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

Ladies and gentlemen, thank you for standing by. Welcome to Banco Hipotecario's Third Quarter 2023 Earnings Release Call. [Operator Instructions] Today, Mr. Martin Diez, Banco Hipotecario's CFO, will be presenting. I would now like to turn the conference over to Mr. Martin Diez. Please go ahead.

Thanks, Angela. Good morning, everyone. Thanks for joining us today for the Third Quarter 2023 Consolidated Results Conference Call. The bank began reporting results applying hyperinflation accounting in accordance to IFRS rules IAS 29, 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 September 30, 2023. Also, the provisioning model of IFRS 9 Section 5.5 was applied established by the Central Bank. Net income attributable to owners of the parent company for the quarter was ARS 1,936.5 million compared to ARS 5,413.7 million of last quarter and ARS 1,495 million of the same quarter of last year. The return over average assets -- sorry, our average equity for the third quarter of 2023 was 6.9%, this compares to 19.9% for the second quarter of 2023 and 6.2% for the same quarter of last year, where a return of average assets for the same period were 0.8%, 2.7% and 0.7%, respectively. The net operating income for the quarter was ARS 49,834.2 million. This is 2% lower than the ARS 50,870.9 million of the previous quarter and 16.6% higher than the ARS 42,723.4 million of the same quarter of last year. Operating income for the quarter was ARS 21,301.9 million compared to ARS 22,625.7 million of the previous quarter and ARS 13,169.3 million of the same quarter of last year. Loans to the nonfinancial private sector and foreign residents decreased 15.8% quarter-over-quarter and 29.6% year-over-year. Deposits increased 12.8% quarter-over-quarter and 49.5% year-over-year, while capital market debt decreased 3.2% quarter-over-quarter and 40.4% year-over-year. Nonperforming loans increase from 2.7% to 3% quarter-over-quarter, but decreased from 4.4% compared to the same quarter of last year. Consumer and commercial NPL were 2.5% and 3.8%, respectively. The coverage ratio increased from 92.3% in the third quarter of 2022 to 113% in the second quarter of 2023 and 117.8% in the third quarter of 2023. The coverage ratio for the consumer portfolio was 159.7% and the commercial portfolio was 17.7%. Total capital ratio as a percentage of risk-weighted assets as of September 30, 2023, was 25.3% compared to 23.8% of the previous quarter and 22.2% of the same quarter of last year. The general level of consumer price index accumulated an increase of 34.7% in the third quarter of 2023, while it was 23.9% and 21.7% on the previous quarter and for the same quarter of last year, respectively. We've also paid an installment of the unsecured note Series 4 of $15.6 million on October. This is already in the first quarter, but we mentioned here, this is the third installment out of 5 that we have of that particular unsecured note. Well, now let's go to some highlights that we usually mentioned quarter-over-quarter. The first one is related to the financial margin. As you will see, the net income higher reduction quarter-over-quarter and year-over-year a considerable one. But when you see the financial margin, as we mentioned, that it's the combination of the net interest income, net income from financial instruments at fair value through profit and loss, income from asset derecognition and gold and foreign currency and exchange rates differences for the third quarter of 2023 was 38,236.6 million. This compares to ARS 44,285.2 million of last quarter, but it's higher than the ARS 31,933 million of the same quarter of last year. So this represents a decrease of 13.9% quarter-over-quarter, but also represents an increase of 19.4% year-over-year. Here, you will see we have a particular line that had an impact -- that is the line of income from asset derecognition measured at amortized cost. This is due to the fact that in this quarter, we've taken out -- we had some bonds in investments that we received in the exchange of bonds that the [ sovereign ] did in 2020, and we've taken the hit in this particular quarter. So that explains almost all the difference when you compare to the previous quarter. Then let's go to the NPL, where you've seen a slight increase quarter-over-quarter. This is due to the fact that some of the loans that we have, especially on the -- no, not especially, on the commercial portfolio, are denominated in dollars, so -- and we've seen a reduction in the portfolio. So with the increase of the exchange rate, there is an increase on the ratio, but it is not due to an increase in the amount or in the number of loans that are in arrears. Then we have a slight decrease of the loan loss provision, but this is related to how the loans are performing, and this is something that we've seen in the last quarters as well. We've seen a good behavior on the portfolio. Then I will comment a couple of things more that are not necessarily in what I just read, but it's something that we would like to mention. And it's related to how we are working on the commercial side. You all know that this last years have been quite tough on the universal banking business. But we've seen an increase in, what we call, the target segment accounts. Those are the accounts that we are quite focused on increasing, that is where people deposit their wages and what we call Sueldo Búho that it's very similar where we have on a monthly basis an income related to the wages of the customers, but they do not deposit their wages in the bank. And in exchange of that, they have some benefits. Well, those accounts, combined with the wages accounts increased 5.6% quarter-over-quarter. So now we have 177,000 accounts where we used to have 167,000. And then I would also like to comment on the performance of Búhobank, that is -- as we always mentioned, for those who attend this call regularly, what we call Búhobank, that is our platform to acquire digital customers, we acquired 22,000 customers in the quarter. You will see a reduction on the fourth quarter because we had a very good year that it's -- we are fulfilling the objectives that we had for the year. But what we are seeing there is that the quality of the customers that we are acquiring and this is a learning process. It's not what we expected. So we're working a lot on identifying the -- where the good clients come from and we are -- we have diminished during this quarter the investment in this because of this learning curve, and we expect to invest more in 2024, but trying to go to the specific places where the good customers are coming from. So this is a learning process that we are very happy with this, but we are trying to leverage the better customers instead of getting a considerable number of customers and then do not use the bank as we expect it to. And then also on the result, you will see a very considerable impact on the gain or loss on the monetary position that this quarter was ARS 20 billion and it compares to ARS 13 billion of the previous quarter and ARS 7.9 billion of the same quarter last year. This is related to the inflation of the quarter. As I mentioned before, it was 34.7%. It was a very challenging environment as well, we managed to -- obtainable results. Also, perhaps -- before you ask the question, let me comment a bit on the situation on the size of the balance sheet and on the Leliq position and repos with the Central Bank. As -- if you read the different research from the market, you will see that all the banks are shifting from Leliq to mainly repos with the Central Bank or even treasury notes. Well, during the fourth quarter, we are reducing, a little, the balance sheet. And also, we are shifting from Leliqs to -- or we have been shifting from Leliqs to repos with the Central Bank. This is not only to what the elected President Milei mentioned that there has to be something with the Leliqs because this will apply us to the repos as well. So we do not see a difference between the different instruments of the Central Bank. But what we've done is we reduced the tenure or -- yes, the relation of our assets with the Central Bank because we were not sure of what was going to happen with the rate, and we expect to continue the decrease of the balance sheet until December 11, that it's when the new administration takes place, and we will see what are the measures there, to see how we continue with the different business lines. So I believe this is all from my side. I don't know if there are any questions, Angela?

[Operator Instructions].

Are there any questions?

So allowing a few moments, I'm showing no questions in queue. Please continue.

Okay. Well, thank you so much, everybody, for joining us today, and talk to you in the next quarter. Thank you. Bye-bye.

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