BBVA Argentina (NYSE:BBAR), the Argentine subsidiary of the global financial services group Banco Bilbao (NYSE:BBVA) Vizcaya Argentaria, S.A., has announced a significant increase in net income for the second quarter of 2024, despite Argentina's challenging economic environment. The bank reported a net income of ARS 112.9 billion, a 178.8% increase from the previous quarter, with a Return on Equity (ROE) of 19.5% and Return on Assets (ROA) of 4.7%. However, operating income declined by 40.3% quarter-over-quarter due to lower interest income and higher loan loss allowances.
Key Takeaways
- BBVA (BME:BBVA) Argentina's net income surged to ARS 112.9 billion in Q2 2024, up 178.8% from the previous quarter.
- The bank's operating income decreased by 40.3% due to lower interest income and increased loan loss allowances.
- Digital channels are driving customer acquisitions, with 81% of new customers coming through digital platforms.
- Loan and deposit market shares have improved, with private sector loans growing by 23.1% in real terms.
- Capital and liquidity ratios remain strong, with a capital ratio of 25.3% and a liquidity ratio of 69.5%.
Company Outlook
- BBVA Argentina is focusing on digital transformation as a key strategic development.
- The bank is adapting to the changing monetary policies and economic conditions in Argentina.
Bearish Highlights
- Argentina's GDP is expected to decline by 4% in 2024.
- The year-end inflation rate is projected to be 135%, a decrease from the previous year's 211%.
Bullish Highlights
- BBVA Argentina has seen a notable increase in its digital sales, with 93.1% of retail sales in units being digital.
- The bank maintains a strong competitive position and asset quality, with a non-performing loan ratio of 1.18%.
Misses
- The bank's operating income took a hit due to a decrease in interest income and an increase in loan loss allowances.
Q&A Highlights
- Ines L'Anusse, Investor Relations Officer, expressed confidence that Argentina's fiscal consolidation and the government's monetary policy adjustments could lead to a slowdown in inflation.
- The increase in public sector exposure was attributed to the government's monetary policy aimed at eliminating remunerated liabilities of the Central Bank.
In the midst of Argentina's economic difficulties, which include a projected GDP decline and high inflation, BBVA Argentina has managed to report strong financial results for the second quarter of 2024. The bank's commitment to digital transformation is evident in the significant proportion of customer acquisitions and sales made through digital channels. While operating income has suffered due to economic conditions, BBVA Argentina's strategic focus and strong capital and liquidity positions suggest resilience in the face of economic headwinds.
Full transcript - BBVA Banco Frances (BCBA:BBARm) SA ADR (BBAR) Q2 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 Second Quarter 20 24 Results Conference Call. Participants will be in listen only mode during company presentation. After company 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 the 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 Ms. Carmen Morella Araujo, CFO Ms. Ines L'Anusse, IRO and Ms.
Belen Forcada, Investor Relations. Ms. Forcada, you may begin your conference.
Belen Forcada, Investor Relations, BBVA Argentina: Good morning, and welcome to VEVER Argentina's 2nd 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. Speaking during today's call will be Ines Dhanousse, our Investor Relations Officer and Carmen Mauricio Arroso, our Chief Financial Officer, who will be available for the Q and A session. 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 ease of comparability, 2023 2024 figures have been restated to reflect the accumulated effect of the inflation adjustment for each period through June 30, 2024.
Now let me turn the call over to Ines.
Ines L'Anusse, Investor Relations Officer, BBVA Argentina: Thank you, Belen, and thank you all for joining us today. In the Q2 of 2024, the significant fiscal consolidation, the relative FX rate stability and the sharp contraction in economic activity have led to a gradual moderation of inflation in recent months. Despite the uncertainty and related risks according to BBA Research, it is likely that these ongoing adjustments eventually complemented by additional measures could set the basis for an inflation slowdown along the year. On the other hand, although the deterioration of economic activity could be reversed by midyear, it is expected that after falling by 1.6% in 2023, GDP will decrease by 4% in 2024 and 135% inflation is expected by 2024 year end with a downward tendency versus 211% as of December 2023. 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 June 2024, new customers' acquisitions through digital channels reached 81% versus 76% 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 93.1% in the Q2 of 2024 and represent 74% of the bank's total sales measured in monetary value. Moving to Slide 4, I will now comment on the bank's Q2 2024 financial results. BBVA Argentina's Q2 2024 net income was ARS112.9 billion increasing 178.8 percent quarter over quarter. This implied a quarterly ROE of 19.5% and a quarterly ROA of 4.7%.
On the other hand, operating income in the Q2 of 2024 was ARS446.7 billion, 40.3 percent lower quarter over quarter. This fall in the quarterly operating result is explained by a lower operating income, mainly due to, 1, lower interest income basically due to the decline in the monetary policy rate, 2, lower results from write down of assets at amortized cost and at fair value through OCI in particular due to the contrast generated by the sale of CPI linked bonds in the Q1 of 2024 and followed by 3 higher loan loss allowances in line with the growth in real terms of the loan portfolio. Net income for the period was highly impacted by income from net monetary position. Inflation on the Q2 of 2024 was 18.6%, much lower than the Q1's 2024 51.6%. Consequently, the income from net monetary position line recorded a 59.9% lower loss than the previous quarter, having a positive impact in the net income comparison.
Turning into the P and L lines in Slide 5, net interest income in the Q2 of 2024 was ARS678.6 billion falling 27.4 percent quarter over quarter. In the Q2 of 2024, interest income in monetary terms decreased more than interest expenses. The former fall was due to a lower income from loans, REITUS and CPI linked bonds. The latter is explained by lower expenses in checking accounts, time deposits and in the expense accounts. In the Q2 of 2024, interest income totaled MXN970 3,300,000,000, falling 35.7 percent compared to the Q1 of 2024.
Quarterly decrease is mainly driven by 1, lower income from loans and 2, lower income from repos, both explained by a decline in the monetary policy rate from 80% at the beginning of April to 40% by mid May and for the rest of the quarter. Also the decline in the quarterly inflation caused a decrease in incomes and CPI link points. Interest expenses totaled ARS294.7 billion denoting a decrease of 49.1 percent quarter over quarter. Quarter decline is described by lower checking account expenses, in particular interest bearing checking accounts followed by time deposits and investment account expenses due to lower rates in line with the deregulation of minimum time deposits rates. Interest from time deposits including investment accounts explained 64.6% of interest expenses versus 47% in the previous quarter.
Net fee income as of the Q2 of 2024 totaled ARS 58,800,000,000, falling 1.8% quarter over quarter. The decline is explained by a greater increase in expenses versus fee income in monetary terms. In the Q2 of 2024, fee income totaled MXN117.7 billion, increasing 9% quarter over quarter. Improvement in fee income is mainly explained by 1, greater fee income from credit cards and 2, greater fee income linked to liabilities mainly account maintenance and bundles. On the side of fee expenses, these totaled ARS 58.9 percent, billion increasing 22.5 percent quarter over quarter.
This is explained by higher expenses due to processing fees and promotion on debit and credit cards. In the Q2 of 2024, loan loss allowances increased 30.4% in line with the growth in real terms of the loan portfolio. During the Q2 of 2024, total operating expenses were ARS342.8 billion, decreasing 6.6% quarter over quarter of which 32% were personnel benefits costs. Personal benefits increased 3% quarter over quarter with wages increasing in line with inflation. As of the Q2 of 2024, administrative expenses fell 4.3% quarter over quarter.
This is mainly explained by 1, rent 2, other administrative expenses and 3, document distribution. The first two are related to an increase in inflation, which was higher than the nominal increase of expenses in software licenses and service contracted with the parent company. Regarding the decrease in document distribution expenses, this is due to the contracts generated by the renovation of Car Clastics in the Q1 of 2024. The quarterly efficiency ratio as of the Q2 of 2024 was 55.3 percent improving versus the 65.4% reported in the Q1 of 2024 and above the 52% reported in the Q2 of 2023. The quarterly decrease is explained by a greater increase in the denominator than the numerator, especially due to lower quarterly inflation.
In terms of activity on Slide 6, private sector loans as of the Q2 of 2024 totaled ARS3.9 trillion, increasing 23.1% in real terms. Loans to the private sector in pesos increased 24.2% in the Q2 of 2024. During the quarter, growth was driven by a 28.6% increase in discounted instrument followed by a 14.3% increase in credit cards, a 37.3% increase in overall draft and an increase in consumer loans. In all cases, the increment is boosted by genuine growth in real terms of the portfolio levered on the lower market interest rates. Loans to the private sector denominated in foreign currency increased 16% quarter over quarter.
Quarterly increase is mainly explained by a 14% growth in financing and pre financing of exports and a 44% growth in credit cards. During the quarter, the retail portfolio grew 19% and the commercial portfolio increased 26.6%. The commercial portfolio represents 54.7% of total portfolio from 44.9 percent a year ago. As observed in previous quarters, loans portfolio were impacted by the effect of inflation during the Q2 of 2024, which reached 18.6%. In nominal terms, BBA Argentina managed to increase the retail, commercial and total loan portfolio by 41.1%, 50.1% and 45.8%, respectively, during the quarter, surpassing quarterly inflation levels in all cases.
As of the Q2 of 2024, the total loans and other financing over deposit ratio was 67% above the 55.9% recorded in the Q1 of 2024 and the 58.2% in the Q2 of 2023. Total (EPA:TTEF) loan participation of our total assets is 40% versus 32% in the Q1 of 2024 and a 34% in the Q2 of 2023. BBVA's Argentina consolidated market share of private sector loans reached 10.54% as of the Q2 of 2024, improving from 9.01% a year ago and sustaining the 2 digit cities. As of the Q2 of 2024, asset quality ratio keeps a very good performance at 1.18% in line with the total loan portfolio growth and the good behavior of both the commercial and retail portfolio. On the funding side, as of the Q2 of 2024, total deposits reached ARS5.8 trillion, increasing 2.6 percent quarter over quarter.
The bank's consolidated market share of private deposits reached 7.50 percent as of the Q2 of 2024. Private non financial sector deposits in pesos totaled ARS 4,100,000,000,000 increasing 6.7% compared to the Q1 of 2024. The quarterly change is mainly affected by a 36% increase in time deposits, a 21% increase in saving accounts offset by a 19% fall in checking accounts, especially non interest bearing checking accounts. Private non financial sector deposits in foreign currency expressed in pesos fell 5.6% quarter over quarter. BBVA Argentina continues to show strong solvency indicators as of the Q2 of 2024.
Capital ratio reached 25.3%. Capital excess over regulatory requirement reached 210.3%. The fall in the capital ratio quarter over quarter is particularly explained by a 16.4% increase in risk weighted assets and by a fall in ordinary capital of 16.3%. The latter is related to 1, dividend distribution, which implied the classification to liabilities and its consequent payment followed by 2, the impact of OCI in the equity. 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 Q2 of 2024, total public sector exposure excluding Central Bank totaled ARS 2.5 premium, increasing 87.7 percent quarter over quarter and representing 26.3 percent of total assets above the 13.9% in the Q1 of 2024. The quarterly increase is explained by the monetary policy promoted by the government in the aim of removing all remunerated liabilities of the Central Bank and aiming for that liquidity to migrate to treasury debt. This is the reason for a 112.5 percent higher precision in national treasury debt in pesos composed mainly by Lecaps, which by quarter end will reflect the monetary policy rate. BBVA Argentina's total security portfolio is mainly Lecaps and to lower extent bonds held as of the Q2 of 2024. As of July 2024, the macro reference rate will be that of the new instrument created by the Treasury, LIFIS, Lettres Fical DelGuies.
In the quarter, the liquidity ratio reached 69.5 percent decreasing versus the Q1 of 2024. Liquidity ratio in local and foreign currency reached 61.4% and 88.6 percent respectively. The decline is explained by lower position in repos as well as a real growth in total deposits of 2.6%. Last but not least, as of the date of this report, the bank has ended its payment schedule of dividends in 3 consecutive installments in cash or cash for ARS264.2 billion expressed in December 31, 2023 currency and that pursuant the Central Bank Regulation, it has been adjusted by inflation as of the day of each payments. 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. At this time, we are showing no questions. I would like to turn the conference back over to Ms. Linusse for any closing remarks.
Ines L'Anusse, 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: The conference has now concluded. You may now disconnect your lines. Have
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