Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to Banco Macro's First Quarter 2021 Earnings Conference Call. We would like to inform you that the first quarter 2021 press release is available to download at the Investor Relations website of Banco Macro at www.macro.com.ar/relaciones-inversores/. Also this event is being recorded and all participants will be in a listen-only mode during the Company's presentation. [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 of Investor Relations. Now, I will turn the conference over to Mr. Nicolas Torres. You may begin your conference, sir.

Thank you. Good morning and welcome to Banco Macro's first quarter 2021 conference call. Any comment, 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 on our website. First quarter 2021 press release was distributed yesterday and it's also available on our website. All figures are in Argentine pesos and have been restated in terms of the measuring unit current at the end the reporting period. As of the first quarter of 2020, the Bank began reporting results applying hyperinflation accounting in accordance with IFRS IAS 29 as established by the Central Bank of Argentina. For ease of comparison, previous quarters have been restated applying IAS 29 to reflect the accumulated effect of the inflation adjustment for each period through March 31, 2021. I will now briefly comment on the Bank's first quarter 2021 financial results. Banco Macro's net income for the quarter was ARS2.2 billion, 39% lower than in the fourth quarter of 2020 and 77% lower than the result posted a year ago. The Bank's first quarter 2021 annualized ROE and ROA of 5.4% and 1.1% respectively remained healthy and show the Bank's earnings potential. Net operating income before general and personnel expenses for the first quarter of 2021 was ARS37.2 billion, increasing 5% or ARS1.8 billion quarter-on-quarter due to lower level of provisions and higher income from financial instruments at fair value to profit or loss. On a yearly basis, net operating income decreased 10% or ARS4.1 billion due to lower net interest income and lower net fee income. Operating income after general, administrative and personnel expenses was ARS18.9 billion, 16% or ARS2.6 billion higher than in the fourth quarter of 2020 and 19% lower than…

[Operator Instructions] And the first question will come from Pedro Nobrega with Citigroup. Please go ahead.

This is Gabriel here. So I just wanted to check in on the asset quality front on this quarter. We saw you booked almost no provisions, so if you could just maybe give us a bit of color here. Did you may be reversed any provisions which you had done in the last year? Or are you just really confident and uncomfortable with your current risk profile that you don't need to create these provisions? And then just lastly, how should we think of provisions going forward? And I'll ask you second question afterwards. Thank you.

Hi, Gabriel, this is Jorge Scarinci. Yes, the answer to your question is basically that we think that we have a reasonable level of provisioning and we're very conservative in 2020. So considering the situation of our loan book, we consider that the level of provisions is enough considering what is going on now and what we are expecting for the rest of the coming quarters. Going forward, I would assume as a cost of risk estimate between, let's say, 2% and 2.5% for the whole 2021.

All right. That's very clear. And that's from my second question, looking at your capital base, I understand you have already declared recent dividends, but even if we were to subtract these dividends from your capital, your common equity Tier 1 ratio would still be above 20%. So I just wanted to understand are there any other strategies which the Bank is pursuing on this excess capital that you may think that an acquisition makes sense right now?

There is not a lot to do considering the regulations established by the Central Bank. And - I mean, inorganic growth has been always an element present in Banco Macro strategy for last 20 years, so that could be our strategy. Of course, we have - we are open to any possibilities, however, we have to see if there is any bank willing to lift the game, but that could be an alternative. But apart from that, we are not finding for the moment another attractive element in order to put - where to put excess capital, honestly.

The next question will come from Ernesto Gabilondo with Bank of America. Please go ahead.

Good morning, Jorge and Nicolas. My question is on inflation. When looking to April inflation, it's already at 46%, so a little bit higher when compared to March. Do you expect it could be higher in the second quarter and then normalizing for the rest of the year? Just want to know how would it be impacting the results of the net monetary position? And then also you can share us your expectations for interest rates and the effective tax rate in the coming quarters will be very helpful. Thank you.

Hi, Ernesto. In terms of inflation, yes, what we - you know that we do not measure inflation, but according to the local economies that consider those mechanism of trying to estimate inflation, they say that the first quarter was the highest quarter. The coming quarters should be showing a bit lower of inflation. Expectations for 2021 are between 45%, 47% approx. So we should be seeing lower inflation levels in second, third and fourth quarter. So that is going to have, let's say, positive impact in our income statement basically because the level of the monetary position is going to be - should be below the level that we posted in the first quarter. And in terms of the guidance for interest rates, honestly, for the moment we are not seeing any movement on interest rates in the second quarter. We think that the level is going to be maintained. However, according to some, also local economies, they are expecting for some increase in the third and fourth quarter of the year, maybe between 100 and 200 basis points. Honestly, I don't know. I mean, when you look at the macroeconomic variables, we think that a higher level of nominal interest rate should be needed here, however, the Central Bank is not showing any movement or any guidance in that front. But according to local economies, they are saying that in the third, fourth quarter, we should be seeing an increasing interest rate. Going forward, I would expect for second, third and fourth quarter of this year, in terms of margins, I would assume an average between what we saw in the fourth quarter of last year and the first quarter of this year considering the current level of interest rates. In terms of effective income tax rate, yes, I mean, you know that here in Argentina, tax rate is a bit of America and we have a kind of accounting balance for taxes and our accounting balance for P&L. I mean, for estimation purposes, I would assume a 35% - between 35% and 37% income tax rates as an average for the year. And that is what we're expecting for this year in according to what the local version of IFRS starting - in its pockets.

For my second question, is there any update related to regulation, for example, if we should expect subsidiary to continue or cap rates or floors or anything else?

I mean, we think that for the moment the regulations are going to be maintained. Honestly, we do not know what we have in by the end of the year after mid-term elections, but for the second quarter and at least big part of the third quarter, we are seeing that the breadth and regulations are going to be maintained.

The next question will come from Alejandra Aranda with Itau. Please go ahead.

Good morning, Jorge and Nicolas. Thank you for the call. And just to have a little bit of color on what you're seeing on the deposit side and how are you thinking about the liability management. And then the second thing is that the treasury had ARS1.2 billion to roll over in the next three months, which looks quite challenging and we saw a measure yesterday from the Central Bank that it was really uninspiring. So what do you expect in terms of additional measures going forward? What do you think that there - that we could expect from them in the coming months?

Alejandra, how are you? I mean, in terms of deposits, what we have seen is, of course, the nominal level of deposits in the system is growing. In terms of our asset and liability management, we are like trying to find which is the best level of deposit that we should have because, as you know, the loan demand is picking up, but in a very timid speed. So if we increase a lot of deposits, we have to apply that excess liquidity either in repos to the Central Bank or funding the treasury in order to have an attractive interest rate, in order to compensate the level of the deposit rate. Therefore, we are not aggressive or that aggressive in terms of increasing the - our deposit base. For the moment, we are trying to find out which is the best level always keeping an eye as we always have done on the profitability of the bank. We do not want to increase market share if that is going to affect the profitability of the bank. So, in first place, we put profitability. In terms of your second question, according to the regulation that the Central Bank puts out year to date, I mean, we understand that the treasury needs a lot of financing in the coming future as you mentioned and this is a kind of a voluntary element in order to reduce the level of Leliq and increase the level of local public bonds in pesos and put that as a way of reserve requirement at the Central Bank. Of course, we are analyzing the measure. We consider that the risk - the - having the Central Bank as a debtor is better than having the treasury as a debtor. And I think that public owned banks are going to use these regulations, but I don't know what will be the reaction of the rest of the banking system. So again, we still don't know what we are going to do. We are going to be, of course, pretty conservative trying to find out which is the best for Banco Macro. And, of course, keeping a close eye on depositors that this is the key question here if depositors would feel comfortable with their deposit being applied on these reserve requirements in the form of public sector bonds. So that is what we are going to keep an eye on.

The next question will come from Alonso Garcia with Credit Suisse. Please go ahead.

Thank you for taking my question. My question is on the volume side. I mean, we observed not only in Banco Macro, but in the rest of your peers as low starting in loan volumes in 2021. I know that seasonality has something to do with that, also the fact that you report in real terms some inflation was even higher in the first quarter compared to the fourth quarter. But is there something else? Could you please comment on how you are seeing demand dynamics both on the commercial side and on the retail side? And also on your side, how is your risk appetite at the moment? Thank you. And how you expect this to evolve for the remainder of the year? Thank you.

Hi, Alonso. I mean, loan demand, it is, of course, pretty tied to expectations that is not new expectation here in Argentina. For the moment, it is a recovery in GDP compared to the big decline that Argentina suffering to up around '20. But the recovery of the GDP return is expected to be between 6% and 7%. Inflation, as I mentioned before, between 45% and 47% that is what the market is expecting. So for the moment, we continue to see companies demanding working capital short term in pesos. You know that having the mid-term election around the corner is something that is a big question mark bearing depending on the result, what will be the new policies that the government could be taken. In terms of consumers, what we are seeing is a bit of increase in consumer demand tied to the increase in the nominal level of salaries, tied to the negotiations between the unions and the companies. But you have to consider that we continue to have the pandemic with us. You know that the last nine days and this is going to last - next Sunday, there was a big kind of close of the economy here in Argentina and the commuting in order to reduce the level of people having this COVID-19. The level of the vaccine - or the amount of the population having two doses of vaccine here is slightly below 3%. So that is going very slow motion as low speed. And - so that is also affecting the behavior of consumers. And - so we think that by the end of the year, loan increase in Banco Macro is going to be slightly positive in real terms. What we expect it to see between the third and the fourth quarter, a pickup in loan demand.

The next question will come from Carlos Gomez with HSBC, New York. Please go ahead.

My question is a follow-up on the alternative to U.S. Treasury pacer for your liquidity requirements. We understand that it is optional at this point and you have made very clear that you prefer the credit of the Central Bank. Do you think there is a possibility that in the future it might be an obligation that you might have to buy paper from the government? Any particular you have any legal recourse against that? Thank you.

Hi, Carlos. Yes, for the moment it's voluntary. Honestly, we don't know if in the future it is going to be - we're going to be forced to that. If I had to guess, I would say no because we had these type of experiences in the past in Argentina and the conclusion or the ending of that was not good, not for the country, nor for the banking sector. But if that is the case, we are going to see if there is a legal alternative to go. And if it is, we are going to go for that. That is what I'm guessing for the moment. But again, I think that is going to be or it will continue to be voluntary. We are not - I mean, we are sending a very low probability of occurrence that is going to be - that the banks are going to be for that.

Thank you. That's very clear. And if I can follow-up, do you have particularly high inflation adjustment this quarter? I understand that there was a change in accounting and it was bigger also in the fourth quarter, but it is a normal level of adjustment or should we expect lower in the future, not only because inflation goes down, but because there was something especially in the quarter?

No, nothing special. And going forward, we think that these - with decline in inflation, the level of this monetary loss is going to go downwards.

The next question will come from Santiago Petri with Templeton. Please go ahead.

I mean, my question is related to these new regulation. Can you remind us of the percentage reserve requirement now? And does this new regulation has already stated as to how - what percentage of these reserve requirements can be directly [indiscernible] assets? And finally, what's the limit - can you remind us what's the limit to total public sector asset holdings? And if this reserve requirement is into this limit? Thank you.

In terms of Leliq, we can have up to 45% of transactional deposits and 27% of time deposits. And for the moment, we have a level of close to ARS125 billion in Leliq. I mean, going forward, we are going to continue - these regulations starting next Tuesday, that's 1st of June, we are going to continue as, say, we are working right now with Leliqs, no exposure in - or not putting the sovereign bonds there. And honestly, we think that this is - this regulation is more targeting Banco Nacion or maybe Banco Provincia that they have a huge amount of sovereign bonds in pesos. And besides, this is a way of leaving more room for the treasury to get extra financing and reducing the financing of the Central Bank through Leliqs. But for the very beginning of June, we are going to continue as we are working right now.

Excellent. So can you remind us the limit to public sector holdings at the moment? I mean, it's customer - so what is that the limit?

In terms of the public sector, I mean, we have ARS130 billion in public bonds in pesos, denominated in pesos and that is approaching below the - around 21%, 22% of total assets.

The next question will come from Rodrigo Nistor with AR Partners. Please go ahead.

My question is regarding strategy. Well, it seems that many of the margins that determine the banking sector results like inflation and the level of monetary policy rates are not under your control. So my question is what is your approach with the virus you can't control? What can you share with us on that front?

Hi, Rodrigo. I mean, no, we are trying to do - and we did that in 2020 and we are trying to do in 2021, I mean because of the pandemic that we are undergoing and how that is affecting the economy as a whole as a country is to work maybe in expenses, to work on the quality of - on the credit risk and trying to match the best level of the deposits that we have, I mean, asset and liability management. And basically, again, always looking on the profitability of the bank and we are not carrying about market share. So that is something that in Banco Macro we have been looking for that in the last 30 years. And the idea is to continue for that. And if there is a possibility to use the excess capital in any of the alternatives, we are going to study and goal for the best. So that is what we are working on a daily basis here in Banco Macro and those issues that I mentioned before.

As there are no more questions at this time, this concludes the question-and-answer session. I would like to turn the conference back over to Mr. Nicolas Torres for any closing remarks. Please go ahead, sir.

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.