Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to BBVA Argentina's Second Quarter 2020 Results Conference Call. We would like to inform you that this event is being recorded. [Operator Instructions]. First of all, let me stress that some of the statements made during this conference call may be forward-looking statements within the meaning of the safe harbor provisions found in Section 27A of the Securities Act of 1933 under U.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. Additional information concerning these factors is contained in the BBVA Argentina's annual report on Form 20-F for the fiscal year 2019 filed with the U.S. Securities and Exchange Commission. Today with us, we have Mr. Ernesto Gallardo, CFO; Ms. Ines Lanusse, IRO; and Mr. Javier Kelly, Investor Relations Manager. Mr. Kelly, you may begin your conference.

Hello, everyone, and welcome to BBVA Argentina Earnings conference call for a discussion of our second quarter 2020 results. Before we begin our formal remarks, allow me to remind you that certain statements made during the course of the discussion may constitute forward-looking statements, which are based on management's current expectations and beliefs that are subject to a number of risks and uncertainties that could cause actual results to materially differ, including factors that may be beyond the company's control. For a description of this risk, please refer to our filings with the SEC and our earnings release, which are available at our Investor Relations website, ir.bbva.com.ar. Speaking today will be Ines Lanusse. Also joining us today is Ernesto Gallardo, our Chief Financial Officer, who will be available for the Q&A session. Please note that starting January 1, 2020, as per Central Bank regulations, we have begun reporting results applying hyperinflation accounting in accordance with IFRS rule IAS 29. For ease of comparability, figures for all quarters of 2019 have been restated applying IAS 29 to reflect the cumulative effect of the inflation adjustment for each period through June 30, 2020. Now let me turn the call over to Ines.

Thank you, Javier, and thank you all of you for joining us on our second quarter 2020 earnings conference call. We hope you and your beloved ones are healthy and safe on these challenging times. From the beginning of the pandemic, BBVA Argentina has prioritized its client and employee safety for the central offices and in the branch network. In particular, branches have applied the necessary protection measures in line with the highest security standards to minimize risks in interaction. The bank has shown great adaptive capacity on the one hand by the agile incorporation of the all COVID-19 support measures pressures, and on the other hand, by making them available to clients through different channels, thus providing an efficient service to clients during the pandemic. All these has been possible, thanks to the investment and digitalization done during the last years, providing all its services through digital tenants, both to retail and corporate clients. The penetration of digital clients reached 69.3% from 67.7%, and the penetration of mobile clients reached 57.4% from 56.1% in the prior quarter. In these unprecedented times, the bank has once again demonstrated resilience, maintaining a solid asset liquidity, solid levels of capital, well above regulatory requirements and has also been able to improve its loan portfolio quality. On the other hand, through the efficiency plan implemented into the fourth quarter of last year, the bank has been able to reduced expenses in a sustained manner for 2 quarters in a row. Now I will comment on the bank's second quarter 2020 financial results. All figures mentioned herein after are measured in current currency at the end of the reporting period, including the corresponding financial sales for previous periods provided for comparative purposes, unless otherwise noted. BBVA Argentina's second quarter 2020 net income, including inflation…

[Operator Instructions]. Our first question is from Gabriel Nóbrega with Citigroup. Gabriel Nóbrega: So during the quarter, we saw that you finally wrote off Molca, and we saw your coverage ratio levels going back to the previous very high levels, which we had seen in the past. And my question here is, taking into consideration what you're seeing with some specific segments, what the economists are expecting for Argentina as well. Do you expect to maybe have to make additional and extraordinary provisions only related to COVID? Or are you comfortable with your coverage level this quarter? And I'll make a second question afterwards.

Gabriel, thanks for your question. Yes, as you mentioned, we basically NPL improved in this quarter, basically by two factors. We write it off Molca and also with the waiver we have from Central Bank. To give you an idea, our NPL as of June would have been 2.14% if we wouldn't have the waivers of Central Bank. We are projecting an NPL towards the end of the year, around 3.53%, more or less. That is excluding all the Central Bank waivers we have. Regarding coverage, sorry, going back to NPL, just to make it clear, the effect is mainly down because we had a sharper reduction of the nonperforming loan and the loan book, the denominator grew more. Going towards coverage, it has increased a lot. As you mentioned, it looks more like the sort of coverage we had in the past. The idea is to take it down. We're expecting a coverage ratio, towards the end of the year, around 170%. The effect you had in this quarter is mainly because the denominator in a coverage ratio, which includes the NPLs, decreased more than the effect it had in the provisions in the denominator. We feel comfortable with this level of provisioning. Our portfolio is very healthy. As you see, the retail portfolio, NPL remained stable, and you had a sharp decrease in the commercial line. So we are feeling comfortable with the extra level of provisioning we are having, which is full IFRS 9. Gabriel Nóbrega: All right. Perfect. And as for my second question, actually, looking at your net financial margin. And I'm here, I'm also including the net loss from the write-down of assets, which fell a lot during the quarter, even though we had lower interest rates and also the benefits from the lower non-remunerated reserve rate requirements due to the bank disbursing loans at a 24% interest rate. So what I wanted to understand is that should we see maybe your total financial margin staying at these levels? Or could there even be some more added pressure as you begin repricing all of your assets to the lower interest rate environment?

The sound is, I can't hear you very well. I understand you're asking by the line of net interest income, correct? That line towards the end of the year -- you should keep seeing it stable towards the end of the year. You had an extra effect on the line which we had to recognize the collection of the capital payment of the 25% of the Leliq which was ARS2 billion. That was previously in the other comprehensive income and now we have to recognize that lower price in the P&L. Going forward, you should see also an effect in that line because of the 60% remaining that, as we mentioned [Technical Difficulty] swap in July 2020. So you're going to see also a negative effect in the third quarter. But the net interest income, you should see it stable going forward towards the end of the year.

The next question is from Alonso Garcia with Crédit Suisse.

My question is actually a follow up. First [indiscernible] hello, can you hear me now?

Now, yes. You sort of shut down. But now I can hear you.

Hello?

Hello? Yes

My question is actually a follow-up on asset quality. I just wanted to ask you, when do you -- I mean, you said you feel comfortable with your current coverage levels. So I wanted to ask you, when do you expect asset quality to peak? Is it going to be the third quarter, fourth quarter maybe? Even in the first quarter of next year. And I mean in terms of NPLs provision, when you think the peak will take place and if you have a color on the level of either cost of risk or NPL that we could see at the peak?

We expect at the -- depending on Central Bank's regulation now, if a waver continues or doesn't continue. Being that said, we expect the peak more towards the fourth quarter this year. And then again, it depends on how much -- regarding the ratio, how much the loan book finally grows. We are expecting a loan book to grow above inflation. We are projecting an inflation towards the end of the year around 47%. So those two variables will finally define the level of NPLS, you could see towards the end of the year or the coming 2021. But we feel comfortable, again, with the level of provisioning we are having.

So you would expect a rather stable level of provisioning or maybe an increase together with the growth of your loan portfolio, but in terms of cost of risk, you think current levels are sustainable for the coming quarters despite the deterioration that we are going to see most likely in the second half of the year. Is that correct?

The coverage ratio should go down towards the end of the year. NPLs should increase. But you could see a higher level of provision also towards the fourth quarter of 2020.

Okay. Okay. Got it. And just finally, on the margins. So you mentioned that you expect the net interest income to be stable for the remainder of the year. What do you think about next year? Do you think there could be additional pressures? Or do you think there could be upside next year if you resume growth in your retail loan portfolio?

Alonso, you may imagine to predict 2021 in Argentina, it's quite difficult. A lot will have to do what happens with the economy, where the inflation level finishes at the end of 2020. Yes, definitely, we see a pickup at the end of 2020 and -- if we see an improvement in the economy, you should see the retail portfolio picking up, and that definitely should help our market margins because on the budget, we are basically working on it. So it's still difficult to predict 2021.

[Operator Instructions]. The next question is from Carlos Gomez with HSBC New York.

My first question is about loan growth. You had already been saying that you expect it to grow above inflation. And you are growing above inflation. Can you explain to us what the origin of this growth is? Is it because there is more obligation to land at this 24% rate because there is more demand because interest rates are negative? Or because you want to grow your loan portfolio? And my second unrelated question is regarding your tax rate that was high. Can you explain how you calculate it and whether it will be at these levels through the end of the year?

Okay. Regarding loan growth, the projection we're giving, that is to grow a little bit above inflation, it basically has to do that we come from a very low base in 2020. Remember, we had a huge amount of loans in dollars that sharply decreased in 2021 and are still decreasing, we're not lending in dollars because exporters are now asking peso loans. So that should reflect the high increase in the loan portfolio, mainly it will be driven definitely by the peso portfolio and mainly by the commercial lines, mainly because of the special lines we are offering around 24% and the zero interest rate. The retail portfolio, despite starting to pick up the pace, and there you can see also the 0% interest rate. And we have a little bit to do, how fast it will recover. What we finally with inflation. So basically, that's what we are seeing on the loan book, but it's not genuine demand per se, is basically -- we come from a very low base in 2020, plus the mandatory loans that you are providing, again, everything in peso. Your second question was regarding our tax rate. Yes. As you can see, we ended the quarter with our tax rate around 44%, higher than the regulatory 30%. Basically, that has to be -- to do with the difference in the fiscal base that you need to take to consider that tax rate of today from the base you see on the P&L. It's basically -- that is what the stores -- the effect on the effective tax rate. Probably going forward, you should assume a tax rate around 40% for your model.

And that is for this year and also for next year. I mean, that is the rate that we should expect...

At least for this year. At least for this year. Just for this year because the main effect is that you're resonating the inflation. And again, as I mentioned, since you have to -- the fiscal base you calculate tax is different from the accounts [indiscernible]. Those are the distortions and it's mainly by the inflation effect.

This concludes the question-and-answer session. At this time, I would like to turn the floor back to Ms. Lanusse for any closing remarks.

Thank you, operator, and thank you all for joining us. We appreciate your interest in the company. We look forward to meeting you more with a view on our coming months and providing financial and business update next quarter. As usual, if you have any further questions, please do not hesitate to reach us, and we'll be happy to follow-up. Thank you, and enjoy the rest of the day.

Thank you. This concludes today's presentation. You may disconnect your line at this time, and have a nice day.