Banco BBVA Argentina S.A. 2026 Q2 Earnings Call

Please go ahead. Good morning, everyone, and thank you for joining us today for BBVA Argentina's 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 continue, 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 the 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 the decline in interest rates and more favorable seasonality, although still affected by elevated delinquency levels. Moving into our financial highlights for the quarter, BBVA Argentina posted an inflation-adjusted net income of ARS 131.6 billion for the second quarter of 2026. This represents a 44.6% increase quarter-over-quarter, driven by the operating income remaining relatively stable in a lower inflation environment. This bottom-line expansion boosted our quarterly ROE to 12.2%. 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. NIM, net of monetary position loss, improved from 14% to 14.7%.

Regarding efficiency, our quarterly efficiency ratio stood at 45%, with personal 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. Total financing to the private sector closed the quarter at ARS 17.1 trillion. While local currency loans increased 2%, our foreign currency private loans grew by 2.5% 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. On the funding side, total deposits reached ARS 19.2 trillion. Private deposit market share remained flat at 9.91%, 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. BBVA Argentina's NPL ratio stood at 6.09%, up 49 basis points during the quarter. The financial system ratio was 7.22% by the end of June, increasing 54 basis points since March. BBVA Argentina's quarterly cost of risk reached 7.13%, broadly in line with the first quarter figure when adjusted for non-recurring effects. Looking at solvency and liquidity, our liquidity ratio closed at a very comfortable 45.5%. More importantly, our capital position remains robust, with a regulatory capital ratio of 18.8%, representing 128.7% excess over minimum regulatory requirements. In conclusion, as we head into the second half of 2026, 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.

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 Argentina. 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 be not linear, and there are still important differences across sectors, but we believe the overall direction remains positive. We expect inflation to end 2026 at around 29%, with monthly inflation moving toward 1.5% to 2% range. Beyond these numbers, we remain confident in Argentina medium and long-term potential.

Energy, mining, and agriculture are already making a growing contribution to exports and investments. The large projects under the Régimen de Incentivo para Grandes Inversiones 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 income 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 a 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 on a very comfortable position. We have a strong liquidity, and we do not see funding as a constraint to growth. Rather than targeting any specific level for deposit growth, we will manage deposits according to our funding needs and the opportunities we see in the asset side. On margins, we expect some moderate pressure on our activity NIM in ARS 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 a strong growth. Net fees are up around 35% year-over-year, reflecting the good progress we are making across our main fee-generating business. We expect fees to remain an important contributor to revenue growth going forward. Moving to asset quality, the recent indicators are encouraging. Our NPL ratio ended June at around 6%, and cost of risk was 7.1%. These figures still reflected 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. Based on what we see today, we expect NPLs to stabilize and then gradually improve during the second half, ending the year at around 5.5%. For full year 2026, we expect cost of risk to be around 6.5%. 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 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 the 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. Our quarterly ROE improved to 12.2% in the second quarter from 8.3% 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.