BBAR

Good morning, everyone, and welcome to BBVA Argentina's second quarter 2026 results conference call. Today with us are Belén Fourcade, Investor Relations Manager, Diego Cesarini, IRO and Head of Asset and Liability Management, and Carmen Morillo Arroyo, CFO. This presentation and the second quarter 2026 earnings release are available on BBVA Argentina's Investor Relations website, ir.bbva.com.ar, and will also be available for download in the chat. First of all, let me point out that some of the statements made during this conference call may be forward-looking statements, with the meaning of the safe harbor provision found in Section 27A of the Securities Act of 1933 under U.S. Federal Securities Law. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements.

Additional information concerning these factors is contained in BBVA Argentina's annual report on Form 20-F for the fiscal year 2025, filed with the U.S. Securities and Exchange Commission. During the company's presentation, all microphones will be disabled. At this time, we are going to open it up for questions and answers. If you have a question, please raise your hand for audio questions. You will then receive a request to activate your microphone. Please activate it and pick it up for your headset to provide optimum sound quality when posing your question. I will now turn the call over to Belén Fourcade. Please go ahead.

Good morning, everyone, and thank you for joining us today for BBVA Argentina's second quarter 2026 results conference call. During the second quarter of 2026, inflation continued to decline, reinforcing expectations that this trend will further consolidate. This environment should support a recovery in credit and consumption, together with an improvement in real incomes. Economic activity, while showing differences across sectors, is displaying signs of overall growth. In addition, announcements and approvals of projects under the RIGI continue, totaling more than $15 billion during the quarter, with the potential to increase capital inflows and strengthen the trade balance. The Treasury also made progress in improving its debt maturity profile. It extended a significant portion of local currency maturities to 2028 and 2029, and in foreign currency, lengthened the maturities of repo agreements with banks and the swap agreement with China, while also securing financing backed by the IFI guarantees.

These developments, together with reserve purchases of more than $13 billion, are helping to reduce uncertainty and strengthen the macroeconomic outlook. The second quarter showed early signs of a recovery in lending activity, gradually reflecting the effects of the decline in interest rates and more favorable seasonality, although still affected by elevated delinquency levels. Moving into our financial highlights for the quarter, BBVA Argentina posted an inflation-adjusted net income of ARS 131.6 billion for the second quarter of 2026. This represents a 44.6% increase quarter-over-quarter, driven by the operating income remaining relatively stable in a lower inflation environment. This bottom-line expansion boosted our quarterly ROE to 12.2%. In spite of net interest income being affected by lower rates on the asset side, our reported NIM remained stable quarter-over-quarter and year-over-year. NIM, net of monetary position loss, improved from 14% to 14.7%.

Regarding efficiency, our quarterly efficiency ratio stood at 45%, with personal benefits and administrative expenses reflecting the ongoing management of our corporate structure, and also some costs declining related to lagging activity. Let's look at the dynamics of our balance sheet and credit portfolio. Total financing to the private sector closed the quarter at ARS 17.1 trillion. While local currency loans increased 2%, our foreign currency private loans grew by 2.5% sequentially, equivalent to a 2% increase in hard currency. Mortgage lending continues to gain momentum. Furthermore, we are successfully capturing business, mainly driven by the commercial segment and foreign currency loans. Our consolidated loan market share stood at 12%, signaling a total gain of 15 basis points over the last 12 months. On the funding side, total deposits reached ARS 19.2 trillion. Private deposit market share remained flat at 9.91%, but up 26 basis points year-over-year.

With regard to asset quality, although non-performing loan levels remain elevated, we can identify signs of improvement in certain indicators, such as early-stage delinquencies. BBVA Argentina's NPL ratio stood at 6.09%, up 49 basis points during the quarter. The financial system ratio was 7.22% by the end of June, increasing 54 basis points since March. BBVA Argentina's quarterly cost of risk reached 7.13%, broadly in line with the first quarter figure when adjusted for non-recurring effects. Looking at solvency and liquidity, our liquidity ratio closed at a very comfortable 45.5%. More importantly, our capital position remains robust, with a regulatory capital ratio of 18.8%, representing 128.7% excess over minimum regulatory requirements. In conclusion, as we head into the second half of 2026, BBVA Argentina is well-positioned, supported by robust capital levels, strong liquidity, and healthy operating results.

We remain fully equipped to lead the market and support credit supply as the financial system in Argentina continues to normalize. Thank you for your time and for your continued support. I would like now to turn the call over to Carmen Morillo, our CFO, for some closing remarks.

Thank you, Belén. Thank you, and good morning, everyone. Before we move to the Q&A, I would like to spend a few minutes sharing our view for the second half of the year, both for Argentina and for BBVA Argentina. Starting with the macro. In our view, it remains constructive. The economy continues to normalize. Fiscal discipline remains an important anchor. Inflation is coming down. The external accounts are improving, and the financial system is gradually converging after many years of very low financial intermediation. This process will be not linear, and there are still important differences across sectors, but we believe the overall direction remains positive. We expect inflation to end 2026 at around 29%, with monthly inflation moving toward 1.5%-2% range. Beyond these numbers, we remain confident in Argentina medium and long-term potential.

Energy, mining, and agriculture are already making a growing contribution to exports and investments. The large projects under the RIGI framework should further increase Argentina's productive and export capacity and create opportunities across the value chains. Here, being part of a global bank is an important competitive advantage for us. We can combine our international capabilities with our strong local presence to support large investment projects and the companies around them. Turning to banking activity, Argentina still has a very low credit penetration, as you all know. This gives the financial system significant room to grow as inflation and interest rates normalize and real income recover. After a relatively soft start of the year, lending activity showed some improvement in the second quarter, and we expect activity to continue improving gradually during the second half. For 2026, we expect our loan book to grow around 10% in real terms.

We see opportunities across the businesses. In retail, mainly in secured lending and customers where we have a strong visibility on income. And in companies and SMEs, particularly in the more dynamic sectors of the economy. We will pursue this growth with discipline, maintaining our focus on credit quality and risk-adjusted returns. On funding, we are on a very comfortable position. We have a strong liquidity, and we do not see funding as a constraint to growth. Rather than targeting any specific level for deposit growth, we will manage deposits according to our funding needs and the opportunities we see in the asset side. On margins, we expect some moderate pressure on our activity NIM in pesos as interest rates decline. However, at the P&L level, this should be partially offset by the positive impact of lower inflation. The currency mix will also matter, of course.

If dollar-denominated business gains weight in our balance sheet, consolidated margins could be somewhat lower. Although, we don't expect this effect to be significant, at least in the short term. On fees, the underlying trend remains very positive. The quarter-over-quarter comparison is affected by some one-offs recorded in the first quarter. But excluding these effects, fee income continues to show a strong growth. Net fees are up around 35% year-over-year, reflecting the good progress we are making across our main fee-generating business. We expect fees to remain an important contributor to revenue growth going forward. Moving to asset quality, the recent indicators are encouraging. Our NPL ratio ended June at around 6%, and cost of risk was 7.1%. These figures still reflected the deterioration of previous quarters, while some of the more recent indicators are already moving in a better direction.

Early arrears are improving, and recent vintages are performing better after the changes we made to underwriting and origination. Based on what we see today, we expect NPLs to stabilize and then gradually improve during the second half, ending the year at around 5.5%. For full year 2026, we expect cost of risk to be around 6.5%. Our coverage ratio ended the quarter at around 80%. When looking at this ratio, it is important to consider our historical recovery experience, which is around 25% of loans in arrears being recovered before write-offs. In this context, we consider the current level of coverage adequate. We expect 80% level to be the bottom for this ratio, and from here to gradually rebuild coverage as asset quality improves. Overall, we remain prudent on the timing, but we are increasingly confident about the direction of the asset quality.

On efficiency, the progress is already clear. Our quarterly efficiency ratio improved to 45% in the second quarter, and we remain very focused on cost discipline and operating leverage. For the full year, we expect the efficiency ratio to end below 45%. We will continue to be ambitious quarter after quarter as volume recovers. Finally, let's talk about profitability. Our quarterly ROE improved to 12.2% in the second quarter from 8.3% in the first one. For the full year, we continue to expect a real ROE in the low teens level, consistent with the guidance we have been providing in previous quarters. Going forward, higher business volumes, positive contribution from fees, continued efficiency improvements, and a gradual normalization of credit costs should support profitability. There may still be volatility between quarters, but we believe the underlying trend is very positive.

To summarize, we remain constructive on Argentina and on BBVA Argentina's outlook for the second half. We expect this real loan around 10%. On funding, our strong liquidity gives us flexibility to manage deposits according to the growth opportunities we see. We expect moderate pressure on activity margins, partially compensated at the P&L level by lower inflation, while fees should continue to provide a positive contribution to revenues. Asset qualities indicators are starting to move in the right direction. We expect to end the year with an efficiency ratio below 45%, and we continue to guide for the real ROE in low teens. We enter this phase with a strong position, with a CET1 ratio of 18.8% and a strong liquidity, and we have the capability to capture growth opportunities while maintaining a prudent approach to risk.

We believe BBVA Argentina is well-positioned for the next phase of Argentina's economic cycle. With that, we can move to your questions. Happy to hear.

We will now open the floor for questions. If you have a question, please click on Raise Hand button for audio questions. Our first question comes from Brian Flores with Citi.

Hi, team. Thank you for the opportunity to ask questions. I have one on asset quality. Carmen, I know the bank is already focused in corporate loans, and I wanted to just get your thoughts on what do you think explains this deterioration. Do you think it is the uneven distribution of the recovery in the economy? Or, what do you think explains this cost? Because on paper, the thing we can see is you have been already cautious in your allocation in the loan book. Just wanted to check with you, looking backwards, what do you think explains this deterioration in asset quality? Then in my second question, just a follow-up. You mentioned for the end of the year, maybe cost of risk around 6.5%.

Just wanted to check with you if directionally, the improvement should be sequential, that means lower from the 7.1%, and then we go anywhere between that and 6.5%, or do you think the third quarter still is pressure, and then we drop more sharply in the fourth quarter? Thank you.

Hi, Brian. Thank you for your questions. The first question, at the beginning, you mentioned the corporates. I do not really get why. In the corporate segment, we see zero deterioration, so we are expecting to grow there, as much as we can, depending on the demand on credit. In that segment and also in companies, so small to medium companies, we are outperforming the market, and we are comfortable with that position. Going to the retail side, what we have been doing is, as you know, being more focused on recoveries on one side, on origination on the other side. What we see, as I mentioned before, is that new vintages are performing better. So the quality of the assets is still not so good as we want to see in personal loans and credit cards.

These are the two portfolios where we are more cautious on growing, and we will wait a bit more to see the better performance on that. Of course, when you split between, for example, payrolls and clients, things are much better there than non-clients or non-payroll clients. As I mentioned, we will be cautious on those segments. Then related to the trend for this year, what we see is that coming from actual levels for the third quarter, we see a slight better performance, and then a better one in the fourth one. What we see is the peak NPL and also cost of risk in the second quarter, and then a slightly better performance in the third quarter and a better one in the last quarter to get this average cost of risk I was mentioning.

No, super clear. Then if I may, just a quick follow-up, you mentioned the levels of coverage that will be recovered gradually.

Yes.

Obviously, in the last years, we have seen the decrease, I would say, from very extraordinarily high levels. Just wanted to check with you if, I don't know, if you have a target in mind or any level that you would feel more comfortable with, maybe by the end of 2027. Is it, I don't know, above 100%, 101% something, or do you think it's more of a stable around the 100% level? Any, I think, idea here would be very helpful. Thank you.

Okay. As I mentioned, we expect this 80% level to be the bottom of the ratio, and from here on to gradually rebuild the coverage ratio as asset quality improves. I don't know if 100% is the level for next quarter, but we should see better levels in the following quarters.

Thank you, Carmen and team.

Thank you.

Our next question comes from Juliana Ohara with Goldman Sachs.

Hi, everyone. Thanks for taking my questions. I have a quick follow-up on asset quality. I was wondering if you could somehow share the magnitude of the improvement in the early vintages that you're seeing. Also, I do not know if I am getting ahead, but if you already have some views for 2027 on loan growth and maybe an early ROE expectation would also be great. Thank you.

Magnitude of recovery in the early vintages.

Sorry, Juliana. Thank you for your question. The first one, it's related to the vintages?

Yeah. It was related to if you could share the magnitude of the improvements in the asset quality that you mentioned in the new vintages.

As I was mentioning, you have to split payroll, non-payroll, and different products. These segments we are having are maybe too early to get to a conclusion. But what we see is that from, I don't know, from levels in credit cards of around 6% a year ago, we are near 2.2% this year. It's difficult to get an exact figure there, but what I can say is that we see a constant better figure on a monthly base in these two portfolios. Maybe it's useful to know that in personal loans and also in credit cards, we are already in the payroll portfolio in levels similar to December 2024. There we are already comfortable with what we see.

These segments are the ones we were waiting for to start growing, as I mentioned, in clients that we know their income, and moreover, that we have this payroll is also really important for us.

Yeah. Thank you. Do you already have any expectations for 2027?

Maybe it is a little bit soon to answer that question. But what we expect for the system is a real growth around 10%-15%, and we will be above that. We want to outperform the market. Yeah, something above this level for sure. Maybe next quarter we can have some more color on this.

Yeah. Super helpful. Thank you so much.

Next question comes from Eduardo Resende with UBS.

Hi, everyone. Thanks for taking my questions. I have two on my side as well. The first one, I would like to ask a color on the portfolio mix that you expect for the coming quarters. Mortgage loans were a positive highlight in the second quarter, and more recently, the government announced a new funding program backed by FGS resources. I would like to know the appetite to growing retail mortgage, and how relevant this new program from the government could be to BBVA. This is the first question. The second one is regarding the NIMs. You mentioned that some pressure is expected as rates and inflation continues to decline, but could you provide some color on what levels could we see for the coming quarters and for 2026? That's all from my side. Thank you.

Hi, Eduardo. This is Diego. On your first question regarding the mix of portfolio, we've been growing in the last quarters more on commercials. That represents approximately 57% of our portfolio, but that growth has somewhat stabilized as these kind of loans have already stalled and are not growing so much. For the coming quarters, we are seeing that the retail portfolio has touched some floor on growth. We are seeing some recovery, especially, as you mentioned, in mortgages, probably also on car loans. But gradually, also consumer and credit cards, as Carmen said. We are seeing some signs of improvement on credit quality, so it could be possible to start growing a little in the coming quarters. But anyway, mortgages and pledges will gain traction with more speed and will represent a bigger share of that retail portfolio.

Nowadays, both of them, if you take mortgages and car loans, they represent around 27% of that retail portfolio. Probably, that percentage should grow in the coming quarters. But we will also make efforts to grow in commercial. As Carmen said, we are seeing that credit quality on those segments is good. Of course, we have not seen too much demand on the first part of the year, but we think that seasonally, that first part of the year is the worst. Rates have fallen a lot during these past months, so we should expect some pickup in activity there, too. We have been telling the market that we are focused on companies, on mid-size companies especially, so we will be there. Regarding currencies, we have been growing in the past a little more in the dollar activity.

Probably, that could be the trend in the future, but at very slower pace. We are not seeing that mix of dollar/peso will change dramatically in the coming quarters. Regarding these mortgages, the bank has been active in the past quarters. We have been growing. We have been selling approximately 20% of the new origination in the past four or five months. We intend to keep that track for the coming months. We see with good eyes this new program that the government has implemented, because, of course, in Argentina, there are no institutional investors, and having the ANSES doing that job, I think it's good for the market. So we will participate in the program.

[inaudible] the NIMs.

Regarding NIMs have been performing well in the past quarters, especially the measure that we like to present, that is the NIM. In real terms, we take the cost of inflation from the interest margin, and that measure has gone up 70 basis points in the last quarter. Probably, this is the higher point of the year. Probably, net interest income should stabilize in the coming quarters, and as loan portfolio starts growing, we should see NIMs deteriorating a little. In historical, NIMs should fall around, we think, 200 basis points by year-end, but that will be partially offset by the fall in inflation. So the real NIM should fall around 100 basis points or 125 basis points. This is not a huge problem for us, of course.

This is the trend that everyone is expecting in Argentina if things keep normalizing and inflation keeps going down along with rates.

Super clear. Thank you.

Our next question comes from Sergio [Nanot Del Amico with Particular]. Sergio, your microphone is open. You can open microphone, Sergio. Well, I think that is going to be some problem, technical issue. Next question comes from Mario Estrella with Itaú.

Hey, guys. Hi, team. Thank you for the question. Just two questions. The first I think is already sort of been answered. Regarding the early signs that you've seen, the signs you've seen in early NPLs, I know that you're saying that the new vintages are behaving well, but I don't know if we, as investors, can we track stage 2 or stage 1 loans in order to also be on tracking or measuring well that behavior. I don't know if that is accurate to be following since early, the vintage is not something that we can see. Also because we know that in Argentina, the loan book is very short duration as of now, right?

You correct me if I'm wrong, but I don't know if stage 2 can be also a good measure that we can follow in order to try to anticipate to an improvement in asset quality. The other question was about regulation. We also saw that the government announced that it's going to let banks to grant USD loans up to 15% of deposits, regardless of the client being a USD generator or not, right? I wanted to check on you guys, your views on that policy, if this is going to have a huge impact or not. That would be great to have your color on that as well. Thank you.

Okay. Thank you. Yeah, you're right. If we follow stages, of course, they will give us also some color on the better performance of the portfolio and it is that way. When we take a look to individuals, to retail, we see this better performance along the months this year, and we hope to see it by the end of the year at a better pace. Yes, the answer is yes. I know you don't have enough information to see vintages, and it could be a good indicator for you, so I agree. Related to dollar, Diego, do you want to take that one?

Yes. Hello, Mario. Regarding your other question, we welcome that measure by the government, but, in fact, we already had the capacity to lend to companies that do not originate dollars because we have some bond issues in the market. So we had that capability, even if we do not use it broadly. We look case by case. There are a few companies that we have already lent, but we do not think that we will make this massive. We are aware of the risks. On the other side, we have a very good demand of exporters or of projects. So our liquidity ratio in foreign currency is where we want it to be. Of course, if deposits and funding in general terms keeps going up, we will keep lending. But it is like we did not need this measure to match in order to keep growing our portfolio.

But of course, it is welcome because it allows us more flexibility if we need it.

Perfect. Both. Just to check on what you mentioned about guidance. It was loan growth close to 10% and cost to risk 6.5% and ROE, I think I did not catch that, if there was a correction on that.

Yes. Low teens.

Low teens on ROE.

Yeah.

And—

And the loans around 10%.

Yes.

Yeah, that's right. The other one, I didn't get it. Do you want to check loans?

Cost to risk, 6.5%.

Cost to risk. Yeah. That's right. 6.5%.

That's 6.5% for the full year.

Yeah.

Okay. Thank you. Thank you, guys.

You're welcome.

The next question comes from Lisandro Lloveras with one618.

Congratulations on the results. I have two questions here. The first one is if you can provide a deposit guidance growth for the full year 2026, and the second one is that we saw the bond portfolio and the public sector exposure growing this quarter, and I was wondering if you think it can continue growing the following quarters. Thanks.

[inaudible]

The first one, if I—

[inaudible]

The first one, if I did not get it wrong, it is related to guidance deposit growth, as I said before.

Yes.

Okay. On funding, we are very comfortable with our position, and we think it. We have enough liquidity to keep growing, and it will depend, the opportunities we see on the asset side, and according to that, we will be growing in deposits. We do not see any restraint there. To give you a figure, maybe, it will depend on the system, but we could be around 5%-10%, something similar to that. As I mentioned, if we need more liquidity because the activity grows faster, then we will not have any problem there.

Yes, Lisandro, as you know, we have been growing in market share in deposits. We have grown around 300 basis points through the last two or three years. Then we stopped because, of course, credits are not growing that fast by the moment. When we need to resume that growth, we will. Regarding your second question, it is true that public sector portfolio has grown in the second quarter after having decreased in the previous two years. I think it is temporary. The explanation is just that loans did not traction during this first part of the year. Besides, we saw some good opportunities in building a value bond portfolio. We prefer floating rate adjustment. We started with TAMAR bonds, and then, of course, we switched to this dual bonds that pay the most between inflation and TAMAR rates.

At least two-thirds of our portfolio consists of that kind of bonds, which as I said before, we think that provide value for our NII in the coming one, two, until up to three years. We are comfortable with that position. Of course, we keep some part of the portfolio short-term to attend liquidity situations. That is as a prudency measure.

Perfect. Thank you.

The next question comes from [Stefan Svinger] as a private investor. [Stefan], you can open your microphone. Can you hear this, [Stefan]? Okay, I think that he's going to be a technical problem. One more time, if you wish to ask a question, please click on Raise Hand button. Please hold while we pull for questions. Okay, this concludes with the Q&A section and today's presentation. You may now disconnect and have a nice [inaudible]

Good morning, everyone, and welcome to BBVA Argentina's first quarter 2026 results conference call. Today with us are Mrs. Belén Fourcade, Investor Relations Manager, and Diego Cesarini, IRO and Head of Asset and Liability Management. This presentation and the first quarter 2026 earnings release are available on BBVA's investor relations website, ir.bbva.com.ar, and will also be available for download in the chat. First of all, let me point out that some of the statements made during this conference call may be forward-looking statements within the meaning of the safe harbor provisions found in Section 27A of the Securities Act of 1933 under U.S. Federal Securities Law. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements.

Additional information concerning these factors is contained in BBVA Argentina's annual report on Form 20-F for the fiscal year 2025, filed with the U.S. Securities and Exchange Commission. During the company's presentation, all microphones will be disabled. At this time, we are going to open it up for questions and answers. If you have a question, please write it down in the Q&A section or click on Raise Hand for audio questions. You will receive a request to activate your microphone. Please activate it and pick up your headset to provide optimum sound quality when posing your question. I will now turn the call over to Belén Fourcade. Please go ahead.

Good morning, everyone, and thank you for joining us today for BBVA Argentina's first quarter 2026 results conference call. During the first quarter of the year, our business model demonstrated resilience within a macroeconomic environment characterized by a gradual transition and the normalization of key financial variables. We observed a reduction in interest rate volatility, which sustained the downward trend initiated in the previous year, alongside ongoing adjustments in monetary and regulatory policy aimed at a better management of liquidity. While the combination of fiscal discipline and stabilizing external indicators establishes a more predictable framework for the financial sector, we maintain a cautious and prudent outlook regarding the pace, timing, and evolution of a broader private credit recovery in the upcoming quarters. Moving into our financial highlights for the quarter, BBVA Argentina posted an inflation-adjusted net income of ARS 85.2 billion for the first quarter of 2026.

This represents a 31.2% increase quarter-over-quarter, driven by revenue performance and expense management. This bottom-line expansion boosted our quarterly ROE to 8.3%. At the same time, net interest income grew by 5.9% sequentially to ARS 879.9 billion. Our funding costs fell faster than asset yields due to the shorter average life of our liabilities, expanding our total net interest margin to 18.6%. Regarding efficiency, our quarterly efficiency ratio stood at 51.4%, with personnel benefits and administrative expenses reflecting the ongoing management of our corporate structure. Let's look at the dynamics of our balance sheet and credit portfolio. Total financing to the private sector closed the quarter at ARS 15.7 trillion. While local currency loans fell 6.5% due to seasonal low commercial activity, our foreign currency private loans grew by 6.8% sequentially, which represents a 23.3% increase in dollar terms.

We continue to see continuous momentum in pledge and mortgage lines. Furthermore, we continue to capture business effectively, mainly driven by the commercial segment and foreign currency loans. Our consolidated loan market share rose to 12.15%, signaling a total gain of 95 basis points over the last 12 months. On the funding side, total deposits reached ARS 17.5 trillion. Private deposits saw a minor seasonal 8 basis points market share dip to 9.93%, but they remain up 78 basis points year over year. Regarding asset quality, systemic pressures caused our non-performing loan ratio to rise to 5.60%, primarily driven by the retail card and consumer portfolios. However, commercial delinquency remained exceptionally well-behaved at just 0.50%. Our cost of risk dropped from 8.11% last quarter to 6.14%, partially thanks to our strengthened origination policies, leaving our coverage ratio at 88.41%.

Looking at solvency and liquidity, our liquidity ratio closed at a very comfortable 45.5%. More importantly, our capital position remains robust with a regulatory capital ratio of 18.8%, representing 128.7% excess over minimum regulatory requirements. Before opening the floor to your questions, I want to highlight that on May 15, the Central Bank approved our dividend distribution for ARS 69 billion, which underscores our unyielding commitment to generating shareholder value. BBVA Argentina enters the rest of 2026 with an exceptionally solid foundation. Backed by robust capital, healthy liquidity, and an expanding market footprint, we possess all the necessary tools to lead the market and supply credit as the Argentine financial system normalizes. Thank you for your time. Operator, please open the line for questions.

Thank you. We are now going to start the Q&A session. To ask a question, you can click on the raise hand button. Our first question comes from Tito Labarta with Goldman Sachs.

Hi. Good morning, Belén, Diego. Thanks for the call. Excuse me. My question, I guess, on the asset quality outlook. Seems you're getting a little bit more constructive there, although we're still seeing NPLs deteriorate, but provisioning levels came down. We saw coverage come down a little bit more. Just to understand how comfortable you are on the credit quality improving from here, should we already begin to see that in the second quarter? What would that then mean for loan growth? Do you expect loan growth to accelerate as you see that? Just to get a sense of the timing on how this credit cycle should evolve from here. Thank you.

Hello, Tito. This is Diego. Thanks for the question. Well, as you say, we are a little more comfortable with asset quality, in this first quarter of the year. We have been able to make provisions at a below level of last quarter. There are certain one-off there, as we mentioned in our press release. We have a better rating on some wholesale customers that affected us positively. Besides that, I think that our origination policies are working, and we are starting to see the light at the end of the tunnel. Having said this, of course, the situation still remains a little difficult. For many quarters, in general, we have been thinking that the worst one was over, finally, then the solution was delayed.

We remain reasonably comfortable that during the second quarter, we were stabilizing, and we could probably see a better outcome than in the first one. Regarding loan growth, well, we have been reviewing downwards our expectations. We started the year thinking about the range of 25%-30% growth in real terms. Now, we are thinking of a range between 15%-20%. Of course, the first quarter of the year was not easy. Seasonally, it's not the best quarter of the year. Peso demand is low in the first quarter. Dollar demand was still strong. Second quarter probably will be a little better. In the second half of the year, we are seeing probably a better performance. Regarding the retail business, of course, consumer and credit cards will take longer to recover. We need to be comfortable for new origination.

Okay. That's very helpful. Thank you, Diego.

You're welcome.

Our next question comes from Brian Flores with Citi.

Hi, team. Good morning. Thank you for the opportunity. Maybe a follow-up on Tito's question. If you could provide maybe an update across the lines, Diego, on the guidance. We know we saw some interesting dynamics on the deposit side. I don't know if you could maybe double-click there as to what is happening. We saw very, I would say, competitive dynamics in terms of the funding in dollars. Just wanted to check if this is seasonality, if this is everybody fighting for these dollar deposits. Also, if you could provide your outlook for the overall NIMs, because we see that they were expanding maybe despite the challenges, right? Just trying to understand how sustainable do you think these good margins should be throughout the year. Thank you.

Okay. Hello, Brian. Well, starting with the guidance of deposits, probably we could adjust that guidance, regarding how much we are growing on loans. Many years have started slow on loan growth and then the year performed better. In the first quarter, of course, we saw a difficult dynamic in deposits. We reduced our size in real terms, but that is not to worry, in our opinion, because, of course, as loan demand was not picking up, we needed less deposits, so we were not fighting for commercial ones, especially. Regarding dollar deposits, they are growing slowly, but constantly. We are seeing a 2%-3% monthly growth. It's true that banks, the retail side of the business, is still buying dollars every day. We are keeping a portion of those deposits.

We are not really fighting for deposits, as I think that banks, in general terms, are still liquid. Loan to deposit in dollar terms is still, at a systemic level, probably below 50%, so there's still some room for banking industry to grow in dollar loans without having to fight for more deposits. We are being able to issue also local bonds at reasonable rates. I see a good dynamic, if you ask me, in this part of the business. Regarding NIMs, nominal NIMs have increased around 100 basis points in this quarter, but it's also true that inflation was also higher. We like to measure NIMs in real terms, and they have been mostly flat in the first quarter. They have grown, I guess, 15 basis points.

We have seen this real term NIM very stable, not just in the last quarter, but in the last year and even more than a year. We are expecting that behavior for the coming quarters. We expect next quarter to be also flat or maybe a little positive because inflation is going down. For the second semester, probably we could see, if inflation still keeps going down and rates follow that path, we could see a little deterioration in NIM. But in real terms, I would say that it will be a very similar year to last one. We think that net interest income is a positive contributor to the recovery of ROEs for this year.

No, perfect, Diego. Just to confirm, your ROE range is reiterated for 2026?

Yes, we keep that guidance. We have been talking about low to mid-teens. We keep that guidance, probably closer to low than to mid, but we are still there.

No, perfect. Thank you.

Our next question comes from Pedro Offenhenden with Latin Securities.

Hello. Good morning, Carmen, Diego, Belén. Thank you for taking my questions. I wanted to do a follow-on on a question on coverage. How should we think it going forward? It's maybe a goal or a target for the bank to bring it back closer to the previous levels.

Pedro, how are you? Well, we have seen our coverage ratio in line with the whole financial system going down a little below 100%. Probably, we are seeing the bottom of that ratio, and we should start seeing a recovery on that ratio in the coming quarters. We do not have a specific target. We do not have a specific timeline, but we know that it should go back at least to 100% in the coming future.

Hello, Pedro, this is Belén. I just wanted to add to what Diego was saying regarding coverage. There is not a specific number right now that we have in mind in terms of re-buffering that level of coverage. We are still focused on the needs that we have on provisioning. We are still not passed through the fall in the NPL matters and on cost of risks. Again, remember that coverage will always be rebuilt as long as we consider that it makes sense for us to increase cost of risk in change of that. Again, as Diego said, the system is at our same level. We are not worried on these levels of coverage.

Perfect. Thank you, Belén, Diego. If I might add on NPLs, how did you see asset quality, maybe through the quarter? It was January, February, much different from March, or it was an acceleration, maybe equally between months?

No. In March, I think that there was this acceleration. We are seeing that trend to continue. Probably April could be a little above March, but still mainly flat. From then on, we should see NPL stable for a couple of months and then starting to come down until we reach a level by the end of the year that could be a little below of what we are seeing right now.

Thank you, Diego.

You are welcome, Pedro.

Please hold while we poll for questions. Our next question comes from Carlos Gomez-López with HSBC.

Hello, and good morning. You have probably commented on this already, but can you tell us how the quarter is coming along? We're already in the middle, actually, at the end of May. We saw this negative growth in the first quarter. You have lower rates. You have perhaps a more stable framework. Are you starting to see demand come back, and if so, in which areas? Thank you.

Hello, Carlos. This is Diego. Well, the quarter started slowly, even with lower rates, in terms of ARS activity. In the last couple of weeks, we have seen more demand or more questions from the part of companies regarding ARS loans. When deposit rates were around 30-something, there was no interest in ARS loans. Now that deposit rates have fallen to a 20-something level, we are seeing more interest from companies. We are expecting a pickup in demand, mainly in commercial loans. As I said before, seasonally, the first three or four months of the year are usually very low on ARS demand, starting in May with tax payments and next month when companies pay the aguinaldo, the half complementary salary that they pay, we usually start to see a better demand in ARS.

Regarding dollar, of course, there have been pretty good demand in the first four months of the year. On the contrary, in May, we are seeing a little more calm in this currency.

In terms of the dollars, if I can ask, in the past, you have had continuous purchase by retail investors of physical dollars. How has that evolved in the last couple of months?

Retail investors have been buying U.S. dollars since all the regulations were lifted one year ago. Of course, we are not seeing the same level of demand that we saw in the third quarter of last year, but I would still say that it's high compared with historical levels. We are not at the highest, of course, but people are still buying and saving in U.S. dollars mainly.

Thank you very much, Diego.

You're welcome, Carlos.

Our next question comes from Matias Cattaruzzi with Adcap.

Hi, team. How are you? I have two questions. First, how do you see the TAMAR trajectory over the coming quarters? Do you expect peso NIM to hold or lower? Do you have an NPL guidance for year-end 2026? What is the view on GDP growth and a potential recovery in real wages in the second part of 2026?

Hi, Matias. I will start with TAMAR. We have seen a pretty strong decrease in TAMAR rates through March and April, probably. That has provided good fuel for our NII, as, of course, we have shorter-term liabilities than assets. What we are seeing is that this negative level of interest rates, of course, is not sustainable. Probably, we are seeing it coming to a neutral level or something close to neutral in the coming months, mainly because inflation is going down more than the TAMAR going down. Probably, we are expecting TAMAR to be in line with inflation for the coming months. Inflation keeps going down, TAMAR could go marginally down, not too much. I think that the big movement has already been done, this year at least. Regarding peso NIMs, as I was saying before, it has remained pretty stable in real terms.

We are expecting it nominally to fall a little as interest rates go down. When you consider that inflation is also going down, we are seeing a smaller loss on our net income on inflation. It's reasonable to say that peso NIMs will hold pretty stable in the coming quarters. Probably a little down, no more than 50 basis points or 100 at the most. Regarding NPL, we are not providing a specific guidance. As I said before, we think that it will be a little lower than the levels that we have seen at the end of this first quarter. It should be around 5%, we guess, or a little below. Regarding GDP, we are expecting 3%. I think that you have made another question.

Sorry, about real wages recovery.

Well, real wages should recover as inflation is going down, we guess. I think that one of the main reasons why real wages decreased in the latest last year was the pickup in inflation. We are expecting a reversal on that trend. We are pretty confident generally on the outlook. This first quarter has brought a lot of good news for the financial system and the country, we think that those good news should start to have an impact soon.

Great. As a follow-up, are you seeing a real interest rate in the coming quarters, but tighter than before?

Real interest rates, we are expecting them to come back to neutral levels.

Neutral. Okay.

More as a consequence of inflation going down than TAMAR going up.

Okay. Thank you so much.

You're welcome.

Our next question comes from William Barranjard with Itaú BBA.

Thank you for the presentation. I have two quick ones. First, on your recently done layoff program, if you could share with us the amount of savings you're expecting from it. A second one, still on loan growth. If you could go through the year, in terms of expectations of growth, when it accelerates, and what is the amount expected for growth, if any, in the second half of the year? Those are the two ones.

Okay. Thanks, William. Regarding our layoff program, it's not really a program, I would say. The bank, in the latest two years, as a part of our growth plan, we've been very aggressive in growth. We have grown more than 400 basis points in loans through the last three years without having acquired any entity. In fact, we are the bank that has grown the most in the Argentinian financial system without buying or merging with another bank. We have been growing in payrolls. Now, this quarter, we are making a little efficiency, but it's usual business. Probably in the coming quarter, you could also see some more layoffs. As I said before, it's not a part of a program, it's just the usual business. Sometimes we grow, sometimes we go down on employees. Savings will impact relatively quick.

I think that it's less than approximately a year or 15 months. In that time, we recover what we have paid for those layoffs. In terms of loans, as I was saying, we are expecting every quarter to be a little better than the previous one. At the beginning, the focus, of course, will be on the commercial side, on bigger companies and medium-sized companies. Dollar demand, even if I said that May was coming a little soft, we are expecting to pick up quickly. We have many companies looking for dollar loans. Many projects were there. On the retail part of the business, we are more focused right now on our mortgages. Mortgages have shown a really low impact in NPLs. They are still at a very low level. People are paying. We are originating mortgages very cautiously with loans to value that are very safe.

We are not slowing down on mortgages. We were the only bank that, in the fourth quarter of last year, kept our very competitive prices, we are still leading the recovery in this market. The same with pledges, even if in car loans, even if the first quarter was not as big in new demand. We are partners with four brands, we have a substantial portion of the new car loans. We still want to be there. It's the same as in mortgages. We think that the retail demand of loans should be rotating from consumer, which consumer has had an abnormal portion of banks' portfolios in the past years as a consequence of the economic situation.

As stability is growing in Argentina, we should see that these investment lines, like cars or mortgages, should take a bigger part of our portfolio in the future. As I said before, probably this is not the year to be that aggressive in general terms in retail business. We have been growing very fast in the past two years. We grew more than 80% in real terms in 2024. We grew almost 50% last year. It doesn't really matter if this year we are growing 20%, 15%, or 25%. It's the same. We intend to keep growing in the country, and there is a lot of room to keep going. We are not really in a hurry, especially in the retail business, until general conditions start to improve.

Okay. Thank you very much.

You're welcome, William.

Our next question comes from Martín Argento with Delta Asset Management. Sir, you can open your microphone. I believe he's having some technical issues. Sir, can you open your microphone? We're gonna go ahead to-

Hello. Now you hear me? Sorry.

Yes, we can hear you.

Problem with the microphone.

Go ahead.

Yeah, sorry. Hi. Thanks for taking my question. I have a few quick questions. First, on efficiency, the ratio came in 51% this quarter. Partly, I know that impact by this one-off severance, where do you see the efficiency ratio landing by year-end, and what's the steady state in the long term now? The other question is about ROE. You have guided to mid-teens for 2026, I know it's tough to give a number for 2027, given the election cycle. Directionally, where do you see ROE in the longer term now, when the cycle fully normalized, if you imagine? Related with this, how much of drag is RECPAM for ROE nowadays? That's the questions.

Okay. Thanks, Martin, for the question. Regarding efficiency, well, last year as a whole, our efficiency was 53.9%. Last quarter of last year was really low, but because of one-offs probably. When you compare to this first quarter, you see a spike in the ratio that jumps to 51%. It also, as you mentioned, has some one-offs. For the whole year, for this year, we are expecting to be much better than the previous one as our fees are improving. We have been improving in fees. We have been improving in NII, of course, as we have been mentioning for some quarters. Our expenses are under control. We are expecting a better performance of this ratio. Probably it will be, the year as a whole, below 50%.

I could say that it could be around 48%, 49%, but it should be a substantial improvement compared to the past years. In the future, we need, of course, to keep improving on this ratio. It's still very high. We do not have a specific target, yet we know that banks, of course, and our bank is going to keep growth in place. Volume should offset the fall in NIMs, and fees should keep going, and as I said before, expenses should be kept under control. The trend for this ratio is that it will keep going down. Regarding ROE, yes, it's very difficult, as you said, giving guidance for coming years, as we do not have a track record of normal years, as I like to say, in Argentina.

We have been living under regulations and many regulations that have kept us from having normal banking activity. We know that we still have a lot of room to grow. We are confident that we'll reach higher ROEs. We know that when hyperinflation accountancy, when we get rid of that, we do not have a specific date for that. We know that Argentina could possibly comply with one of the requirements. That is, having an accrued inflation over the last statistics must be below 100%. That requirement could be met by the end of next year. It doesn't necessarily mean that the Central Bank is going to rule that we can get rid of that kind of accountancy. Of course, that makes us, right now, not comparable to banks in other geographies.

If we had to compare with a Brazilian or a Peruvian or a Colombian bank in countries where inflation is running among 3% and 4% or 5%, well, when we saw ROEs from those geographies, you should subtract 2%, 3%, 4% from those ROEs to make them comparable with banks in Argentina. The impact, the precise impact, let's suppose that in 2028, we are without that adjustment. The impact, it's difficult to consider because it will depend on how high inflation is at that moment. If inflation is running at 3%, let's say, it's difficult, but the impact will be small. If inflation is still running at 10%, 12%, the impact will be much higher.

Just trying to make it brief, we think that we have a lot of room to keep improving on our ROE, and we know that if we want to, even if we are very comfortable with our capital position, we know that if we want to be a bigger bank in a bigger financial system, we have to deliver on ROE. That's very clear for us.

Our next question comes from Marcos Serú with Allaria.

Hi. Good morning. Thank you for taking my question. It is about NPLs. The central bank rules require to classify a loan as non-performing, even if that client isn't non-performing with you, but it is delinquent with another bank. I wanted to know how much of the NPL you reported is driven by this cross-bank reclassification rule, and how much is clients that are actually delinquent with the bank. Also, another question, if you could separate the deposits and loan growth, sorry, guidance between ARS and USD. Thank you.

Hello, Marcos. Thank you for your question. The first part, regarding what you said about having in stage three on IFRS or stage three and over on the Central Bank classification, this only applies for commercial loans, not for individuals. I think you mean this rule where you have to classify a client as non-performing if they are non-performing in another bank. This only applies for commercial, and we have had almost nothing. Our commercial NPL is below 1%, and the only maybe worsening, but that we are already seeing an improvement by April was with some SMEs, but we don't have any particular client or that is substantial to your question and to our provisionings. I think that's what you meant in this case, if I'm not mistaken.

Yes. Perfect.

Okay. Regarding the other question, Marcos, of course, we are seeing stronger growth on USD deposits and loans than in pesos for this year. Regarding pesos, Central Bank monetary policy has been very restrictive in the last couple of years. As a system, deposits have not grown in the last two years. The bank, BBVA, yes, we have grown a lot. We have gained market share, for this year, which is not especially strong, as I was mentioning in local currency, we are expecting both deposits and loan growth in local currency of around 10%-15% in real terms. Of course, that means that we are seeing a strong second half of the year, because the year started very slow. Regarding USD, we are seeing deposit growth of around 30%, and loan growth of around 40%.

Our next question comes from Brian Flores with Citi.

Hi, team. Thank you for the opportunity of circling back here. I think we didn't touch on the regulatory side. Just wanted to check with you because we know that the government has been really, I would say, flexibilizing some of the measures. Just wanted to check with you if there's any short-term, low-hanging fruits that the banking system as a whole is still asking for in terms of support on the regulation side. Diego, I think maybe the idea we get from what you mentioned today, along with Belén, is that, we are seeing more of a normalized cycle, right, in terms of credit. Just, you spoke a bit on, I would say, some better trends on, I wouldn't say very optimistic trends, but better trends in terms of credit demand.

If you could maybe, in your view, provide a view of what is missing here as the missing piece to maybe turn the whole cycle around in a more, I would say, strong way given the solid initial traction that we are seeing.

Thanks, Brian. Regarding your first questions about regulations, we all know what happened in the third quarter of last year and all the reserve requirement regulations that were put in place. That meant, of course, interest rates going up very, very quickly. The impact that it had in our NIIs and all the difficulties we had operationally, because it was very difficult to comply on those reserve requirements on a daily basis. Those regulations have been mainly removed. I think that made sense. It was on the Central Bank agenda that as soon as elections were over, they were going to dismantle all this, and they have complied with that. We are seeing an environment of less volatility, rates going down. Everything has normalized pretty well. There are minor issues.

Of course, reserve requirements are still very high in Argentina, even if not the 100% of those requirements mean necessarily some harm to our incomes. If you consider local currency, reserve requirements reach 30% of our deposits, but just 1/3 of that, we complied on a Central Bank account at zero rate, and the remaining 2/3 of those requirements are met with bond positions that we would hold anyway. What we assume is that whenever a loan demand in ARS pick up and Central Bank is comfortable regarding the path of inflation, they will start to release these abnormally high reserve requirements. In the meantime, I have to say that we have more liquidity. We have free liquidity. We have enough liquidity to grow, even if Central Bank doesn't decrease this level of requirements in the short term. We are not worried about liquidity.

We think that we still can gain some market share in local currency and, of course, in foreign currency, too. Liquidity is not really an issue. To complete your question regarding all other regulatory issues, I think that there's nothing really very important, very substantial. We are always talking, and Central Bank is always willing to receive our comments on small issues. I think that the system is working really good right now. Regarding what is needed to normalize the cycle of credit, I think that we should bear in mind that a lot of things are happening in Argentina and not everything has its effect that quick. We come from many decades of doing things wrong from the economic and institutional and political points of view. Just to have to bear in mind, a lot has happened in the past four or five months.

Argentina has passed two or three very important reforms, labor reform, Glacier Law amendment. We have the new RIGI. We have passed a budget. The Central Bank has started buying USD. A rating agency has improved the rating of the country. We keep the fiscal load, and inflation keeps going down. Argentinian companies and some sovereigns have been issuing plenty of USD in foreign markets. We have lower rates. We have lower taxes for exports. I'm probably forgetting a lot of things good that are happening to Argentina, and that probably those things will start to have an effect on activity soon. Probably we are a little anxious regarding how quick this can happen, but we have to bear in mind that we come from many decades of mismanagement on these issues. I think that we are on the right path.

Eventually, things will start to get better. Of course, I cannot tell when this is going to happen, having lower rates, just to give an example, and lower inflation in the coming months and quarters probably should prove to be two very good pieces of news for our short-term activity. We think that, of course, when we originate, just to take the example of retail business, of course, we keep originating retail loans at a much lower extents than a year ago. We are giving those loans to our best customers, let's say, at lower rates. Those loans are proving to behave better. They are behaving really good. With time, we will start to be a little more loose on how we can keep originating those kinds of loans. We will be making proofs, and eventually, we will get more comfortable with this origination.

Of course, we are not in a hurry. As I said before, we have been growing fast in the past two years. We have gained a place of relevance in the financial system. We are number two bank in market share in private loans. We were number four, three or four years ago. All this without having acquired any other entity. We are very confident that we are on the right path.

Thank you. This concludes today's Q&A. I would now like to hand the floor back to BBVA's team for closing remarks.

Okay, thanks. Well, I want to thank again for joining. We are really pleased, as we said, at how BBVA has been able to carry out our strategy in a context that all of you know that has not been the ideal in the last three quarters, and especially having been able to make the necessary tactical amendments to our strategy. We know that we have been able to keep our growth strategy, as I said. We have shown for our second quarter in a row with a sequential improvement in our net income, though we are still very far from what we think is our potential.

Of course, we remain very focused and confident that with all these reforms that are taking place in the country and the better financial conditions that we are starting to see these quarters, we should be soon able to resume growth and keep this path of improvement in our financial performance. That's all, and thanks again for joining.

Thank you. This concludes today's conference call. You may now disconnect.