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

Financial Data and Key Metrics Changes - Grupo 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 the cost of funding [8] Business Line Data and Key Metrics Changes - Banco Galicia recorded a net loss of ARS 104 billion, while Naranja X reported a loss of ARS 49 billion; however, Galicia Asset Management and Galicia Seguros posted profits of ARS 36 billion and ARS 27 billion respectively [7] - The deterioration in asset quality was primarily due to an increase in delinquency rates in the retail loan portfolio, with non-performing loans (NPLs) rising to 14.3% from 3.2% at the end of the previous year [11][13] - The average interest-earning assets reached ARS 25 trillion, a 3% increase from the previous quarter, driven by a 9% increase in dollar-denominated loans [9] Market Data and Key Metrics Changes - Private sector dollar-denominated deposits amounted to $36.4 billion in December 2025, reflecting an 11.7% increase during the quarter and a 14.6% increase year-over-year [5] - The bank's estimated market share of loans to the private sector was 14.3%, down 50 basis points from the previous quarter, while the market share of deposits was 16.2%, down 20 basis points [13] 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 25% loan growth for 2026, albeit at a slower pace in the first half of the year [16][23] - The bank is focusing on commercial lending, particularly in sectors such as agribusiness, oil and gas, and automotive, while being cautious about sectors that are not performing well [73][75] Management's Comments on Operating Environment and Future Outlook - Management believes Argentina is entering a phase of stability with a more predictable policy framework, expecting GDP growth of 3.7% and inflation at 23% for 2026 [16] - The management anticipates that NPLs will peak in March 2026, with a subsequent decrease in credit loss charges expected in the first quarter of 2026 [17][32] - The company is optimistic about improving profitability in 2026, with a projected ROE in the low double digits, between 10% and 11% [18][46] Other Important Information - The bank's total regulatory capital ratio reached 25.2%, increasing 310 basis points from the previous quarter, indicating a strong capital position [14] - The company expects a reduction in administrative expenses by around 10%-11% year-over-year, excluding one-off costs from the previous year [40] Q&A Session Summary Question: 2026 guidance on deposit growth - Management confirmed that deposit growth is expected to be between 15% and 20% [21] Question: Changes in growth strategy and market share - Management aims to defend and potentially increase market share, with a slower growth pace anticipated in the first half of the year [23][24] Question: Cost of risk and credit quality improvement - Management expects the cost of risk to decrease, projecting an end-of-year target of 8% for 2026 [35] Question: Restructuring or acquisition costs - Management indicated that one-off costs are largely behind, focusing on normal operations moving forward [39] Question: Growth expectations in specific segments - Management expects more growth in the commercial portfolio, particularly in agribusiness and oil and gas sectors [73][75]