Financial Data and Key Metrics Changes - In Q3 2025, Banco Macro reported a net income loss of ARS 33.1 billion, a decrease of ARS 191.5 billion from the previous quarter, primarily due to higher loan loss provisions and administrative expenses [3] - Total comprehensive income for the quarter was an ARS 28.4 billion loss, with net income for the first nine months of 2025 totaling ARS 176.7 billion, down 35% year-on-year [3] - The annualized ROE and ROA as of Q3 2025 were 4.5% and 1.5%, respectively [3] Business Line Data and Key Metrics Changes - Net operating income before general and administrative expenses was ARS 779.6 billion, down 23% from Q2 2025 and down 29% year-on-year [4] - Provision for loan losses increased to ARS 156.8 billion, up 45% from Q2 2025 and up 424% year-on-year [4] - Net interest income totaled ARS 686.2 billion, a decrease of 7% from Q2 2025 and 8% year-on-year [4] - Net fee income was ARS 177.3 billion, down 7% from Q2 2025 but up 14% year-on-year [10] Market Data and Key Metrics Changes - Total financials reached ARS 10.1 trillion, increasing 3% quarter-on-quarter and 69% year-on-year [13] - Private sector loans increased 3% quarter-on-quarter and 67% year-on-year, with commercial loans showing significant growth [14] - Total deposits increased 5% quarter-on-quarter and 11% year-on-year, with demand deposits leading the growth [16] Company Strategy and Development Direction - The bank aims to utilize its excess capital of ARS 3.3 trillion for potential M&A opportunities, with a capital adequacy ratio of 29.9% [17] - The strategy includes a focus on both commercial and consumer loan growth, with expectations of a 35% real growth in loans for 2026 [25] - The bank's market share in private sector loans reached 9% as of September 2025, with a focus on maintaining a well-optimized deposit base [16] Management's Comments on Operating Environment and Future Outlook - Management indicated that the delinquency rate was higher than expected, leading to increased provisions [20] - For 2026, the bank forecasts loan growth of 35% in real terms and deposits to grow around 25% in real terms, with an expected ROE in the low 10s [21] - The peak in non-performing loans (NPLs) is anticipated to occur between October and November 2025, with a cost of risk expected to decrease to around 5% in 2026 [23] Other Important Information - The bank's non-performing total finance ratio reached 3.02%, with a coverage ratio of 120.87% [17] - Employee benefits increased by 20% due to provisions for early retirement plans, impacting administrative expenses [12] - The bank's liquidity ratios remain strong, with a liquid assets to total deposit ratio of 67% [17] Q&A Session Summary Question: Was the result worse than anticipated? - Management acknowledged that the results were impacted by higher provisions and unexpected expenses, along with bond price performance [20] Question: What are the expectations for loan growth and returns next year? - The bank forecasts a 35% real growth in loans and a low 10s ROE for 2026 [21] Question: What additional expenses were incurred? - The unexpected expenses were primarily related to early retirement plans [22] Question: When is the peak of NPLs expected? - The peak is anticipated to occur between October and November, with a cost of risk of 6.5% in Q3 [23] Question: What is the plan for the $400 million bond maturing in 2026? - Management stated that various options are being considered, including potential bond issuance or cancellation [39]

Summary of Conference Call on China Financials Industry Overview - The conference call focused on the **China financials sector**, including banks, insurance firms, and non-performing loan asset management companies (NPL AMCs) [1][3]. Key Points and Arguments 1. Revenue and Profit Growth Expectations - Financial firms anticipate a **rebound in revenue and profit growth** in 2026, driven by stable credit costs and a potential recovery in net interest margins (NIM) [1][3]. - The expectation is supported by stable rates and a stabilizing NIM, with most banks indicating that new loan yields have stabilized due to rational competition and reduced window guidance [1][7]. 2. Loan Yield and NIM Trends - Most banks believe that **loan yields have likely bottomed**, paving the way for stabilizing or rebounding NIM in 2026 [7][10]. - ICBC expects a modest decline in NIM by approximately **2 basis points** in Q4 2025, with a year-over-year decline of less than **10 basis points** in FY26 [10]. 3. Credit Quality and NPL Management - Credit quality pressures are deemed manageable, with retail and property NPL pressures persisting but not accelerating [2][10]. - Banks have been digesting around **Rmb4 trillion** in NPLs annually through various means, including write-offs and sales [2][13]. - The recovery of property NPLs is maturing, and new risks are being well controlled [2][3]. 4. Positive Outlook for Investment - The outlook for China financials is considered **attractive**, with expectations of strong double-digit growth in household financial assets [3][5]. - Potential fiscal support for mortgage interest payments in 2026 is expected to mitigate property-related credit risks [3][20]. 5. Specific Bank Strategies - **Minsheng Bank** has set KPIs to lift loan yield by **2 basis points** per quarter and is focusing on deposit cost control to support NIM [1][11]. - ICBC is adjusting its bond trading strategy to shorten duration in anticipation of a rebound in bond yields [10]. 6. NPL Formation and Recovery - Mortgage NPL formation remains stable, with ICBC reporting that its mortgage loan-to-value (LTV) ratio is below **42%** overall [14][20]. - Cinda reported that banks are expected to continue large-scale NPL disposals, with corporate NPLs projected to be around **Rmb400-500 billion** and retail NPLs over **Rmb150 billion** [13][16]. 7. Regulatory Environment - Strict constraints on local government financing remain, with no new policies introduced this year, but existing measures are firmly in place [17][18]. Additional Important Insights - The conference highlighted the importance of **self-disciplinary measures** in improving the competitive environment for loan pricing [11]. - The potential for **foreclosure and auction** of property collateral is linked to defaulted inclusive loans rather than mortgages, indicating a shift in risk management strategies [16][20]. This summary encapsulates the key insights and trends discussed during the conference call regarding the China financials sector, emphasizing the expectations for recovery and growth amidst ongoing challenges.

Investment Rating - The industry view for China's financial sector is rated as Attractive [4] Core Insights - China's banks have sufficient capacity to absorb potential risks from increased US tariffs, with stable earnings and dividends expected to support share performance [1][12] - The potential industrial non-performing loan (NPL) ratio is forecasted to rise to 10-11% from 8.4% at the end of 2024 due to tariff impacts [15][20] - The analysis indicates that approximately 4% of total loans, primarily export-related credits, are exposed to tariff risks, with electronics and electrical equipment being the most affected sectors [10][12] Summary by Sections Financial Stability - Major Chinese banks are expected to maintain stable earnings and dividends despite potential delays in net interest margin (NIM) and fee income recovery [1][58] - The banking sector has been digesting over RMB 3 trillion of total NPLs annually, with a consistent provision charge of around RMB 1.3 trillion [18][19] Risk Assessment - The incremental NPL from higher tariffs could be 2-3% for industrial loans, translating to an increase of 40-60 basis points in total loans [7][12] - The forecast suggests that if tariffs affect one-third of export-oriented manufacturing credits, the cumulative industrial NPL ratio could reach 15-16% [20][22] Sector-Specific Insights - The electronics sector accounts for 22% of exports to the US, while apparel and furniture have higher revenue exposure, indicating varying levels of risk across sectors [10][11] - Continued capital expenditure rationalization in the industrial sector is expected to ease some risks associated with industrial loans [33][37] Market Dynamics - The ongoing tariff dynamics are anticipated to create uncertainties in the A-share market, affecting both fundamentals and investor sentiment [58] - A shift in preference back to defensive banks from insurance is noted, reflecting market volatility and the need for stable earnings [56][58]