BBVA Argentina (NYSE:BBAR), in its Q3 2024 earnings call, revealed a decline in inflation-adjusted net income by 21.6% quarter-over-quarter to 99.2 billion pesos. The bank faced a tough economic environment in Argentina, marked by reduced interest income and lower foreign exchange results. However, BBVA (BME:BBVA) Argentina showed progress in digital transformation, with a significant portion of new customer acquisitions through digital platforms. The bank's loan and deposit metrics were positive, and it maintained a strong capital and liquidity position despite the challenging market conditions.
Key Takeaways
- BBVA Argentina's inflation-adjusted net income fell to 99.2 billion pesos, a 21.6% decrease from the previous quarter.
- Return on equity (ROE) was recorded at 16.9%, and return on assets (ROA) stood at 2.9%.
- The bank's digital channels accounted for 83% of new customer acquisitions in September 2024.
- Private sector loans and total deposits grew by 26.5% and 30.9%, respectively.
- BBVA Argentina issued corporate bonds worth 24.5 billion pesos, the first issuance since 2019.
Company Outlook
- BBVA Research projects a 4% GDP decline in 2024 with a recovery of 6% growth in 2025.
- Inflation expectations are improving, with an estimated year-end inflation of 125%, down from 211% the previous year.
- The bank expects a gradual easing of foreign exchange market restrictions in the coming quarters.
Bearish Highlights
- The economic environment in Argentina remains challenging, impacting the bank's financial performance.
- Lower interest income and reduced market rates contributed to the decline in net income.
- Foreign exchange results were lower than in previous quarters.
Bullish Highlights
- Digital sales in retail reached 92.6% in units and 73.7% in monetary value.
- BBVA Argentina's market share in private sector loans and private deposits saw an improvement.
- The capital ratio was healthy at 22.2%, with a capital excess over regulatory requirements of 172.4%.
Misses
- The bank reported a significant quarter-over-quarter decrease in inflation-adjusted net income.
Q&A Highlights
- Ines La Nusa, IRO, emphasized the bank's strong service indicators in Q3 2024.
- BBVA Argentina's focus on digital transformation was highlighted as a key strategy, with 83% of new customers acquired digitally.
BBVA Argentina's third-quarter results reflect the resilience and strategic adjustments the bank has made in response to the economic difficulties in the country. While the bank's financial performance showed a decrease in net income, the emphasis on digital transformation and efficiency, along with a strong capital and liquidity position, positions BBVA Argentina for potential growth as the economic climate in Argentina shows signs of stabilization. The bank's efforts in digital customer acquisition and service delivery underscore its commitment to innovation and operational excellence in a rapidly evolving banking landscape.
Full transcript - BBVA Banco Frances (BCBA:BBARm) SA ADR (BBAR) Q3 2024:
Conference Operator: Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to BBVA Argentina's Third Quarter 2024 Results Conference Call. We would like to inform you that this event is being recorded and all participants will be in listen only mode during the company's presentation. After the company's remarks are completed, there will be a question and answer session. At that time, further instructions will be given.
First of all, let me point out that some of the statements made during this conference call may be forward looking statements within the meaning of the Safe Harbor provisions found in Section 27A of the Securities Act of 1933 under U. S. Federal Securities Law. These forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward looking statements. Additional information concerning these factors is contained in BBVA Argentina's Annual Report on Form 20F for the fiscal year 2023 filed with the U.
S. Securities and Exchange Commission. Today with us, we have Mrs. Ines La Nusa, IRO and Ms. Belen Forcade, Investor Relations.
Ms. Forcade, you may begin your conference.
Belen Forcade, Investor Relations, BBVA Argentina: Good day to everyone and welcome to BBVA Argentina's 3rd quarter 2024 results conference call. Today's webinar will be supported by a slide presentation available on our Investor Relations website on the financial information section. Please note that starting January 1, 2020 as per Central Bank Regulation we have begun reporting results applying hyperinflation accounting pursuant to IFRS rule IAS 29. For risk of comparability, 2023 2024 figures have been restated to reflect the accumulated effect of the inflation adjustment for each period through September 30, 2024. Now let me turn the call over to Ines.
Ines La Nusa, IRO (Investor Relations Officer), BBVA Argentina: Thank you, Belen, and thank you all for joining us today. In the Q3 of 2024, the significant fiscal consolidation and the relative exchange rate stability have been contributing to a process of moderation of inflation throughout 2024. Furthermore, after a sharp contraction in the first half of the year, there are incipient signs of recovery in the economy activity, Mostly in line with BBVA Research Expectation, we continue to forecast a 4% decline in GDP in 2024, followed by an expansion of 6% in 2025. As for inflation, expectations of federal reduction have been improved. A 125% inflation is estimated by year end versus the 211% on the same period of 2023.
PVEA Research continues to expect within its base scenario gradual easing of FX market restrictions during the Q4 of 2024 and in the Q3 of 2025, combined with the final decline in the PAIS tax announced for December. Additionally, some signs of recovery start to appear, such as industrial activity, which has increased 12% between June September of 2024. Now moving into business dynamics, as you can see on Slide 3 of our webcast presentation, our service offering has evolved in such a way that by the end of September 2024, new customers' acquisition through digital channels reached 83% versus 80% a year ago. The response on the side of customers has been satisfactory, and we are convinced this is the path to pursue in the aim of sustaining and expanding our competitive position in the financial system. Retail digital sales, measured in units, reached 92.6% in the Q3 of 2024 and represents 73.7% of the Bank's total sales measured in monetary value.
Moving to Slide 4, I will now comment on the Bank's Q3 2024 financial results. PVVA Argentina's inflation adjusted net income in the Q3 of 2024 was Ps99.2 billion, decreasing 21.6 percent quarter over quarter. This implied a quarterly ROE of 16.9 percent and quarterly ROA of 2.9%. The 41.3% fall in the quarterly operating results was explained by a lower operating income, mainly due to: 1, lower interest income, especially due to lower average market rates as a result of a lower average monetary policy rate 2, lower interest from CPI linked bonds and 3, lower FX results, mainly due to the dual bond having matured. This was positively offset by a decrease in operating expenses, mostly driven by less other operating expenses, mainly due to lower turnover tax and less personal benefits.
Net income for the period was highly impacted by income from net monetary position, although with lower impact than the prior quarter. The income from net monetary position line recorded a 43.9% lower loss than the previous quarter, having a positive impact in the quarter over quarter net income comparison. Turning into the P and L lines, in Slide 5, net interest income in the Q3 of 2024 was Ps. 460,300,000,000, falling 39.5 percent quarter over quarter. In the Q3 of 2024, interest income decreased more than interest expenses, both in monetary and percentage terms.
The former fall was due to a lower income from REPOs and CPI linked bonds due to lower inflation, additional to a fall in income from loans. Expenses are explained by lower expenses on SAER, UBA, close adjustments and interest on investment accounts. In the Q3 of 2024, interest income totaled Ps 760,200,000,000, falling 30.3% compared to the previous quarter. Quarterly decrease is mainly driven by: 1, lower income from repos and 2, lower income from loans, both explained by a decline in the quarterly average monetary policy rate. Also, the decline in quarterly inflation caused a decrease in income from CPI linked bonds.
Interest expenses totaled Ps299,900,000,000, denoting a decrease of 9.3% quarter over quarter. Quarter decline is described by lower investment account expenses and lower said Uber (NYSE:UBER) adjustment expenses, the latter due to lower quarterly inflation. Interest from time deposits explain 71% of interest expenses versus 64.6 percent the previous quarter. Net fee income as of the Q3 of 2024 totaled Ps. 71,100,000,000, increasing 7.9 percent quarter over quarter.
The increase is explained by an increase in income and a greater fall in expenses in monetary terms. In the Q3 of 2024, fee income totaled ARS 133,200,000,000, increasing 1% quarter over quarter. Improvement in fee income is mostly explained by: 1, greater fee income linked to liabilities 2, higher dollar fees, mainly account maintenance and bundles and 3, fee links to securities. 12 are mainly explained by price updates and more activity. On the side of fee expenses, these totaled Ps.
62,100,000,000, falling 6% quarter over quarter. This is explained by lower expenses on fee and promotions with debit and credit cards in addition to lower expenses from fraudulent trade transactions. In the Q3 of 2024, loan loss allowances decreased 11.5 percent, in line with the growth in real terms of the performing loan portfolio. During the Q3 of 2024, total operating expenses were BRL 316,600,000,000, decreasing 17.6 percent quarter over quarter in real terms, of which 32% were personal benefits costs, in line with past quarters. Personal benefits decreased 18.1 percent quarter over quarter in spite of wages increasingly in line with inflation.
As of the Q3 of 2024, administrative expenses fell 6.1% quarter over quarter. This is mainly explained by 1, rent 2, taxes and 3, softwares. Rent and softwares are related to less expenses of softwares licenses and services contracted with the parent company. The tax line fell due to a contrast with the Q2 of 2024, in which income tax was paid in relation to the banking transaction tax mainly as a result of dividends distribution. The quarterly efficiency ratio as of the Q3 of 2024 was 59.2%, above the 55.3% reported in the Q2 of 2024.
In spite of expenses decreasing, income considering monetary position results had a greater form, especially due to a decrease in net interest income. In terms of activity on Slide 6, private sector loans as of the Q3 of 2024 totaled Ps. 5,500,000,000,000, increasing 26.5 percent quarter over quarter in real terms. Loans to the private sector in pesos increased 23% in the Q3 of 2024. During the quarter, growth was especially driven by: 1, a 48% increase in discounted instruments, followed by 2, a 51% increase in consumer loans 3, a 14.2% increase in credit cards and 4, an increase in other loans, mainly commercial loans and floor plan.
In all cases, the increase is boosted by genuine growth in real time of the portfolio, levered on the lower market interest rate and greater commercial efforts. Loan to the private sector denominated in foreign currency increased 50%. Quarterly increase is mainly explained by a 15.8% growth in financing and pre financing of exports and a 270.3% growth in discounted instruments. During the quarter, the commercial portfolio grew 30.2% and the retail portfolio increased 22.6%. The commercial portfolio represents 55.7 percent of the total portfolio from 47.3 percent a year ago.
As observed in previous quarters, loan portfolios were impacted by the effect of inflation during the Q3 of 2024. It reached 12.1%. In nominal terms, BBVA Argentina managed to increase the retail, commercial and total loan portfolio by 38.6%, 44.5% and 42.1% respectively during the quarter, surpassing quarterly inflation levels in all cases. As of the Q3 of 2024, the total loans and other financing over deposits ratio was 64.9%, below the 67% recorded in the Q2 of 2024 and above the 53.6% in the Q3 of 2023. Total (EPA:TTEF) loans participation over total assets reached 43% versus 40% in the Q2 of 2024 and 35% in the Q3 of 2023, evidencing lower exposure to the public sector in line with real loan growth demand.
BBVA's Argentina consolidated market share of private sector loans reached 10.35% as of the Q3 of 2024, improving from 9.35% a year ago and sustaining the 2 digit figures. As of the Q3 of 2024, asset quality ratio keeps a very good performance at 1.18 percent with non performing loans growing in line with the total portfolio. On the funding side, as of the Q3 of 2024, total deposits reached ARS 8,500,000,000,000, increasing 30.9 percent quarter over quarter. The bank's consolidated market share of private deposits reached 8.67 percent as of the Q3 of 2024. Private non financial sector deposits in pesos totaled 5,100,000,000 pesos, increasing 12.4% compared to the Q2 of 2024.
The quarterly change is mainly affected by a 34.8% increase in time deposits and a 13.9% increase in checking accounts, offset by a 45.2% fall in investment accounts and a 7.3% fall in saving accounts. Private non financial sector deposits in foreign currency expressed in pesos increased 84.9% quarter over quarter. This is mainly explained by an 88.6% increase in saving accounts directly affected by the fiscal amnesty promoted by the government. BBVA Argentina continues to show strong service indicators on the Q3 of 2024. Capital ratio reached 22.2%.
Capital excess over regulatory requirement reached 172.4%. It is important to mention that capital ratio was highly impacted in the Q2 of 2024 by dividend distribution, which was paid in 3 consecutive installments in cash or in kind for 264,200,000,000 pesos expressed in December 31, 2023 currency and that first one, the Central Bank regulation, it has been adjusted by inflation as of the day of each payment. Furthermore, the fall in the capital ratio in this quarter is particularly explained by the 14.9% increase in risk weighted assets over the increase in ordinary capital level 1 of 1.1%. The increase in risk weighted assets is linked to the real growth in the loan portfolio in line with the increase in market risk requirements. As of the Q3 of 2024, total public sector exposure, excluding Central Bank, totaled Ps.
2,600,000,000,000, decreasing 6.4%. The quarterly decrease is mainly explained by the maturity of the dual bond on June 30, 2024. As of July 2024, the macro reference rate will be that of the new instrument created by the Treasury, LIFIS, which the bulk ended the quarter with no position. As a result of the monetary policy adopted by the treasury and the central bank, central bank exposure fell 87.3%, mainly due to the removal of repos with the central bank from the market. Exposure to the public sector, excluding central bank exposure, represents 21% of total assets below the 26.3% in the Q2 of 2024 and as mentioned before, in light with real loan growth demand.
In the quarter, liquid assets were Ps5.7 trillion, increasing 26.6 percent quarter over quarter. This was mainly driven by an increase in cash and deposits in banks, especially due to the fiscal amnesty. As of September 2024, the Bank issued corporate bonds for Ps 24,500,000,000 at face value at Butler plus 5 percent rate and maturity on June 2025 with quarterly interest payments. BBVA Argentina last corporate bond issuance was in 2019. This concludes our prepared remarks.
We will now take your questions. Operator, please open the line for questions.
Conference Operator: We will now begin the question and answer session. Showing no questions. This concludes the question and answer session. At this time, I would like to turn the floor back to Mrs. Lannusa for any closing remarks.
Ines La Nusa, IRO (Investor Relations Officer), BBVA Argentina: Okay. Thank you for your time and let us know if you have further questions. Have a good day.
Conference Operator: Thank you. This concludes today's presentation. You may disconnect your line at this time and have a nice day.
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