Grupo Financiero Galicia Q1 Earnings Call Highlights

Key Points

• Profitability weakened sharply in Q1 2026, with Grupo Financiero Galicia’s net income falling 66% year over year to ARS 66.5 billion. Management blamed higher loan-loss provisions, weak loan demand and inflation-related accounting effects, even though margins and efficiency improved sequentially.
• Banco Galicia showed sequential improvement as net income jumped from the prior quarter, helped by lower provisions, better delinquency trends and integration synergies from Galicia Más. However, asset quality remains under pressure, with the nonperforming loan ratio rising to 7.7% and coverage falling to 91.4%.
• Management cut growth expectations but kept ROE guidance, lowering 2026 loan growth to 20%–25% and deposit growth to 15%–20%. Even so, it reiterated low-double-digit ROE guidance of 10%–11%, saying results should improve through the year as Argentina’s macro backdrop stabilizes.

Grupo Financiero Galicia NASDAQ: GGAL management said profitability weakened sharply in the first quarter of 2026, as higher loan-loss provisions, limited loan demand and inflation accounting effects weighed on results, even as margins and efficiency showed sequential improvement.

Pablo Firvida, head of investor relations, said Grupo Galicia posted net income of ARS 66.5 billion for the quarter, down 66% from the prior year. The result represented a 0.6% return on average assets and a 3.2% return on average shareholders’ equity.

The quarter’s result included profits of ARS 47.7 billion from Banco Galicia, ARS 34 billion from Galicia Asset Management, ARS 12.5 billion from Galicia Seguros and ARS 1.5 billion from Galicia Securities. Those gains were partially offset by an ARS 18.6 billion loss at Naranja X.

Banco Galicia Results Improve Sequentially

Firvida said Banco Galicia’s net income improved by ARS 162.6 billion compared with the fourth quarter of 2025. He attributed the sequential improvement to lower loan-loss provisions, better delinquency trends and efficiency gains tied to the integration with Galicia Más, the former SCC.

Operating income rose 153% quarter over quarter, supported by an 11% increase in net operating income and a 25% reduction in loan-loss provisions. Expenses declined 17% from the prior quarter, reflecting synergies from the integration process.

Net interest income fell 7% sequentially, as interest income declined 13% due mainly to lower income from loans and other financing. Credit card income fell 28%, reflecting seasonally lower average volumes, while income from promissory notes decreased 19%. Interest expenses declined 22%, helped by lower deposit-related costs and reduced interest rates and average volumes.

Despite interest rate volatility in January and February, Firvida said Banco Galicia’s financial margin improved sequentially and ended the quarter at 16.7%. Average interest-earning assets totaled ARS 26 trillion, down 4% from the previous quarter, while interest-earning liabilities fell 5% to ARS 23 trillion.

Net fee income declined 6% quarter over quarter, which management attributed to typical first-quarter seasonality and lower transaction levels compared with the fourth quarter. Credit card fees fell 4%, while collection-related fees declined 13%.

Asset Quality Remains a Focus

Provision expenses declined 25% quarter over quarter, driven by what Firvida described as a significant improvement in early delinquency indicators in the individual segment, which fell 49% from the prior quarter. However, Banco Galicia’s nonperforming loan ratio rose to 7.7% from 6.9% in the fourth quarter of 2025, while allowance coverage declined to 91.4% from 97.4%.

Firvida said credit risk stood at 9.5% at quarter-end. He added that Grupo Galicia maintained “healthy” liquidity and solvency metrics, with Banco Galicia’s liquid assets representing 95% of transactional deposits and 56.5% of total deposits. The bank’s total regulatory capital ratio reached 25.5%, up 30 basis points from the prior quarter.

“During the first quarter, financial margin partially recovered, efficiency improved, and the cost of risk declined,” Firvida said. “However, loan demand did not rebound, and asset quality and the monetary loss related to inflation had a significant impact on profitability.”

Management Maintains ROE Guidance

Gonzalo Fernández Covaro, Grupo Galicia’s chief financial officer, said the first quarter began with “interest rate volatility, policy tightening, and high inflation,” but that rates declined in March and have remained stable. He said management expects Argentina to continue moving toward a more stable and predictable policy framework, supporting future credit growth.

Fernández Covaro said loan growth started the year slowly, particularly in peso-denominated commercial lending, while the company applied stricter origination standards in consumer credit. He said commercial lending has begun to show signs of recovery in the second quarter, both in dollars and pesos.

Management lowered its 2026 loan growth expectation to a range of 20% to 25%, compared with an earlier expectation of 25%. Deposit growth is now expected at 15% to 20%, down from a prior expectation of about 20%.

Despite the weaker start to the year, Fernández Covaro maintained Grupo Galicia’s 2026 return-on-equity guidance in the low double digits, specifically in the 10% to 11% range. He said January and February were weak months for results, while March was “a very good month” and April was also tracking well.

“We expect like a ladder, quarter after quarter, to improve net income for the group,” Fernández Covaro said.

Funding, Capital and Loan Demand

In response to analyst questions about deposit outflows and funding, Fernández Covaro said part of the reported decline reflected foreign exchange effects because deposits are reported in pesos. He also said the company deliberately reduced some institutional funding, including mutual fund-related deposits, because loan demand was not strong enough to justify paying for that funding.

Fernández Covaro said Banco Galicia remains well positioned to fund future loan growth due to its scale as the largest private bank in the market and its ability to attract institutional deposits again if needed. He said the company is focused on defending market share in transactional deposits.

Asked about capital deployment, Fernández Covaro said the bank’s capital level is high, but management believes Argentina has a long-term credit growth opportunity and wants to retain capital to support that growth. He said Banco Galicia is seeing more activity in areas such as acquisition financing, privatizations and larger commercial transactions. Over the longer term, he said a sustainable capital ratio around 15% would be appropriate in a more normalized market.

Naranja X and Macro Outlook

Hernán García, chief financial officer of Naranja X, said the unit’s ARS 18.6 billion loss represented a roughly 60% improvement from the prior quarter’s loss of about ARS 50 billion. He said the improvement was driven mainly by lower loan provisions and improving delinquency trends since September 2025. For the full year, Naranja X expects return on equity to recover to high single-digit levels, García said.

On macroeconomic assumptions, Fernández Covaro said management expects Argentina’s GDP to grow about 3% in 2026, inflation to end the year around 28% to 29%, and the exchange rate to finish near ARS 1,590 to ARS 1,600 per U.S. dollar. He said management expects Banco Galicia’s margin to remain around 16% for the year and cost of risk to decline to about 8% for the full year, compared with 9.5% in the first quarter.

Firvida also outlined the broader economic backdrop, noting that Argentina’s national consumer price index rose 9.4% during the first quarter, with year-over-year inflation at 32.6% in March. He said exchange rate and interest rate volatility had eased after a volatile 2025 election period, and that private-sector lending and deposits continued to grow year over year across both peso and dollar segments.

About Grupo Financiero Galicia NASDAQ: GGAL

Grupo Financiero Galicia is a diversified financial services holding company headquartered in Buenos Aires, Argentina. As one of the country's largest private-sector financial institutions, the company provides a comprehensive suite of banking, insurance and investment products to individual, small-to-medium enterprise (SME) and corporate clients. Its operations span retail and commercial banking, asset management, leasing, factoring and pension fund administration.

The core banking segment offers deposit and lending services, credit and debit cards, payment solutions and digital banking platforms.

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