Grupo Financiero Galicia(GGAL) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Indicators Changes - The net loss for the quarter amounted to ARS 87.7 billion, primarily due to losses from Banco Galicia, NaranjaX, and Galicia Seguros, partially offset by profits from Galicia Asset Management [4] - The quarter included extraordinary restructuring expenses associated with the merger with HSBC Argentina amounting to ARS 105.3 billion [4] - Net operating income decreased by 23%, with net interest income down by 10% and loan loss provisions increasing by 26% [6][8] Business Line Data and Key Indicators Changes - Banco Galicia's results included ARS 101.1 billion of extraordinary expenses, negatively affected by increased cost of risk and a decrease in financial margin [5] - Private sector dollar-denominated loans amounted to $18.3 billion, recording a 15.8% quarterly growth and a 153.4% annual increase [3] - Time deposits in pesos rose by 13.1% during the quarter and 76.3% year-over-year [3] Market Data and Key Indicators Changes - The average exchange rate was ARS 1,400 per dollar in September 2025, reflecting a 15.6% devaluation compared to June 2025 [2] - Private sector deposits in pesos averaged ARS 94.1 trillion in September, increasing by 5.6% during the quarter and 53% year-over-year [3] - The estimated market share of loans to the private sector was 14.8%, while the market share of deposits was 16.4% [10] Company Strategy and Development Direction - The company expects an improvement in profitability during the fourth quarter and next year, with a projected ROE of around 4% for 2025 and between 11% and 12% for 2026 [12][13] - The focus will be on improving margins and managing costs, with a significant reduction in headcount due to restructuring [15] - The company anticipates a peak in non-performing loans (NPLs) around March next year, followed by improvement as new, better-quality loans gain weight in the portfolio [15][27] Management's Comments on Operating Environment and Future Outlook - The management noted that the third quarter was marked by high political effects and monetary volatility, negatively affecting margins and asset quality [11] - There is an expectation of a gradual recovery in asset quality, with new origination performing better than older loans [56] - The company is optimistic about the economic environment post-elections, anticipating increased investment and lending opportunities [25][27] Other Important Information - The total regulatory capital ratio reached 22.1%, decreasing 160 basis points from the previous quarter, while the tier one ratio was 21.8% [11] - The company is monitoring liquidity and capital needs closely, with a minimum capital appetite of 13% to 13.5% [19] - The company has seen a significant reduction in dollar purchases from customers post-elections, indicating a stabilization in demand [51] Q&A Session Summary Question: Capital ratio and ROE expectations - The capital ratio was down 120 basis points from the second quarter, with expectations for ROE to improve gradually [16][30] Question: NPL peak and asset quality - The management expects NPLs to peak around March next year, with a range of 6-7% anticipated [27][28] Question: Economic assumptions for inflation and interest rates - The company forecasts GDP growth of 4% for this year and 3.7% for next year, with inflation expected to end this year at 30% and next year at 18% [47][48] Question: Loan-to-deposit ratio and liquidity - The loan-to-deposit ratio is around 99-100%, and the company is comfortable with this level, expecting deposit growth to continue [48] Question: Future funding and market conditions - The company is exploring potential debt in the market but prioritizes deposit growth as a stable funding source [34][35]