Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to Banco Macro's 4Q 2019 Earnings Conference Call. We would like to inform you that the 4Q 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 sir.

Good morning and welcome to Banco Macro's 4Q 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 is available at our website. 4Q 2019 press release was distributed yesterday, and it's also available at our website. I will now briefly comment on the bank's 4Q 2019 financial results. Banco Macro's net income for the quarter was Ps.13.3 billion, 1% higher than in 3Q 2019 and 153% higher than the Ps.5.2 billion posted a year ago, based on an increase in net interest income and in net fee income. The bank's 4Q 2019 accumulated ROE and ROA of 59% and 10.4% respectively, remained healthy and show the bank's earning potential. On a fiscal year basis, Banco Macro earned Ps.40.8 billion in fiscal year 2019, 159% higher than the Ps.15.7 billion earned in fiscal year 2018. Net operating income before general, administrative and personnel expenses for 4Q 2019 was Ps.29.7 billion, increasing 13% or Ps.3.5 billion quarter-on-quarter and 83% higher than a year ago. Operating income after general and administrative expenses and personnel expenses was Ps.16.4 billion, 38% or Ps.4.5 billion higher than in 3Q 2019 and 117% or Ps.8.9 billion higher than in 4Q 2018. In fiscal year 2019, operating income totaled Ps.38.1 billion, 114% higher than in fiscal year 2018. In the quarter, net interest income totaled Ps.22.7 billion, 13% or Ps.2.7 billion higher than the result posted in 3Q 2019 and 85% or Ps.10.4 billion higher than the result posted one year ago. This performance can be traced to an 8% quarter-on-quarter decrease in interest income and a 35% decrease in interest expenses. In fiscal year 2019, net interest income totaled Ps.22.5 billion, 83% higher…

Thank you. At this time we’re going to open it up for question-and-answers. [Operator Instructions] Today’s first question comes from Ernesto Gabilondo of Bank of America. Please go ahead.

Hi, good morning Gustavo, Jorge and Nicolas, and thanks for the opportunity to make questions. My first question is on your loan growth expectations. We have seen lower interest rates. We failed to see credit demand above inflation. Well, yesterday, we saw the introduction of some caps on interest rates. So I remember in the former administration this decentivized some of the banks from lending. So any color on this will be much appreciated. And then on my second question is on the EPR [ph] inflation accounting. I think you will be reporting it next quarter. So I am just wondering if you have estimated how was your 2019 ROE including EPR inflation accounting. And then for my last question you see the possibility of the net earnings contracting in 2020 or showing a lower earnings growth due to lower security gains and still soft credit demand? Thank you.

Hi, Ernesto. This is Jorge Scarinci answering. How are you? The first part of your question about loan growth expectations. Honestly, this is very easy to project or to forecast in this volatile scenario, but in general terms, we are forecasting loan growth to be slightly below inflation expectation considering that the market consensus is expecting inflation to be in the area of 45. So, therefore, we are looking for nominal growth of loans a little bit below that. In terms of the caps on interest rate that yesterday, Central Bank said, I think that we have been commenting about this, the priority of these measures to happen. Finally, they appeared here according to this cap on interest rates on credit cards at the level of 55% starting as of March. At the same time, there was some decrease in reserve requirements tied to credit corporations. The net of these on the P&L shows of course making a forecast on interest rate make a net positive impact of 100 – approximately Ps.100 million in 2020. Then on your question about inflation accounting, we are going to start reporting adjusted numbers in the first quarter of 2020 and we are working on that. In terms of ROE, adjusted by inflation in 2019 is in the area of 18%. So that is basically the questions that you have. I don't know if I'm missing someone.

Yes, thank you. So yes, the last one is considering that probably you will see lower security gains in 2020. I don’t know if you should see lower earnings growth or actually earnings contracting in 2020.

Yes. If you only look at security gains could be of course for the moment interest rates are lower than the ones that we saw last year. Even though banks in general try to defend the margin as much as we can and that is something that we are working on. But of course everything has a limit in the sense that if we see more downward pressure on interest rates and on security rates, we will try to translate that to depositors. At some point depositors will not covalidate that. So, until we reach that point, we will try to defend the margin as much as we can. So we are trying to maintain the ROE levels for 2020 relatively similar than – in real terms similar than the one that we posted in 2019. But again, we are in February, there is still 10 more months to come in Argentina and that's a lot of time. So the scenario could change from one month to the other. But basically the idea that we have for the moment is to try to maintain the adjusted ROE in 2020.

Perfect. Thank you very much.

You’re welcome.

Our next question today comes from Gabriel Nobrega of Citibank. Please go ahead.

Hi everyone, good afternoon and thank you for the opportunity to ask questions. I have a – my I have the first question, actually, on the top-down that you're seeing. It's already been two months that the new administration has come in. I understand the situation isn't still as clear as we had thought, mainly because the administration is still talking about the bonds and the restructuring of the debt. But having said this, what do you believe will be the main challenges and opportunities that you could have over this year? And what are you implementing – what strategies are you implementing in order to untackle these two fronts? I will make a second question afterwards. Thank you.

Hi, Gabriel how are you. Yes you are right, we thought that at this point could have a better or clearer landscape on 2020. However, we are still working and dealing with volatile scenarios. And with the government that has not announced an economic program yet. That restructuring is the main issue for the government. And honestly we do not know exactly at what time that is going to be finally solved. So for the moment, I would say that economic activity continues to be very sluggish. According to market consensus, GDP is expected to be minus 1% in real terms in 2020, inflation in the year of 45 as I commented in the previous question to Ernesto. So basically challenges and opportunities is – I mean we have seen and we have sailed through these volatile scenario many times in the last 20 years, 25 years in Argentina. And Banco Macro has a high liquid position and excess capital that put us in the top ranking of solvency here in Argentina. And so if there is an opportunity in terms of organic growth, we are going to go through that highway. If there is an opportunity through organic growth, we might take that one also. So we are going to, as Nicolas commented in the comments, we're going to make on the excess capital, the best use that we consider and try to defend the margin as much as we can in these scenario of downward trend on interest rates.

All right. That's very clear and thank you. And as for my second question it is actually looking at your asset quality, we saw the provisions increased a lot and I understand that this comes a lot from Byzantine being that the loan went to category four and you had to have to provision for this. I also understand there are other companies, but maybe looking forward being that your NPL ratios also increased this year. Do you expect that, you should make more provisions over the year to uncover these companies and also if you could just mention what coverage you have achieved for Byzantine please.

As far as we continue to see sluggish economic activity, I think that we might see more deterioration in asset quality, even though that taking into consideration that we have a 2% of NPL to total loans when the season is close to seven. So this is the result of many years of working on our current standards and of course to have our consumer portfolio very tight to payrolls. But you're right, that we are seeing some corporate or commercial companies going into travel. So the idea is that we want to maintain the coverage ratio in the area of 120 to 150. Byzantine provisioned 100%. So going forward, again, if these economic situations continues for most of 220, we could see NPLs in our – the NPL ratio going between 2.2, 2.4 by the end of the year. I am maintaining, as I mentioned before, the coverage in the area of 120, 140 approx.

Can I just make a follow-up here? In this coverage which you are guiding between 120 and 140, are you already contemplating the implementation of the expected loss model under IFRS9?

Not if – I mean we are going to start with that maybe by mid-year or we have not started yet.

All right, clear, thank you.

You're welcome.

And our next question today comes from Domingos Falavina of JP Morgan. Please go ahead.

Thank you gentlemen, also for taking the call. I just want to run through the basic forecast and I'm sorry if I missed that in the beginning, but like we have an inflation of around 45. If you could just, give even in ranges, like loan growth 40 to 45 NII above the same as loan, cost of risk effective tax rate. I understand your goal is to kind of maintain a similar ROE 2020 over 2019, but just, so that we have, we understand it's volatile, Argentina, but just to have a directional view on how you guys are thinking about next year, about this year? Sorry.

Hi Domingos, yes, as I mentioned before, we are in February and it happened to me in the last maybe two or three years at least that we're forecasting some scenario at the beginning of the year and the scenario changed completely in the following months and our expectation, some forecasts where - we're thrown to the trash.

The same here, but always good to know what you are thinking.

Inflation in the area of 40, you have to take into consideration loan growth between 35 and 40, net interest income an increase of maybe 25 to 30. The effective income tax rate – it is not easy to forecast in the sense that we are going to both adjust inflation numbers, but it is going to be maybe in the area of what we posted in 2019. Deposit growth also similar and loan growth between 35 and 40. Expenses, those in salaries I think that the negotiations have not started yet, but I think that salaries should be growing below inflation expectations, so between 35 and 40, I would assume. So for expenses I would make an average growth of maybe 40 area approx. Those are the main issues.

Yet the cost of risk I think is the only one we did not touch.

Yes, cost of risk. Yes. Again, depending on market conditions, that could range between 2.5 and 3.5.

Okay. And the last one on my side is the growth should be more tilted to consumers, more corporates, SMEs, how exactly would you guess that?

The what? Sorry.

The loan growth, like the strategy for 2020 is originating in which segment?

No, I think that's, I mean, should be nominally speaking both. I would assume that could be 60%, 65% consumer and the rest commercial.

Super clear. Thank you.

You are welcome Domingos.

[Operator Instructions] Today's next question comes from Carlos Gomez at HSBC. Please go ahead.

Yes. A couple of clarifications, could you let us know where your average interest rate on credit cards was before the implementation of this cap at 55%. Second, for next year, your tax rate should be 30% again on your inflation adjusted earnings. Is that correct? And finally, will the inflation adjustment be the same in your local currency statements as in your 20-F? Thank you.

Hi Carlos, how are you? The average rates before the 55% cap was 75. That's your first question. The second one and the statutory rate is 30%, but depending on the impact of inflation, I think that the effective is going to be below that.

Sorry, effective on the – again effective on the inflation adjusted earnings or effective on the earnings without inflation adjustment.

Might be both, but I think that the effective on the adjusted numbers is going to be much lower than the 30.

Okay.

And I couldn't get the last question. Carlos.

Yes. I was wondering if the inflation adjustment, which we understand will be one line. I think after the pre-tax earnings, correct me if I'm wrong, if it will be the same as your local currency financial statements and in your 20-F?

Not so sure. I mean on the 20-F, we are still debating that with external auditors. But on the local reporting and the Central Bank, we are going to report adjusted numbers.

Okay. And will you also will you also adjust the history, like in the past, you would give us inflation adjusted numbers, inflation adjusted historical numbers?

We're not so sure about that. If I have to answer it now, I would say no. But we are still also for working with our company department, the Central Bank and external auditors on that because these are very complicated calculation on that. So, we are still trying to see, we have to or we have maybe a kind of approval for the Central Bank that we can report without the adjusted numbers of the previous years.

Okay. If you do have to present adjusted numbers, we beg you to present the nominal as well so that we can continue the historical series

Okay. So I will send you – say our press release, a book. Thanks Carlos.

Thank you so much.

And the next question comes from Santiago Petri of Templeton. Please go ahead.

Yes. Hi good afternoon guys. Today, there was a press report that states that this was related to fintech, but I would like to know if this impact this, your activities in any sense that it for which the automatic deduction of the installments from loans, from they are because I think it is – so I would like to know if, how do you collect your loans and if this applies to you.

Basically, this measure have a much higher impact on the fintechs. Basically when you have your client account with you, you have the possibility to deduct the installment of the personal loan or the credit card, as we have been doing for the last 15 years. So, it's not impacting banks basically.

Okay. Thanks. Thanks a lot.

You are welcome.

And our next question comes from Brian Flores of Citibank. Please go ahead.

All right, thank you for the opportunity. Just a quick question on your funding cost, we saw it decreasing quarter on quarter significantly. So just wanted to, sorry to ask you, how are you thinking about these particularly going forward how recurrent do you think it could be going forward? Thank you.

Of course. I think that's some of these, I mentioned that before, banks always try to defend the margins but we will try to translate 100% or the most as we can. The decrease on LELIQ rate to our depositors. But of course you have a limit. That's the point when the depositers says I'm not going to renew these peso time deposit because he's well below inflation, well below what I have in mind for the FX depreciation. So I'm going to, instead of renewing that, I'm going to, I don't know, buy a fridge, buy a car, go on holidays or maybe buy dollars on the informal market because we have FX control here. So, there is a limit for the decrease on the funding cost. Going forward, I think that we are quite close to that limit, so I don't believe that we could go farther reducing the funding cost compared to what we have done in 2019

Very clear. Thank you.

You're welcome.

And there are no more questions at this time, so this concludes the question-and-answer session. I would like to turn the conference back over to Mr. Nicolas Torres for final consideration.

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

Thank you. The conference has now concluded. We thank you all for attending today's presentation. You may now disconnect.