Banco Hipotecario S.A. (BHIP) Earnings Call Transcript

Ladies and gentlemen, thank you for standing by. Welcome to Banco Hipotecario Third Quarter 2025 Earnings Release Call. [Operator Instructions] Today, Mr. Martin Diez, Banco Hipotecario's CFO; and Mr. Juan Altuna will be presenting. I would now like to turn the conference over to Mr. Juan Altuna. Please go ahead.

Thank you, [indiscernible]. Thanks, everyone, for joining us today. I will go through the quarter highlights and then give some color on the main drivers of our results. The bank began reporting results applying hyperinflation accounting in accordance to IFRS rule IAS 29 as established by the Central Bank as of the first quarter of 2020. Therefore, every result and variation described in this report is expressed in constant currency as of September 30, 2025. Also the provisioning model of IFRS 9 Section 5.5 was applied as established by the Central Bank. Net income attributable to the owners of the company for the quarter was minus ARS 18.3 billion compared to ARS 34.8 billion in the previous quarter and ARS 18.5 billion in the same quarter last year. Annualized quarterly ROAA was minus 1.9% in the third quarter of 2025, 3.8% in the second quarter of 2025 and 1.9% in the third quarter of 2024. Annualized quarterly ROAE was minus 13.3% in the third quarter of 2025, 24.8% in the second quarter of 2025 and 13.3% in the third quarter of 2024. Accumulated annualized ROAA was 0.2% in the third quarter of 2025, 1.2% in the second quarter of 2025 and 2.1% in the third quarter of 2024. Accumulated annualized ROAE was 1% in the third quarter of 2025, 8.1% in the second quarter of 2025, and 14.7% in the third quarter of 2024. Net operating income for the quarter was ARS 84.6 billion, minus 32% more than ARS 124.4 billion in the previous quarter and 51% lower than ARS 173 billion in the same quarter of last year. Operating income for the quarter was [ 7.6% ] compared to ARS 37.7 billion in the various quarter and ARS 73.3 billion for the same quarter of last year. Loans to the non-financial private sector and foreign residents increased by 17.4% quarter-on-quarter and 129.6% year-over-year. Deposits decreased by 4.7% quarter-on-quarter and decreased by 2.6% year-over-year, while capital markets debt increased by 18% quarter-on-quarter and by 300% year-over-year. NPL ratio stood at 4.4% in the third quarter of 2025 compared to 3.1% in the second quarter of 2025 and 1.5% in the third quarter of 2024, while the coverage ratio was 103.8%, 106.2% and 159%, respectively. Total capital ratio as a percentage of risk-weight assets as of September 30, 2025, was 22.9% compared to 20% in the previous quarter and [ 26.8% ] in the same quarter last year. General level of Consumer Price Index was 6% in the third quarter of 2025 compared to 6% in the previous quarter and 12.1% in the same quarter of previous year. Dividends corresponding to fiscal year 2024, authorized by the Central Bank on June 17 of 2025, amount to ARS 62 billion to be distributed in 10 consecutive monthly installments. On November 20, 2025, the bank issued the notes 9 -- sorry, 11 and 12 for USD 34.4 billion, maturing on November 20, 2026. Let me go through some highlights on the main drivers of our results. First of all, I would like to go through some points related to the reserve requirements imposed by the Central Bank. The quarter was marked by [indiscernible] monetary environment. The Central Bank increased reserve requirements to historically high levels with effective ratios exceeding 50% of total deposits, including more than 35% in cash. Additionally, compliance [indiscernible] basis, significantly reducing liquidity across the financial system. These measures severely constrained credit supply and amplified pressure on margins, resulting in a sharp deterioration of our financial margin during the quarter. After the end of the quarter, these requirements have started to ease. Initially, daily compliance was set at 100% of the requirement, creating inefficiencies. It was later reduced to 95%. And starting in December, it will be further relaxed to 75%, which should help improve liquidity and reduce pressure on margins going forward. Regarding loan loss provisions, they have increased significantly, reflecting both the expansion of our loan portfolio and the deterioration in macroeconomic variables. The sharp rise in real interest rates and the slowdown in economic activities ahead of the elections affected household disposable income and asset quality across all segments. As a result, provisions for recoverability were a major driver of the negative result in the third quarter. In September, economy showed signs of growth despite political volatility. In November, interest rates began to decline. In our view, this trend will support performance of our loan portfolio going forward, helping to stabilize asset quality and improve overall results. At the same time, we maintain strong liquidity and strong capital ratios, which position us well to navigate the transition and continue supporting our clients and business strategy. Juana, if you want to open the Q&A session.

[Operator Instructions]

It seems that we don't have any questions. So I think that just to add to Juan, our view on what's coming. Third quarter, as Juan mentioned earlier, it's been a very tough quarter for the system as a whole, and we were not the exception. But we expect the situation, as Juan mentioned, to ease especially on the liquidity restrictions that the Central Bank impose will make the bank function much better basis during the fourth quarter [indiscernible] as we expect. So we expect to recover profitability in this fourth quarter. We expect a positive ROE for the end of the year. And we expect 2026 to begin declining or at least we expect that the NPL will peak during the month of maybe November or even December, and we expect it to start easing in the beginning of 2026. Also just to give some additional color on Juan mentioned is that the increase that we've seen in NPL is mostly driven by the consumer portfolio. When it comes to the commercial portfolio, the NPL is under control and is very low as it was in the previous quarter. We've seen some SMEs having difficulties with some payments, but we've not seen any generalization of great crunch there. So we are optimistic on that end. So I think that's what we had to share with you. So thanks, everybody, for joining us today. Thanks, Juan and Juana.

Ladies and gentlemen, that does conclude your conference call for today. Thank you for your participation in Banco Hipotecario's Third Quarter 2025 Earnings Release Call. You may now disconnect.