Grupo Financiero Galicia S.A. (GGAL) Q1 2012 Earnings Call May 11, 2012 11:00 am ET Executives Pablo Firvida – Head-Investor Relations Analysts Nicolas Chialva – Itaú BBA Federico Rey Marino – Raymond James Presentation Operator
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Economic growth moderated in the U.S. compared with the previous quarter and European economy faced a mild recession. Under the influence of this international scenario, the Argentine economy decelerated its pace of growth. Private estimates point to a 2.5% year-over-year growth in the first quarter of this year, compared to a 3.9% in the fourth quarter of fiscal year 2011, while in the quarterly basis, GDP grew a modest 0.2%.During the quarter, national fiscal revenues increased 29% year-over-year, similar to the 30% recorded in the fourth quarter, while growth of primary expenditures grew from 26% in the fourth quarter to 31% year-over-year in the first quarter. Therefore the primary surplus for the quarter amounted to 2.2 billion pesos, 2.7 billion pesos lower than a year before. Consumer prices slightly increased its growth pace expanding 2.5% in the quarter, as measured by the official index and 5.3% according to private estimates. While annual inflation rates as of March 2012 reached 9.8% and 21.9% respectively. On the monetary front, in the first quarter, the portfolio realization process continued diminishing due to controls over dollar purchases. We estimate that outflows were around $2.7 billion compared to $3.3 billion for the prior quarter. The Argentine Central Bank contracted the monetary base by 2.3 billion pesos in the quarter and exchange rate increased from 4.29 to 4.36 pesos per dollar representing a depreciation of 1.6% in the quarter. Average interest rates paid by private banks decreased during the quarter. In March, the average rate on pesos-denominated time deposits for up to 59 days decreased to 12.9% from 17.3% in December 2011, while the average rate on overdraft decreased 438 basis points to 21.1%. Private sector deposits at the end of March amounted to 346 billion pesos with a 6.8% growth during the quarter, and a 28.1% inter-annual increase. Peso-denominated deposits increased around 8%, and dollar denominated deposits decreased nearly 1%.
Time deposits increased 12%, while transactional deposits grew 3.1%. At the end of the quarter, total loans for private sector amounted to 300 billion pesos, recording a 4.5% increase from December 2011 and a 43.5% inter-annual increase.Turning now to Grupo Financiero Galicia, net income for the quarter amounted to 281.7 million pesos, mainly due to profits in Banco Galicia for 256.6 million pesos and Sudamericana Holding for 20.7 million pesos. Banco Galicia’s net income for the quarter amounted 270.2 million pesos compared to a 235.3 million profit in the same period of fiscal year 2011. Annualized return on assets and equity for the bank reached 2.4% and 29% respectively, while the financial margin and efficiency recorded slight improvements as compared to the first quarter of fiscal year 2011. The banks credit exposure to private sector reached 38.6 billion pesos up 38% during the last 12 months and deposits reached 32.5 billion pesos up 34% during the same period. At the end of the quarter the banks estimated market shares of both private sector loans and deposits were 8.56% and 8.86% respectively. Regards to asset quality, the ratio of non-accrual loan portfolio to total loans to the private sector shows a sight decrease of 10 basis points in the last 12 months, ending the quarter at 3.14% and its coverage with allowances for loan losses decreased 3 percentage points reaching 137%. Even though these figures are similar to those of the year before and still low in historical terms, they show signs of deterioration when compared to those of the previous quarter when the NPL’s were 2.63% and the coverage 152%. The net financial income increased 52.4% as compared to the same quarter of previous fiscal year. And the average interest earning assets grew by 12.7 billion pesos as compared to the same quarter of the previous fiscal year, as a consequence of the 9.3 billion pesos increased in the average portfolio of loans to the private sector, and while this year increased 271 basis points. Read the rest of this transcript for free on seekingalpha.com