Banco Macro S.A. 2026 Q2 Earnings Call

Good morning, and welcome to Banco Macro second quarter 2026 earnings conference call. Thank you all for joining us today. Banco Macro second quarter earnings release was distributed yesterday, and it is available on our investor relations website. For this quarter's call, we are also introducing an earnings call presentation, which will accompany today's remarks. The presentation will be available on our website following the call. Please note that this call may include forward-looking statements, and please refer to our SEC filings for further information. All figures discussed today are in Argentine pesos and have been restated in terms of the measuring unit current at the end of the reporting period in accordance with Central Bank regulations. With that, let me briefly introduce today's speakers.

We have with us today Juan Parma, Chief Executive Officer of Banco Macro, Jorge Scarinci, Chief Financial Officer of Banco Macro, and myself, Nicolás A. Torres, Investor Relations from Banco Macro. I will now briefly comment on the second quarter 2026 macroeconomic context before moving on to the bank's second quarter 2026 financial performance. Economic activity moderated after the first quarter, with April and May economic activity averaging 0.8% below the first quarter of 2026. Agriculture and mining offset weakness in manufacturing and commerce. Inflation declined throughout the quarter from 2.6% in April to 1.9% in June. On rates, tomorrow declined from 26.3% at the end of March to 22.7% at the end of June. On the exchange rate, ARS depreciated 7.3% during the quarter, remaining stable throughout April and May before weakening in June.

On credit, growth remained muted. Finally, system asset quality remained under pressure. System NPLs increased from 7.6% in March to 7.7% in May, which is the latest available data, with household delinquency at 12.8% versus 3.5% for corporates, while coverage declined from 90.1% to 86.3%. Turning to our main figures, starting on the left, second quarter net income totaled ARS 206.8 billion, increasing 39% quarter-on-quarter and 4% year-on-year. The improvement was mainly driven by higher results from financial instruments at fair value through P&L and lower loan loss provisions, and a foreign loss from the net monetary position.

Net operating income before administrative expenses reached ARS 1.29 trillion, down 2% quarter-on-quarter and up 1% year-on-year. Operating income after administrative expenses was ARS 603.8 billion, down 1% quarter-on-quarter and up 1% year-on-year. Moving to the left-hand side, adjusted net income reached ARS 221 billion, implying an adjusted annualized ROE of 14.3%. This excludes ARS 14.2 billion in after-tax restructuring expenses in line with the restructuring impact that we saw in the first quarter. On efficiency, our efficiency ratio was 33.9%, stable year-on-year as we continue to execute on the bank's efficiency transformation. Finally, our reported NPL ratio was 6.25% as of June 2026.

This remained below the 7.7% reported for the system as of May 2026, while the coverage ratio stood at 95.4% above the market's 86.3% of May. Before moving on to the detailed financial performance, let's review the main highlights of the quarter. First, we registered double-digit net income growth, with net income up 39% quarter-on-quarter to ARS 206.8 billion. This result represents an annual ROE of 13.4%, while adjusted ROE is still at 14.3%, up 4.4 percentage points from the last quarter. Second, margins remained stable. Net interest income remained stable while deposits continued to represent 76% of liabilities as the average cost of interest-bearing liabilities fell below 20%. Third, we continued executing on efficiency, including another 18 branch closures during the quarter.

The after-tax restructuring charges remained almost unchanged quarter-over-quarter at ARS 14 billion. Fourth, asset quality continued to outperform the system, with NPLs at 6.25% below the system's 7.7%, and moreover, coverage stood at 95.4% above the system's 86.3%. Fifth, lending growth remained challenging. Total lending increased 3% quarter-on-quarter, supported by commercial growth, while on a yearly basis, total financing decreased 5%. Our private sector loan market share remains stable at 8.2%. Sixth, our balance sheets remain strong with a Tier 1 ratio of 28% and ample liquidity, both fundamental for pursuing growth and strategic opportunities. Now, let's turn to the quarter-over-quarter P&L variations breakdown.

Net income increased ARS 57 billion quarter-on-quarter due to higher income from government securities for valued profit or loss, lower loan loss provisions, and lower loss from the net monetary position. Net interest income decreased 1% or ARS 7.4 billion quarter-on-quarter, as lower funding costs mostly offset lower loan yields and average lending volumes. Income from securities decreased 18% to ARS 30.5 billion quarter-on-quarter. In the first quarter of 2026, a ARS 71 billion one-off result from the sale of bonds was recorded. Net fee income decreased 2% or ARS 4.6 billion in the quarter, as higher mutual funds and securities fees were offset by lower credit and debit card fees, as well as lower corporate services fees.

Loan loss provisions decreased 24%, or ARS 60.7 billion in the quarter, mainly reflecting the lower commercial delinquency while keeping coverage at an adequate level. Personal administration expenses increased to ARS 26.6 billion, led by personal and marketing and risk costs, while achieving extraordinary efficiency. The other major positive driver of the quarter was the result from the net monetary position. The loss was ARS 102.1 billion, smaller than the first quarter, reflecting the decline in quarterly inflation. Finally, income tax and other items contributed ARS 7 billion to the quarter-on-quarter by efficiency. Lower other operating expenses more than offset the higher income tax rate registered in the quarter. Altogether, these factors explain the increase in reported ROE from 10% in the first quarter to 13.4% in the second quarter. Slide seven shows the impact of the restructuring program on reported profitability.

Reported net income was ARS 206.8 billion during the quarter. We recorded ARS 14.2 billion of after-tax restructuring charges related mainly due to early retirement plans and certain payment provisions. Excluding these charges, adjusted net income would have reached ARS 221 billion, implying an adjusted annualized ROE of 14.3% and adjusted ROA of 3.5%. These expenses are part of the efficiency program we have been implementing to create a more agile operating model and a lower structural cost base. Moving to our second quarter 2026 assets and liabilities performance, you can see the evolution of our balance sheet mix and pricing of both assets and liabilities. On the asset side, loans increased 3% at quarter end and represent 45% of total assets, while government securities make up 25% of our assets.

Assets yield declined 280 basis points quarter-on-quarter, from 44% to 41% in the second quarter, reflecting a 327 basis points decline in the average lending rate, while the average volume of loans increased 3%. On the liability side, deposits continued to represent 76% of total assets. Total deposits reached ARS 14.7 trillion, down 1% quarter-on-quarter and up 4% year-on-year. Funding costs declined 350 basis points quarter-on-quarter, from 24% to 19%, due to a 310 basis points decline in the average rate paid on deposits, while the average volume of deposits decreased 3%. Funding costs declined faster than the asset yield, driven by lower private sector peso deposit rates. Turning to slide 10, the gross credit portfolio, shown on the left, continued growth to ARS 12.6 trillion, increasing 3% quarter-on-quarter.

Commercial lending was the main driver of the increase, while consumer lending grew more moderately and represented 71% of the gross portfolio at quarter end, compared with 29% for commercial loans. Loans and other financing reached ARS 11.7 trillion, with private sector financing up 3% quarter-on-quarter, including 2% growth in peso lending and 1% growth in US dollar lending, while our private sector loan market share remains stable at 8.2%. On the right-hand side, net interest income reached ARS 1.03 trillion, stable compared with the first quarter and 11% above the second quarter of last year. Net interest margin, including FX, declined from 25% to 24%, mainly due to a lower FX contribution. Excluding FX, net interest margin increased 30 basis points from 23.8% in the first quarter to 23.5% in the second quarter.

Moving on to asset quality, the left-hand chart shows our reported NPL ratio increasing from 5.4% in the first quarter of 2026 to 6.5% in the second quarter. As we explained last quarter, the reported NPL ratio is affected by mandatory customer representation that take into account a customer's behavior across the financial system. Our Stage 3 loans ratio increased 30 basis points from 3.8% to 4.1%. Our coverage ratio stood at 95.4%. This remained above the 86.3% level for the system as of May 2026. It is important to mention that coverage Stage 3 loans reached 148.8% in the second quarter. The right-hand chart shows the different trend by segments. Commercial NPLs improved to 2.9% from 1.3% in the first quarter and remain well below the system's average of 3.5%. Consumer NPLs increased to 8.4% from 6.9% last quarter, but also remained below the 12.8% reported for the system.

Turning to efficiency, operating expenses, shown on the left, reached ARS 450 billion in the second quarter. Employee benefits increased 7% quarter-on-quarter, and administrative expenses increased 8%. As a result, the efficiency ratio increased from 32% to 34%. The chart on the right shows the continued streamlining of our operating model. We ended the quarter with 402 branches, 18 fewer than in March and 89 fewer than one year ago. Headcount declined to 8,180 employees, down 1% quarter-on-quarter and 8% year-on-year. These actions are part of the restructuring program with the objective of increasing efficiency and agility while preserving the reach and service capabilities of our franchise. Slide 13 shows the capital and liquidity remaining key strengths. On the left, our Tier 1 capital ratio stood at 28%, compared with an 11.5 regulatory requirement.

On the right, the loan-to-deposit ratio increased to 79%, while liquid assets remained equivalent to 74% of our deposits. Our capital and liquidity positions therefore continue to provide significant capacity to support growth and generate strategic opportunities. Before opening the call for questions, I would like to spend a few minutes discussing our long-term transformation. I will now let Juan Parma, our CEO, to comment on strategy.