Grupo Financiero Galicia SA Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Ernesto Gabilondo - BofA Securities, Inc - Analyst : Thank you. Hi, good afternoon, Pablo. Thanks for the opportunity to ask questions. My first question will be on your expectations for loan growth for this and next year. And what would be the macro assumptions behind it in terms of GDP, inflation and interest rates? And then my second question will be on your HSBC acquisition. So from what I have been looking into your press releases, I think you can issue at most 162 million shares to acquire HSBC, which is roughly 11% of the total shares outstanding. But how much net income would be -- would HSBC be adding to Galicia's operation? And when do you think you can communicate like some pro forma details on the transaction? Do you think this could be more known December or maybe until the next quarter? Any color on this will be very helpful. And then my last question is on your ROE expectations. Just wondering if you continue to see ROE levels between 25%, 30% this year. And how much ROE can we expect for next year? And maybe adding to the second question is, if there is like kind of visibility on how much additional basis points could add the HSBC acquisition to the consolidated ROE of Galicia. Thank you.

Question: Ernesto Gabilondo - BofA Securities, Inc - Analyst : No. This is super, super helpful, very detailed. Just a follow-up in terms of the Galicia's ROE for next year. So you said it could be around 20%? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 05, 2024 / 8:00PM, GGALm.BA - Q3 2024 Grupo Financiero Galicia SA Earnings Call

Question: Ernesto Gabilondo - BofA Securities, Inc - Analyst : Okay. And this is conservative considering that the loan book is taking off and you should also have lower losses in the net monetary position. So do you think this assumption could be kind of conservative?

Question: Ernesto Gabilondo - BofA Securities, Inc - Analyst : Okay. No, excellent. Thank you very much, Pablo.

Question: Brian Flores - Citibank - Analyst : Hi, Pablo. Thank you for the opportunity. I have two questions. The first one is on capital, right? You have been consuming capital very strongly. Also, funding is increasing, which in theory is helpful. But I know that the main driver of this growth is USD deposits, which are restricted, if I'm not mistaken. Maybe this has changed. And if it has, please let me know. I think the -- let's say the multiplier that is embedded on these deposits are USD denominated. It's not as large as peso-denominated ones. And we also have, as you mentioned, the acquisition of HSBC. Naturally, this should bring also some capital, right, in the acquisition and the consolidation. But you're consuming capital very fast, right, because you're growing, let's say, very dense in terms of risk assets, right? You're growing in SME. You're growing in credit cards, which is obviously where you are very strong. So I think this is natural. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 05, 2024 / 8:00PM, GGALm.BA - Q3 2024 Grupo Financiero Galicia SA Earnings Call So just can you -- the first question is, can you guide us through capital consumption? If at any point in 2025, you're already thinking about maybe raising capital, how can we think about this? Because from what we can see, capital consumption is going to be very strong. And then I'll make my second question. Thank you.

Question: Brian Flores - Citibank - Analyst : Super clear, Pablo. So my other question was just confirming what you mentioned to Ernesto's question on loan growth, right? Because I understood that for this year -- sorry, 2025, you reiterated maybe 50%. But I didn't understand if 2024 was actually revised upwards. I think you were mentioning in the second-quarter conference call between 35 and 40 in real terms. Are you seeing a slight pickup for 2024?

Question: Brian Flores - Citibank - Analyst : Perfect. And Pablo, just a very final follow-up on what you mentioned on capital, right? I think the last time there was capital raises across Argentine banks was 2017, 2018. I don't know if you could just remind us. At what level did you decide in terms of core equity Tier 1 to raise capital to seize this beneficial market conditions back then?

Question: Brian Flores - Citibank - Analyst : Super clear. Thank you.

Question: Yuri Fernandes - JPMorgan Chase & Co - Analyst : Thank you and good afternoon. I would like to explore a little bit the loan yields. When we go to your margins, it has been coming down. And again, I guess there is no surprise. But when we go to the interest income coming from loans, we see some decrease. So Pablo, if you can explain what should expect. You mentioned in a previous answer saying something like this could be the weakest quarter. Maybe the loan yields may recover. So whatever you can provide on different product dynamics, how to think about the yields. And on deposits, just a follow-up on the previous questions from Brian. Your deposits are growing fine, right, like 40% quarter-over-quarter. This is above loans. But as Brian said, this is mostly coming from foreign deposits, right? The local peso-denominated deposits are up 6% quarter-over-quarter. So how to attract deposits because capital is part of the equation, but liability is also necessary. So how to bring more deposits for the bank? Thank you.

Question: Yuri Fernandes - JPMorgan Chase & Co - Analyst : Super clear, Pablo. I remember in the past, you mentioned NIM expectations going to mid-20s, like 25. Is this still a good proxy for the near term? Anything you can share on total NIMs?

Question: Yuri Fernandes - JPMorgan Chase & Co - Analyst : Pesos and dollars.

Question: Yuri Fernandes - JPMorgan Chase & Co - Analyst : Thank you very much, Pablo. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 05, 2024 / 8:00PM, GGALm.BA - Q3 2024 Grupo Financiero Galicia SA Earnings Call

Question: Walter Chiarvesio - Santander Bank - Analyst : Yes, hi. Thank you for answering the question. I -- most of the questions that I have, been already answered. But I would like to ask you two questions. One is related to the inflation adjusted lost that as a percentage of the operating result was quite higher than the previous quarter despite that inflation was actually lower. So is there a way that you can think that we should use to estimate that looking forward or why that happened in this quarter? That is one question. And secondly, the book value of Grupo increased quite more than what the result of the quarter suggests even despite that you distributed some dividend during the quarter. And I don't find the reason for that within some other assets and liability. If you could give a hint or any idea of why the equity of Grupo increased more than the -- what the results suggest during the quarter. Those are my two questions. Thank you.

Question: Walter Chiarvesio - Santander Bank - Analyst : Yes, I would appreciate that. So you think it comes from some accounting related to the bonds, the reason why the equity increased more than what the results have suggested. Is that right?

Question: Walter Chiarvesio - Santander Bank - Analyst : All right. Okay. Thank you very much, Pablo. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 05, 2024 / 8:00PM, GGALm.BA - Q3 2024 Grupo Financiero Galicia SA Earnings Call

Question: Marina Mertens - Latin Securities - Analyst : Hi, good afternoon. I have a question about the securities portfolio composition. So how do you see it evolving moving forward? And also, with the recent rally in Lecaps, do you expect this to be a relevant contributor to the fourth quarter results?

Question: Marina Mertens - Latin Securities - Analyst : Okay. Thank you.

Question: Nicolas Riva - BofA Securities, Inc - Analyst : Thanks very much Paulo for the chance to ask questions. You mentioned that after the end of the quarter, you issued the 2028, the senior bond dollars to be used to pay for the acquisition of HSBC Argentina. But you also have the 2026 Tier 2s. And I know that you didn't exercise the call option back in 2021, I don't think you would be able to fully redeem at par now those bonds. But given they only count $50 million of Tier 2 capital, then my question would be if there's any restrictions for you to do a tender offer on these bonds and at the same time, to issue new Tier 2s so as to use the dollars raised with the new Tier 2s to do the tender offer on the 2026. Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 05, 2024 / 8:00PM, GGALm.BA - Q3 2024 Grupo Financiero Galicia SA Earnings Call

Question: Nicolas Riva - BofA Securities, Inc - Analyst : Okay. Thank you very much, Pablo.