Banco BBVA Argentina S.A. (BBAR) Earnings

Management highlights

- Macroeconomic Environment: Inflation is declining and expected to end 2026 at ~29%, with monthly inflation targeting 1.5-2%. Economic activity shows overall growth, supported by RIGI projects (> $15B approved) and reserve purchases (> $13B). Fiscal discipline remains an anchor. - Credit Growth & Strategy: Loan book is expected to grow ~10% in real terms for 2026. Growth is disciplined, focusing on secure lending, payroll clients, and commercial/SME sectors. Mortgage lending is gaining momentum. - Asset Quality: Non-performing loan (NPL) ratio is 6.09% (+49 bps QoQ), but early-stage delinquencies are improving. New vintages in credit cards (down to ~2% from 6%) and personal loans show better performance due to stricter underwriting. - Funding & Liquidity: Total deposits reached 19.2 trillion pesos. Liquidity ratio is comfortable at 45.5%. The bank manages deposits based on asset-side opportunities rather than targeting specific deposit growth levels. - Capital Position: Regulatory capital ratio is robust at 18.8%, representing 128.7% excess over minimum requirements. - Fee Income: Net fees grew ~35% YoY, excluding one-offs from Q1, indicating strong underlying trends across fee-generating businesses.

Guidance

- Loan Growth: Expects real loan book growth of around 10% for full-year 2026; system-wide growth expected at 10-15%. - Cost of Risk: Full-year 2026 cost of risk guided at ~6.5%, down from the Q2 figure of 7.13%. Expected to peak in Q2 and improve sequentially through Q4. - Efficiency Ratio: Full-year 2026 efficiency ratio expected to be below 45%. - Profitability: Real ROE guidance remains in the 'low teens' for full-year 2026. - Margins: Expects moderate pressure on nominal NIM as rates decline, partially offset by lower inflation. Real NIM is expected to remain healthy, potentially falling 100-125 basis points year-end but stabilizing. - Coverage Ratio: Current 80% coverage is viewed as the bottom; will gradually rebuild as asset quality improves.

Segment performance

The transcript does not provide a breakdown of financial performance by specific product segments (e.g., Retail, Corporate) in terms of absolute revenue contribution percentages. It reports consolidated figures: Inflation-adjusted net income was 131.6 billion pesos (a 44.6% QoQ increase). Net Interest Margin (NIM) remained stable at the reported level, while NIM net of monetary position loss improved from 14% to 14.7%. The efficiency ratio was 45%. Return on Equity (ROE) reached 12.2%.

Risks & headwinds

- Asset Quality Deterioration: NPL ratios remain elevated (6.09%), though early signs of improvement exist. Specific caution remains regarding non-payroll retail clients and credit cards. - Macro Volatility: Economic recovery is uneven across sectors and may not be linear. Inflation declines could slow or reverse. - Margin Compression: Declining interest rates and potential shift toward dollar-denominated business could pressure net interest margins. - Regulatory Changes: Government policies on USD lending and funding programs introduce operational complexities and risk management challenges.

Analyst Q&A

• Q: Brian Flores asked about the drivers of asset quality deterioration in corporates vs. retail and the sequential trend for cost of risk.

  A: CFO Carmen Morillo clarified that corporate loans showed zero deterioration and are outperforming the market. Retail deterioration is concentrated in non-payroll personal loans and credit cards, where new vintages are now performing better. She expects cost of risk to peak in Q2 and improve sequentially, reaching the ~6.5% annual target by Q4.

• Q: Juliana O'Hara requested details on the magnitude of improvement in early vintages and 2027 outlook.

  A: Morillo highlighted that credit card delinquency rates dropped from ~6% a year ago to ~2.2% currently, with payroll portfolios already normalized. For 2027, she anticipates system-wide loan growth of 10-15%, with BBVA aiming to outperform this market rate, though specific bank targets will be provided next quarter.

• Q: Eduardo Rezende asked about portfolio mix shifts, specifically mortgage appetite under new government funding programs, and future NIM trends.

  A: Diego Cesarini noted that while commercial loans dominate (~57%), retail mortgages and car loans are recovering. The bank welcomes the government's FGS-backed program and will participate. Regarding NIM, he expects nominal NIM to fall ~200 bps by year-end due to rate cuts, but real NIM should stabilize after a 100-125 bp decline, as lower inflation offsets margin pressure.

• Q: Mário Estrela inquired if Stage 1/2 loan data can track asset quality improvements and views on the new policy allowing USD loans up to 15% of deposits regardless of client currency generation.

  A: Morillo confirmed that Stage 1/2 metrics do reflect improving performance and serve as good indicators for investors. Cesarini stated the bank welcomes the USD lending policy but notes it already had capacity via bond issuance. They view the policy as useful but will not lend massively to non-exporters without case-by-case justification, maintaining strict FX risk controls.