Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to Banco Macro’s 1Q ‘23 Earnings Conference Call. We would like to inform you that 1Q ‘23 press release is available to download at the Investor Relations website of Banco Macro at www.macro.com.ar/relaciones-inversores. [Operator Instructions] It is now my pleasure to introduce our speakers joining from Argentina, are Mr. Gustavo Manriquez, Chief Executive Officer; and 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.

Thank you, Anthony. Good morning, and welcome to Banco Macro’s first quarter 2023 conference call. Any comments we may make today may include forward-looking statements, which are subject to various conditions, and these are outlined in the 20-F, which was filed to the SEC, and it’s available at our website. First quarter 2023 press release was distributed yesterday, and it’s available at our website. All figures are in Argentine pesos and have been restated in terms of the measuring unit current at the end of 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 recent comparison, figures of previous quarters have been restated assigned IAS 29 to reflect the estimated effect of the inflation adjustment for each period through March 31, 2023. I will now briefly comment on the bank’s first quarter 2023 financial results. Banco Macro’s net income for the quarter was ARS9.8 billion, 52% lower than the fourth quarter of 2022 and 20% lower than the result posted a year ago. The bank’s first quarter 2023 ROE and ROA of 8.2% and 1.7%, respectively, remained healthy and showed the bank’s earnings potential. Net operating income before general, administrative and personnel expenses for the first quarter of 2023 was ARS167.8 billion, increasing 5% or ARS8 billion quarter-on-quarter due to higher income from financial instruments at fair value to profit or loss and higher net fee income. On a yearly basis, net operating income before general, administrative and personnel expenses increased 28% or ARS36.8 billion. In the first quarter of 2023, provision for loan losses totaled ARS3.5 billion, 13% or ARS397 million higher than in the previous quarter. On a yearly basis, provision for loan losses…

[Operator Instructions] Our first question will come from Brian Flores with Citibank. You may now go ahead.

Hi, thank you for the opportunity to ask questions. I just have two questions. The first one is on ROE. So I know you’re running at high levels of capital, and this could be a headwind, but are you changing the soft guidance you provided on the – around 10% ROE from the previous conference call? And my second point is on politics. Given the momentum in [indiscernible] candidacy, I just wanted to know if you know of any specific measures proposed by him or his team that could affect the banking regulation? Thank you very much.

Good morning, Brian, this is Jorge Scarinci. How are you? On your first question about ROE guidance that we gave in the former quarter conference call. Basically, what I’m thinking is what we mentioned was a kind of a range of guidance. Basically, what we are seeing right now in Argentina is high inflation than the one that we – at least the consensus was expecting. So the range for ROE for this year should be slightly lower than 10%. Should be 9% or 8.5% area. So because the consensus is expecting inflation to be 130% compared to the 94% that we had in 2022. So basically, this is not an operating level. Because at an operating level, we are showing good growth rates year-over-year and quarter-over-quarter. But in terms of bottom line, we are affected by high inflation. Second – your second question, honestly, we do not make a lot of comments on politics, but honestly, we do not know as far as for the moment, any potential measure on [indiscernible] candidacy. So honestly, no clue in this politics question that you asked.

That is great. Thank you very much.

You are welcome.

Our next question will come from Ernesto Gabilondo with Bank of America. You may now go ahead.

Thank you. Hi, good morning, Gustavo, Jorge and Nicolas. Thanks for the opportunity to ask questions. I have three from my side. The first one will be on your expectations for loan growth considering that – well, as you mentioned, we have been seeing higher inflation and higher interest rates in Argentina. So if you can elaborate on your expectations per segment for this year will be helpful. Then my second question is on your sensitivity to the Argentine peso and inflation, I think you have a dual bond position that benefits from the peso depreciation and the higher inflation. So I would like to understand the sensitivity. So for example, an increase of 100 basis points on inflation or 100 basis points on the depreciation of the Argentine peso. What would that mean in terms of Argentine pesos in your P&L? I know it’s a difficult one to estimate. But something approximately will help us. And then my last question is on your Tier 1 ratio. So we have seen that the regulator has allowed the banks to start paying excess capital and allow you to pay dividends. So after paying the dividends, where do you see your Tier 1 ratio? And where do you see will be like your targets or your comfortable level for the Tier 1 ratio during the next years? Thank you.

Hi, Ernesto, how are you? First question, in terms of loan growth, again, what we are seeing is that loans are going to grow in nominal levels but are going to decrease in real terms as – what we are seeing for the moment. Basically, this is a special year in terms of elections plus high inflation and of course, high nominal rates. So we are not expecting a pressure on loan demand. So we are expecting loans to be below inflation between 5% and 10% in 2023, mostly in the commercial area, maybe not that much in the consumption portfolio. But the total loan book should be down between 5% and 10% compared to inflation in 2023. In terms of your second question about the sensitivity on the dual bond portfolio and a 1% increase in inflation or the devaluation of the official effects could be impacting our loan book. As we mentioned, it’s not that easy to measure, but I would assume approximately, in pesos should be after income tax, in the area of ARS2.3 billion, ARS2.4 billion, a 1% increase in inflation, 1% increase on the devaluation of the official effects. So, take this number as a rough number, okay. And in terms of your fourth question, the Tier 1 ratio that, of course, we know, and we are conscious that it’s a high number that this is a consequence of what has happened in previous years about raising capital and 2 years of – that we cannot – banks, in general, could not pay cash dividends. So, as we mentioned, we are allowed to pay dividends this year again in six installments. Assuming that the dividend payment would be one installment, the Tier 1 ratio would be down from the level of 39.1% that we posted…

Now, this is super helpful. Thank you very much.

You’re welcome, Ernesto.

Our next question will come from Yuri Fernandes with JPMorgan. You may now go ahead.

Thanks. Hello everybody. Thank you for Nicolas. I have a question regarding deposits. Deposits are down 7% quarter-over-quarter, but when we look to the sheet, demand deposits, and savings and all of that, they are down even more. And I kind of guess that there may be some seasonality first Q versus fourth Q. But looking year-over-year, they are still down. So, my question is what is happening with deposits? What is your outlook there? And I have a second question regarding capital. like, for sure, you were not paying dividends. All those explanations already gave in the previous question. But also the mix of loans to assets also changed a lot over the years, right? So, you have much more government security in loans. And I think the risk weighting factors of this mix is super beneficial for your capital ratios. My question is, have you ever done like an exercise like returning to a more normalized loans to assets mix? And what would be your capital ratio today, because the concern is, at some point, let’s say, Argentina becomes a more normalized banking sector and starts having more loans. How your capital would look like, like do you really have this amount of excess capital, or is this mostly because you have like a very like government-related securities mix? Thank you.

Hi Yuri. How are you? And In terms of your deposit question, I mean you have to consider the inflationary environment here. So, at some point, it sounds quite reasonable that people holding money in transactional accounts tried to minimize those balances because inflation being at, I don’t know between 7.5% and 8% a month is a lot. So, at some point, that’s – could be some reasonable behavior from depositors on the transactional accounts. When you see the time deposits, they are growing quarter-on-quarter or year-over-year in real terms. And that is because of the increase on the interest rate that we have seen that the Central Bank have done in the last 60 days or 90 days. So, we think that the deposits behavior is quite reasonable. And of course, we continued to be pretty liquid in that sense. So, in terms of funding, we feel pretty comfortable on the structure that we have right now on our deposit base. On your second question, we have not done the calculation exactly on what will happen if instead of having securities or government bonds that will be translated into new loans. As far as we know, of course, the level of loans to assets right now is one of the lowest in the history as a consequence of what we have mentioned. Previously, basically, the economy is not doing that well. Inflation is very high. Elections are going to take place in the next four months or five months. But when – if you look backwards, I think that we reach loans to asset levels of close to 65%. I would say that in those areas, we would remain with a very high Tier 1 ratio. So, in that sense, we do not have, of course a problem of excess capital. We continue to be the best capitalized bank in Argentina. And we feel, again, comfortable with the level of capital that we have going forward, not in the present because of [indiscernible] is high. But going forward, we think that we are going to be – or we become much more efficient on this excess capital.

No, that’s pretty clear, Jorge. Just a follow-up on deposits, the minimum the payments, right? It’s only for time deposits, right? So, most of your spread on deposits, they are coming from checking and savings account, is that correct, or are those deposits also have some kind of minimum government remuneration?

The minimum rate is for term deposits only.

Prefect. Thank you.

You’re welcome.

Our next question will come from Carlos Gomez with HSBC. You may now go ahead.

Hello. Good morning. Questions, I am looking at the Page 16 of your press release, and I noticed that you have sharply reduced your exposure to share and increase your U.S. dollar net exposure, is that correct? Are you currently $1.5 billion long? And if the time comes, how certain are you that is this net position is something that you could have access to? And what is the reason for the reduction in terms of exposure? Was this a swap of assets or there is different views that you have about how things are going to go? Thank you.

Hi Carlos. How are you? Basically, the change here is because we have a large portfolio on these dual bonds and a little bit on dollar-linked bonds. And in this case, all the loan position on this bond is taken into the foreign currency position and not on the inflation position because we have to choose whether to put it, and that’s why we have increased – why we have such a loan position in U.S. dollars, and decrease on the inflation exposure basically.

Okay. So, you have to choose. But then if I add your set exposure and your ForEx exposure, it would have been reduced in the first quarter, right, because you had 200 at 73% and you had 1.6 and 1.5 Have you closed the gaps in your balance sheet going into 2022?

Basically, no, if you put all the effects – you mean if you put all the net effects on that, could be a little bit, but because we changed from some inflation bonds to dual bonds. But basically, we continued to be – since we have to choose one of each, but in reality, we have exposure to both either inflation or devaluation of the effect, higher. So again, maybe a little bit in terms of inflation. So, this could be also because there were some loans tied to inflation that were mature, and we have an increase in our loan book adjusted by inflation in the same amount that the one that we were doing, basically.

Okay. And one final clarification, so again, when I look at this table, and I see a position of ARS1.5 billion, that’s about half of your equity with the official exchange rate. Should we see that as realized? Are you indeed hedged to, let’s say, to half of your capital if and when there is a devaluation in Argentina?

Yes.

Excellent. Thank you so much.

You’re welcome.

[Operator Instructions] Our next question will come from Robert Gilman with Three Technology [ph]. You may now go ahead.

In regards to your dividends, how many dividend payments are you planning to make in the next year?

Good morning. We are going to make a payment – this year, we are going to pay six installments starting at the end of May, the first one.

Thank you.

You’re welcome.

Our next question will come from Rodrigo Nistor with Latin Situations. You may now go ahead.

Hi. How are you? Gustavo and Jorge, thank you for the opportunity. I mean most of my questions have already been answered, but just with all of these inflation challenges and tough regulations we are expecting this year, are you at Banco Macro already brainstorming for 2025, ‘26, or does the upcoming election makes too hard to plan that for ahead? And then maybe, Jorge, what are the big things on your worry list right now? Thank you.

Hi Rodrigo. Of course, we do not – right now, we are not thinking exactly on ‘25 or ‘26. But in Argentina, it’s not that easy to forecast 2 years or 3 years ahead. Of course, we know where we want to be. And our strategy – we will continue with our strategy in the long run, that is to be the leading bank in Argentina. Maybe in the interim, we have to adjust the strategy as the one that we are doing right now. I think that most of the banks are doing that when you have a decline in loan demand, and you have deposits growing, you have excess funds. At some point, you have to invest them in some place where to get some return, plus at some point, you have to hedge your equity against inflation or I guess a potential devaluation of FX. But I think that in the long run, we have a clear picture where we want to be in the leading positions of the banking sector in Argentina. I would say that the thing that the worries us the most are basically an acceleration of inflation that this is going to affect more the loan demand and of course, the P&L on banks. I would say that inflation would be the worst problem for the banking sector, and I think that’s for Argentina in general.

Okay. That was helpful. Thank you.

You’re welcome.

There are no more questions at this time. This concludes the question-and-answer session. I would 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. Have a good day.

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