: BBAR reported higher first-quarter 2026 profit as management pointed to resilient revenue, lower funding costs and tight expense control, while cautioning that Argentina’s private credit recovery remains gradual.

On the company’s earnings call, Investor Relations Manager Belén Fourcade said BBVA Argentina posted inflation-adjusted net income of ARS 85.2 billion for the quarter, up 31.2% from the prior quarter. The result lifted quarterly return on equity to 8.3%.

Fourcade said the quarter unfolded in a macroeconomic environment marked by “a gradual transition and the normalization of key financial variables,” including lower interest-rate volatility and continued adjustments in monetary and regulatory policy. She said the bank remains cautious about “the pace, timing, and evolution of a broader private credit recovery” in coming quarters.

Margins Improve as Funding Costs Fall

Net interest income rose 5.9% sequentially to ARS 879.9 billion, according to Fourcade. She said funding costs declined faster than asset yields because the bank’s liabilities have a shorter average life, expanding total net interest margin to 18.6%.

In the question-and-answer session, Diego Cesarini, IRO and Head of Asset and Liability Management, said nominal net interest margins increased by about 100 basis points in the quarter, though real-term margins were broadly stable. He said BBVA expects real net interest margins to remain similar to last year, with net interest income contributing positively to the recovery in ROE.

Cesarini said management continues to guide for 2026 ROE in the low- to mid-teens, “probably closer to low than to mid.”

Loan Growth Outlook Revised Lower

Total financing to the private sector ended the quarter at ARS 15.7 trillion. Fourcade said local-currency loans declined 6.5% sequentially due to seasonally low commercial activity, while foreign-currency private loans rose 6.8%, or 23.3% in dollar terms. The bank continued to see momentum in pledge and mortgage lending, she said.

BBVA’s consolidated loan market share increased to 12.15%, up 95 basis points over the past 12 months. Cesarini said the bank has grown more than 400 basis points in loan market share over the past three years without acquiring another institution, and is now the No. 2 bank in private-loan market share.

However, Cesarini said management has lowered its real-term loan growth expectations for 2026. The bank began the year expecting 25% to 30% growth, but now expects 15% to 20%.

“The first quarter of the year was not easy,” Cesarini said, citing weak peso loan demand and a seasonal slowdown. He said the second quarter should be somewhat better, with a stronger performance expected in the second half of the year.

For local-currency loans and deposits, management expects growth of about 10% to 15% in real terms this year. For U.S.-dollar business, Cesarini said BBVA expects deposit growth of about 30% and loan growth of about 40%.

Asset Quality Pressures Persist, but Management Sees Stabilization

Asset quality remained a key focus of analyst questions. Fourcade said the bank’s non-performing loan ratio rose to 5.60%, driven mainly by retail credit-card and consumer portfolios. Commercial delinquency remained low at 0.50%.

The bank’s cost of risk declined to 6.14% from 8.11% in the previous quarter, helped in part by strengthened origination policies and a positive one-off related to improved ratings for some wholesale customers, Cesarini said. The coverage ratio stood at 88.41%.

Cesarini said BBVA is “a little more comfortable” with asset quality and is beginning to see “the light at the end of the tunnel,” though he added that conditions remain difficult. He said the bank expects stabilization in the second quarter and a potentially better outcome than in the first quarter.

Asked about coverage, Cesarini said the ratio is likely near a bottom and should recover in coming quarters, though the bank does not have a specific target or timeline. Fourcade added that BBVA is not concerned about current coverage levels, noting that the broader financial system is at similar levels.

Cesarini said non-performing loans could end the year around 5% or slightly below, but BBVA is not providing formal NPL guidance.

Deposits, Liquidity and Capital Remain Solid

Total deposits reached ARS 17.5 trillion. Fourcade said private deposits recorded a small seasonal market-share decline of 8 basis points to 9.93%, but remained up 78 basis points year over year.

Cesarini said the bank reduced deposit size in real terms during the quarter because loan demand had not yet picked up, meaning BBVA did not need to compete aggressively for commercial deposits. He said U.S.-dollar deposits are growing slowly but steadily, at about 2% to 3% per month.

Liquidity remained comfortable, with a liquidity ratio of 45.5%. The bank’s regulatory capital ratio was 18.8%, representing 128.7% excess over minimum regulatory requirements, Fourcade said.

Fourcade also highlighted that Argentina’s central bank approved a dividend distribution of ARS 69 billion on May 15, which she said underscored the bank’s commitment to shareholder value.

Management Points to Gradual Normalization

On regulation, Cesarini said measures introduced last year that sharply increased reserve requirements and volatility have largely been removed. He said the environment has normalized, with lower rates and less volatility, though reserve requirements in Argentina remain high.

Cesarini said the bank has enough liquidity to grow even if reserve requirements are not reduced in the short term. He said management expects the central bank may begin releasing elevated requirements once peso loan demand picks up and inflation remains on a comfortable path.

Management said commercial lending should recover before consumer lending. Cesarini said BBVA is being more cautious in retail origination, while remaining active in mortgages and pledge loans, where delinquency has remained low.

In closing remarks, Cesarini said BBVA has delivered two consecutive quarters of sequential improvement in net income, though results remain “very far” from management’s view of the bank’s potential. He said reforms in Argentina and improving financial conditions should eventually allow the bank to resume growth and continue improving its financial performance.

About BBVA Banco Frances NYSE: BBAR

BBVA Banco Francés is one of Argentina's leading financial institutions, operating as a subsidiary of the global banking group BBVA. The bank provides a full range of retail and commercial banking services to individuals, small and medium‐sized enterprises, large corporations and institutional clients. Its product suite spans deposit accounts, mortgages, personal and auto loans, credit and debit cards, transactional banking and digital solutions designed to meet the evolving needs of customers in both urban and regional markets.

Founded in Buenos Aires in the late 19th century, Banco Francés has developed a longstanding presence in Argentina's financial sector.

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