Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to Banco Macro’s Third Quarter 2019 Earnings Conference Call. We would like to inform you that the 3Q 2019 press release is available to download at the Investor Relations website of Banco Macro, www.macro.com.ar/relaciones-inversores. Also, this event is being recorded and all participants will be in listen-only mode during the company’s presentation. After the company’s remarks are completed, there will be a question-and-answer session. At that time further instructions will be given. [Operator Instructions] It is now my pleasure to introduce our speakers. Joining us from Argentina are Mr. Gustavo Manriquez, Chief Executive Officer; Mr. Jorge Scarinci, Chief Financial Officer; and Mr. Nicolas Torres, IR. Now I will turn the conference over to Mr. Nicolas Torres. You may begin your conference.

Good morning, and welcome to Banco Macro’s third quarter 2019 conference call. Any comments we may make today may include forward-looking statements, which are subject to various conditions, and these are outlined in our 20-F, which was filed to the SEC and it’s available at our website. Third quarter 2019 press release was distributed last Friday, and it’s also available at our website. I will now briefly comment on the bank’s three quarter 2019 financial results. Banco Macro’s net income for the quarter was ARS 13.2 billion, 87% or ARS 6.2 million higher than 2Q 2019 and 243% higher than the ARS 3.8 billion posted a year ago based on an increase in net interest income and in net fee income. The bank’s 3Q 2019 accumulated ROE and ROA of 57.3% and 9.4%, respectively, remained healthy and showed the bank’s earning potential. Recurring net income in the quarter totaled ARS 50.5 billion, 99% or ARS 7.7 billion higher than in the previous quarter. Recurring net operating income before general, administrative and personnel expenses for three quarter 2019 was ARS 26.2 billion, increasing 27% or ARS 5.6 billion quarter-on-quarter and 103% higher than a year ago. Recurring operating income after general and administrative expenses was ARS 14.3 billion, 28% or ARS 3.2 billion higher than in 2Q 2019 and 160% higher than in 3Q 2018. In the quarter, net interest income totaled ARS 20.1 billion, 19% or ARS 3.3 billion higher than the result posted in 2Q 2019 and 95% or ARS 9.7 billion higher than the result posted one year ago. This performance can be traced to a 14% quarter-on-quarter increase in interest income and a 7% increase in interest expenses. Within interest income, interest on loans increased 9% quarter-on-quarter and 30% year-on-year. In 3Q 2019, interest on loans represented…

At this time, we are going to open it up for questions and answers. [Operator Instructions] The first question comes from Gabriel Nobrega with Citibank. Please go ahead.

Hi, everyone. Thank you for the opportunity to ask questions. My question here is more on the top-down, and we’re already entering the third week since the elections. I know it may be still a bit early to understand where this administration is going to go. But I actually wanted to understand how have you been preparing the bank for this very volatile scenario? And also, as we move on to December, what are your strategies there to prepare the bank for this new administration? And I’ll make a second question afterwards. Thank you.

Hi, Gabriel, how are you? This is Jorge Scarinci answering. As you might notice in the quarter, we were working on reallocating the excess liquidity from LELIQs into short-term lending to AAA companies and also investing in other financial instruments like corporate bonds in pesos, everything. And at the same time, we were seeing some reduction in peso-denominated deposits and also in dollar-denominated deposit as a consequence of what’s happened in the past election and also in the election that Alberto Fernandez won the past 27th of October. So we are – we have been working on the bank in order to maintain the level of profitability, and that is something that we have successfully done looking at the numbers that we posted in the third quarter, maintaining or even widening the net interest margin that we also posted in the quarter, keeping asset quality completely under control at the level of 1.9%, as we have shown relatively or much better than the average of the system. And we are working to put the bank or to maintain the bank as liquid as we can, maintaining profitability and waiting for the new administration to take place and to see if there are going to be new regulations. Depending on those regulations, we are going to focus on them and – but always working on maintaining the bank’s solvency, liquidity and asset quality. For the moment, we do not have additional information on what the new administration could be doing on – basically on the economic program as a whole and also on – if there’s going to be new regulation coming from the Central Bank on the banking sector. So we keep on going on this direction, working on, as I mentioned before, maintaining the margin, profitability, liquidity and asset quality.

All right. That’s perfectly clear, Jorge. And as for my second question, it’s also actually a follow-up here. I understand you have been maybe diversifying your investments as well. But being that securities has come down from representing 26% of your total assets to around 22% in the third quarter and also as we have been seeing these deposits coming out from the bank and the reference interest rate also coming down, do you believe that maybe this was the peak for your net interest margin? And this should become – to come down in the coming quarters? Or do you believe that as you diversify, you will be able to maintain this NIM going forward?

It’s a good question, Gabriel. I think that the level of the margin that we saw in the third quarter, I think that is one of the highest in the last, I would say, five, six years. I’m not so sure that we are going to maintain that level, as you mentioned, because of the decline in interest rate that we are seeing and also because the LELIQs rates are going down, and most of the rates in the season are going down. So I would say that we could be – even though it is a bit early to say, but we could be going back to a level of maybe second quarter levels in terms of net interest margin approx. But again, I think that this is a bit early, but it’s not going to be very easy to maintain the level of net interest margin that we achieved in the third quarter.

Perfect, Jorge. Thank you.

You’re welcome, Gabriel.

The next question comes from Nicolas Riva with Bank of America. Please go ahead.

Yes. Thanks for taking my question. It’s a follow-up on the prior question. So regarding your LELIQs, which came down a lot this quarter, was this because you are concerned with the Central Bank not paying these obligations? Eventually, you are concerned about this risk exposure with the Central Bank. And also, what’s the plan for the remaining LELIQs? Because they are still about 14% of your total assets. We should expect further reductions in these holdings, given that you cannot use them for reserve requirements on checking accounts and savings accounts. Thanks.

Hi, Nicolas. No, we believe that – the assumption is that the administration could be maybe putting new regulation on the banking sector. I mean, the banking sector as a whole is highly profitable. And Argentina is going in a recession for the last, I would say, four years on average or eight years on average. With the inflation being double digit, this year is going to reach maybe 60%, 65% – around 60%, sorry. So it’s like the only system having profitability or showing profitability in Argentina. So our assumption that there could be – again, there could be new regulation coming. So that is the assumption. And we were working on maybe reducing the size of the bank in order that if there’s going to be new regulation to have a lower impact on the bank’s profitability. So once we were reducing the peso – or we saw the peso deposits are going down and also the dollar deposits going down, we decided to allocate the excess liquidity in other vehicles because we saw – we took advantage on the LELIQs because there were some reserve requirements regulation that the Central Bank implemented at the end of the second quarter and in the third quarter that were extremely positive for taking new time deposits and allocating those funds in LELIQs that we believe that, that would disappear in the future. So we started to win that big balloon in terms of LELIQs that we built between the – I would say, in the second quarter and the first month of the third quarter. So that is why we were doing what we did in the third quarter and also in the fourth quarter we continue reducing the LELIQs level. I can give you the exact number, but it’s below 10% of total assets. And the idea is to maybe reach the end of November. We have few millions in terms of LELIQ because we have been replacing that with loans with AAA companies and again other financial instruments. So that was the main reason why we were reducing the LELIQs.

Thanks. Maybe since you mentioned this concern that you might have of the new administration potentially doing things, which could be negative for the banking system. I mean in the past, Cristina Kirchner’s government, they had put caps on interest rates. They had also required banks to get approval before increasing fees. Any of all those things or even the treatment of the LELIQs, but you’re saying that LELIQs should be kind of unwinded by the end of November. Any of those things that concern you more really in the potential set of measures that the new administration could take?

No. I would say no. I mean when you look at the period between 2011 and 2015, there were FX controls and there were lot of regulations on the banking sector and even though that banks were also profitable. So no, we do not have a specific concern in any of those measures. Honestly, we don’t know – we do not know which measure could be implemented. The idea that we want to prepare the bank is a result of these measures to have the less impact on the bank’s solvency and profitability, and that’s why we have been working on putting the bank on that situation towards – at the end of December.

Thanks very much, Jorge.

You’re welcome, Nicolas.

The next question comes from Carlos Gomez with HSBC. Please go ahead.

Hello. Good morning and thank you for the call. We have seen interest rates decline sharply over the last few weeks. Do you see that as a consequence more of the exchange controls? Or there is simply less demand for any type of financial asset? Second, for next year – we know it’s extremely difficult to project. Do you expect any type of loan growth or contraction like in this year? And what would you think your tax rate might be next year with inflation account? Thank you.

Hi, Carlos, how are you? On your first question, I would say that the decline in interest rate is as a consequence of the FX controls because there are a lot of pesos going on. And I think that is the main reason why the Central Bank has been working on reducing the level of interest rates. So that is what we think. And according to what we are seeing, we are going to reach the bottom of the level stated by the Central Bank that was 63% for the LELIQs, and that was achieved yesterday. So we’re going to maintain this level until the end of the month. And at the end of the month, the Central Bank – we have to state, which is going to be the lower rate for December. But the main reasons are FX control. 2020 loan growth, it is not an easy question to answer. We think that according to the market consensus, inflation is going to be in the low 40s. And we believe that loan growth is going to be a bit negative in real terms. So we are working with a scenario of loan growth between 35%, 38% for the moment. But of course, you know that this landscape can change in one or two months, depending on what’s happening with the new administration and the economic program and regulations. In terms of the tax rate, I would say that is similar than the loan growth, could be changing. We think that according to the inflation level, we might be posing credits on the income tax. But again, we have to see how much inflation is going to be at the end of 2019 and 2020. And depending on that and, of course, depending on the growth that we are going to make in terms of assets there, you have the tax rate. But again, we think that there’s going to be some credit, but it’s difficult to make some assumptions at this time of the year.

Thank you very much.

You’re welcome, Carlos.

There are no questions at this time. This concludes the question-and-answer session. I will now turn over to Mr. Nicolas Torres for final considerations.

Thank you all for your interest in Banco Macro. We appreciate your time and look forward to speaking with you again. Good day.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.