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

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

Thanks, Vicki. Hello, everybody. Thanks for joining us today. Well, let's begin. 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, 2024. 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 14 billion. This compares to ARS 13.1 billion of the last quarter and ARS 5.9 billion of the same quarter last year. Return on average equity for the third quarter of 2024 was 13.3%. This compares to 12.7% for the second quarter of 2024 and 7.2% for the same quarter of last year, where return over average assets for the same period were 1.9%, 1.9% and 0.9%, respectively. Also, annualized accumulated return over average equity for the year, it's 14.7%, and annualized accumulated return over average assets for the year 2024, it's 2.1%. Net operating income for the quarter was ARS 131.5 billion. This is 10.7% lower than the ARS 147.3 billion of previous quarter and 14.6% lower than the ARS 154 billion of the same quarter of last year. Operating income for the quarter was ARS 55.6 billion compared to ARS 67.1 billion of previous quarter and ARS 65.8 billion of the same quarter of last year. Loans to noncore nonfinancial private sector on foreign residents increased 25.2% quarter-over-quarter and 17.3% year-over-year. Going to a breakdown on this, the commercial loans increased 27% quarter-over-quarter and 73% year-over-year, while the consumer portfolio increased 21% quarter-over-quarter and decreased 2.5% year-over-year. Deposits increased 6.1% quarter-over-quarter and decreased 19.3% year-over-year, while capital market debt decreased 32.9% quarter-over-quarter and 54.6% year-over-year. The NPL for the third quarter of 2024 was 1.5%. This compares to 2.6% for the second quarter of 2024 and 3.0% for the second quarter of last year. The coverage ratio was 139.6% compared to 106.1% in the previous quarter and 117.8% of the same quarter of last year. Total capital ratio as a percentage of risk-weighted assets as of September 30, 2024, was 26.8% compared to 32.5% of the previous quarter and 25.3% of the same quarter of last year. General level of consumer price index accumulated an increase of 12.1% in the third quarter of 2024 compared to 18.6% in the previous quarter and 34.8% in the same quarter of the previous year. Well, going back -- going to some color on these figures. First, let me begin by what I just mentioned about the consumer price index and the accumulated inflation. This is something that you can see in our income statement, where you will see that the gain or loss, in this case, loss on the monetary position is 32% lower than the previous quarter. And this also has an impact on the financial margin that as we always mentioned, the financial margin, as we consider, this is measured as the sum of net interest income -- sorry, net income from financial instruments at fair value to profit and loss and gold and foreign currency exchange difference. And this for the third quarter was ARS 103 billion, and this compares with ARS 121 billion of the previous quarter and ARS 134 billion of the same quarter of last year where you will see a reduction of 14.4%. This is mainly due to the fact that rates are going down, so the margins are shrinking, but also the adjustment for the inflation is lower. So it has an impact on both sides. Also, this has an impact on the operating income that you will also see a reduction. But then when you deduct a lower adjustment on the monetary position, this is offset. But this is something that we're going to see, hopefully, in the next quarter as well as we expect inflation to continue its downtrend. Then other figures that I would like to go back, it's the NPL that the NPL for the quarter was 1.5%, and this is compared to 2.6% and 3% of the same quarter of last year. We've been mentioning this what we've seen here related to the previous -- not the immediate previous quarter but compared to the rest quarter of this year to the last year, where we've been mentioning that we expected a reduction mainly on the commercial side. In fact, now the commercial portfolio, the NPL is 0.3%. This had an impact on the recovery of some loans, but also on the growth of the loan portfolio that we've experienced on a yearly basis now and also on a quarter-over-quarter basis. This is very important for our business, as you might have seen that where all the banks are originating more loans. And related to this, we've had a very good demand on the mortgage loans that for us it's a very important product related to the name of the bank, but also to the main expertise that we have. In fact, we have decided to raise the rates of the mortgage loans because the demand has been very high. We originated during the quarter 427 mortgage loans totaling ARS 33.5 billion, and there's still demand for loans. So we have a very good expectations around that product, but we have been forced to raise the rates in order to diminish the demand. And so those are the main topics that I wanted to highlight. So we can open for questions if there are any.

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

No, I think that that's all from my side. I would like to thank everybody for joining us today again and talk to you for the full year results.

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