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

Ladies and gentlemen, thank you for standing by. Welcome to Banco Hipotecario's Second Quarter 2026 Earnings Release Call. [Operator Instructions] Today, Mr. Brian Feldman, Banco Hipotecario's CFO, and Mr. Juan Altuna, Head of Capital Markets and Investor Relations will be presenting. The bank began reporting results of hyperinflation accounting in accordance to IFRS rule IAS 29 as established by the Central Bank as of June 8, 2020. Therefore, every result aberration described in this report is expressed in constant currency as of June 30, 2026. Also, the provisioning model of IFRS 9 Section 5.5 was applied as established by the Central Bank. I would now like to turn the conference over to Mr. Brian Feldman. Please go ahead.

Thanks, Marcos. Hi, everyone. Thanks for joining the Banco Hipotecario conference call. Net income attributable to the owners of the parent company for the quarter was ARS 12.5 billion as compared to minus ARS 10.7 billion in the previous quarter and ARS 43.8 billion in the same quarter of last year. Net income attributable to the owners of the parent company for the first half of the year amounted ARS 1.7 billion. Excluding the impact of one-off severance expenses of ARS 21.4 billion recognized during the period, ARS 13.9 billion net of income tax. Adjusted net income would have reached ARS 15.7 billion, equivalent to an adjusted ROE of 4.7% compared with a reported ROE of 0.5%. ROA for the second quarter was 7.5% compared to minus 6.5% in Q1 and 24.8% in the same quarter last year. While return on average assets for the same period was 1.2%, minus 1% and 3.8%, respectively. Net operating income for the quarter was ARS 156.8 billion compared to ARS 13.9 billion in the previous quarter and ARS 156.8 billion in the same quarter of last year. Operating income for the quarter was ARS 40.8 billion compared to ARS 25.7 billion in the previous quarter and ARS 47.5 billion of same quarter of last year. Loans to the nonfinancial private sector and foreign residents decreased by 2% quarter-over-quarter and by 3.5% year-over-year. Deposits increased by 5.1% quarter-over-quarter and decreased by 18.3% year-over-year. While capital markets debt decreased by 2.1% quarter-over-quarter but increased by 26.2% year-over-year. NPA ratio was 9% in the second quarter versus 8.3% in the first quarter of the year and 3.1% in the same quarter of 2025. Total capital ratio as a percentage of the risk-weighted assets as of June 30 of 2026, was 26.8% compared to 28.3% in the previous quarter and 20% in the same quarter of last year. The CPI index was 6.76% in the second quarter of 2026 as compared to 9.44% in the previous quarter and 6.1% in the same quarter of previous year. Dividends for the fiscal year 2025 amounting ARS 12.7 billion were authorized by the Central Bank on June 4 of 2026 and will be distributed in three consecutive months in monthly installments. The first installment of ARS 4.2 billion was paid on June 29, and the second installment was paid on -- of ARS 4.2 billion was paid on July 30. The third and last installment of ARS 4.2 billion will be made on August 28. Now having said that, let me add a few comments behind the numbers. From a macro perspective, the quarter was characterized by a relatively stable interest rate and continued decreasing inflation. This combination creates a healthy environment for growth and for the banking sector overall. Now turning to the bank's performance. Let me start with asset quality. The increase in the NPL ratio to 9.0% from 8.3% deserves some additional context. In our consumer portfolio, which accounts for most of our NPL, the absolute amount of NPL actually declined during the quarter. I will repeat that, the absolute amount of NPLs actually declined during the quarter. The ratio nonetheless increased due to a denominator effect as the consumer book continues to shrink, reflecting our strict origination standards. Now coverage ratio declined by 10% during the quarter but the drivers were different across the segments. In the commercial portfolio, a significant portion of the loans classified as NPL during the quarter are back by warranties, by preferred warranties. And the local regulations, these exposures are classified based on days past due. However, the guaranties substantially reduced the expected loss, and our provisioning levels reflect that. In the retail portfolio, the decline in coverage increase ratio is mainly driven by updated recovery assumptions in our expected credit loss model based on the early collection performance we have been observing. The benefits of the tighter underwriting standards implemented over the last several quarters are showing up in early-stage collection metrics, and our models are incorporating that upside improvement as well as the entire intra industry has been doing so. Regarding mortgages, origination volume remained modest, but we have resumed mortgage lending and housing finance is one of our core strategic priorities as it has always been. We are also constructive on the program announced yesterday under which the shares will place long-term CPA deposit with the bank to support mortgage lending. Long-term funding has been the main constraint of the development of this market. So we believe this initiative could become an important catalyst for mortgage growth in Argentina. So overall, we believe the quarter reflects the early stage of a recovery in asset quality, a lower cost of risk and a continued progress in positioning the bank for growth in a business that are strategically important to us particularly housing finance and SMEs.

Thank you, Brian. We now open the Q&A session. [Operator Instructions] I see one question from Brian Flores.

Two questions here. We saw an announcement very interesting announcement just from the Ministry of Finance on the potential boost to the market here. So I just wanted to check with you, I mean, for you, in particular, what is your read through? Does it really change your appetite? We know you have been very, I would say, cautious, so I just wanted to check with you, do you think this is something that is transformational? Or is it just maybe a first step towards the right direction?

Sorry, can you repeat the question? We have a technical problem here. From the start, please?

Sure, sure, no worries. No, just wondering if you could share your thoughts on the measure announced yesterday by the Ministry of Finance on the potential boost to the real estate market in Argentina. So just wondering if this changes your appetite. And also, do you think this is a structural change, transformational change? Or do you think this is maybe just an initial step in one of those I would say, long roads needed? And then maybe the second question on a different topic is asset quality. You mentioned your ratios are starting to improve, but we also know that your maybe risk appetite has been very limited. So I just wanted to get a sense on how are you perceiving the I would say, the health of the consumer and also of the companies. And if you -- do you think maybe the second half could allow for, I would say, a more aggressive higher loan growth, if you will.

Thank you, Brian. First of all, we are always open and happy of hearing the news regarding the mortgage market. We are optimistic about this measure. The initial amount announced yesterday will be enough for about 20,000 credits, which is very good for a start. But just to give you a few figures. Mortgage over GDP in Argentina are about 1%, while in any other country of the region, it would be about 4 or 5x higher and that is not comparing with a developed market. Just not Chile, not Brazil, not U.S.A., of course, just to -- number. And GDP in Argentina, it's about $100 billion. So to move toward that number we will need about, let's say, $30 billion, which is much higher than this announced. But these programs attach what we consider is the main constraint of the mortgage program, which is the long-term funding. So I think it's a very good start, but we will need to -- we will see some more evidence in order to provide some more guidance. In regard to your second question about the NPLs and the performance. Well, as I said before, the inflation is going down. Of course, as you know, as inflation goes down, real salaries and disposable income should come up. And as you, of course, have already had also the entire system is doing efforts in terms of refinancing. So once again, it's kind of early to say if it will be kind of a game changer for what we have seen in terms of credit, but once again, second half of the year, might have some better conditions

No, perfect. If I may, just a final question. Now the -- obviously, you have made a lot of changes. But do you think at some point, we could see a new guidance? Obviously, I know it's a tough thing to do in Argentina, right, but just because the rest of your peers are doing so, so I just wanted to check with you if you have any expectations now with maybe only 4 months to go as to how 2026 could look.

As we have said before, we have chosen not to provide guidance for this year, for 2026. Let's hope the country's normalization process and growth continues. And inflation still come down and credit and NPLs continue to normalization. And if that happens, we might start providing some guidance in the future.

We now go to the line of Marcos.