Banco Hipotecario S.A. (BHIP) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. Welcome to Banco Hipotecario's Year 2022 Earnings Release caller. [Operator Instructions] Today, Mr. Martin Diez, Banco Hipotecario's, CFO, will be present. I would now like to turn the conference over to Mr. Martin Diez. Please go ahead.

Thank you [Audio Gap] for full year 2022 consolidated results. The bank began reporting results applying Hyperinflation Accounting in accordance to IFRS rule IAS 29 as established by the Central Bank as of the first quarter of 2020. Therefore, every result and variation described in this report is expressed in constant currency as of December 31, 2022. Also the provisioning model of IFRS 9 Section 5.5 was applied, as established by the Central Bank. Net income added to owners of the parent company for the year was ARS 6,034 million compared to ARS 98,183 million of the last year. Net income attributable to as of the parent company for the quarter was ARS 1,402 million compared to ARS 735 million of the last quarter and ARS 1,058 million the same quarter of last year. Return on average assets for the full year 2022 was 1.1% compared to minus 1.5% for the full year of 2021, while return average assets -- sorry, equity for the same period were 13.1% and minus 17.3% expected. Net operating income for the year was tests 86,514 million compared to 63,009 million over the last year, which will present an increase of 63.1% year-over-year. Net operating income for the quarter was ARS 21,658 billion compared to ARS 21,017 million over the last quarter ARS 17,917 billion in the same quarter of last year. Operating income for the year was special ARS 24,132 billion compared to minus ARS 3,987 million of last year [indiscernible] income quarter was ARS 6,362 million compared to ARS 6,482 million last quarter and ARS 2,235 million of the same quarter -- during the fourth quarter of '22, equity coverage ratio was 16%. Net stable funding ratio was 186.1%, and liquid asset deposit ratio was 86%. Loans to the nonfinancial foreign residents decreased 32.3% year-over-year and 2.7% for Deposits decreased 47.5% year-over-year and increased 6% quarter-on-quarter. Capital Market Daily decreased 63.6% year-over-year and 66.3% quarter-over-quarter. On a consolidated basis, NPL decrease from 13.4% fourth quarter of furniture to 4.8% in the fourth quarter of 2018, while NPL in the costumer portfolio decreased from 3% to 2.5% during the same period. Coverage ratio decreased from 69.1% to 61.9% for the period. Total capital ratio as a percentage of risk-weighted assets as of December 31, 2022, was 23.1% compared to 22.2% of last quarter and 16.4% the same quarter of last year. On February 2, of 2023, there was a partial cancellation of $ 8,953 corresponding to a secured commercial loan was in real as of December 31, 2022. The payment has been made before the end of year, the NPL would have been 2.9% and coverage ratio will be 13.7% are the highlights. Let me add a bit of color as we usually do in our calls, what we call the financial market -- or the financial margin that is calculated as the sum of net interest income plus net interest income from financial instruments at fair value superlots income from asset derecognition verse at or results cost and on foreign currency exchange rate different for the full year 2022 was ARS 61, 917 million and this is compared to ARS 28,182 million of last year, which represents an increase of 18.7%. For the year 2022, the financial margin as a percentage of average assets was 11.4%, and this compares to 5.2% for the full year 2021. Then when it comes to funding and capital markets, in October, we made the second principal payment of our card international volume. This was $15.6 million and we principal interest. We still remain equitable payments in the [ 425 ]. Over the last year, we made -- the principal payment was $ 2,600 million. And during the 2, we also issued a local harden -- those are the highlights of the year when we have to funding and gave markets. Then let's go a bit to MBL expect to comment also in the last quarter that as well. Last quarter, we had a slight increase in the consumer year, which went from 2.2% to 2.5%. But this is even this is mainly explained by the decrease of the consumer portfolio is that resin in nominal terms was based light. So this doesn't mean that we are seeing a spike on the delinquency ratios. It's just taking that's not worried us. Then the commercial NPL went from 8.2% to 81% in the quarter. The core decrease in the commercial side because we will have commercial loans denominated in product that's the one in areas and with the increase of the exchange rate, bigger and the increase of the portfolio. This makes the rate ratio increase, but there is no other case there thinks as good. And then as I mentioned before, there was a partial cancellation of $8.9 million that occurred in 2023. This one is the biggest one that we have -- it's not fully canceled, but we expect that it would be fully canceled. We still have mortgages that secure that loan, so we've been able to collect to consider amount of that. And as we mentioned before, the NPL in that case, considering that this occurred happening, we don't have new cases would have been in December to will be 13.7% impact, something that I also want to mention is that has happened in the last quarter of 2021. In 2022, our loan provision was positive in the quarter. This is explained by the retaliation of our for model is the same explanation of last year or -- for those of you who wasn't the for cost. And this is -- you made to the fact that our portfolio is improving continuously coats. So we've been able to adjust the names of the figures. The coverage ratio decreased during this quarter, but this is mainly due to these positive loss provision that I mentioned before and also to the fact that we knew that we had a lot of expectation of recovering this loan that we will recover of $3.9 million doing to, but prudent we have is called spans the failure for years that were due in January. So. we've been able to collect it on February. And I think those are the main highlights of the results. So, any questions or Thomas, if you have to open for questions.

[Operator Instructions] We go to the line of Nicolas from Bank of America.

I have 3 questions. So, the first one to understand your comments on coverage of NPLs in commercial lending Martin. So, what you're saying is that even though the coverage of NPLs was very low, 28% at the end of the quarter, if we consider this partial payment of this corporate client in February, then the coverage of NPLs for this segment would be already above 100%, and the NPLs just for the Commercial segment would be 2.9%. Is that correct? And then I have 2 more questions.

It's for the core portfolio. yield for the whole portfolio of the rand, considering this payment that we received, as I mentioned or we mentioned in the quarter, we didn't have a lot of coverage for that particular loan because we had a market. And in fact, the Central Bank does not allow you to finish that loan too much because your expectation of recurring it was very high. So that's why we make more provisions on that particular loan but 2.9% and the 103% of the coverage ratio will be for the whole portfolio, both commercial and consumer.

Okay. Understood. And then the second question, so a trend that we have seen for many quarters now in the Argentine banks has been the use of the excess liquidity towards buying Central Bank bills and government bonds were then making loans because credit demand has been very weak from the private sector. So, I wanted to ask you if you see -- if you foresee any positive change in credit demand from the private sector sometime this year, perhaps in the second half? And in a scenario where can be almost with the presidential reduction, how would that impact the banking sector and your bank specifically? And then I have a final question about your bonds.

Well, as the question that you just asked is quite difficult to answer. I can give you my view or in advance because we may not have an institutional view on part of the question. But on one part, we will have a finance -- you mentioned that operate was very weak. We still see very weak in the first 2 months of 2023, and we do not expect a hike in fact -- the amount was when the economy was growing and the economy is not rolling out, some will not expect a higher demand. Also, inflation target higher. We have reiterated [indiscernible] again, Argentina. So all of those aspects also generate a weaker [indiscernible]. So, we don't see a grow demand for pad in the next couple of months. Also, the election years coming with a [indiscernible] uncertainty. So, we expect this to have the growth of top -- so that answers the question. What we can tell you is our [indiscernible]. And the other question regarding what we think it will happen in the industry in a more wins. We see but now because they have not been very clear on what they would take look. But when you listen to different candidates for Avios, you have different views on how to deal with the amount of cost of remunerating liabilities of the Central Bank and with the maturities from the central government. And even though there has been some noise 2 weeks ago when they said that something had to be done -- in a press release after that, they didn't push much around that. And in fact, the one over of the treasury last week, a Friday was a low expectations from the market. So I cannot answer what they would do because we honestly don't know when we have and will I think it's a fair question, not only, but also it's the incurrent wins as well.

Martin. And at this point, what would be your best expectation regarding loan growth in real terms for the bank this year.

Well, we're not very positive on loan rates. The only -- well, we've been originating quite well when the consumers are, but we are limiting the worst is in our origination, as we mentioned some quarters ago, here, even though we seeing that we have been able to originate some loans on the consumer side. So, we expect to be around maybe the inflation during this year the consumers are -- and on the commercial side, I think it's going to be tougher as of what we mentioned around the lack of demand for grade row. -- we do have to originate loans Subsidies for SMEs, and we will see an increase this year because we have to increase. We will have to increase when the picture is taking our market varieties. -- but I don't think that we will go above inflation. So, I don't expect a growth in the intent for the whole portfolio of the...

Martin. And my last question, you mentioned that you made the second payment -- the principal payment of the 2025 last October, $15 million. You have to make an AR paint this October. I want to confirm that the base case is still you're going to get the dollars from the Central Bank, given that you already restructured, you extended the maturities of this bond back in 2020?

Yes, with the current editions, we are able to pay as we in October 2021 and to 2022.

Okay. And then finally, you also have a dollar-linked bond maturing this year for $10 million. I want to confirm if that payment is actually made impact also not subject to any oil capital control restrictions?

That's a loan index inside and on the core...

[Operator Instructions] I'm showing no other questions in queue, please continue.

Okay. Well, so if we have no further questions, thanks so much. Thank you for as for your questions. Thanks, everybody, for joining us today talk to you in the next quarter.

Ladies and gentlemen, that does conclude your conference call for today. Thank you for your participation in Banco Hipotecario's year 2022 earnings release. You may now disconnect.