Grupo Financiero Galicia(GGAL) - 2019 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net income attributable to Grupo for Q3 2019 was MXN11.6 billion, a 175% increase year-over-year, driven by profits from Banco Galicia and other subsidiaries [10] - The profit represented a 7.1% annualized return on average assets and a 58.2% return on average shareholders' equity, compared to 3.6% and 34.6% a year ago [11] - Net interest income for the quarter increased by 14% compared to the same period in 2018, primarily due to a 43% increase in interest on loans [12] Business Line Data and Key Metrics Changes - Banco Galicia's net income for the quarter increased by 197% year-over-year, attributed to higher net operating income and profits from financial instruments [11] - Net income from financial instruments rose by 167% compared to Q3 2018, due to higher holdings of central bank paper [13] - Peso-denominated loans to the private sector amounted to MXN1.65 trillion, a 7.1% increase during the quarter [7] Market Data and Key Metrics Changes - The Argentine economy contracted by 1.3% year-over-year in Q3 2019, compared to a 0.6% expansion in Q2 [4] - The average exchange rate was MXN56.5 per dollar in September, a 29% increase from June 2019 [5] - Private sector deposits in pesos increased by 1.8% during the quarter and 42.5% year-over-year, totaling MXN2.5 trillion [5] Company Strategy and Development Direction - The company is focused on maintaining liquidity in both dollars and pesos while protecting profitability and capital situation amid political uncertainty [18] - The bank is leveraging digitalization to improve efficiencies and is preparing for potential economic challenges [18] Management's Comments on Operating Environment and Future Outlook - Management noted significant political uncertainty and an increase in the country risk premium, which has accelerated the dollarization of the economy [9] - There is an expectation of recovery in loan demand next year, potentially aided by lower interest rates [20] Other Important Information - The Argentine Central Bank contracted the monetary base by MXN65.8 billion in Q3, a 4.9% decrease from the previous quarter [4] - The bank's exposure to Leliqs and repo transactions is split to maintain liquidity, with roughly MXN45 billion in each [24] Q&A Session Summary Question: Political outlook and bank strategies - Management indicated uncertainty regarding the new president's economic plan and emphasized a focus on liquidity and asset quality [18] Question: Asset quality and charge-offs - The improvement in NPL ratios was attributed to recovery in loan volumes and the sale of past-due loans, with expectations of nearing peak NPL levels [20] Question: Tax adjustments and risks - Management confirmed that inflation adjustments for taxes are under current regulations, with an expected effective tax rate of around 16% for Q4 [23] Question: Impact of debt reprofiling - The impact of debt reprofiling was around MXN2 billion, with expectations of recovery in the short term [27] Question: Strategy for dollar loans - The bank has decided to stop originating loans in dollars and is focusing on offering loans in pesos to exporters [28]