BBVA Banco Frances Q2 Earnings Call Highlights

Key Points

• Q2 net income rose 44.6% sequentially to ARS 131.6 billion on an inflation-adjusted basis, while return on equity improved to 12.2% from 8.3% in Q1.
• BBVA expects its loan book to grow about 10% in real terms during 2026, supported by mortgages, auto loans, commercial lending and foreign-currency loans. Early signs of a lending recovery emerged, although growth remains constrained by elevated delinquencies.
• Asset quality remains the main risk: nonperforming loans increased to 6.09%, driven by retail portfolios, but management expects the ratio to stabilize and decline toward 5.5% by year-end as newer loan vintages improve.

BBVA Banco Frances NYSE: BBAR reported inflation-adjusted net income of ARS 131.6 billion for the second quarter of 2026, up 44.6% from the prior quarter, as Argentina’s lower-inflation environment supported relatively stable operating income. The bank’s quarterly return on equity rose to 12.2% from 8.3% in the first quarter.

During the earnings call, Investor Relations Manager Belén Fourcade said Argentina’s continuing disinflation, progress on public debt maturities and more than $13 billion in reserve purchases were contributing to a stronger macroeconomic outlook. She also cited more than $15 billion of projects announced or approved under the country’s RIGI investment-incentive framework during the quarter.

“The second quarter showed early signs of a recovery in lending activity,” Fourcade said, though she noted that lending was still affected by elevated delinquency levels.

Loan growth and balance-sheet position

Total financing to the private sector ended the quarter at ARS 17.1 trillion. Local-currency loans increased 2% sequentially, while foreign-currency private-sector loans rose 2.5%, equivalent to 2% growth in hard-currency terms. Mortgage lending continued to gain momentum, and the bank said it was capturing business largely through commercial lending and foreign-currency loans.

The bank’s consolidated loan market share was 12%, representing a gain of 15 basis points over the past 12 months. Total deposits reached ARS 19.2 trillion. Its private-deposit market share was unchanged sequentially at 9.91% but increased 26 basis points year over year.

Chief Financial Officer Carmen Morillo Arroyo said the bank expects its loan book to grow about 10% in real terms during 2026. She said BBVA sees lending opportunities in secured retail products and customers with visible income, as well as companies and small and medium-sized businesses in more dynamic sectors of the economy.

For 2027, Morillo Arroyo said it was too early to provide detailed guidance, but she expects the banking system to expand by roughly 10% to 15% in real terms and said BBVA aims to grow faster than the market.

Diego Cesarini, investor relations officer and head of asset and liability management, said commercial loans account for about 57% of the portfolio. While commercial loan growth has moderated, he said retail lending was beginning to recover, led by mortgages and auto loans, with consumer and credit-card lending potentially following as credit quality improves.

Asset quality remains a focus

BBVA’s nonperforming loan ratio stood at 6.09% at the end of June, up 49 basis points from the prior quarter. That compared with a 7.22% nonperforming loan ratio for Argentina’s financial system, which rose 54 basis points between March and June. The bank’s quarterly cost of risk was 7.13%, broadly in line with the first-quarter level after adjusting for nonrecurring effects.

Morillo Arroyo said asset-quality deterioration was concentrated in retail portfolios, particularly personal loans and credit cards, while the bank was seeing “zero deterioration” in corporate lending. The bank is being more selective in retail underwriting and is prioritizing payroll customers and other clients with greater visibility into their income, she said.

Management said early arrears and newer loan vintages were showing improvement. Morillo Arroyo said credit-card delinquency levels in newer vintages had declined to near 2.2%, from around 6% a year earlier, although she cautioned that it was still early to draw firm conclusions across all customer segments.

The bank expects nonperforming loans to stabilize and then improve gradually in the second half, ending 2026 at around 5.5%. It expects full-year cost of risk of approximately 6.5%, with a slight improvement in the third quarter followed by a more significant improvement in the fourth quarter.

Its coverage ratio ended the quarter at about 80%. Morillo Arroyo said management considers that level adequate given its historical recovery experience and expects 80% to represent the low point before coverage gradually rebuilds as asset quality improves.

Margins, fees and capital

Reported net interest margin was stable both sequentially and year over year. Net interest margin after monetary-position losses improved to 14.7% from 14%. Cesarini said the bank expects activity margins in Argentine pesos to face moderate pressure as interest rates decline. He estimated that historical net interest margin could decrease about 200 basis points by year-end, while real net interest margin could decline by roughly 100 to 125 basis points.

Management said lower inflation should partially offset the pressure on margins at the profit-and-loss level. Fee income remained a positive contributor, with net fees up about 35% year over year excluding one-time items recorded in the first quarter.

The quarterly efficiency ratio improved to 45%, and the bank expects to finish 2026 below that level. Management reiterated its full-year expectation for real return on equity in the low teens.

BBVA ended the quarter with a liquidity ratio of 45.5% and a regulatory capital ratio of 18.8%, which Fourcade said represented 128.7% excess capital over minimum regulatory requirements. Management said funding was not a constraint on growth and indicated deposits could grow about 5% to 10% during 2026 depending on asset-side opportunities.

The bank also said it would participate in the government’s new mortgage funding program, which is backed by ANSES resources. Cesarini said BBVA had sold approximately 20% of new mortgage originations over the prior four or five months and intended to maintain that pace.

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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