Grupo Financiero Galicia(GGAL) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Grupo Financiero Galicia reported a net income of ARS 196 billion for 2025, which is 91% lower than the previous year, resulting in a 0.4% return on average assets and a 2.5% return on average shareholders' equity [5][6] - Excluding integration expenses, the adjusted net income would have been ARS 333 billion, leading to a return on equity (ROE) of 4.2% [6] - The financial margin was negatively impacted by changes in reserve requirement regulations and a significant increase in interest rates, affecting funding costs [7][10] Business Line Data and Key Metrics Changes - Profits from Galicia Asset Management amounted to ARS 127 billion, Naranja X contributed ARS 59 billion, and Galicia Seguros provided ARS 40 billion, while Banco Galicia reported a loss of ARS 70 billion [6] - In the fourth quarter, Banco Galicia recorded a net loss of ARS 84 billion, with significant losses from Naranja X and Banco Galicia, while Galicia Asset Management and Galicia Seguros posted profits [6][10] - The bank's estimated market share of loans to the private sector was 14.3%, down 50 basis points from the previous quarter, and the market share of deposits was 16.2%, down 20 basis points [12] Market Data and Key Metrics Changes - Private sector dollar-denominated deposits reached $36.4 billion, increasing by 11.7% during the quarter and 14.6% year-over-year [5] - Peso-denominated loans to the private sector averaged ARS 87.6 trillion, showing a 10.4% quarterly increase and a 73% year-over-year rise [5] - The average interest rate on peso-denominated private sector time deposits was 26.6%, down 6.4 percentage points from December 2024 [4] Company Strategy and Development Direction - The company aims to maintain and potentially increase its market share, focusing on a gradual growth strategy with expectations of loan growth at 25% for 2026, albeit with a slower pace in the first half of the year [14][21] - The bank is focusing on improving efficiency ratios and capturing benefits from restructuring after the HSBC acquisition [15][38] - The company anticipates a stable macroeconomic environment in Argentina, with GDP growth projected at 3.7% and inflation at 23% for 2026 [14] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about Argentina entering a phase of stability and a more predictable policy framework, which is expected to support investment and economic development [14] - The management expects non-performing loans (NPLs) to peak in March 2026, with a decrease in credit loss charges anticipated in the first quarter of 2026 [15] - The company maintains a ROE guidance for 2026 in the low double digits, between 10% and 11% [16] Other Important Information - The coverage ratio with allowances reached 97.4%, down from 101.5% in the previous quarter [12] - The total regulatory capital ratio was 25.2%, increasing by 310 basis points from the previous quarter [13] - The company proposed a dividend payment of ARS 190 billion, subject to central bank approval [16] Q&A Session Summary Question: Follow-up on 2026 guidance for deposits - Management confirmed that deposit growth is expected to be between 15% and 20% [19] Question: Changes in growth strategy and market share - Management aims to defend and potentially increase market share, with a slower growth pace in the first half of the year [21] Question: Comfort on credit quality improvement and loan growth - Management believes that the economic cycle is passing and expects improvements in credit quality and loan growth in the second half of the year [30] Question: Cost of risk expectations - Management projects the cost of risk to end the year at around 8%, down from 12.5% in the last quarter [32] Question: Restructuring or acquisition costs - Management indicated that one-off costs are largely behind, with a focus on improving efficiency [37] Question: Growth expectations in specific segments - Management expects more growth in the commercial portfolio, particularly in agribusiness, oil and gas, and mining sectors [72]