Banco BBVA Argentina S.A. ($BBAR)

Good morning, everyone, and welcome to BBVA Argentina's First Quarter 2026 Results Conference Call. Today with us are Mr. Billen Force, Investor Relations Manager; and Diego Cesarini, IRO and the Head of Asset and Liability Management. This presentation and the first quarter 2026 earnings release are available on the BBA's Investor Relations website, ir.bbva.com.ar. and will also be available for download in the chat. 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. [Operator Instructions] At this time, we're going to open it up for questions and answers. If you have a question, please write it down in the Q&A section or click on raise hand for audio questions. You will then receive a request to activate your microphone. Please activate it and pick up your headset to provide optimum sound quality when posing your questions. I will now turn the call over to María Fourcade. Please go ahead.

Good morning, everyone, and thank you for joining us today for BBVA Argentina's First Quarter 2026 Results Conference Call. During the first quarter of the year, our business model demonstrated resilience within a macroeconomic environment characterized by a gradual transition and the normalization of key financial variables. We observed a reduction in interest rate volatility, which sustained the downward trend initiated in the previous year, alongside ongoing adjustments in monetary and regulatory policy aimed at a better management of liquidity. While the combination of fiscal discipline and stabilizing external indicators, establishes a more predictable framework for the financial sector. We maintain a cautious and prudent outlook regarding the base timing and the evolution of a broader private credit recovery in the upcoming quarters. Moving into our financial highlights for the quarter BBVA Argentina posted an inflation adjusted net income of ARS 85.2 billion for the first quarter -- this represents a 31.2% increase quarter-over-quarter, driven by revenue performance and expense management. This bottom line expansion boosted our quarterly ROE to 8.3%. At the same time, net interest income grew by 5.9% sequentially to ARS 79.9 billion. Our funding costs fell faster than asset yields due to the shorter average life of our liabilities, expanding our total net interest margin to 18.6%. Regarding efficiency, our quarterly efficiency ratio stood at 51.4% with personnel benefits and administrative expenses reflected the ongoing management out of our corporate structure. Let's look at the dynamics of our balance sheet and credit portfolio. Total financing to the private sector closed the quarter at MXN 15.7 trillion. While local currency loans fell 6.5% due to seasonal low commercial activity, our foreign currency private loans grew by 6.8% sequentially, which represents a 23.3% increase in dollar terms. We continue to see continuous momentum in pledge and mortgage lines. Furthermore, we continue to capture business effectively, mainly driven by the commercial segment and foreign currency loans. Our consolidated loan market share rose to 12.15%, signaling a total gain of 95 basis points over the last 12 months. On the funding side, total deposits reached ARS 17.5 trillion, private deposits saw a minor seasonal 8 basis points market share dip to 9.93%, but they remain up 78 basis points year-over-year. Regarding asset quality, systemic pressures caused our nonperforming loan ratio to rise to 5.60%, primarily driven by the retail card and consumer portfolios. However, commercial delinquency remained exceptionally well behaved at just 0.50%. Our cost of risk dropped from 8.11% last quarter to 6.14% partially thanks to our strengthened origination policies, leaving our coverage ratio at 88.41%. Looking at solvency and liquidity, our liquidity ratio closed at a very comfortable 45.5%. More importantly, our capital position remains robust with a regulatory capital ratio of 18.8%, representing 128.7% excess over minimum regulatory requirements. Before opening the floor to your questions, I want to highlight that on May 15, the Central Bank approved our dividend distribution for ARS 69 billion, which underscores our unyielding commitment to generating shareholder value. In conclusion, BBVA Argentina enters the rest of 2026 with an exceptionally solid foundation, backed by robust capital, healthy liquidity and an expanding market footprint, we process all the necessary tools to lead the market and supply credit as the Argentine financial system normalizes. Thank you for your time. Operator, please open the line for questions.

[Operator Instructions] Our first question comes from Tito Labarta with Goldman Sachs.

My question, I guess, on the asset quality outlook. It seems you're getting a little bit more constructive there, although we're still seeing NPLs deteriorate, but provisioning levels came down, you saw coverage come down a little bit more. Just to understand how comfortable you are on the credit quality improving from here? Should we already begin to see that in the second quarter? And then what would that mean for loan growth, do you think -- expect loan growth to accelerate as you see that? Or just to get a sense of the timing on how this credit cycle should evolve from here.

This is Diego. Thanks for the question. Well, as you said, we are a little more comfortable with asset quality in this first quarter of the year. We have been able to make provisions at a below level of last quarter. There are certain one-off there, as we mentioned in our press release, -- we have a better rating on some wholesale customers that affected us positively but besides that, I think that our origination policies are working, and we are starting to see the light at the end of the channel. Having said this, of course, the situation still remains a little difficult for many quarters, in general, we have been thinking that the worst was over. And finally, then the solution was delayed. So -- but we remain reasonably comfortable that during the second quarter, we are stabilizing, and we could probably see a better outcome than in the first one. Regarding loan growth, well, we have been reviewing the onwards, our expectations. We started the year thinking about the range of 25% to 30% growth in real terms. Now we are thinking of a range between 15% and 20%. Of course, the first quarter of the year was not easy. Seasonally, it's not the best quarter of the year peso demand is low in the first quarter. But dollar demand was still strong. And second quarter probably will be a little better. And in the second half of the year, we are seeing probably a better performance. Regarding the retail business, of course, consumer and credit cards will take longer to recover. We need to be comfortable for new origination.

Our next question comes from Brian Flores with Citi.

Maybe a follow-up on Tito's question. If you could provide maybe an update across the lines on the guidance. We know we saw some interesting dynamics on the deposit side. And I don't know if you could maybe double click there as to what is happening. We saw a very, I would say, competitive dynamics in terms of the funding in dollars. So I just wanted to check if this is seasonality, this is everybody lifting for these dollar deposits. And also if you could provide your outlook for the overall NIMs because we see that they were expanding maybe despite the challenges, right? So just trying to understand how sustainable do you think this good margins should be throughout the year?

Okay. Hello, Brian. Well, starting with the guidance of deposits. Probably, we could adjust that guidance regarding how much we are growing loans. Many years have started to slow on growth, on loan growth and then the year performed better. So we -- in the first quarter, of course, we saw a difficult dynamic in deposits. We reduced our size in real terms -- but that is not to worry in our opinion because, of course, we -- as low in demand was not picking up, we needed less deposits. So we were not fighting for commercial ones, especially. Regarding dollar deposits, they're growing slowly, but the constantly. We are seeing a 2% to 3% monthly growth -- it's true that banks are ethereal side of the business is still buy in dollars every day. So we are keeping a portion of those deposits. We are not really fighting for deposits. I think that banks in general terms are still liquid loan to deposit in other terms, it's still at a systemic level, probably below 50%. So there's still some room for banking industry to grow in dollar loans without having to fight for more deposits. We have been able to issue also local bonds at reasonable rates. So I see a good dynamic if you ask me in this part of the business. Regarding NIMs, nominal NIMs have increased around 100 basis points in this quarter, but it's also true that inflation was also higher. So we like to measure NIMs in real terms and they have been mostly flat in the first quarter. They have grown, I guess, 15 basis points. We have seen this real term NIM very stable in the last not just in the last quarter, but in the last year and even more than a year. And we are expecting that behavior for the coming quarters. We expect next quarter to be also flat or maybe a little positive because inflation is going down. And for the second semester, probably we could see if inflation still keeps going down and rates follow that path, we could see a little deterioration in NIM. But in real terms, I would say that it will be a very similar year to last one. We are not seeing -- we think that net interest income is a positive contributor to the recovery of ROEs for this year.

Perfect, Dave. So just to confirm, your ROE range is reiterated for 20.

Yes, we keep that guidance. We have been talking about low to mid-teens. We keep that guidance probably closer to low than to mid, but we are still there.

Our next question comes from Pedro of ending with Latin Securities.

To follow on a question on coverage. How should we think it going forward? It's maybe a goal target for the bank to bring it back closer to the previous levels?

Well, we have seen our coverage ratio in line with the whole financial system going down a little below 100 in probably, we are seeing the bottom of that ratio, and we should see -- we should start seeing a recovery on that ratio in the coming quarters. We do not have a specific target. We do not have a specific time line. But we know that it should go back at least to 100 in the coming future.

Pedro, this is Belen. I just wanted to add to what Diego was saying regarding coverage, there is not a specific number right now that we have in mind in terms of rebuffering that level of coverage. We are still focused on the needs that we have on provisioning. I mean we are still not passed through the fall in the matters and on cost of risk. So again, remember that coverage will always be rebuild as long as we consider that, it makes sense for us to increase cost of risk in change of that. So again, as Pedro said, the system is at our same level. We are not worried on this leverage of coverage.

Perfect. Mendo. And if I might add on NPLs, how did you see asset quality maybe through the quarter? It was January, February, much different from March or it was an acceleration maybe equally between months.

No. In March, I think that there was a deacceleration -- and we are seeing that trend to continue. Probably April could be a little above March but still mainly flat. And from then on, we should see and be stable for a couple of months and then starting to come down until we reach a level by the end of the year, that could be a little bit low of what we are seeing right now.

[Operator Instructions] Our next question comes from Carlos Gomes Lopes with ABC.

You have probably commented on this already, but can you tell us how the quarter is coming along. We're already in the middle -- actually, at the end of May, we saw this negative growth in the first quarter. Now you have lower rates. Now you have perhaps a more stable framework. Are you starting to see demand come back and so in those areas?

Hello, Carlos, this is Diego. Well, the quarter started slowly even with lower rates in terms of peso activity, but -- in the last couple of weeks, we have seen more demand on more questions from the part of companies regarding peso loans. When the deposit rates were around 30 something. There was no interest in peso loans. But now that deposit rates have fallen to something level, we are seeing more interest from companies. So we are expecting a pickup in demand in -- mainly in commercial loans. As I said before, seasonally, the first 3 or 4 months of the year are usually very low on peso demand, but starting in May with tax payments and next month when companies pay then they have a complementary salary that they pay, we usually start to see a better demand in local currency. Regarding dollar, of course, there have been pretty good demand in the first 4 months of the year on the contrary. In May, we are seeing a little more come from -- in this currency.

And in terms of the dollars, if I can ask, in the past, we have had a continuous purchase by retail investors of physical dollars? How has that evolved in the last couple of months?

Retail investors have been buying dollars since the -- all the regulations were lifted 1 year ago. Of course, we are not seeing the same level of demand that we saw in the third quarter of last year. But I would still say that it's high compared with historical levels. It's -- we are not at the highest, of course, but people are still buying and saving in dollars, mainly.

Our next question comes from Mathias Catarosa with AdCap.

I have 2 questions. First, how do you see the Tamar trajectory over the coming quarters? Do you expect Pesonen to hold or lower? And do you have an NPL guidance for year-end 2026 -- and what is the view on GDP growth and a potential recovery in real wages in the second part of 2026?

Mateus, I will start with Tamar. Well, we have seen a pretty strong decrease in term of rates in the first through March and April probably that has provided a good fuel for our NII as we -- of course, we have a shorter-term liabilities than assets. So what we are seeing is that this negative level of interest rates, of course, is not sustainable probably, we are seeing it coming to a neutral level or something close to neutral in the coming months, but mainly because inflation is going down with more than Tamar going down. Probably, we are to be in line with inflation for the coming months. So inflation keeps going down. The market could go marginally down, but not too much. I think that the big movement has already been done this year at least. Regarding peso NIMs, as I was saying before, it has remained pretty stable in real terms. We are expecting it nominally to fall a little as interest rates go down. But when you consider that inflation is also going down. So we are seeing -- we're seeing a little -- a smaller loss on our net income on inflation. It's the reasonable to say that peso NIMs will hold pretty stable in the coming quarters probably a little down, but no more than 50 basis points or handed at the most. Regarding NPL, we are not providing specific guidance. But as I said before, we think that it would be a little lower than the levels that we have seen at the end of this first quarter. It should be around 5%, we guess, we're a little below. Regarding GDP, we are expecting 3%. And I think that you have made another question.

Sorry. About real wages recovery?

Well, real wages should recover as inflation is going down, I guess. I think that the -- 1 of the main reasons why real wages decreased in the latest last year was the pickup in inflation. So we should -- we are expecting a reversal on that trend. We are pretty confident on -- generally on the outlook. This first quarter has brought a lot of good news for the financial system and the country. So we think that those good news should start to have an impact soon.

Great. And then as a follow-up, are you seeing a real interest rate in the coming quarters, but tier than before?

Real interest rates, we are expecting them to come back to neutral level but more as a consequence of inflation going down, then Tamar going up.

Our next question comes from William with.

I have 2 quick ones. First, on your recently done layoff program, if you could share with us the amount of savings you're expecting from it? And a second one, still on loan growth. If you could go through the year in terms of expectations of growth when it accelerates? And what is the amount expected for growth, if any, in the second half of the year? Those are the 2 ones.

Okay. Thanks, William. Regarding our of product, it's not really a problem, I would say. The bank in the latest 2 years, as a part of our growth plan. We've been very aggressive in growth. We have grown more than 400 basis points in loans through the last 3 years without having acquired any entity. We are -- in fact, we are the bank that has grown the most in the Argentinian financial systems without buying or merging with other bank. So we have been growing in payrolls. Now this quarter, we are making a little efficiency, but it's usual business, probably in the coming quarters, you could also see some more layoffs. But as I said before, it's not a part of a program. It's just the usual business, sometimes we grow, sometimes we go down on employees. And savings will impact relatively quick. I think that we have -- it's less than approximately a year or 15 months. In that time, we recovered what we have paid for those lay offs. In terms of loans, as I was saying, we are expecting every quarter to be a little better than the previous one. At the beginning, the focus, of course, will be on the commercial side and bigger companies and medium-sized companies dollar demand, even if I said that, May was coming a little soft. We are expecting to pick up quickly. We have many companies looking for dollar loans, many projects were there. And on the retail part of the business, we are more focused right now on our mortgages. Mortgages have shown a pretty low impacting NPLs. They are still very at very low level. People are paying. We are originating mortgages very cautiously. We launch value real that are very safe. So we are not slowing down on mortgages. We were the only bank in the fourth quarter of last year kept very competitive prices. So we are still leading this the recovery in this market. And the same with pledges even in car loans, even if the first quarter was not as big in new demand. You know we are our partners with brands, and we have a substantial portion of the new car loans. So we still want to be there. It's the standard in mortgages. We think that the retail demand of loans should be rotating from consumer, which consumer has had an abnormal portion of bank's portfolios in the past years as a consequence of the economic situation. But as stability is growing in Argentina. We should see that these investment lines like cars or mortgages should take a bigger part of our portfolio in the future. But as I said before, this is -- probably this is not the year to be that aggressive in general terms in retail business, we have been growing very, very fast in the past 2 years. We grew more than 80% in real terms in 2024. Then we grew almost 50% last year. So it doesn't really matter if this year, we are growing 20%, 15% or 25% the same. We intend to keep growing in the country, and there is a lot of room to keep going. So we are not really in a hurry, especially in the retail business until general conditions start to improve.

Our next question comes from Martin Argento with Delta Asset Management.

Yes, sorry. I have a few quick questions. First, on efficiency. The ratio came in 51% this quarter. Partly, I know that impacted by this one-off severance. But where do you see the efficiency ratio landing by year-end? And what's the steady state in the long term? And the other question is about ROE -- you have guided to mid 10 for 2026. And I know it's tough to give a number for 2027, given the election cycle. But directionally, where do you see ROE in the longer term when the cycle fully normalized, if you imagine. And related with this, how much of drug is Red pump for ROE nowadays. That's the question.

Okay. Thanks, Martin, for the question. Regarding efficiency, well, this -- last year, as a whole, our efficiency was 53.9%. Last quarter of last year was really low, but because of one-offs probably -- and when you compare to this first quarter, you see a spike in the rates that change to 51%. But it also, as you mentioned, has some one-offs. For the whole year, for this year, we are expecting to be much better than the previous one. Our fees are improving. We have been improving in fees. We have been improving in NII, of course, as we have been mentioning for some quarters. And our expenses are under control. So we are expecting a better performance of this ratio. Probably it will be the year as a whole below 50%. I would say that it would be around 48, 49 but it should be a substantial improvement compared to the coming to the past years. In the future, we need, of course, to keep improving on this ratio. It's still very, very high. We do not have a specific target. But yes, we know that banks, of course, and our bank is going to keep growth in place. So volume should offset fall in NIMs and this should keep going. And as I said before, expenses should be kept under control. So the trend for this ratio is that it will keep going down. Regarding ROE, yes, it's very difficult, as you said, giving guidance for coming years as we do not have a track record of normal years, as I'd like to say, in Argentina, we have been living under regulations and many -- well, there's many regulations that have kept us from having normal activity -- normal banking activity. We know that we still have a lot of room to grow. We are confident that we'll reach higher ROEs -- we know that when hyperinflation accountancy, when we get rid of that, we do not have a specific date for that. But we know that Argentina could possibly comply with 1 of the requirements that is having an accrued inflation over the last that is 6 months below 100%. That requirement could be met by the end of next year, but it doesn't necessarily mean that the Central Bank is going to rule that we have to -- that we can get rid of that kind of accountancy. But of course, that makes us not -- right now, not comparable to banks in other geographies. If we -- if we had to compare with the Brazilian or Aurubian or a Colombian bank in countries where inflation is running among 3% and 4%, 5% well, if we -- when we sold ROEs from those geographies, you should subtract 2%, 3%, 4% from those ROEs to make them comparable with the banks in Argentina. The impact, the pre-lets suppose that in 2028, we are without that adjustment. The impact, it's difficult to consider because it will depend on how high inflation is at that moment. If inflation is running at 3% let's say, it's difficult, but the impact will be so will be small. If inflation is still running at 10%, 12%, the impact will be much, much higher. But just trying to make it brief. We think that we have a lot of room to keep improving on our ROE. And we know that if we want to even if we are very comfortable with our capital position. We know that if we want to be a bigger bank in a bigger financial system, we have to deliver on ROE. That's very clear for us.

Our next question comes from Marco Sero with Aledia.

It is about NPLs. The Central Bank rules required to classify a loan as nonperforming, even if that line isn't nonperforming with you, but it is delinquent with another bank. I wanted to know how much of the NPL you reported is driven by this across bank reclassification rule and how much is clients are actually delinquent with the bank. And also another question, if you could separate the deposits and loan growth guidance between pesos and dollars.

Marcos. Thank you for your question. The first part regarding what you said about having in state Page 3 on IFRS or statification. This only applies for commercial loans not for individuals. I think you mean this rule where you have to classify a client has not performing, if they are unperforming in another bank. This only applies for commercial -- and we have had almost nothing. I mean, our commercial NPL is the low 1%, maybe worsening, but that we are already seeing an improvement by April was with some SMEs, but we don't have any particular clients or that is substantial to your question and to our provisioning. I think that's what you meant in this case, if I'm not mistaken.

Okay. And regarding the other question, Marcos, of course, we are seeing stronger growth on dollar deposits and loans than in pesos for this year. Regarding pesos, Central Bank monetary policy has been very restrictive in the last couple of years as deposits have not in the last 2 years, the bank BVIs, we have grown a lot because we have gained market share. But for this year, which is not especially strong, as I was mentioning, in local currency, we are expecting both deposits and loan growth in local currency of around 10%, 10% to 15% in real terms. Of course, that means that we are seeing a strong second half of the year because the year started very slow. And in dollar regarding dollars, we are seeing deposit growth of around 30%. and dollar -- sorry, and loan growth of around 40%.

Our next question comes from Brian Flores with Citi.

Circling back here. I think we didn't touch on the regulatory side. So I just wanted to check with you because -- we know that has been really, I would say, flexibilizing some of the measures. We will check with you if there's any short-term low-hanging fruits that the banking system as a whole is still asking for into support? On the relation -- and also, DI think maybe the idea we get from what you mentioned today along with Belen is that we are seeing more of a normalized cycle, right, in terms of credit. So you spoke a bit on I would say better trends on, I wouldn't say very optimistic trends with better trends in terms of credit demand. So if you could maybe in your view, provide a view of what is missing here as a missing piece to maybe turn the whole cycle around in a more, I would say, strong way, given the solid initial.

Brian, regarding your -- your first question is about regulations. We all know what happened in the third quarter of last year and all the reserve requirement regulations that were put in place. That meant, of course, interest rates going up very, very quickly, the impact that it had in our NIIs -- and all the difficulties we had in operational because it was very difficult to comply on those reserve requirements on a daily basis. So those regulations have been mainly removed. I think that made sense. It was on the Central Bank agenda that collections were over. They should -- they were going to dismantle on this, and they have they have comply with that. So we are seeing an environment of less volatility, rates going down, everything has normalized pretty well. So there are minor issues. Of course, resell requirements are still very high in Argentina, you know even if not the 100% of those requirements mean necessarily some harm to our income. If you consider local currency, reserve requirements reached 30% of our deposits. But just 1/3 of that, we complied on the Central Bank account at C rate, and the remaining 2/3 of those requirements are met with bond positions that we would hold anyway. So what we assume is that whenever a loan demand in pesos pick up and Central Bank is comfortable regarding the path of inflation they will start to release this abnormally high reserve requirements. In the meantime, I have to say that we are -- we have more liquidity we have liquidity. We have enough liquidity to grow even if Central Bank doesn't decrease this level of requirements in the short term. So we are not worried about liquidity. We think that we still can gain some market share in local currency and, of course, in foreign currency to -- so equity is not really an issue. And to complete your question regarding all other regulatory issues, I think that there's nothing really really very, very, very important, very substantial. We are always talking and Central Bank is always willing to receive our comments on small issues, but I think that the system is working really, really good right now. Regarding what is needed to normalize the cycle of credit, I think that we should put -- we should bear in mind that a lot of things are happening in Argentina. Not everything has its effect that quick. We come from many decades of doing things wrong from the economic and institutional and political point of view. And just to have to bear in mind, and that has happened in the past 4 or 5 months. Argentina has passed 2 or 3 very important reforms, labor reform, law low amendment -- we have the new resi. We have passed a budget, the Central Bank has started buying dollars a rating agency has improved the rating of the country. We keep the fiscal order inflation keeps going down. So our Argentinian companies and so sovereigns have been issuing plenty of dollars in foreign markets. We have lower rates. We have lower taxes for exports. So I'm probably forgetting a lot of things that are happening in Argentina that probably those things will start to have an effect on activity soon. But probably, we are a little anxious regarding how quick this can happen, but -- we have to bear in mind that we come from many decades of risk management on these issues. So I think that we are on the right path. Eventually, things will start to get better. Of course, I cannot tell when this is going to happen. But having lower rates, just to give an example, and lower inflation in the coming months and quarters probably should prove to be very good pieces of news for our short-term activity. So we think that we -- of course, when we originate just to take an example of retail business. Of course, we keep originating retail loans much at a much lower extent that a year go and we are giving those loans to our best customers, let's say, at lower rates. And those loans are providing are proving to behave better. They are behaving really good. So we will -- with time, we will start to be a little more loose on how we can keep originating those kinds of loans. We will be making proofs. And eventually, we will get more comfortable with this origination. But of course, we are not in a hurry, as I said before, we have been growing fast in the coming -- in the past 2 years, we have gained a place of relevance in the financial system. We are buying #2 bank in in market share in driven loans. We were #4, 3 or 4 years ago. And all this without having acquired any other entities. So we are very confident that we are on the right path.

Thank you. This concludes today's question and answer. I would now like to hand the floor back to BBVA's team for closing remarks.

Okay. Thanks. Well, I want to thanks again for joining. We are really pleased, as we said that how BBVA has been able to carry out our strategy in a context that -- all of you know that has not been the ideal in the last 3 quarters and especially having been able to make the necessary tactical amendments to our strategy. We know that we have been able to keep our growth strategy, as I said. We have shown for our second quarter in a row with a sequential improvement in our net income, though we are still very far from what we think is our potential. And of course, we remain very focused and confident that with all these reforms that are taking place in the country and the better financial conditions that we are starting to see these quarters we should be soon able to resume growth and keep this path of improvement in our financial performance. So that's all, and thanks again for joining.

Thank you. This concludes today's conference call. You may now disconnect.