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

Ladies and gentlemen, thank you for standing by. Welcome to Banco Hipotecario's Second Quarter 2024 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.

Thank you, Vicki, and hello, everybody. Thanks for joining us today. Let's begin with the results. The bank began reporting results applying hyperinflation accounting in accordance to rules -- 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 June 30, 2024. Also, the provisioning model for 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 11,672 million compared to ARS 17,207.4 million of the last quarter and ARS 14,918.5 million in the same quarter of last year. The return on average equity for the second quarter of 2024 was 15.7% compared to 17.8% for the first quarter of 2024 and 21.7% for the same quarter of last year, while return on average assets for the same period were 2.3%, 2.6% and 2.7%, respectively. Net operating income for the quarter was ARS 131,373.4 million. This is 42% lower than the ARS 229,257.9 million of the previous quarter and 6.2% lower than the ARS 140,000 million of the same quarter of last year. Operating income for the quarter was ARS 59,802.5 million compared to ARS 139,306.8 million of the previous quarter and ARS 62,349.9 million of the same quarter of last year. Loans to the nonfinancial private sector and foreign residents increased 23% quarter-over-quarter and decreased 21% year-over-year. Deposits decreased 17.7% quarter-over-quarter and decreased 14.2% year-over-year, while capital market debt decreased 32.2% quarter-over-quarter and 30.3% year-over-year. The nonperforming loans for the second quarter of 2024 was 2.6%. This compares to 2.8% of the first quarter of 2024 and 2.7% for the same quarter of last year. The coverage ratio decreased to 106.1% in the second quarter 2024. Total capital ratio as a percentage of risk-weighted assets as of June 30, 2024, was 32.5%. This compares to 36.1% of the previous quarter and 23.8% of the same quarter of last year. The general level of consumer price index accumulated an increase of 18.6% in the second quarter of 2024. This compares to 51.6% in the previous quarter and 23.8% in the same quarter of the previous year. The dividend announced on May 7 was distributed in 3 installments. The first installment was paid on May 27, the second on June 27 and the final one was paid on July 29. This amounted a total of ARS 45 billion. On August 15, a secured commercial loan of USD 2.6 million was collected. If this would have been collected before the closing of the NPL, in this quarter, would have been 1.9% and the coverage ratio would have been 141%. Let me come to this particular item, as I mentioned in the previous quarter, the coverage ratio decreased to 106.1% -- 106% in the second quarter of 2024, and the NPL decreased slightly, and we were working on collecting this particular loan that we've been discussing during the last maybe 1.5 years that it was impacting our coverage ratio since it was -- it had a great collateral. We didn't have provision enough to have a better coverage ratio because we were quite certain that we were going to collect that, and that happened in July and the figures that we are looking at right now considering this that happened during the third quarter are the figures that we believe are more related to where we want to be at an NPL of around 2% and with a coverage ratio above 100%. And in this particular case, it would be 141%. So these are some comments I would like to make. Also, let me go to the financial margin that we've seen a reduction. As we usually discuss here, the financial margin, we considered as the net interest income plus the net income from financial instruments at fair value, plus they both are foreign currency exchange rate differences. That's what we call the financial margin. In this quarter, this quarter was ARS 108,000 million and it was ARS 206,000 million last quarter. So this is a reduction of 47.7%. And when you compare it to the same quarter of last year, there's a reduction of 11.5%. This is mainly due to the the changes in the nominal terms in the economy, the high inflation. Also based on that, there has been a reduction on the interest paid by the Central Bank during the second quarter. It's what we call the normalization process of the macro economy. If you see the numbers of this particular quarter are more similar to the same quarter of last year then to the first quarter of 2024, but we've seen the inflation figures that were extremely high. This also happened in the third quarter of 2023. But the change in the financial margin is mainly due to that. Also, there's -- we are looking at the reduction in the net interest margins, but this is related to generalization of the economy, and it was something that we were not expecting. Also other things that happened during the -- not the second quarter, but already in the third one. We paid the amortization of the notes -- unsecured notes Series 7 for an amount of ARS 13 billion. And in October, during this quarter, we have the installment payment of the Series 4 [indiscernible] bonds, this would be the fourth installment out of 5. The last one will be October of 2025. And we're going to pay that as well. Then I think that I mentioned the inflation, then the gap between the official rate and the registered for the quarter was 37%. And also let me go in something else, not necessarily related to the bank, but related to the changes in the macro economy and the the tools that the Central Bank and the treasury are using now to perform the monetary policy. The Central Bank established this new letters that are -- these new bonds that are called [Foreign Language], are called, in english basically this means the letters they give would be like liquidity treasury [indiscernible] in English. And these are issued by treasury and are released by the Central Bank to the banks. This is something that is used to -- for the overnight rate, it's the instrument that replaces the Repo with the Central Bank. And then a big part of the liabilities in the Central Bank went from Leliq at the beginning of the year and Repos in the remaining part of the year to mainly to [ revise ] into treasury -- sorry [ the gaps ] and to other treasury notes issued by the treasury. So we've seen a change in the monetary policy. Also, there's a target of -- what, the Central Bank calls the [Foreign Language] it's extended monetary base. Well it's ARS 47 million -- sorry ARS 47 trillion, there's plenty of space to grow the monetary base there. And that target is related to the historical size of the monetary base and the Central Bank [indiscernible] for -- as a percentage of the GDP. So I believe this is all from my side. And we'll take a part of questions.

[Operator Instructions] I'm showing no other question in queue. Martin, do you want to add something else? Please continue.

No, we could just post on the site. Thanks, everybody for joining us. And of course, if anybody has any questions, we are always there to respond to them. Contact us through email or phone.

Ladies and gentlemen, that does conclude your conference call for today. Thank you for your participation in Banco Hipotecario's Second Quarter 2024 Earnings Release Call. You may now disconnect.