Banco BBVA Argentina Q2 2026 Earnings Call: Complete Transcript

Banco BBVA Argentina (NYSE: BBAR ) held its second-quarter earnings conference call on Friday. Below is the complete transcript from the call. This content is powered APIs. 2%.

5% sequentially. 8%, highlighting a strong capital position. 09%, but early-stage delinquencies showed signs of improvement. Management expects real loan growth of around 10% for 2026, with a focus on maintaining credit quality and pursuing opportunities in retail and dynamic sectors.

Efficiency improvements were noted, with a quarterly efficiency ratio of 45%, and expectations to end the year below this level. Future outlook suggests continued growth in lending, stable or improving asset quality, and a real ROE in the low teens. Management remains optimistic about macroeconomic conditions in Argentina, predicting a gradual improvement in the financial system. Full Transcript OPERATOR Good morning, everyone, and welcome to Banco BBVA Argentina Q2 2026 results conference call today.

With us are Mrs. Belén Farkade, Investor Relations Manager; Diego Cesarini Iro, Head of Assets and Liability Management; and Carmen Morillo Arroyo, CFO. ar, and they will also be available for download in the chat. First of all, let me point out that some of the statements made during this conference call may be forward-looking statements within the meaning of the safe harbor provision found in Section 27A of the Securities Act of 1933.

S. federal securities law, these forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. S. Securities and Exchange Commission.

During the Company's presentation, all microphones will be disabled. We are going to open it up for questions and answers. If you have a question, please raise your hand for audio questions. You will then receive a request to activate your microphone.

Please activate it and pick up your headset to provide optimum sound quality when posing your question. I will now turn the call over to Belén Farkade. Please go ahead. Belén Farkade, Investor Relations Manager Good morning, everyone, and thank you for joining us today for Banco BBVA Argentina second quarter 2026 results conference call.

During the second quarter of 2026, inflation continued to decline, reinforcing expectations that this trend will further consolidate. This environment should support a recovery in credit and consumption together with an improvement in real incomes. Economic activity, while showing differences across sectors, is displaying signs of overall growth. In addition, announcements and approvals of projects under the RIGI continued, totaling more than $15 billion during the quarter, with the potential to increase capital inflows and strengthen the trade balance.

The Treasury also made progress in improving its debt maturity profile. It extended a significant portion of local currency maturities to 2028 and 2029, and in foreign currency, lengthened the maturities of repo agreements with banks and the swap agreement with China, while also securing financing backed by IFI guarantees. These developments, together with reserve purchases of more than $13 billion, are helping to reduce uncertainty and strengthen the macroeconomic outlook.

The second quarter showed early signs of a recovery in lending activity, gradually reflecting the effects of declining interest rates and more favorable seasonality, although still affected by elevated delinquency levels. 6 billion pesos for the second quarter of 2026. 6% increase quarter over quarter, driven by the operating income remaining relatively stable in a lower inflation environment. 2%, in spite of net interest income being affected by lower rates.

On the asset side, our reported NIM remained stable quarter over quarter and year over year. 87%. Regarding efficiency, our quarterly efficiency ratio stood at 45%, with personnel benefits and administrative expenses reflecting the ongoing management of our corporate structure and also some costs declining related to lagging activity. Let's look at the dynamics of our balance sheet and credit portfolio.

1 trillion pesos. 5% sequentially, equivalent to a 2% increase in hard currency. Mortgage lending continues to gain momentum. Furthermore, we are successfully capturing business mainly driven by the commercial segment and foreign currency loans.

Our consolidated loan market share stood at 12%, signaling a total gain of 15 basis points over the last 12 months. 2 trillion pesos. 91%, but up 26 basis points year over year. With regard to asset quality, although non-performing loan levels remain elevated, we can identify signs of improvement in certain indicators such as early-stage delinquencies.

09%, up 49 basis points during the quarter. 22% by the end of June, increasing 54 basis points since March. 13%, broadly in line with the first quarter figure when adjusted for non-recurring effects. 5%.

7% excess over minimum regulatory requirements. In conclusion, as we head into the second half of 2026, Banco BBVA Argentina is well positioned, supported by robust capital levels, strong liquidity, and healthy operating results. We remain fully equipped to lead the market and support credit supply as the financial system in Argentina continues to normalize. Thank you for your time and for your continued support.

I would like now to turn the call over to Carmen Morillo, our CFO, for some closing remarks. Carmen Morillo Arroyo, Chief Financial Officer Thank you, Belén. Thank you, and good morning, everyone. Before we move to the Q&A, I would like to spend a few minutes sharing our view for the second half of the year, both for Argentina and for BBVA.

Starting with the macro, in our view it remains constructive. The economy continues to normalize, fiscal discipline remains an important anchor, inflation is coming down, the external accounts are improving, and the financial system is gradually converging. After many years of very low financial intermediation, this process will not be linear and there are still important differences across sectors, but we believe the overall direction remains positive. 5% to 2% range.

Beyond these numbers, we remain confident in Argentina's medium- and long-term potential. Energy, mining, and agriculture are already making a growing contribution to exports and investments. The large projects under the RIGI framework should further increase Argentina's productive and export capacity and create opportunities across the value chains here. Being part of a global bank is an important competitive advantage for us.

We can combine our international capabilities with our strong local presence to support large investment projects and the companies around them. Turning to banking activity, Argentina still has a very low credit penetration, as you all know. This gives the financial system significant room to grow as inflation and interest rates normalize and real incomes recover. After a relatively soft start of the year, lending activity showed some improvement in the second quarter, and we expect activity to continue improving gradually during the second half.

For 2026, we expect our loan book to grow around 10% in real terms. We see opportunities across the businesses: in retail, mainly in secured lending and customers where we have strong visibility on income; and in companies and SMEs, particularly in the more dynamic sectors of the economy. We will pursue this growth with discipline, maintaining our focus on credit quality and risk-adjusted returns. On funding, we are in a very comfortable position.

We have strong liquidity and we do not see funding as a constraint to growth. So rather than targeting a specific level for deposit growth, we will manage deposits according to our funding needs and the opportunities we see on the asset side. On margins, we expect some moderate pressure on our activity NIM in pesos as interest rates decline. However, at the P&L level, this should be partially offset by the positive impact of lower inflation.

The currency mix will also matter, of course. If dollar-denominated business gains weight in our balance sheet, consolidated margins could be somewhat lower, although we don't expect this effect to be significant at least in the short term. On fees, the underlying trend remains very positive. The quarter-over-quarter comparison is affected by some one-offs recorded in the first quarter, but excluding these effects, fee income continues to show strong growth.

Net fees are up around 35% year over year, reflecting the good progress we are making across our main fee-generating businesses. We expect fees to remain an important contributor to revenue growth going forward. Moving to asset quality, the recent indicators are encouraging. 1.

These figures still reflect the deterioration of previous quarters, while some of the more recent indicators are already moving in a better direction. Early arrears are improving and recent vintages are performing better after the changes we made to underwriting and origination. 5%. 5.

Our coverage ratio ended the quarter at around 80%. When looking at this ratio, it is important to consider our historical recovery experience, which is around 25% of loans in arrears being recovered before write-offs. In this context, we consider the current level of coverage adequate. We expect the 80% level to be the bottom for this ratio and from here to gradually rebuild coverage as asset quality improves.

Overall, we remain prudent on the timing, but we are increasingly confident about the direction of asset quality. On efficiency, the progress is already clear. Our quarterly efficiency ratio improved to 45% in the second quarter, and we remain very focused on cost discipline and operating leverage. For the full year, we expect the efficiency ratio to end below 45%.

We will continue to be ambitious quarter after quarter as volume recovers. Finally, let's talk about profitability. 3% in the first one. For the full year, we continue to expect a real ROE in the low-teens level, consistent with the guidance we have been providing in previous quarters.

Going forward, higher business volumes, positive contribution from fees, continued efficiency improvements, and a gradual normalization of credit costs should support profitability. There may still be volatility between quarters, but we believe the underlying trend is very positive. So, to summarize, we remain constructive on Argentina and on BBVA's outlook for the second half. We expect real loan growth around 10%.

On funding, our strong liquidity gives us flexibility to manage deposits according to the growth opportunities we see. We expect moderate pressure on activity margins, partially compensated at the P&L level by lower inflation, while fees should continue to provide a positive contribution to revenues. Asset quality indicators are starting to move in the right direction. We expect to end the year with an efficiency ratio below 45%, and we continue to guide for a real ROE in the low teens.

8% and strong liquidity, and we have the capability to capture growth opportunities while maintaining a prudent approach to risk. We believe Banco BBVA Argentina is well positioned for the next phase of Argentina's economic cycle, and with that we can move to your questions. Happy to hear. OPERATOR We will now open the floor for questions.

If you have a question, please click on the Raise Hand button for audio questions. Our first question comes from Brian Flores with Citi. Brian Flores, Analyst at Citi Hi Tim, thank you for the opportunity to ask questions. I have one on asset quality.

Carmen, I know the bank is already focused in corporate loans and I wanted to just get your thoughts on what do you think explains this deterioration? Do you think it's the uneven distribution of the recovery in the economy or what do you think explains this cost? Because on paper the thing we can see is you have been already cautious in your allocation in the loan book. So just wanted to check with you.

Looking backwards, what do you think explains this deterioration in asset quality? 5. Just wanted to check with you if directionally the improvement should be sequential. 5.

Or do you think the third quarter still is pressure and then we drop more sharply in the fourth quarter? Thank you. Carmen Morillo Arroyo, Chief Financial Officer Hi Ryan, thank you for your questions. So the first questions at the beginning you mentioned the corporates.

I don't really get why in the corporate segment we see zero deterioration. So we are expecting to grow there as much as we can depending on the demand on credit. So in that segment and also in companies, so small to medium companies, we are outperforming the market and we are comfortable with that position. Going to the retail side, what we've been doing is, as you know, be more focused on recoveries on one side, on origination on the other side.

And what we see, as I mentioned before, is that new vintages are performing better. So the quality of the assets is still not so good as we want to see in personal loans and credit cards. So these are the two portfolios where we are more cautious on growing and we will wait a bit more to see the better performance on that. Of course, when you split between, for example, payrolls and clients, things are much better there than non-clients or non-payroll clients.

So as I mentioned, we will be conscious, cautious on those segments. And then related to the trend for this year what we see is that coming from actual levels for the third quarter we see a slight better performance and then a better one in the fourth one. So what we see is like the peak NPL and also cost of risk in the second quarter and then a better performance, slightly better performance in the third quarter and a better one in the last quarter to get this average cost of risk I was mentioning. Brian Flores, Analyst at Citi No, super clear.

And then if I may just a quick follow up. You mentioned the levels of coverage that will be recovered gradually. Obviously in the last years we have seen the decrease for, I would say, from very extraordinarily high levels. But just wanted to check with you if—I don't know if you have a target in mind or any level that you would feel more comfortable with maybe by the end of 27.

Is it, I don't know, above 100%, 101 something, or do you think it's more of a stable around the 100 level? Any, any, I think, idea here would be very helpful, thank you. Carmen Morillo Arroyo, Chief Financial Officer Okay, so as I mentioned we expect this 80% level to be the bottom of the ratio and from here on to gradually rebuild the coverage ratio as asset improves. I don't know if 100% is the, the, the level for next quarter but we should see better levels in the following quarters.

Brian Flores, Analyst at Citi Thank you Carmen and Tim. OPERATOR Thank you. Our next question comes from Juliano Hara with Goldman Sachs. Juliano Hara, Analyst at Goldman Sachs Hi everyone.

Thanks for taking my questions. I have a quick follow up on asset quality. I was wondering if somehow you could share the magnitude of the improvement in the early vintages that you're seeing and also—I don't know if I'm getting ahead—but if you already have some views for 2027 on loan growth and maybe an early ROE expectation would also be great. Thank you.

Carmen Morillo Arroyo, Chief Financial Officer Okay, so sorry Juliana, thank you for your question. So the first one was—so it's related to the vintages.