Grupo Financiero Galicia(GGAL) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net income for the quarter amounted to ARS 173 billion, a 70% decrease from the same quarter last year, with a return on average assets of 1.9% and a return on average shareholders' equity of 9.5% [9][10][16] - The primary surplus reached 0.4% of GDP, while the overall surplus was 0.2% of GDP, with primary revenues increasing by 37.7% year over year [4][5] Business Line Data and Key Metrics Changes - Profits from Banco Galicia were ARS 98 billion, Naranja X contributed ARS 32 billion, Galicia Asset Management provided ARS 27 billion, and Galicia Seguros added ARS 13 billion [9] - The net income from Banco Alesia was 76% lower than the same quarter of 2024, primarily due to a 67% decrease in operating results and a 192% increase in loan loss provisions [10][12] Market Data and Key Metrics Changes - Private sector deposits in pesos averaged ARS 89.1 trillion, increasing by 10.6% during the quarter and 69.1% year over year [7] - The exchange rate averaged ARS 11.81 per dollar in June 2025, reflecting a 23.5% devaluation year over year [6] Company Strategy and Development Direction - The company successfully completed the merger with Galicia Mas, resulting in a 2.5% increase in market share for both loans and deposits [8] - The strategy focuses on prioritizing lower-risk segments in credit granting and stabilizing asset quality following the merger [16][19] Management Comments on Operating Environment and Future Outlook - Management expects a temporary margin compression in the third quarter due to increased short-term interest rates and volatility, with stabilization anticipated post-elections [18][19] - The company aims for a return on equity (ROE) in the range of 9% to 11% for 2025, excluding potential restructuring costs [21][22] Other Important Information - The coverage ratio for nonperforming loans (NPLs) decreased to 117.9%, down from 160.3% a year ago [16] - The bank's total regulatory capital ratio reached 23.7%, a slight decrease from the previous year [16] Q&A Session Summary Question: Follow-up on guidance for loan growth and deposits - Loan growth is now expected to be closer to 40%, down from 50%, with deposits anticipated to grow around 30-35% [27] Question: Clarification on capital improvement - The increase in capital ratio is primarily due to the merger with Galicia Mas, resulting in a new capital ratio close to 24% [33] Question: Impact of NPLs and asset quality - NPLs are expected to stabilize by the end of the third quarter, with a slight increase anticipated [62] Question: Financial margins outlook - Margins are expected to deteriorate in the third quarter due to increased funding costs, with a return to second quarter levels anticipated post-elections [66] Question: Corporate segment NPLs - Corporate segment NPLs are not expected to see significant changes, remaining around 0.7% to 1% [76]