Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to BBVA Argentina's fourth quarter and fiscal year 2021 results conference call. We would like to inform you that this event is being recorded, and all participants will be in a 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. Should any participant need assistance during the call, please press star zero to reach the operator. 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 2020, filed with the U.S. Securities and Exchange Commission. Today with us, we have Mr. Ernesto Gallardo, CFO, Mrs. Inés Lanusse, IRO, and Ms. Belén Fourcade, Investor Relations. Ms. Fourcade, you may begin your conference.
Good morning, everyone, and welcome to BBVA Argentina's fourth quarter and fiscal year 2021 earnings conference call. Before we begin our formal remarks, let me stress that some of the statements made during the course of this conference call may constitute forward-looking statements, which are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements, including factors that may be beyond the company's control. For a description of these risks, please refer to our SEC filings and earnings release, which are available at our investor relations website, ir.bbva.com.ar. Speaking during today's call will be Inés Lanusse and Ernesto Gallardo, our Chief Financial Officer, who will be available for the Q&A session.
Please note that starting January 1st, 2020, as per central bank regulation, we have begun reporting results applying hyperinflation accounting pursuant to IFRS rule IAS 29. For ease of comparability, 2020 and 2021 figures have been restated to reflect the accumulated effect of inflation adjustment for each period through December 31st, 2021. Now let me turn the call over to Inés.
Thank you, Belén, and thank you all of you for joining us today. The pandemic situation improved during the second half of 2021, which enabled a recovery of the economic activity. This situation has had a positive impact on the financial system as a whole, which holds strong to cope with the challenge that still persists in the short term. BBVA Argentina has a corporate responsibility with society inherent to the bank's business model, which bolsters inclusion, financial education, and supports scientific research and culture. The bank works with the highest integrity, long-term vision, and best practices, and it is present through the BBVA group in the main sustainability indexes.
With respect to digitalization, our service offering has evolved in such a way that by December 2021, digital clients' penetration reached 74% from 72% a year back, while that of mobile clients reached 64% from 60% in the same period. The response on the side of customers has been satisfactory, and we are convinced this is the path to pursue with the aim of sustaining and expanding our competitive position in the financial system. The bank actively monitors its business, financial conditions, and operating results with the aim of keeping a competitive position to face the contextual challenges. I will now comment on the bank's fourth quarter 2021 and fiscal year 2021 financial results.
BBVA Argentina 2021 net income was ARS 21.2 billion, 27.1% higher than the ARS 16.6 billion reported in 2020. This implies an accumulated annualized ROE of 13.5% and an ROA of 2% in 2021 compared to the accumulated annualized ROE of 10.9% and an ROA of 1.7% in 2020. The increment in the bank's operating income is mainly explained by, one, an increase in interest and fee income, the latter mostly enhanced by the implementation of a new reward program with credit card benefits, which meant savings in fee expenses. Two, lower net loss from write down of assets at amortized cost and fair value through OCI.
Three, lower loan loss allowances, mainly due to a good evolution in the behavioral loan portfolio. It should be noted that in 2020, results were affected by the partial collection of payments and voluntary swap of the National Treasury U.S. Dollar-linked notes, LELink, which had been restructured in August 28, 2019, and that generated a loss in the line net loss from write down of assets at amortized cost and fair value through OCI. Another factor to be highlighted is the income tax line. Accumulated income tax during 2021 recorded a gain of ARS 80 million. The first and second quarter of 2021 were affected by the reversal of a provision connected to the repayment of income tax inflation adjustments for 2016, 2017, and 2018 fiscal years.
Excluding the effect of actions of the clarity judgment during the year, the effective tax rate would have been 30% for 2021 compared to an effective tax rate of 43% in 2020. The accumulated net income for 2021, net of the effect of actions of the clarity judgment on the tax line would have been ARS 15.7 billion, decreasing 5.6% versus the accumulated net income for 2020. This exclusion would have meant an accumulated ROE of 10.2% and an accumulated ROA of 1.5%. Additional to these factors, net income was affected by the income from the monetary position in a context of higher inflation.
BBVA Argentina fourth quarter 2021 net income was ARS 4.8 billion, increasing 27.8% quarter-over-quarter. This implied a quarterly ROE of 11.8% and a quarterly ROA of 1.8%. Quarterly results are mainly explained by, one, lower loan loss allowances, especially due to a satisfactory behavior of the loan portfolio. Two, a greater fall in interest expenses. Three, lower administrative expenses. The increase in the result is offset by, one, lower net fee income due to higher activity. Two, higher expenses in other operating expenses line item due to the recording of a new provision for organization charges. Three, a higher loss from the net monetary position.
Turning to the P&L lines, net interest income for the fourth quarter of 2021 was ARS 33.6 billion, increasing 4.3% quarter-over-quarter and 13.9% year-over-year. In the fourth quarter of 2021, interest income decreased less than interest expenses, mainly due to one, higher income from interest from loans and other financing. Two, increases in income from CER/UVA clause adjustment. And three, an improvement in the funding mix. In the fourth quarter of 2021, interest income totaled ARS 55.9 billion, falling 2.5% compared to the third quarter of 2021, and increasing 15.7% compared to the fourth quarter of 2020.
Quarterly decrease is mainly driven by lower income from premium or reverse repo transactions, especially due to a lower pricing in this instrument as a result of higher activity. This fall was partially offset by a 4.7% increase in CER/UVA clause adjustment, mostly on income from government securities linked to certain indexes, and a 4.5% increase in interest from loans and other financing. Interest expenses totaled ARS 22.3 billion, denoting an 11.3% decrease quarter-over-quarter and an 18.4% increase year-over-year. Quarterly decrease is described by lower checking account expenses, partially offset by higher expenses by inter-financial loans received by the bank subsidiaries. Interest from time deposits and investment accounts explain 76.6% of interest expenses versus 71.5% the previous quarter.
Net fee income as of the fourth quarter of 2021 totaled ARS 5.8 billion, falling 14.5% quarter-over-quarter and increasing 37.9% year-over-year. In the fourth quarter of 2021, fee income totaled ARS 11.6 billion, growing 1.6% quarter-over-quarter and 1.8% year-over-year. The quarterly growth is mainly explained by an increase in income from credit cards due to higher activity and those linked to loans. Regarding fee expenses, these totaled ARS 5.7 billion, growing 25.6% quarter-over-quarter and falling 19.6% year-over-year. Higher expenses in the quarter are partially explained by higher expenditures linked to an increase in marketing actions, higher consumption, and a strategy of favored business acquisition.
During the fourth quarter of 2021, personal benefits and administrative expenses totaled ARS 16.2 billion, falling 8.9% compared to the third quarter of 2021, and growing 11% compared to the fourth quarter of 2020. The accumulated efficiency ratio as of the fourth quarter of 2021 was 69.1%, improving compared to the 69.7%, and deteriorating versus the 56.8% reported in the third quarter of 2021 and in the fourth quarter of 2020, respectively. The quarterly improvement is explained by a higher percentage increase in the denominator than the numerator, which has been positively affected by improvement in net fee income and net interest income.
Excluding inflation adjustment considered in the income from the monetary position line item, the fourth quarter 2021 accumulated efficiency ratio would have been 49.4%, marginally improving compared to the 49.7% of the third quarter of 2021, and deteriorating compared to the 45.1% in the fourth quarter of 2020. In terms of activity, private sector loans as of the fourth quarter of 2021 totaled ARS 388.4 billion, increasing 3.7% quarter-over-quarter and falling 11.1% year-over-year. Loans to the private sector in pesos increased 6.8% in the fourth quarter of 2021, and decreased 6.5% year-over-year.
During the quarter, growth is especially driven by a 23.6% increase in other loans, a 19.9% increase in discounted instruments, and a 3.2% increase in credit cards, the latter primarily explained by Ahora 12 programs. Loans to the private sector denominated in foreign currency fell 29.2% quarter-over-quarter and 51.8% year-over-year. Quarterly decrease is mainly explained by a 24.8% fall in pre-financing and financing of exports, and a 100% fall in discounted instruments, and a 17.7% fall in other loans. All the aforementioned indicates a lack of demand of loans in foreign currency. In real terms, retail loans have increased 2.2% quarter-over-quarter and fallen 7.9% year-over-year.
During the quarter, the greater increase are seen in consumer loans with a 4.1 increment, followed by a 3.1 growth in credit cards. Commercial loans grew 6.1% quarter-over-quarter and contracted 16.2% year-over-year, both in real terms. Growth in commercial loans in the quarter was primarily motivated by marketing campaigns during the fourth quarter of 2021. Loan portfolios are mainly impacted by the effect of inflation in the fourth quarter of 2021, which reached 10.2%. In nominal terms, the retail, commercial, and total loan portfolio all increased 12.6%, 17%, and 14.3% respectively during the quarter, well beyond real term growth.
BBVA Argentina consolidated market share of private sector loans reached 8.05% as of the fourth quarter of 2021, from 8.49% a year ago. As of the fourth quarter of 2021, the total loans and other financing over deposit ratio was 55.4%, above the 54.5% recorded in the third quarter of 2021, and below the 61.2% in the fourth quarter of 2020. In the fourth quarter of 2021, asset quality ratio was 1.87%, compared to the 2.54% recorded in the third quarter of 2021. The decrease is mainly explained by, one, a satisfactory behavior of the loan portfolio. Two, the write off of non-performing loans, mainly retail.
Three, an important increase in the total loan portfolio. The cover ratio was 181.89% in the fourth quarter of 2021, versus a 181.75% recorded in the third quarter of 2021. The change in the ratio reflects a similar variation in allowances, mainly due to the update and improvement of the IFRS 9 impairment loss model parameters, with most impact on the retail portfolio and the total non-performing loan portfolio. Cost of risk reached 0.46% as of the fourth quarter of 2021, lower than the third quarter of 2021, 2.80%.
This is mainly explained by the reduction in loan loss allowances as a result of the annual update of IFRS 9 impairment loss model parameters, and an improvement in the sovereign rating for the commercial portfolio, upgrading the commercial loans portfolio rating. This was offset by the negative effect of the new default definition implemented in November 2021. Exposure to the public sector, excluding Central Bank instruments in the fourth quarter of 2021, represented 8% of total assets, above the 6.9% in the third quarter of 2021, and the 5.6% in the fourth quarter of 2020.
On the funding side, as of the fourth quarter of 2021, total deposits reached ARS 708.3 billion, growing 1.9% quarter-over-quarter and falling 1.9% year-over-year. Private non-financial sector deposits in the fourth quarter of 2021 totaled ARS 394.8 billion, increasing 1.6% quarter-over-quarter and falling 2.4% year-over-year. Private non-financial sector deposits in pesos totaled ARS 531.9 billion, increasing 6.1% compared to the third quarter of 2021, and 4.7% compared to the fourth quarter of 2020. The quarterly growth is mainly explained by the increase in sight deposits, especially checking accounts, non-interest-bearing, and savings accounts.
This was partially offset by a 7.8% decrease in term deposits. Private non-financial sector deposits in foreign currency expressed in pesos fell 10.6% quarter-over-quarter and 20% year-over-year. Measured in U.S. dollars, these deposits fell 5.3% quarter-over-quarter and 1.2% year-over-year. As of the fourth quarter of 2021, the bank's transactional deposits, checking accounts and saving accounts, represent 65.6% of total non-financial private deposits versus 63% in the third quarter of 2021. The bank's consolidated market share of private deposits reached 6.95% as of the fourth quarter of 2021 from 7.13% a year ago.
In terms of capitalization, BBVA Argentina continues to show strong solvency indicators as of the fourth quarter of 2021. Capital ratio reached 20.8%, lower than the third quarter of 2021, 23.5%, mostly due to the announcement of dividends distribution on November 3rd, 2021 for ARS 6.5 billion. Tier 1 ratio was 20.3%, and capital excess over regulatory requirement was ARS 88.5 billion or 154.5%. It is worth mentioning that since 2020, the bank's shareholders meeting have announced dividends for a total of ARS 28 billion, which remain pending of distribution, given that the central bank started a suspension in the distribution of results of financial institutions until December 31st, 2021.
Now that the suspension has been lifted, the bank will proceed to work on the authorization request to the regulator once its 2021 results are approved by the shareholders meeting. The bank's liquidity ratio in pesos and dollars remain healthy at 72% and 92.9% of total deposits as of December thirty-first, respectively. This concludes our prepared remarks. We will now take your questions. Operator, please open the line for questions.
We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question is from Carlos Gomez with HSBC. Please go ahead.
Hello. Good morning. First of all, congratulations on your 2021 results, and in particular on your victory in the tax front. I have two questions. One is in general, you know, what type of growth you expect for this year and next year? I realize there is a lot of uncertainty and, you know, you still have to see the economic plan that has been pacted for the IMF, but I mean, you must have a budget and you must have some ideas. What is it that you expect that you'll be able to get this year, again, in terms of volumes and in terms of returns? That will be my first question.
Hi, Carlos, this is Ines speaking. Yes, as you mentioned, there is still a lot of uncertainty in Argentina, but we have some figures that we can share with you. The loan book, as you can see, in real terms, ended decreasing 11% in the year, but mainly driven by [audio distortion] , this lack of demand for that type of loans. For 2022, we are seeing real growth around 5%. We are seeing our system contracting around 11% in real terms. Just to mention, we are projecting inflation for 2022 around 55%. That's for private loans.
Regarding private deposits, the year 2021 ended with a contraction of 2%, mainly also driven by U.S. dollars deposits. For 2022, we're expecting there a contraction around 3%, but the system will even contract more around 7%. All those figures are in real terms.
Again, to clarify, do you expect that the system will contract loans by 11% in real terms in 2022, or that was the figure for 2021?
Yes. 2022, the system will be contracting 11% in real terms, and we should be growing around 5% in real terms. We should be gaining some market share. In deposits [crosstalk]
That's a lot of difference, right? That's almost a 15% difference.
[crosstalk] Yes.
Why do you expect to do so much better than the system?
Mainly because we have been, in 2021, not that active. As you can see, in the fourth quarter, we've pre-presented a lot of marketing promotions to attract more customers. We have grown in number of customers, so we believe there could be some more demand on SME particularly that we are trying to tackle and bring more customers into the bank. From the side of individuals, we can see some more demand.
That answers your question. You can see that we have expanded more.
In terms of loans.
Yes. We have expanded more in acquisition in the fourth quarter. We had been quite stable in the first three quarters, and that reflects in the amount of customers that we have increased, particularly in SME.
Okay. You expect to grow more. Fair enough. In terms of profitability for the bank?
Profitability, well, we presented ROEs, positive ROEs. If you exclude the acción declarativa, the ROE would be around 10.2% compared to the 13.5% that was presented. An ROE we presented of 2%, without the declaratory actions would have been 1.5%. For the following year, we are seeing stable figures, slightly lower probably, because we are seeing inflation a little bit higher. Again, we need to see how also the cost of funds keeps evolving. We have improved our mix in the fourth quarter. We need to see what happens for 2022. On the income side of interest, there we should see a better performance, mainly because, you know, the monetary policy rates have increased.
Basically stable or a bit lower probably.
Again, because rates are going to be higher, shouldn't that, in principle, improve your margins and improve your ROE?
Yes, it could increase, but we're gonna have more inflation, and we are gonna spend a little more in acquisition costs. Remember 2021, the fee line evolved very well, mainly because we spent less. We had less non-interest expenses. That started to increase in the fourth quarter because we're being more active in trying to attract new customers.
Very good. If I can ask another question, I don't think there are so many. On the dividends, we understand that you have been allowed to pay dividends but in a very particular fashion, which is these 12 installments that the central bank has allowed. Is that subject to change, and would you be willing to pay in such a schedule, or you are trying to negotiate something different with the central bank? Second, what is eligible to be distributed given that you have already declared dividends for the last two years that have not been distributed yet?
Yes. We have already declared ARS 78 billion that are already in the liability side. That's why also our capital ratio has decreased. Being that said, we are gonna. The regulation says that the results for 2021 need to be approved by the annual shareholders meeting that is gonna be held on April 29th. Last night, the relevant event was released. We're gonna present, after those results have been approved, our proposal to the central bank. We believe we will be able to distribute around ARS 31.13 billion in the 12 installments as the regulation says. Again, then that needs to be approved by the central bank once the 2021 results have been approved by the annual shareholders meeting. We're not projecting extra dividends to be declared in 2022 for the time being.
Let me get this straight. You think that of the ARS 28 billion that you already have declared, ARS 13 billion, 1-3, would be distributable?
Exactly.
Okay. The other 15 would not be distributable this year, but probably will be distributable in the future.
We need to see how the regulation evolves. It's very difficult to say what probably some regulations can change. We need to see what happens. A lot has to do with the macroeconomic situation and the IMF and many things that we need to see what happens in that front.
Okay. Now, if I understand correctly, your intention is not to declare additional dividends for now until the other ones are paid or you would declare the dividends on the 2021 earnings?
We need to see again what happens in 2022 and how the macroeconomic scenario evolves.
Okay. That's a decision you could do later in the year?
Yeah. We need to see. Yeah, it could be a possibility, yes. [crosstalk] As of today-
Mm-hmm.
We are okay with ARS 13 billion that we expect that we'll be able to distribute during 2022.
13, not 30, right? 13, 1-3.
Yeah, 1-3.
1-3. Okay. Now, so do you need to call for another AGM to declare more dividends in the future or you can do it, or the board can do it without shareholders approval?
During the annual shareholders meeting of April 29th, or we should call for an extraordinary shareholders meeting as we did two in 2020 and two in 2019.
Okay. In terms of the timing, as you said, you have the possibility of paying over 12, in 12 installments. That seems logistically complicated, but you are willing to go through that particular process or you have hopes that it will be changed in the future?
All right. We have the annual shareholders meeting in April twenty-ninth. We still have two months to go, and then we need to present the option, the proposal to the central bank, which needs to be approved. The timeframe will depend a lot on how long the central bank takes to approve our proposal.
There is no specific amount of time.
Exactly.
For the central bank to answer our request to pay the dividends.
Okay. No, I understand. The BCRA can respond to your request at any point in time, and it can take long. My question is specifically whether you will be willing to make, you know, 12 small payments over the year or you think that it can be changed?
We don't know if this is going to be changed in the future. To be honest, I don't know. For the time being, what we know is that we have to pay, let's say in 12 installments, and we will do as soon as we have the authorization from the central bank.
Okay. That's very clear. Thank you so much for your time.
Thank you.
Again, if you have a question, please press star then one. Please stand by as we poll for questions. Showing no further questions, this concludes the question and answer session. At this time, I'd like to turn the floor back to Mrs. Lanusse for any closing remarks.
Thank you very much for your time, and let us know if you have further questions. Have a good day.
Thank you. This concludes today's presentation. You may disconnect your line at this time and have a nice day.