Banco BBVA Argentina (NYSE:BBAR) held its second-quarter earnings conference call on Friday. Below is the complete transcript from the call.
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Summary
Banco BBVA Argentina reported an inflation-adjusted net income of 131.6 billion pesos for Q2 2026, marking a 44.6% increase quarter over quarter, with a quarterly ROE rising to 12.2%.
Total financing to the private sector reached 17.1 trillion pesos, with local currency loans up 2% and foreign currency loans up 2.5% sequentially.
The company's liquidity ratio stood at 45.5% with a regulatory capital ratio of 18.8%, highlighting a strong capital position.
The NPL ratio increased to 6.09%, but early-stage delinquencies showed signs of improvement.
Management expects real loan growth of around 10% for 2026, with a focus on maintaining credit quality and pursuing opportunities in retail and dynamic sectors.
Efficiency improvements were noted, with a quarterly efficiency ratio of 45%, and expectations to end the year below this level.
Future outlook suggests continued growth in lending, stable or improving asset quality, and a real ROE in the low teens.
Management remains optimistic about macroeconomic conditions in Argentina, predicting a gradual improvement in the financial system.
Full Transcript
OPERATOR
Good morning, everyone, and welcome to Banco BBVA Argentina Q2 2026 results conference call today. With us are Mrs. Belén Farkade, Investor Relations Manager; Diego Cesarini Iro, Head of Assets and Liability Management; and Carmen Morillo Arroyo, CFO. This presentation and the second quarter 2026 earnings release are available on Banco BBVA Argentina's investor relations website, ir.bbva.com.ar, and they 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 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 Banco 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. 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 up your headset to provide optimum sound quality when posing your question. I will now turn the call over to Belén Farkade. Please go ahead.
Belén Farkade, Investor Relations Manager
Good morning, everyone, and thank you for joining us today for Banco BBVA Argentina 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 continued, 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 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 declining interest rates and more favorable seasonality, although still affected by elevated delinquency levels. Moving into our financial highlights for the quarter, Banco BBVA Argentina posted an inflation-adjusted net income of 131.6 billion pesos 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 14.87%. Regarding efficiency, our quarterly efficiency ratio stood at 45%, with personnel 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 17.1 trillion pesos. 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 19.2 trillion pesos. 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. Banco 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. Banco 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 a 128.7% excess over minimum regulatory requirements.
In conclusion, as we head into the second half of 2026, Banco 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.
Carmen Morillo Arroyo, Chief Financial Officer
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. 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 not be 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 the 1.5% to 2% range. Beyond these numbers, we remain confident in Argentina's 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 incomes 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 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 in a very comfortable position. We have strong liquidity and we do not see funding as a constraint to growth. So rather than targeting a specific level for deposit growth, we will manage deposits according to our funding needs and the opportunities we see on 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 strong growth. Net fees are up around 35% year over year, reflecting the good progress we are making across our main fee-generating businesses. 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 reflect 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 the 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 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. So, to summarize, we remain constructive on Argentina and on BBVA's outlook for the second half.
We expect real loan growth 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 quality 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 a real ROE in the low teens.
We enter this phase in a strong position, with a CET1 ratio of 18.8% and strong liquidity, and we have the capability to capture growth opportunities while maintaining a prudent approach to risk. We believe Banco BBVA Argentina is well positioned for the next phase of Argentina's economic cycle, and with that we can move to your questions. Happy to hear.
OPERATOR
We will now open the floor for questions. If you have a question, please click on the Raise Hand button for audio questions. Our first question comes from Brian Flores with Citi.
Brian Flores, Analyst at Citi
Hi Tim, 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's 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.
So just wanted to check with you. Looking backwards, what do you think explains this deterioration in asset quality? And 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.
Carmen Morillo Arroyo, Chief Financial Officer
Hi Ryan, thank you for your questions. So the first questions at the beginning you mentioned the corporates. I don't 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. So 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've been doing is, as you know, be more focused on recoveries on one side, on origination on the other side.
And 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. So 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.
So as I mentioned, we will be conscious, cautious on those segments. And 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. So what we see is like the peak NPL and also cost of risk in the second quarter and then a better performance, 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.
Brian Flores, Analyst at Citi
No, super clear. And then if I may just a quick follow up. You mentioned the levels of coverage that will be recovered gradually. Obviously in the last years we have seen the decrease for, I would say, from very extraordinarily high levels. But 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 27. 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, any, I think, idea here would be very helpful, thank you.
Carmen Morillo Arroyo, Chief Financial Officer
Okay, so 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 improves. I don't know if 100% is the, the, the level for next quarter but we should see better levels in the following quarters.
Brian Flores, Analyst at Citi
Thank you Carmen and Tim.
OPERATOR
Thank you. Our next question comes from Juliano Hara with Goldman Sachs.
Juliano Hara, Analyst at Goldman Sachs
Hi everyone. Thanks for taking my questions. I have a quick follow up on asset quality. I was wondering if somehow you could share the magnitude of the improvement in the early vintages that you're seeing and also—I don't know if I'm 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.
Carmen Morillo Arroyo, Chief Financial Officer
Okay, so sorry Juliana, thank you for your question. So the first one was—so it's related to the vintages. So the—
Juliano Hara, Analyst at Goldman Sachs
Yeah, it was related to how—if you could share the magnitude of the improvements in the asset quality that you mentioned in the early, the new vintages.
Carmen Morillo Arroyo, Chief Financial Officer
So as I was mentioning, you have to split payroll, non-payroll, and different products. We are—so the signals 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%, 2.2% this year. So 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. And 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.
So there we are already comfortable with what we see. So these signals are the ones we were waiting for to start growing, as I mentioned, in clients that we know their income. Moreover, that we have this payroll is also really important for us.
Juliano Hara, Analyst at Goldman Sachs
Thank you. And do you already have any expectations for 2027?
Carmen Morillo Arroyo, Chief Financial Officer
So maybe it's a little bit soon to answer that question. But what we expect for the system is real growth around 10 to 15% and we will be above. We want to outperform the market. But yeah, something above this level for sure. So maybe next quarter we can have some more color on this.
Juliano Hara, Analyst at Goldman Sachs
Yeah, super helpful. Thank you so much.
OPERATOR
Next question comes from Eduardo Hengi with UBS.
Eduardo Hengi, Analyst at UBS
Hi everyone. Thanks for taking my questions. I have two on my side as well. So the first one I would like to ask a color on the portfolio mix that you expect for the coming quarters. I mean mortgage loans were a positive highlight in the second quarter and, more recently, the government announced a new funding program backed by FGS resources. So I'd like to know the appetite to grow in retail mortgage and how relevant this new program from the government could be to Banco BBVA Argentina.
So this is the first question, and the second one is regarding the NIMs. You mentioned some pressures expected as rates and inflation continue to decline. But could you provide some color on what levels could we see for the coming quarters and for 2020? That's all from my side. Thank you.
Diego Cesarini Iro (Head of Assets and Liability Management)
Hi Eduardo, this is Diego. On your first question regarding the mix of portfolio, you know 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 this 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, so 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 improvements 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 in 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. And we are focused—you know, we have been telling the market that we are focused on companies, on mid-sized companies especially—so we will be there.
Regarding currencies, you know 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 a very slower pace. No, we are not seeing that that mix of dollar-peso will change dramatically in the coming quarters. Regarding these mortgages, you know 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 ANSES doing that job, I think it's good for the market. So we will participate in the program. And your second question regarding NIMs. Well, 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. 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 or 125 basis points.
This is not a huge problem for us. Of course this is the trend that everyone is expecting in Argentina—things keep normalizing and inflation keeps going down along with rates.
Eduardo Hengi, Analyst at UBS
Super clear. Thank you.
OPERATOR
Our next question comes from Sergio Nanute del Amico with Particular. Sergio, your microphone is open. You can open microphone, Sergio. Well, I think there are some technical issues. So the next question comes from Mario Estrela with Itaú.
Mario Estrela, Analyst at Itaú
Hey guys. Hi team. Thank you for the question. Just two questions. The first, I think it's already kind of sort of been answered. So regarding, you know, the early signs that you've seen—the signs you've seen in early NPLs. I know that, you know, you're saying that the new vintages are behaving well, but I don't know if we, you know, as investors can—can we track, you know, a Stage 2 or Stage 1 loans in order to also, you know, kind of be on tracking or measuring well that behavior?
I don't know if that is accurate to be following since, you know, early, early—I mean, the vintages is not something that we can see. And also because we know that, you know, in Argentina the loan book short duration as of now, right? So you correct me if I'm wrong, but I don't know if, you know, Stage 2 can be, you know, also like a good measure that we can follow in order to try to anticipate—to try an improvement in asset quality. And the other question was, yeah, it was about regulation.
We also saw that the government announced that it's going to let banks loan USD—to grant USD loans up to 15 of deposits, you know, regardless of the client being a USD generator or not, right? So I wanted to check on you guys your views on that policy, if it's going to have an impact or not. I mean, that would be great to have your color on that as well.
Carmen Morillo Arroyo, Chief Financial Officer
Thank you. Okay, thank you. Yeah, so you're right. So 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. So when we take a look to individuals—so 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. So 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—Diego, do you want to take that one? Yes. Hello, Mario. Well, 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 keep going up, we will keep lending. But it's like we didn't need this measure too much in order to keep growing our portfolio. But of course it is welcome because it allows us more flexibility if we need it.
Mario Estrela, Analyst at Itaú
Perfect. Perfect. Both, just to check on what you mentioned about guidance: it was loan growth close to 10%, and cost of risk 6.5%. And ROE, I think I didn't catch that, if there was a correction on that.
Carmen Morillo Arroyo, Chief Financial Officer
Low teens. Low teens on ROE. Yeah, and then loans around 10%. Yeah, that's right. And the other one, I didn't get it. Yeah, that's right. That's six and a half for the full year.
Mario Estrela, Analyst at Itaú
You want to check the cost of risk? Yeah. Okay, thank you. Thank you, guys.
Carmen Morillo Arroyo, Chief Financial Officer
You're welcome.
OPERATOR
The next question comes from Lisandro Lovas.
Lisandro Lovas, Analyst
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.
Belén Farkade, Investor Relations Manager
Thanks. The first one, if I didn't get it wrong, is related to guidance on deposit growth, as I said before. So, on funding, we're very comfortable with our position and we think we have enough liquidity to keep growing, and it will depend on the opportunities we see on the asset side. According to that, we will be growing in deposits. So we don't see any restraint there. To give you a figure, maybe it will depend on us and on the system, but we could be around 5 to 10%, something similar to that.
But as I mentioned, if we need more liquidity because the activity grows faster, then we won't have any problem there.
Carmen Morillo Arroyo, Chief Financial Officer
Yes, Lisandra, 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, but then we stopped because, of course, credits are not growing that fast at the moment. So when we need to resume that growth, we will. And regarding your second question, it's true that the public sector portfolio has grown in the second quarter after having decreased in the previous two years.
I think it's temporary. The explanation is just the loans didn't traction during this first part of the year, and besides, we saw some good opportunities in building a value bond portfolio. We prefer floating rate adjustment, so we started with TAM bonds and then, of course, we switched to these dual bonds that pay the most between inflation and the TAM rate. So at least two-thirds of our portfolio consists of that kind of bonds which, as I said before, we think provide value for our NII in the coming one to three years.
So we are comfortable with that position. And of course we keep some part of the portfolio short term to attend liquidity situations as a prudential measure.
Lisandro Lovas, Analyst
Perfect. Thank you.
OPERATOR
The next question comes from Stefan Zwinger, a private investor. Stefan, you can open your microphone. Can you hear Stefan? Okay. I think that he is going to be a technical problem. So, one more time, if you wish to ask a question, please click on the raise hand button. Please hold while we poll for questions. Okay, this concludes the Q&A section and today's presentation. You may now disconnect and have a nice day.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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