Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to Banco Macro’s Second Quarter 2023 Earnings Conference Call. We would like to inform you that the second quarter ‘23 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 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; and 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.

Thank you, Andrea. Good morning, and welcome to Banco Macro's second quarter 2023 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 it's available at our website. Second quarter 2023 press release was distributed on Wednesday and it's available at our website. All figures are in Argentinian pesos and have been restated in terms of the measuring unit current at the end of the reporting period. As of the year 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 applying IAS 29 to reflect the accumulated effect of the inflation adjustment for each period through June 30, 2023. I will now briefly comment on the bank's second quarter 2023 financial results. Banco Macro's net income for the quarter was ARS44.2 million, 265% higher than the first quarter of 2023 and 394% higher than the result posted a year ago. The bank's accumulated ROE and ROA of 15.5% and 3.9%, respectively, remained healthy and showed the bank's earnings potential. Net operating income before general, administrative and personnel expenses for the second quarter of 2023 was ARS264.1 billion, increasing 27% of ARS56.4 billion quarter-on-quarter due to higher income from financial instruments at fair value to profit or loss and higher FX gains. On a yearly basis, net operating income before general, administrative and personnel expenses increased 50% or ARS88.5 billion. In the second quarter of 2023, provision for loan losses totaled ARS5.5 billion, 28% or ARS1.2 billion higher than in the previous quarter. On a yearly basis, provision for loan losses increased 232% or ARS3.9…

I’ll begin the question-and-answer session. [Operator Instructions] And our first question comes from Brian Flores of Citibank. Please go ahead.

Hi, team. Good morning and congratulations on the reports. Just two quick questions on my side. The first one is on Itau Argentina, I just wanted to ask, do you actually consume capital in this operation because the pricing of repurchase was (ph) well below book value. So just wondering if this is actually accretive to capital ratio? And the second one is on the bank's Central Bank addition yesterday to change the remuneration of deposits in the virtual wallets just really want to understand if you consider this a threat to your deposit base at some point. Any color on the size of these deposits would be greatly appreciated. Thank you very much.

Hi, Brian. How are you? Yeah. So far there's not a lot of additional information we can add on the announcement that we did on the agreement that we reached with Itau to buy its operations in Argentina. Available data is public according to the Central Bank website. There you will find all the data on Itau. The book value, the latest numbers that we got, I think, is as of June in terms of Argentine pesos, it's ARS83.3 billion. The agreement said that we are going to pay $50 million. So we are paying approximately rough numbers, 20% of book value on Itau’s operations. In terms of your second question on those deposits coming from virtual wallets, basically, we do not have those deposits here. We assume that, of course, that is going to affect those virtual wallets in terms of profitability because those interest has to be accrued on their clients, but we don’t have those kinds of deposits at the bank.

Thank you very much.

Welcome.

Our next question comes from Ernesto Gabilondo of Bank of America. Please go ahead.

Thank you. Hi. Good morning, Gustavo, Jorge and Nicolas. Congrats on your results and thanks for the opportunity to ask questions. My first question would be on loan growth and asset quality. We noticed that you were the bank that posted the lower contraction in loans against all listed banks. But at the same time, we also saw a big jump in the provision charges. So what should we expect in terms of your loan growth appetite for the second half of the year and how should we think about the asset quality? And my second question is on your investment strategy. We have seen your dual bonds position related to FX and inflation have been paying off. So how much do you hold today on those bonds and how would you like to be positioned before elections and after the elections? And my last question will be given these high financial and FX gains that you experienced in this first half, how should we think about the ROE for this and next year? Thank you.

Good morning, Ernesto. In terms of your first question about loan growth asset quality, I think that, it's not that useful to only look at one quarter. I think that in the two quarters of this year and I think that in the coming two quarters, at least, we are going to have loan performance in real terms, showing negative numbers. Imagine that with the level of inflation that we are having in Argentina and the election process that is coming in the next couple of months, loan demand is pretty, pretty sluggish. So I would not concentrate in what you see in only one quarter. I would try to see more a medium-term view and I think that overall, all Argentine banks are going to finish approximately with a negative real performance on lending. In terms of provisioning, what we are forecasting in this is that the economy is going to hold a little bit and it is expected to have a negative performance in real GDP this year. So a kind of a more conservative view on what could be coming in coming future. That's why we increased provisioning this quarter. In terms of your second question about how we are positioned in terms of securities, yes, we are positioning dual bonds and dollar-linked bonds that is almost 95% of our security bonds. The remaining 5% is bonds tied to inflation. And this is how we want to get before the election, depending the outcome on the election, we are going to make some changes or not. But we think that we are in a very well or very good position in terms of securities according to what we are seeing on the FX and inflation coming. And your third question about ROE, we think that's due to the good performance or better-than-expected performance on securities. I would assume that the real ROE for 2023 could be slightly below 20% or around 20%. So that is what we are forecasting for 2023 real ROE.

Thank you. And the ROE for next year, should we think about something around that or lower than that?

I think it's a bit earlier, Ernesto to answer that question because, I mean, the economic outcome for Argentina is not the same, depending on who is the next president. So I prefer to wait a little bit for giving some guidance for 2024.

Okay. No, understood. And just a last question, on this acquisition on Itau's Argentina operations. Yeah, it seems it was very attractive. The multiples for the transaction. But just wondering your common equity Tier 1 ratio after paying the $50 million and the dividend that you're expecting to pay for the rest of the year. How should we think about the common equity Tier 1 ratio? And even after those came in, you will continue to hold a very high capital ratio. So can you share with us how much excess (ph) capital do you have and if you will continue to explore potential M&A opportunities?

I mean, yes, it's clear that after the dividends that we are paying or we will be finishing to pay in a couple of months this year and the acquisition, we'll continue to have capital or Tier 1 ratios that would be around 30%, still high. Honestly, as always have -- we mentioned that we are examining or alert on any potential player leaving the game for sure. And again, we are also prepared for organic growth. If that is the case, for 2024, 2025, depending on the outcome of the economy or maybe to increase some future dividends, if it is possible. So all the alternatives are on the table. As we already mentioned, what the bank has been doing in the last years and we will continue doing in the future is to make the best use of this excess capital.

Excellent. Thank you very much, Jorge.

You are welcome, Ernesto (ph).

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

Thanks, Jorge for taking my questions. I have two questions. The first one, maybe if you can give a bit more color in terms of your FX position because one of the things that the Argentine banks have said for a while is that there is a cap in terms of the long position you can have in dollars. But I think this refers only to the cash position. If I look at all of your assets and liabilities in dollars, you had $2.6 billion net loan position, as of the end of June. And that's actually 91% of your equity and you have been showing large FX translation gains in income [indiscernible]. So again, if you can actually clarify that there is no actual cap in terms of the total net loan position, if I include all assets and liabilities in dollars. And also if you can tell us, let's say, next week or whenever there is a large -- basically, there is -- they removed the FX controls and the official exchange rate, the values essentially to the unofficial one. So there's, let's say, 100% devaluation, how would that impact actually your results and your capital ratios? And then second question on Itau. So my understanding is the price has been set in dollars at $50 million. So I wanted to ask -- actually, what's your -- if you have actually $50 million on hand to pay for this or if you need to get access to dollars from the Central Bank to pay for this? Thanks.

Hi, Nicolas. How are you. In terms of your first question, banks are not allowed to be long in dollars in the spot position. The only way that you can be long in dollars up to 25% of the equity is through either futures or dollar-linked bonds, which are subscribed in pesos. So what you are seeing that we are long in dollars is because we are having some positions in dollar link. And also depending on the structure of the report that you are seeing, sometimes the dual bonds are also use a kind of -- to be long in dollars. But in terms of assets and liabilities in U.S. dollar purely, you have to be completely hedged. So you can use some bonds that are in pesos that are dollar linked or dual just to be long in dollars up to 25% of the equity. And that's what we are -- that's the picture that we are showing that you are looking at, that's why we are long in dollars through those bonds, basically, no other asset in U.S. dollars. Again, peso-denominated bonds that are tied to the evolution of the dollar of the official effects or either inflation or the official effects, the higher, the dual. So that's to be clear about that. On your question about Itau and the $50 million. Yes, we have $50 million, and we are going to use these dollars to pay for Itau, we do not need -- of course, the transaction has to be approved by the Central Bank.

Jorge, thanks very much for that. Maybe just one follow-up on the first point. So again, if I just look at the balance sheet, your FX position in dollars net long is $2.6 billion. Can you clarify if there's a 100% devaluation, you are not going to show a $2.6 billion gain because of that?

Of course, no. What we are going to -- I mean, the impact on the balance sheet is going to be neutral in the sense that you have the same assets in dollars and liabilities in dollars. So in accountancy or accountable, we are going to have a zero percent impact on the P&L. On the net FX position of 2.5 (ph). What we are going to have is basically the impact on the bonds that are tied to the evolution of the effects which are the dollar-link and the dual bonds, if this 100% devaluation is higher than inflation, the impact that you are going to see is in those basically assets. And of course, it's not going to be $2.6 billion impact. Of course, it's going to be a bit less than that. But again, since we could be trading the dollar link and the dual bonds. This is a picture as of June. So now we are reaching September. So there may be some changes there. But the impact on devaluation of 100% on the official effect, it's going to have an impact basically on the bonds that we have tied to the dollar.

Okay. Thanks very much Jorge.

You are welcome.

[Operator Instructions] Our next question comes from Carlos Gomez of HSBC. Please go ahead.

Hi, Jorge. Congratulations on the results and on the acquisition. On the second, can you give us an idea about the expected time line as to when you might receive approval and we understand it's not in your hands that will be clearly on Central Bank. But when is it reasonable to expect that you would get a possession of the asset? And also, I understand that the value agreed is based on the value of the bank as of March -- sorry, April of this year and that it adjusts over time, could you clarify that? And the second question is about your earnings. I'm actually a bit surprised because you are right. This first half has been very good, or rather the second quarter has been really good. Things look better, but we have seen your real ROE fluctuate a lot. I mean, are you confident that you're going to get that closer to 20% ROE before the end of the year. And is there anything in the horizon by whoever comes in the shares of the economy that could impact the profitability of the banks in the short and medium terms? Thank you.

Hi, Carlos. Thanks. On the approval, honestly, we think that it could happen before the end of this year, that is our view. But honestly, again, because we are having elections, could be delayed a little bit, but the idea, what we have in mind is that this might be approved before the end of 2023 here. In terms of the operations, I couldn't get exactly the question that you asked, but basically, I mean, this is reaffirming what we have been saying many, many times that we want to keep on growing in Argentina. I think that the acquisition of Itau that is -- has a lot of value for Banco Macro not only because we think that we are paying a good price on this operation, because also it's increasing the number of branches, mainly in BATT and Greater Buenos Aires in the north part of Greater Buenos Aires. At some point, it is almost doubling our presence in this area. And we have been highlighting that this is the area where we want to grow. And also, we have been stating that if there was a potential acquisition, our main target was to increase our presence in this area. So we are confirming what we have been saying. And also, it's giving us some, of course, new clients on the commercial and the retail area. So I think it is a very good acquisition and very valuable for Banco Macro and more taking consideration the price that we are paying. And on your third question about ROE. I think that we are going to have a third quarter that's going to be as good or maybe, better than the second one, basically because the -- so far, the securities or the bonds are performing really well. So that's why we think that -- honestly, and now in the fourth quarter, it's a big question mark because a lot on the performance of the quarter will be tied to the outcome on the election. So that’s why our – the target that we are putting in the area of 20% is because there’s some uncertainty on how many securities could be performing in the fourth quarter. But of course, if the performance in that quarter continues on the trend that we are showing, ROE in real terms, it’s going to be above 20%, but just put some interrogation mark on the fourth quarter.

That’s very clear. Thank you so much.

Thanks, Carlos.

There are no further questions at this time. This concludes the question-and-answer session. I will now turn the call 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 and you may now disconnect.