Banco BBVA Argentina S.A. (BBAR) Q2 2026 Earnings Report, Transcript and Summary

Good morning, everyone, and welcome to BBVA Argentina's Second Quarter 2026 Results Conference Call. Today with us are Mrs. Belén Fourcade, Investor Relations Manager; Diego Cesarini, IRO and Head of Assets and Liability Management; and Carmen Morillo Arroyo, CFO. This presentation and the second quarter 2026 earnings release are available on BBVA Argentina's Investor Relations website, ir.bbva.com.ar, and will also be available for download in the chat. First of all, let me point out that some of the statements made during this conference call may be forward-looking statements with the meaning of the safe harbor provision 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 BBVA Argentina's annual report on Form 20-F for the fiscal year 2025 filed with the U.S. Securities and Exchange Commission. I will now turn the call over to Belén Fourcade. Please go ahead. María Belén Fourcade: 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 continued, 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 personnel benefits and administrative expenses reflected 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 nonperforming loan levels remain elevated, we can identify signs of improvement in certain indicators such as early-stage delinquencies. BBVA'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's quarterly cost of risk reached 7.13%, broadly in line with the first quarter figure when adjusted for nonrecurring 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. Starting with the macro. Our view -- so 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 difference 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 RIGI 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 in a very comfortable position. We have a strong liquidity, and we do not see funding as a constraint to growth. So rather than targeting a 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 and NIM in pesos 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 reflect the deterioration of previous quarters, while some of the more recent indicators are already moving in a better direction. Earlier 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. And 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. So to summarize, we remain constructive on Argentina and on BBVA's outlook for the second half. We expect this real loan around 10% on funding our strong liquidity gives us flexibility to manage deposits according to the growth opportunities we see. We expect moderate pressure on activity margins, partially compensated at the P&L level by lower inflation, while fees should continue to provide a positive contribution to revenues. Asset quality indicators are starting to move in the right direction. We expect to end the year with an efficiency ratio below 45%, and we continue to guide for the real ROE in low teens. And we enter this phase with a strong position with a CET1 ratio of 18.8% and a strong liquidity, and we have the capability to capture growth opportunities while maintaining a prudent approach to risk. We believe BBVA is well positioned for the next phase of Argentina's economic cycle. And with that, we can move to your questions. Happy to hear.

[Operator Instructions] Our first question comes from Brian Flores with Citi.

I have one on asset quality. Carmen, I know the bank is already focused in corporate loans. And I wanted to just get your thoughts on what do you think explains this deterioration? Do you think it's the uneven distribution of the recovery in the economy? Or what do you think explains this cost? Because on paper, the thing we can see is you have been already cautious in your allocation in the loan book. So I just wanted to check with you looking backwards, what do you think explains this deterioration in asset quality? And then in my second question, just a follow-up. You mentioned for the end of the year, maybe cost of risk around 6.5%. Just wanted to check with you if directionally, the improvement should be sequential. That means lower from the 7.1% and then we go anywhere between that and 6.5%? Or do you think the third quarter still is pressured and then we drop more sharply in the fourth quarter?

Thank you for your questions. So the first question, at the beginning, you mentioned the corporates. I don't really get why. So in the corporate segment, we see 0 deterioration. So we are expecting to grow there as much as we can depending on the demand on credit. So in that segment and also in companies, so small to medium companies, we are outperforming the market, and we are comfortable with that position. Going to the retail side, what we've been doing is, as you know, be more focused on recoveries on one side, on origination on the other side. And what we see, as I mentioned before, is that new vintages are performing better. So we -- the quality of the assets is still not so good as we want to see in personal loans and credit cards. So these are the 2 portfolios where we are more cautious on growing, and we will wait a bit more to see the better performance on that. Of course, when you split between, for example, payrolls and clients, things are much better there than nonclients or non-payroll clients. So as I mentioned, we will be cautious on those segments. And then related to the trend for this year, what we see is that coming from actual levels for the third quarter, we see a slight better performance and then a better one in the fourth one. So we -- what we see is like the peak NPL and also cost of risk in the second quarter and then a better -- a slightly better performance in the third quarter and a better one in the last quarter to get this average cost of risk I was mentioning.

No, super clear. And then if I may, just a quick follow-up. You mentioned the levels of coverage that will be recovered gradually. Obviously, in the last years, we have seen the decrease for, I would say, from very extraordinary high levels. But I just wanted to check with you, I don't know, if you have a target in mind or any level that you would feel more comfortable with maybe by the end of '27? Is it, I don't know, above 100%, 100% or something? Or do you think it's more of a stable around the 100% level? Any, I think, idea here would be very helpful.

Okay. So as I mentioned, we expect this 80% level to be the bottom of the ratio and from here on to gradually rebuild the coverage ratio as asset quality improves. I don't know if 100% is the level for next quarter, but we should see better levels in the following quarters.

Our next question comes from Juliana Ohara with Goldman Sachs.

I have a quick follow-up on asset quality. I was wondering if you could somehow share the magnitude of the improvement in the early vintages that you're seeing? And also, I don't know if I'm getting ahead, but if you could -- if you already have some views for 2027 on loan growth and maybe an early ROE expectation would also be great.

Of recovery in the early...

Sorry, Juliana. Thank you for your question. So the first one was -- so it's related to the vintages. So the...

Yes. It was related to -- if you could share the magnitude of the improvements in the asset quality that you mentioned in the early -- the new vintages.

So as I was mentioning, so you have to split payroll, non-payroll and different products. We are -- so the signals we are having are maybe too early to get to a conclusion. But what we see is that from -- I don't know, from levels in credit cards of around 6% a year ago, we are near 2% to 2.2% this year. So it's difficult to give an exact figure there. But what I can say is that we see a constant better figure on a monthly base in these 2 portfolios. And maybe it's useful to know that in personal loans and also in credit cards, we are already in the payroll portfolio in levels similar to December 2024. So there, we are already comfortable with what we see. So these signals are the ones we were waiting for to start growing, as I mentioned, in clients that we know their income -- and moreover, that we have this payroll is also really important for us.

And do you already have any expectations for 2027?

So maybe it's a little bit soon to answer that question, but what we expect for the system is a real growth around 10% to 15%, and we will be above that. We want to outperform the market. But yes, something above this level for sure. So maybe next quarter, we can have some more color on this.

Next question comes from Eduardo Resende with UBS.

I have 2 on my side as well. So the first one, I would like to ask a color on the portfolio mix that you expect for the coming quarters. I mean mortgage loans was -- were a positive highlight in the second quarter. And more recently, the government announced a new funding program backed by FGS Resource. So I would like to know the appetite to grow in retail mortgage and how relevant this new program from the government could be to BBVA. So this is the first question. And the second one is regarding the NIMs. You mentioned that some pressure is expected as rates and inflation continues to decline. But could you provide some color on what levels could we see for the coming quarters and for 2026? That's all from my side.

Eduardo, this is Diego. On your first question regarding the mix of portfolio, we've been growing in the last quarters more on commercials that represents approximately 57% of our portfolio. But that growth has somewhat stabilized as these kind of loans have already stalled and are not growing so much. For the coming quarters, we are seeing that the retail portfolio has touched some floor on growth. So we are seeing some recovery, especially, as you mentioned, in mortgages, probably also on car loans. But gradually also consumer and credit cards, as Carmen said, well, we are seeing some signs of improvement on credit quality. So it could be possible to start growing a little in the coming quarters. But anyway, mortgages and pledges will gain traction with more speed and will represent a bigger share of that retail portfolio. Nowadays, both of them, if you take mortgages and car loans, they represent around 27% of that retail portfolio. Probably that percentage should grow in the coming quarters. But we will also make efforts to grow in commercial. As Carmen said, we are seeing that credit quality on those segments is good. Of course, we have not seen too much demand on the first part of the year, but we think that seasonally, that first part of the year is the worst. Rates have fallen a lot during these past months. So we should expect some pickup in activity there, too. And we are focused -- we have been telling the market that we are focused on companies, on midsized companies, especially. So we will be there. Regarding currencies, we have been growing in the past a little more in the dollar activity. Probably that could be the trend in the future, but at a very slower pace. We are not seeing that, that mix of dollar-peso will change dramatically in the coming quarters. And regarding these mortgages, the bank has been active in the past quarters. We have been growing. We have been selling approximately 20% of the new origination in the past 4, 5 months. We intend to keep that track for the coming months. We see with good eyes this new program that the government has implemented because, of course, in Argentina, there are no institutional investors and having the -- doing that job, I think it's good for the market. So we will participate in the program. And so on your second question regarding NIMs. Well, NIMs have been performing well in the past quarters, especially the measure that we like to present that is the NIM in real terms, we take the cost of inflation from the interest margin. And that measure has gone up 70 basis points in the last quarter. Probably this is the higher point of the year. Probably net interest income should stabilize in the coming quarters. And as loan portfolio starts growing, we should see NIMs deteriorating a little. Historical NIMs should fall around, we think, 200 basis points by year-end, but that will be partially offset by the fall in inflation. So the real NIM should fall around 100 or 125 basis points. This is not a huge problem for us. Of course, this is the trend that everyone is expecting in Argentina, if things keep normalizing and inflation keeps going down along with rates.

Our next question comes from [indiscernible]. Well, I think that is going to be some problem technical issues. So the next question comes from Mario Estrella with Itaú.

Just 2 questions. The first, I think, is already sort of been answered. So regarding the early signs that you've seen -- the signs you've seen in early NPLs, I know that you're saying that the new vintages are behaving well. But I don't know if we -- as investors, can we track Stage 2 or Stage 1 loans in order to also kind of be on tracking or measuring well that behavior. I don't know if that is accurate to be following since early -- I mean, the vintages is not something that we can see. And also because we know that in Argentina, the loan book is very short. short duration as of now, right? So you correct me if I'm wrong, but I don't know if Stage 2 can be also like a good measure that we can follow in order to try to anticipate to an improvement in asset quality. And the other question was -- yes, it was about regulation. We also saw that the government announced that it's going to let banks to loan USD -- to grant USD loans up to 15% of deposits regardless of the client being a USD generator or not, right? So I wanted to check on you guys, your views on that policy, if it's going to have an impact or not? I mean that would be great to have your color on that as well.

Okay. Thank you. Yes, so you're right. So if we follow stages, of course, they will give us also some color on the better performance of the portfolio, and it is that way. So when we take a look to individuals, so to retail, we see this better performance along the months this year, and we hope to see it by the end of the year at a better pace. So yes, the answer is yes. I know you don't have enough information to see vintages, and it could be a good indicator for you. So I agree. Related to dollar. So Diego, do you want to take that one?

Yes. Well, regarding your other question, well, we welcome that measure by the government. But in fact, we already had the capacity to lend to companies that do not originate dollars because we have some bond issues in the market. So we had that capability. Even if we do not use it broadly, we look case by case. There are a few companies that we have already lent, but we do not think that we will make this massive. We are aware of the risks. And on the other side, we have a very good demand of exporters or of projects. So our liquidity ratio in foreign currency is where we want it to be. Of course, if deposits and funding in general terms keeps going up, we will keep lending. But it's like we didn't need this measure too much in order to keep growing our portfolio. But of course, it is welcome because it allows us more flexibility if we need it.

Perfect. Perfect. Just to check on what you mentioned about guidance, it was loan growth close to 10% and cost of risk of 6.5% and ROE, I think I didn't catch that, if there was a correction on that.

Low teens.

Low teens on ROE.

Yes. And then loans around 10%. Yes, that's right. And the other one, I didn't get it.

Cost of risk of 6.5%.

Yes, that's right.

6.5% for the full year.

The next question comes from Lisandro Lloveras with One618.

Congratulations on the results. I have 2 questions here. The first one is you can provide a deposit guidance growth for the full year 2026. And the second one is that we saw the bond portfolio and the public exposure -- the public sector exposure growing this quarter. And I was wondering if you think it can continue growing in the following quarters.

So the first one, if I didn't get it wrong, it's related to guidance deposit growth. As I said before, so we -- okay. So on funding, we are very comfortable with our position, and we think it -- so we have enough liquidity to keep growing, and it will depend -- the opportunities we see on the asset side. And according to that, we will be growing in deposits. So we don't see any restraint there. So to give you a figure, maybe it will depend on the system, but we could be around 5% to 10%, something similar to that. But as I mentioned, if we need more liquidity because the activity grows faster, then we won't have any problem there. So...

Yes, Lisandro, as you know, we have been growing in market share in deposits. We have grown around 300 basis points through the last 2 or 3 years. But then we stopped because, of course, credits are not growing that fast by the moment. So when we need to resume that growth, we will. And regarding your second question, it's true that public sector portfolio has grown in the second quarter after having decreased in the previous 2 years. I think it's temporary. The explanation is just that loans didn't traction during this first part of the year. And besides, we saw some good opportunities in building a value bond portfolio. We prefer floating rate adjustment. So we started with Tamar bonds. And then, of course, we switched to these dual bonds that pay the most between inflation and Tamar rates. So at least 2/3 of our portfolio consists of that kind of bonds, which we -- as I said before, we think that provides value for our NII in the coming 1, 2 and up to 3 years. So we are comfortable with that position. And of course, we keep some part of the portfolio short term to attend liquidity situations. That's a prudency measure.

The next question comes from [indiscernible] as a private investor. [Operator Instructions] Okay. This concludes the Q&A section and today's presentation. You may now disconnect, and have a nice day.