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

Ladies and gentlemen, thank you for standing by. Welcome to Banco Hipotecario First Quarter 2023 Earning Release Call. [Operator Instructions] Today, Mr. Martin Diez, Banco Hipotecario's CFO, will be presenting. Without further introduction, I would now like to turn the conference over to Mr. Martin Diez. Please go ahead.

Thank you, Marcos. Thank you, everybody, for joining us today. Good morning. Well, first quarter 2023 consolidated results. The bank report -- began reporting results applying hyperinflation accounting in accordance to our IFRS rule IAS 29 established by the Central Bank as of the first quarter of '20. Therefore, every result and variation described in this report is expressed in constant currency as of March 31, 2023. Also, the provisioning model of IFRS 9 Section 5.5 was applied as established by Central Bank. Net income attributable to owners of the parent company for the quarter was ARS 3,665.7 million compared to ARS 1,707.8 million and ARS 2,387 million for the same quarter of last year. The return of average assets for the first quarter of 2023 was 23.6% compared to 11.5% for the fourth quarter of 2022 and 17.7% for the same quarter of last year, while return over average assets for the same periods were 3.2%, 1.5% and 1.4% respectively. The net operating income for the quarter was ARS 27,836.4 million. This is 5.7% higher than the ARS 26,341.6 million of the previous quarter and 9.9% higher than the ARS 25,320.9 million in the same quarter of last year. Operating income for the quarter was ARS 13,176.2 million compared to ARS 7,745.1 million of the previous quarter and ARS 6,279.5 million of the same quarter of last year. As of March 31, Liquidity Coverage Ratio was 173%. Net Stable Funding Ratio was 220.4%, and the liquid assets to deposit ratio was 94.1%. Loans to the non-financial private sector and foreign residents decreased 11.1% quarter-over-quarter and 28% year-over-year. Deposits decreased 18.7% quarter-over-quarter and 25.7% year-over-year, while capital market debt decreased 11.6% quarter-over-quarter and 41.4% year-over-year. On a consolidated basis, NPL decreased from 4.8% fourth quarter 2022 to 2.7% in the first quarter of 2023. The coverage ratio increased from 61.9% to 119% during the same period. Total capital ratio as a percentage of risk-weighted assets as of March 31, 2023, was 25.1% compared to 23.1% of the previous quarter at 17.1% in the same quarter of last year. The general level of consumer price index accumulated an increase of 21.7% in first quarter of 203, where it was 17.2% and 16.1% for the previous quarter and for the same quarter of last year, respectively. In April 23, the bank made the amortization of payments of the secured notes Series 5 for a total amount of $10 million. Well, these are the highlights, and I would like also to make some comments regarding particular items of the quarter and how we see the business for the remaining part of the year or at least for the next couple of months, maybe perhaps talking about the remaining of the year in Argentina seems to be a bit ambitions, maybe. It's important to highlight the financial margins this quarter that as we've been mentioning in our previous calls, you have to see as the combination of different lines. One is net interest income, the other one is net income from financial instruments at fair value and the other one is gold on foreign currency exchange rate. When you see that, we have seen a result of ARS 16,996.7 million, and this is 7.3% lower than the previous quarter and 1.1% higher than a year ago. This is mainly due to the size of the balance sheet that as we always mentioned in our cost during the month of March and September, other months when the picture for the -- for subsidized loans for SMEs is taken by Central Bank. So we reduced the balance sheet in those quarters, in order not to have the need to originate more than we can because this makes us originate at lower rates, and it makes it hard to comply with the rule. So this reduction of the balance sheet is also the fact that it explains the reduction on the deposit side because we try not to grow on it to reduce the deposits from institutional guidance. That's an important point. Also, as I mentioned before, we made amortization payment of U.S. Dollar linked bond of $10 million in this quarter. Also one very important point is on the NPL side. And this is something that it wasn't reflected on our previous balance sheet, but we made a specific bullet of this when we said in the press release explaining that in February, we received a payment of around $9 million of a loan that was in arrears. That loan still has $3 million outstanding, and we have guarantees around that. So we expect to collect the remaining $3 million. So we now have the NPL at 2.7%, and we expect the corporate NPL to reduce further because as I mentioned, we expect to collect $3 million in the remaining part of year. This is something that we've been working very far -- very hard in the last 4 years. And we now believe that the NPL is in a place that we want it to be about 2.5%. We are seeing some slight deterioration on the consumer portfolio NPL, not of the ones that you see here, but when you compare the land NPL, we are starting to see some [indiscernible] high on that. So we are very prudent where we are originating. It's something to be expected because of the reduction of the disposal income in Argentina that we've seen maybe here and a little bit more, maybe 2 years. Then on the loan loss provision, the first -- the next -- last quarter was positive as we explained because of the recalculation of our expecting loss cost or provision and others. In this quarter, we had a negative impact of ARS 680 million. This is not only based on the regular performance of the portfolio, but also because we increased considering limits for credit cards that we had to do that in order to improve the offer of the product, and that has an impact that it should not be paid on explorers. So what we are seeing in this particular quarter is a bit higher than what the portfolio should reflect on a regular basis. Then when you go to the other operating income, there is a line that says others that explains almost ARS 4 billion. And this one particular item there that is the revaluation of a property that we have in order to be sold, it's the [indiscernible]. It's a building in the -- below the way from Ezeiza Airport in the center of the city of Buenos Aires that we have not been adjusting it for inflation in the last 18 months because of the Central Bank requirements, and we were allowed to make an adjustment. We believe that it's a small adjustment, considering the [indiscernible] that we've taken in that particular property where we paid around $70 million some years ago. And now this is in our balance sheet at around $70 million. So we've taken a considerable [indiscernible] and this was allowed by Central Bank in this quarter as believe -- we still believe there's value there, and this should go with the -- if the Central Bank allows it, it should go with inflation at least with the exchange rate of the dollar. So those are the main financial items that I -- that we would like to highlight, then we have a couple of items more then we did quarter -- in the quarter, it's important to highlight that we grew 6% in the quarter on the target accounts. These are on the retail banking, the accounts that deposit their wages in the bank or are similar to that. It's something that we call the duo pack that it's they deposit their wages on their existing bank, but they transfer a certain amount of money every month on an automatically basis to Banco Hipotecario, and we did the benefits of having the wages here. So in the combination of both, we grew 8% -- sorry, 6% quarter-over-quarter. Then also related to this is that we've signed an agreement with ANSYS, that it's the administration of pension -- the pensions in Argentina that will allow us to pay retirement plans or pensions in Argentina. We were not able to do this. So we are starting in this quarter to originate this particular type of account where the wages are the positive here for the -- for pensioners. We expect that, that can have an important [ in the repricing ]. We can have an important number of customers in the future because we plan to be very active on that segment, and we are trying to grow there. And also, there are several clients of the bank that when they reached the the retirement age, they couldn't continue as customers depositing their wages because we didn't have this agreement we assessed, but we now have it, and we are starting to try to acquire those clients. And the other important item of the quarter is that when we've been discussing also on our last calls on the path to agility of the bank, the ideal methodology and in the first -- during the fourth quarter of 2022 and the first quarter of 2023, we've created the housing trial, the wholesale product trial, the retail product trial, the digital channels trial and the benefits of home trial, and we expect that this will give us faster base in order to develop new products. And also we expect that it will help on the efficiency side for the bank following this. So this is all from my side. Marcos?

We now open to Q&A sessions. [Operator Instructions] Allowing a few moments, I'm seeing no other questions in the queue. Martin, do you want to add something else? Please continue.

No. This is everything from our side. Thank you, everybody, for joining us today. Talk to you in 3 months. Thank you.

Ladies and gentlemen, that does conclude the conference call today. Thank you for your participation in Banco Hipotecario's Third Quarter 2023 Earning Release Call. You may now disconnect.