Grupo Financiero Galicia S.A. ($GGAL)

Good morning, ladies and gentlemen. Welcome to Grupo Financiero Galicia First Quarter 2026 Earnings Call. This conference is being recorded, and the replay will be available at the company's website at gfgsa.com. [Operator Instructions] Some of the statements made during this conference call will be forward-looking statements within the meaning of the safe harbor provisions of the U.S. federal securities laws and are subject to risks and uncertainty that could cause actual results to differ materially from those expressed. Investors should be aware of events related to the macroeconomic scenario, the financial industry and other factors could cause results to differ materially from those expressed in the respective forward-looking statements. Now I will turn the conference over to Mr. Pablo Firvida, Head of Investor Relations. You may begin your conference.

Thank you, everybody. Good morning. Although activity levels in February stood 2.2% below those observed in December 2025, high frequency official indicators of March point to a constructive short-term momentum. In this regard, the manufacturing production index increased by 3.2% month-over-month on a seasonally adjusted basis. while the synthetic construction activity indicator, ISAC, rose by 4.7% month-over-month also seasonally adjusted. In the first quarter of 2026, the primary surplus stood at 0.4% of GDP compared to a primary surplus of 0.5% in the first quarter of 2025. The result was explained by a 22.4% year-over-year increase of revenue, whereas primary spending rose 25.9% in both cases, increasing below inflation rates. The national consumer price index accumulated at 9.4% increase during the quarter. Monthly inflation rose from 1.5% in May 2025, to 3.4% in March 2026. On a year-over-year basis, inflation stood at 32.6% as of March. Following 2025 marked by increasing volatility resulting from the electoral process. The spike in volatility has faded with the exchange rate and interest rates showing clear signs of stabilization. As of January 1, 2026, both the lower and the upper limits of the exchange rate band began to adjust on a monthly basis in line with the latest available monthly inflation data published by INDEC, T-2. In March 2026, the exchange rate averaged ARS 1,396 per dollar, reflecting a 23.4% year-over-year depreciation. In March 2026, the average rate on peso-denominated private sector time deposits for up to 59 days, stood at 27.9%, 1.6 percentage points below the March 2025 average. Private sector deposits in pesos averaged ARS 108.3 trillion in March, increasing by 4% during the quarter and 34.4% in the last 12 months. Time deposits rose 13.8% during quarter and 41.7% in year-over-year terms. Peso-denominated transactional deposits decreased 6.54% during the first quarter, but increased 25.7% in year-over-year terms. Private sector dollar-denominated deposits amounted to $38.7 million in March 2026 increasing 6.2% during the quarter and 30.4% in the last 12 months. Peso-denominated loans to private sector averaged ARS 92.2 trillion in March, showing a 5.3% quarterly increase and a 51.7% year-over-year rise. Private sector dollar-denominated loans amounted to $20.5 billion, recording a 12.5% quarterly growth and a 45.5% annual increase. Turning now to Grupo Galicia. Net income for the first quarter amounted to ARS 66.5 billion, 66% lower than in the previous year, which represented 0.6% return on average assets and a 3.2% return on average shareholders' equity. This result was mainly due to profits from Banco Galicia for ARS 47.7 billion; from Galicia Asset Management for ARS 34 billion; from Galicia Seguros for ARS 12.5 billion; and from Galicia Securities for ARS 1.5 billion, partially offset by ARS 18.6 billion loss from Naranja X. Banco Galicia net income improved by ARS 162.6 billion compared to the fourth quarter of 2025. Although results continue to be impacted by elevated loan loss provisions, charges declined quarter-on-quarter, in line with improved delinquency rates. Net interest income was pressured by lower intermediation volumes. However, the financial margin continued its sequential recovery. also seasonal factors typical of the first quarter led to lower fee income, while expenses reflected efficiency gains from the integration process. Operating income increased 153% quarter-on-quarter, driven by an 11% rise in net operating income, mainly reflecting a 25% reduction in loan loss provisions partially offset by lower net interest income amid reduced average intermediation volumes. Expenses declined 17% quarter-on-quarter reflecting efficiency gains from the integration with Galicia Mas, the former HSBC. Despite interest rate volatility during January and February, the financial margin improved sequentially and closed the quarter at 16.7%, while results from government bonds showed a favorable trend toward quarter end. Average interest-earning assets reached ARS 26 trillion, 4% lower than in the previous quarter, primarily due to a 4% lower volume of loans in pesos and 5% in dollars and a 6% decrease of government securities in pesos, partially offset by a 52% higher volume of government securities in dollars. In the same period, its yield decreased 260 basis points, reaching 28.9%, 36.8% in the peso portfolio and 7.4% in the dollar portfolio. Interest-bearing liabilities decreased 5% from December 2025, amounting to ARS 23 trillion, mainly due to a 38% lower volume of other deposits in pesos and 9% in saving accounts in dollars, partially offset by a 9% higher volume of time deposits in pesos. During this period, its cost decreased 260 basis points to 11.7%. Net interest income decreased 7% when compared to the prior quarter with interest income declined 13%, mainly driven by a 15% lower interest income from loans and other financing while credit card income fell 28% due to seasonal lower average volumes and income from promissory notes decreased 19%, reflecting both lower volumes and a reduced interest rate during the quarter. In addition, income from government securities declined 8%, mainly due to lower volumes and yields in the early months of the quarter. Interest expenses declined 22% quarter-on-quarter mainly driven by lower deposit-related costs amid reduced interest rate and average volumes. Expenses on time deposits fell 13% while costs associated with other deposits declined 47%. In addition, interest on repurchase agreements decreased due to lower average volumes and interest expenses on negotiable obligations fell following the maturity of a corporate bond in February. Net fee income declined 6% quarter-on-quarter, mainly reflecting the seasonality typical of the first quarter, which usually records lower transaction levels than the fourth quarter. Fee income decreased 5%, primarily due to a 4% decline in credit card fees following the seasonal spending peak of the prior quarter. Collection related fees also fell with collection fees down 13% amid lower transaction volumes including a 10% decrease in utility bill collection services. Net income from financial instruments increased sharply quarter-on-quarter, partially driven by the sale of certain government securities. In addition, results from government securities measured at fair value improved sequentially. These effects were partially offset by weaker performance in private sector securities, reflecting lower returns during the quarter and by a decline in results from derivative financial instruments mainly associated with forward transactions. Results from quotation differences of foreign currency increased 10% quarter-on-quarter. This performance was supported by overall valuation effects, partially offset by lower income from foreign currency trading, reflecting reduced transactional activity following the unusually high retail volumes recorded in the previous quarter. Provision for loan losses declined 25% quarter-on-quarter driven by a significant improvement in early delinquency indicators in the individual segment, which fell 49% compared to the previous quarter. As a result, portfolio quality closed the quarter with NPLs at 7.7%, while credit risk stood at 9.5%. Personnel expenses declined 8% quarter-on-quarter, mainly reflecting a reduction in average headcount. Administrative expenses also decreased sequentially, falling 18% compared to the previous quarter driven by operating efficiencies and synergies achieved through the integration with Galicia Mas. Other operating expenses declined 21% quarter-on-quarter driven by 74% lower other expenses, 12% lower turnover tax expenses, 73% lower charges for other provisions and a 30% decrease in other financial results. The quarter included an income tax recovery, mainly reflecting the recognition of a tax credit associated with the filing of the fiscal year 2025 tax return, driven by the impact of inflation adjustment. Other comprehensive income declined 86% quarter-on-quarter reflecting the comparison with the prior period that reported strong market valuation of government securities as well as the sale of part of the portfolio during the quarter. The bank's financing to the private sector reached nearly ARS 23 trillion at the end of the quarter, down 4% in the last quarter with peso financing decreasing 6% and dollar-denominated financing up 1%, equivalent to a 21% growth when measured in that currency. Deposits reached ARS 24 trillion, 15% lower than the quarter before due to a 12% decrease in deposits in pesos and an 18% decline in dollar-denominated deposits primarily due to restatement effects as when measured in original currency, the decrease was 6%. The bank's estimated market share of loans to the private sector was 14.4%, 75 basis points lower than at the end of the previous quarter. And the market share of deposits from the private sector was 13.9%, 274 basis points lower than in the fourth quarter of 2025. The bank's liquid assets represented 95% of transactional deposits and 56.5% of total deposits, similar levels of the previous quarter. As regards asset quality, the ratio of nonperforming loans to total financing ended the quarter at 7.7%, recording an 80 basis points deterioration as compared to the 6.9% of the fourth quarter of 2025 despite the improvement in early delinquency indicators in the retail segment. At the same time, the coverage with allowances reached 91.4%, down from the 97.4% recorded in the prior quarter. As of the end of March, the bank's total regulatory capital ratio reached 25.5%, increasing 30 basis points from the end of the prior quarter. In summary, during the first quarter, financial margin partially recovered, efficiency improved and the cost of risk declined. However, loan demand did not rebound and asset quality and monetary loss related to inflation had a significant impact on profitability. Nonetheless, Grupo Galicia was able to keep liquidity and solvency metrics at healthy levels, and we expect a sequential improvement in profitability and asset quality during 2026. Now Gonzalo Fernandez Covaro, CFO of Grupo Galicia will make some additional remarks, and I would like to mention that Hernan Garcia, the CFO of Naranja X is also here with us and will be available to answer specific questions.

Thank you, Pablo, and good morning, everyone. Well, as you know, the quarter started a bit challenging with interest rate volatility, policy tightening and high inflation. But then rates went down in March and continue being stable so far. So looking ahead, we believe Argentina will continue with this phase of stability and more predictable policy framework and really potential for credit growth. And as normalization continues, as you know, the financial system will play a key role in the development of the country. Talking about the specific quarter about volume, the year started with low loan growth due to low demand in the commercial credit side, mainly in pesos, was better in dollars, but peso really very soft demand and a stricter origination policy on the consumer side that we implemented. We believe that commercial lending will pick up starting in the second quarter. In fact, we have already seen some movement in this area in dollars, but also started to see some demand in pesos, and we believe this will continue. And of course, as the economy improves, consumer lending will also start to grow again as we expected. Projection for loan growth for the year, we are now at between 20% and 25%. We were expecting a 25% growth at the beginning of the year. Now we're seeing it a bit lower than that. And in the case of deposits, we are now seeing an evolution of an increase between 15% and 20%. We were talking about 20% before at the beginning of the year. As we said in prior calls, cost of risk already had its peak in the fourth quarter of 2025, and we have started to see the credit loss charges to decrease, as you can see in the first quarter P&L, and we expect that to continue quarter after quarter. And NPL should have the peak in the bank in the fourth quarter, I would say, stability, a bit reduction in the second and then continue to go down. On the cost side, we are capturing the benefit of the restructuring made last year of the HSBC acquisition. We expect to end the year with an 11% cost reduction year-over-year. As you know, we made a big, big restructuring in headcount and also in branches, talking about branches, we are already at the number of branches that we had before the HSBC acquisition. We maintain our ROE guidance for 2026 in the low double-digit range, I would say, 10%, 11% between 10% and 11%. We expect to go from low to high during the year. It's true that we started a bit lower than expected in the first quarter, but mainly due to revenues. As you can see, the cost of risk and costs are coming on or better than expected. Revenues are a bit behind, mainly due to lower asset growth or loan growth and higher inflation that, as you know, has a big impact in bank's P&L. But we expect that now with loans increasing as we expected and inflation is going down, we can catch up during the year to maintain the guidance. To be more specific in the first quarter, January and February were bad months in terms of results, but March was a very good month. We are seeing April also good. So we expect that from now on, monthly results to come good and be able to catch up going forward. In fact, we expect like a ladder quarter after quarter to improve net income for the group. So that's what I have. So now we are open to questions.

[Operator Instructions] Our first question comes from Daniel Vaz with Safra.

I would like to double-click on the loan growth and ROE trajectory that Pablo just mentioned. I guess you are slightly revising downwards on loans as market inflation expectations have materially repriced, right, since the last conference call. And -- but your ROE trajectory are kind of stable at the low double-digit levels. I mean -- let me try to look into your March and April months that you mentioned it was good months. How are you connecting this margin in April to the inflation going forward, right? So we have a print today of the CPI. Maybe it would be good to hear your expectations on that print. And if the inflation could hurt again your NPLs and ROE trajectory take longer than you are foreseeing right now?

I mean expectations for CPI for the year is between 28% and 29%. From today, I mean, the consensus is talking between 2.5% to 2.8% inflation for the month. When I said that the inflation also hurt, it was more talking about the inflation accounting than the NPLs. I would say the NPLs, it's more that the salary is no catch-up with inflation. But with the tightening of origination policies, I wouldn't think that 300, 400 basis points difference in the year inflation will make an effect in the NPL. They can make in our revenues in the inflation accounting. But in fact, we are -- we have a balance sheet covered against inflation. We have inflation-linked bonds, and we have also inflation-linked loans like mortgages, for example, that cover the whole liquid position of the bank. The point that this has a lag. So the inflation-linked bonds reprice after 2 months. So in the first quarter, we have higher inflation than expected, but the inflation-linked bonds didn't catch that effect because they were still 2 months lag. Now in April, we are capturing February inflation, which was high. And in May, we will capture March inflation, which was higher. So that is -- that will help us going forward. So that's referring to how the inflation hurt us in the first quarter, that gap or delay between the inflation-linked bonds and what you need to book in the P&L as a loss on inflation accounting. Talking about the rest of the year with the inflation that we are expecting this 28%, 29%, we expect that it wouldn't hurt further because we see the trend of inflation going down month after month, and we don't see really that generate additional hit in credit losses. I mean let's remember that credit losses are still on a high level. We are reducing them quarter after quarter, but they are still higher than the run rate we expect and that we want to be, but that's something that evolves sequentially and not as fast as we want. But yes, we'll see an improvement quarter after quarter. And so again, what we are seeing more in March and April has to do with now that -- our assets that covered or that are linked to inflation are producing that coverage because the delay is away and because we will start to see increase in the lending side. Also, what we have been doing as we have not -- when we don't see this demand in commercial lending, what we are doing is also taking opportunities in investing in longer-term government bonds that are having good yields, inflation-linked bonds and variable rate bonds that are the last issuances were at good spreads. So that also -- in the meantime that we wait for the demand to catch up, we are also putting some accrual assets that are having good yields that not necessarily are loans.

Our next question comes from Tito Labarta with Goldman Sachs.

My question is, I guess, on the funding, deposits are not growing particularly in pesos. The loan-to-deposit ratio is above 100%. How do you see the outlook for funding, particularly if loans kind of pick up from here and your ability to fund that growth?

Thank you. I mean talking about loan deposits that we have seen a reduction. First, we have almost half of the deposits in dollars. And in the dollar side, you have the effect of the exchange rate that as these numbers are presented in pesos and the peso strength over the quarter, you see a reduction that was not the case. In fact, it's much -- the reduction was much lower when you consider dollars to dollars. Point-to-point was only 6%. And if you see in average, it was a growth of 6% in dollar deposits. But what we also did in dollars, for example, we started to improve the efficiency of the balance sheet as we didn't see demand. We started to reduce the paying for the institutional funding. In dollars, it's mutual funds, that now you have mutual funds in dollars. We didn't need those dollars, we reduced the rate, and we reduce because of that part of the institutional funding in dollars that we didn't need, but that we can recap increasing the rate again when we want, but we prefer to go for the efficiency. And in peso was the same. The main reduction was in institutional funding, mainly mutual funds funding that we -- as the demand was not there in the asset side, we decided to be more efficient and reduce that. In terms of transactional deposits, we have -- our market share is stable. So even though you see a reduction, it is mainly because of the market is a seasonality, market in the first quarter went down -- but funding, I mean, if we go and look at the funding considering our scale, our #1 bank -- private bank in the market and also that we have this institutional deposit that we can go and bring back, we believe that the availability of funding will be there in pesos or in dollars. This was kind of a seasonal plus something that we created considering a better efficiency in the balance sheet management.

Our next question comes from Brian Flores with Citi.

I have a follow-up and a question. The follow-up is just on the guidance, Gonzalo. I think you mentioned you now envision low double-digit ROE. I think the message from last quarter was explicitly 10% to 11%. So I just wanted to check with you if this is marginally slightly higher. I just wanted to check that with you. And then my question is on capital because you're building capital, you have a very robust core equity Tier 1 ratio. So I just wanted to ask you, given maybe the limited credit demand that you're seeing, if at some point, we could see you shifting to perhaps a more aggressive stance on payouts or M&A? I know Pablo mentioned you have a slightly lower market share. I just wanted to check with you if at some point, it makes sense to you to defend it. I think that's it.

Thank you, Brian. I mean guidance is the same. I would say low double digits between 10 and 11 is the same than before. Talking about capital, well, yes, capital is high, but as you see, I mean, we haven't seen the demand in the first quarter, but really, we believe that this should change in the commercial areas of the beginning. In the wholesale lending, we started to see a lot of, for example, of acquisition finance. As you know, there are some privatizations going around in Argentina. Some local companies changing hands. And we are -- some of those deals and seeing customers come and ask for potential transactions. So they start to be demand on the commercial lending, which is the bigger tickets and is the tickets that will make our balance sheet grow faster. Mortgage at some point should come back. At some point, some kind of securitization program should be built, and I think the government should play a role there, and we believe that, that should happen. That's also another source of credit growth that will come. So we believe that we still -- we believe in the credit growth story in Argentina. So we need to have capital for that. Considering acquisitions, I think you mentioned, I mean, we are always open to analyze the market and something that we are not close to. Of course, it needs to be something that makes sense for us and for our strategy. But for the time being, we are concentrating in the organic growth, and we believe that there is a lot of room to improve. We are going to defend our market share. When you see in deposits, some kind of reduction in market share comes mainly from the institutional funding because deposits -- we are taking deposits as a whole. We are not losing market share in the transactional deposits. But -- so it's the one that we want to defend. But we are going to defend market share for us, it's important to be large, to have the scale and the economies of scale. So we are going to do that organically. And if at some point, something comes that is good and fits for our strategy, of course, we'll analyze it also.

No. So very clear. And I know you have the management from Naranja X here. Just Wondering if we should envision Naranja X coming back to profits during 2026.

Hello, thank you. Yes, of course, I mean, in fact, if you take a look at the numbers of the first quarter of this year, even though we posted a net loss of almost ARS 19 billion, this loss represented already a 60% recovery from the previous quarter loss that was almost around ARS 50 billion. So this recovery was mainly driven by a decline in loan provisions and in line with the downward trend that we already seen in delinquency rates that was, in fact, observed since September last year. So for the year as a whole, we expect the ROE to recover and maybe reaching a high single-digit level on a full year basis.

The next question comes from Ernesto Gabilondo with Bank of America.

My first question will be on your macro expectations for the year. You already mentioned inflation at 28%, 29%. But what should we expect in terms of GDP growth, interest rates and FX? And also, how do you see the indebtedness of families especially after the deterioration in asset quality across the banks and fintechs. My second question will be a follow-up in asset quality. So you mentioned NPL reached its peak in this first quarter, then you're expecting to be relatively stable in the second quarter and then trending down in the second half. But we're looking to the reserve coverage ratio, it's below the 100%. So can you provide us any color? And how should we think about the evolution of the reserve coverage ratio? And also linked to the first question, again, based on expected losses and maybe fintechs are showing higher deterioration, how do you see this reserve coverage ratio? And I didn't catch up the cost of risk for the year. So if you can provide us also what will be the level for the year? And my last question is if you can give us any expectations or any color on how you're seeing NIMs this year?

Yes, sure, Ernesto. Well, first, I think it was about the macro, your question, the macroeconomics of the country. I mean, growth, we see more or less 3% GDP growth for the year. Interest rates ending the year with a [indiscernible] of 22. I mean, we believe that it's in line with what we are having today. We see interest rates a bit stable during the rest of the year. Talking about margins also, we see margins in the year around 16% for the bank, which is similar to what we have in the first quarter. So we see margins very stable this year. I think then your questions comes from credit losses, family indebtness.

The FX too.

Well, the FX for the year is like ARS 1,600, ARS 1,590 -- ARS 1,600 per ton. So talking about family indebtedness, I mean, we still see -- for example, we cut our scorecard and strict our credit policies. And that's why NPLs are improving or cost of risk is improving. We still do some champion challengers lending to lower levels, and we still see that those segments are bad. They are not improving. So we didn't see an improvement in the families income, let's say, the improvements that we have been seeing is because we are lending to better quality or higher segments, I would say. So that's how we are now, and we will continue this way until we see that these [indiscernible] tests that we are doing change. But so far, we haven't seen them. Of course, the expectation is that during the year, as inflation continue to go down and economy grows, this can also touch more families and the micro economy also improves. And with that happening, then that situation that I just described should change, and we could start lending to different segments. But so far, we are not seeing that. I mean talking about reserve coverage, I mean, reserve coverage -- in general, when you grow a portfolio, I mean, you build in the -- for the normal or the portfolio that is not past due, it's, of course, building discussion for creating a higher reserve coverage that covers 100% of the nonperforming loans. Now what's happening is that we saw portfolio worsening as you have been seeing, and we started to use those reserves. And that was combined with a quarter with low volume, low origination. So you don't have -- it's kind of a math situation. As you have lower volumes, lower new lending, you are not building new reserves that originated with good credits that are building cushions for the nonperforming. So that's the reality that will be changed during the year with volumes growing again and also with the quality of our portfolios that continues to improve as we saw the improvement in the first quarter, and we will continue to see in the second and third. We expect reserve coverage during the year maybe to come back to 95%, 96%, improving. But -- and then in the '27 and '28, of course, continue to improve as we start seeing the level of NPLs and cost of risk that we want. During the year, we need volumes -- the increase in volumes to come back to normalize the situation because this is generating by the fact of these 2 higher worse quality of the portfolio than a normal situation, plus lower new volume that subsidize and builds new risk factors. Well, then cost of risk for the year, we are expecting it at 8%. We end up, as you know, last quarter was like around 12%, 12.5%. We are at 9.5% in the third quarter. We expect the full year to end at 8%. I don't know if I missed.

No, this is very helpful. Just a follow-up in terms of this reserve coverage ratio. So we have seen NPLs peak probably for the banks in the first quarter. But any color on the fintechs because I believe fintech, especially in credit cards are showing much, much higher NPL. And I just want to check with you if you have to build provisions as maybe in the credit bureau, all of the fintechs are showing this higher NPL and then you as an industry have to create more provisions. So you got to double check on how do you provision this potential deterioration on the fintechs.

No, no. I mean we -- as you know, in general, what you have the obligation to change your credit or your rating is when you see the bank's debtors, then you cannot have more than 2 notches differences with other banks. That's a Central Bank policy. But with fintechs, of course, we monitor credit bureau, et cetera, but credit bureau is more for origination than from changing the situation of your customers or the clarification of your customers. Yes, we use to lend new loans, but not to change or provide for the lending. Yes, we use the database with debtors of the financial system, which is something that we all banks submit to Central Bank. And if the other banks have the same customer in a worse situation, you also need to adjust and we use that. But with fintechs, I would say that it's more considered for the origination of new lending rather than for providing more -- because what you do in general, the customers will have -- they have with us and other banks. So the customer is doing bad in general, he will be doing bad with everyone. So we'll already be catching because it's doing bad with us and doing bad with other banks. It's not common that we have a customer that is doing bad with the fintech, but doing okay with the banks. So we haven't seen that, and we really don't see that impacting the provisioning. Yes, the origination of new lending to those people.

Perfect. Super helpful. And just a last question. I don't know if you can provide us any color about the potential MSCI reclassification of Argentina. When do you expect this to happen?

Well, I mean, it's difficult to answer that question. I mean it's something that we are expecting and we would like to happen soon. But I mean it has to do also with FX restrictions that needs to be waived. And it's not that clear when that will happen. I don't see that, that will happen in the near future. And then in next year, we have elections. So that it's also something that may work against taking away the FX restrictions, but we don't know. So I think that that's a key milestone that the country needs to do before this happening. So it's difficult to believe that this will happen in very, very soon.

The next question comes from Yuri Fernandes with JPMorgan.

I have one regarding regulation. We saw some flexibilization this year already on the reserve requirements. I guess, in March and April, there was this flexibilization. Anything else on that? Like I know inflation is still a little bit under pressure in Argentina. So not sure if the reserve requirement will be much more flexibilized, but what have you heard? Any other regulation asymmetries and pressures that were headwinds for banks in the past quarters that could be solved this year. Just checking on this because I think that's important for margins for you. And then just a follow-up on asset quality. I like the quote on the almost 50% drop on early delinquencies. So just trying to understand how should this reflect on the NPLs, right? Assuming this is really the peak and I think the new NPL formation indications for both Galicia and Tarjeta, they reinforce this message. How quickly early delinquency indication should be reflected in lower NPL? And I guess with lower NPLs, you should also see your coverage moving up on a base effect, right? So if you can explain just the path we should see for early delinquencies and NPLs, I think that's also important for us.

Thank you, Yuri. I mean, reserve requirements, I would say the changes that we saw were -- didn't make a big change because they were mainly on the remunerated reserve requirements because you remember that you have a reserve requirement that go at 0% yield in Central Bank and some of them that you can integrate with government bonds, which has a yield. So the reductions were mainly in the ones that we could integrate with government bonds. So from P&L perspective, didn't change much and from liquidity or lending capabilities, also, it doesn't make a lot of changes because we banks have a lot of lending capabilities still without need to require to change in reserve requirements. Going forward, well, we always talk about that. But remember, the government is also very keen in reducing inflation. So this may go against that. So it's -- we don't have a sense, something that we always talk with Central Bank, but so far, no news and any anticipation of when or if this will happen this year. And any other change, we don't see any other change happening. We always have a list of things that we talk with Central Bank, like, for example, remunerating dollar balances in Central Bank or letting banks to invest in Treasury bills or yielding dollar assets. That's something that we don't have, and it's a lot of dollars that are not very yielding, nothing for banks. But for example, this is one point. We have many that we also continue to discuss, but no sight of when or if they will make any change. Going back to NPLs, yes. I mean early, early indicators, at roll rates are going well. Later stages are still unimproved but softer or at a slower pace than the early ones. So meaning that the one that goes bad then it has more probability to continue in the past due. So I would say that we may see real improvements in NPLs more within 6 months in the second half, I would say between third and fourth quarter, to start seeing reductions in NPLs. Cost of risk, as I said before, we expect this to happen quarter after quarter in the rest of the year, but NPLs to see improvements that you can consider some significant improvement. We should be by the -- we expect the end of the year, NPLs at 6%, around 6%. So that's more or less from 7.7% that we are now. That's the path we are seeing of how the early indicators or the early good performance should translate in better NPLs.

The next question comes from Matias Cattaruzzi with AdCap.

I have a few questions. First, the total deposits fell 16%. It was -- you lost like 2.5 points of market share. And you said that this was because of an aggressive expensive funding reduction. How will we see throughout the year the bridge towards the 15% to 20% real growth in the year with a really like negative first quarter? And do you expect going forward loans to be -- to reach like 30% growth in the upcoming quarters? And is it going to be in the second half of 2026 because current rates in the second quarter doesn't look that good, right? Or is it the seasonal impact of the first quarter? And then I got one more question about the mortgage debt regulatory background, but if you want to ask that one -- answer that one first.

Talking about deposits. Yes, I mean, deposits, remember, I also talk about dollars. You see that the market share is pesos and dollars. We had -- we increased a lot of market share in dollars after the tax [indiscernible] dollar that doesn't have any application. As you know, you can only lend to exporters and with very low yields. So a lot of comes from that from paying less to mutual funds. So that was nothing that was -- so it's not the combination of both. And in pesos was mainly, I mean, funding from mutual funds rather than the transactional deposits. So when we see rates going up again, that is something that, as I said before, we started to see now in the second quarter in the commercial area, we recap those funds going to the market and paying back again in pesos and also in dollars if we need. I mean, talking about a credit portfolio. So that's how we plan to grow again. And of course, we expect the deposits, and we expect market also -- I mean, market in the first quarter always has a seasonal reduction in transactional deposits. We expect that to go up first by seasonality and then our actions, but seasonality should come back the loss that we saw that the market saw in the first quarter in current accounts and savings accounts as we see every year coming from a peak of December that is always a month with a lot of money into the street. Credit, I mean, we -- I said that we see between 20% and 25%, I mean, mainly in the commercial area, we have been in deals with big tickets in acquisition finance, privatizations, and there are some -- there are many coming and talking to us about new things that are big tickets so that also can increase lending faster than in the SMEs or in the individuals. Some of them are in dollars, as you know, and some of them, we are starting to see also peso transactions. So that plus the rates to stabilize in the lower area for commercial, not for individuals. And we expect -- and also economy continue to evolve. We expect this to help on the credit growth. Credit growth, we already start to see in the second quarter, but of course, it will be more consolidated in the third, we would say. But in the second, we already start to see tickets and things that we are not seeing in the first quarter. Of course, that's something that is not sudden, but already will be by steps in the second quarter is better than the first and the third, we expect better than the second.

Okay. Great. And in the loan portfolio mix, it currently -- USD loans represents 35%, right, of loans. How do you expect this mix to evolve throughout 2026 and in the future?

I mean from 2026, we may go maybe 60-40. I mean, dollar loans could grow a bit -- in the future, I mean, the peso will continue with the stabilization of the inflation. And in 2028, we had a lower inflation and rates goes with that, that shouldn't change much further than that because companies to start using the local currency for funding. Of course, next year, it's an election year, so we need to see how the things are going to happen or to be next year. But in general, we see for the future with stabilization. Still we see peso financing being more important than dollar financing. So far, we are in the middle or in transition to rate reduction, that's why companies continue to prefer dollars because of a pricing matter. But as rates in pesos continue to go down, that shouldn't -- peso should continue to be the higher weight in our portfolio.

And how do you see the mortgage debt regulatory background going forward? Is there any indication of ANSES given the needed liquidity for the market to grow more or any other participants?

No. I mean there's not so far these discussions that we continue to have with the banking associations and government that the need of a securitization program that ANSES fund could be a source. We announced a lot of economies also with that opinion. But it's something that so far is not in the agenda, and we don't have a date or something that when it could happen. We hope and expect that at some point, it should because it will help financial, but more than that, the economy because the mortgages are -- they provide a lot of support for the economy construction, et cetera. So -- but so far, no news, even though we continue talking and putting that on the table every time that we can.

So going forward, we won't be seeing a significant growth in the mortgage debt mix.

I mean this year, looking -- I wouldn't expect that this year unless this changes and we have a securitization program inside. But I would say that for the rest of the year, it's hard to see it.

Okay. And from USD loans in the mix, can you walk us through which is -- which are the main components? Is it all [Foreign Language] or how do you -- how they're growing...

There are deals that I said like acquisition financing or privatization that we are seeing now that you can see that they are going out and different type of transaction that require dollar that has higher yields than the [Foreign Language]. So we are talking about higher yielding than the ones that we are used to see with the exporters.

The next question comes from Carlos Gomez-Lopez with HSBC.

When I look at the results, I get the impression that you took the opportunity to make some gains in the bond portfolio because this quarter was especially weak operationally. That's normal. That's a normal management. Is that the correct impression? And would you be able to quantify how much you gained by selling government securities versus other quarters? Second, I would like to ask about the cost reduction. As you say, you have reduced, I mean, from what we saw in the 80% of the personnel of HSBC, the entire number of branches. Is the level of expenses that we've seen in this quarter, the permanent one? Or should we see further reduction or a rebound through the rest of the year in real terms?

[indiscernible] talking about, yes, we rotate our portfolio and we have been doing some extension of duration. So it's not that we sell them and we give up the accrual rather than change for longer duration with good yields. So we keep a good accrual and/or improving sometimes the accrual that we have been having because of longer durations, of course, and get the results in the quarter. I would say that in the quarter, I would say that we have like pretax like ARS 30 billion more or less, which is like ARS 20 billion after tax more or less something that...

There will be the gain or the amount that you -- ARS 30 billion, okay. All right.

Pretax amount. And then the other question was on cost. Yes, we -- I would say that the level of expense that we have is the run rate. We are still doing some restructuring, not because of HSBC, but because of normal. So we may have some things here and there on severances. I wouldn't expect something big, but maybe you will have a peak on 1 month or something because of that, we can do a lot in the first quarter. We may do something in the second quarter, but nothing significant. So maybe it's flat or something a bit higher, but which goes one-off that shouldn't be repeated. In general, our cost should continue to go down with what we -- the run rate because we continue to make efficiencies.

Do you think the costs -- I mean in real terms should actually decline from here, you don't I mean that's also that you probably take that...

I would say that compared with the prior year -- the run rate of this year, I would say that could be similar to the first quarter with some kind of reduction, but nothing significant because it's something that we may be doing some efficiencies, but also investing in technology and other things we want to do. So I would expect more something stable during the year, which is much better than prior year.

Very good. And if I can follow up on the capital you already answered about this. But after loan growth recovers, what is the level of capital that you would like to operate with on a sustainable basis, certainly not the 25% CET1 that you have today?

You said when we reach maturity of the market, that I couldn't get the question.

Yes. Yes. When we go back to a normal growth rate in the market, whatever that is, whenever that is, what level of capital do you...

Around 15%...

The next question comes from Alonso Aramburu with BTG Pactual.

Just wanted to follow up on the loan growth. comments and expectations for this year. If you look at Naranja, it's now in negative territory in the last 12 months, clearly more exposed to consumers. So maybe you can comment on what are the expectations for Naranja and how that can influence your loan growth at the Grupo level, right? I think your 2025 expectation is more at Banco, not at the Grupo level. So when you consolidate to -- what are you expecting for the year?

Alonso, thank you for the question. In the case of Naranja, as you mentioned, during the first quarter, we've seen a reduction in the portfolio, mainly concentrated on the credit card portfolio because the loan -- personal loan portfolio keep on growing. And for the rest of the year, we are not being -- we are not expecting to regain aggressive rate of growth in the case of [indiscernible] in the credit card portfolio. And we are expecting a more stable or I would say, low single-digit growth for the rest of the year in the case of credit card portfolio, but with a much more aggressive rate of growth in the personal portfolio. In that case, we are expecting something like 30% increase as long as we are -- we have enough room to keep on growing there because we are targeting our best segments around our users.

You mentioned 30%, 3-0 in personal loan?

Yes, 30% in the case of personal loan portfolio.

Okay. So that means -- so just to clarify, your 20% to 25% guidance for the year, is that for Grupo or for Banco?

No, that's Banco, sorry.

Banco, okay. So consolidated. So Naranja consolidated would be less than that?

Yes, sorry, Naranja consolidated, it's going to be like in the low single-digit rate of product.

Okay, which means that Grupo is going to be maybe closer to 20%, not 25% given the guidance?

Yes.

The next question comes from Agustin Pacheco...

It's Agustin Pacheco from Banco Mariva. I wanted to ask about Fondos Fima. Given that money market highly represent the majority of Fima's assets under management. If inflation continues to decline and nominal rates move lower, these products could become less attractive for savers. How do you expect Fima's assets under management and fee generation to evolve under that scenario? And are you planning to grow more aggressively in other segments such as fixed income, longer duration funds, dollar-denominated funds or equity products to offset a potential slowdown in money market funds?

Yes. Thanks, Agustin. Yes, I mean we know that money market should, at some point, start to lose feeling from customers because of lower inflation. And we are working. The beauty of that is that we would be -- we could offer more sophisticated funds. So far with high inflation, it was more difficult because the demand was not there, but we are already thinking about different funds in pesos, in dollars, more sophisticated to capture a new market with more stability and that will be more keen to invest in different funds. So that will be the change of strategy. I think you mentioned it in your question is okay, as the money market lose attractiveness, we will be switching to more sophisticated funds.

The question-and-answer session is over. We would like to hand the floor back to Pablo Firvida for the company's final remarks.

Okay. Thank you, everybody. Any additional questions, we are always available. Have a good morning and afternoon. Thank you. Bye-bye.

Grupo Financiero Galicia conference is now closed. We thank you for your participation and wish you a nice day.