Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to BBVA Argentina's 4th Quarter 2020 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 company remarks are completed, there will be a question and answer session. At that time, further instructions will be given.
First of all, let me stress 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 19 33 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 the BBVA Argentina's Annual Report on Form 20F for the fiscal year 2019 filed with the U.
S. Securities and Exchange Commission. Today with us, we have Mr. Ernesto Gallardo, CFO Mrs. Ines La Nuce, IRO and Mr.
Javier Kelly, Investor Relations Manager. Mr. Kelly, you may begin your conference.
Hello, everyone, and welcome to the BBVA Argentina Earnings Conference Call for a discussion of the quarter fiscal year ended December 31, 2020. Before we begin our formal remarks, allow me to remind you that certain statements made during the course of the discussion 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 materially differ, including factors that may be beyond the company's control. For a description of these risks, please refer to our filings with the SEC and our earnings release, which are available at our Investor Relations website, ir.pbva.com.r. Speaking during today's call will be Ines La Nuce. Also joining us today is Ernesto Baccardo, our Chief Financial Officer, who will be available for the Q and A session.
Please note that starting January 1, 2020, as per certain term bank regulations, we have begun reporting results applying hyperinflation accounting in accordance with IFRS rule IAS 29. For ease of comparability, figures for all quarters of 2019 have been restated applying IAS 29 to reflect the accumulated effect of the inflation adjustment for each period through December 31, 2020. Now let me turn the call over to Ines.
Thank you, Javier, and thank all of you for joining us on our Q4 2020 and full year earnings conference call. We hope you and your beloved ones are healthy and safe on these challenging times. EBBA Argentina has been able to maintain a solid position within a high uncertainty context throughout 2020. While some signs of recovery have appeared on the economic side, much still remains to be defined facing 2021, such as the development of the global sanitary crisis, the resolution of internal conflicts related to fiscal deficit financing, the agreement with the IMF and last but not least, the result of 2021 midterm elections. Meanwhile, the bank closely monitors its business, financial conditions and operating results in the aim of anticipating possible effects of the gradual removal of regulations implemented by the government during the pandemic, and especially over asset quality and profitability ratios.
It is important to emphasize that the global cemetery crisis in 2020 confirmed that of which PVVA Argentina was convinced some years ago, the significance of technology in the delivery of financial services. In virtue of our vision of the future, we were able to rapidly adapt to the new normality and continue to offer our services to all our clients during the pandemic. These unexpected circumstances ratify that the path we have taken in terms of digital transformation, internal process adaptation and personal training is most adequate. Regarding digital transformation, total digital clients reached 1,900,000 with a penetration of 72% from 66% a year ago. Total mobile clients reached 1,600,000 with a penetration of 60% from 54% in the prior year.
Moreover, digital branches have been launched as of October 2020, combining several features between human capital and structured facilities to promote client self-service aiming to digitalize and migrate clients to remote channels. During December 2020, we launched More. MOLO is the 1st payment solution app to be launched in a strategic alliance with other Argentine banks. MOLO enables wire transfers and cashless payments through mobile phones and includes all member advance promotions at a level at purchase. Mogo has already reached 1,000,000 users and keeps growing.
In terms of responsible banking, during 2020, BBVA's purpose to bring the edge of opportunity to everyone became even more relevant. In line with our commitment to sustainable development and assuming a role as a leading financial institution in this area, we launched a new line of eco personal loans and a line of green loans for corporations. In addition, we were the 1st bank to deliver sustainable cards made with recyclable material. BBVA Argentina keeps working towards its sustainability model, supporting responsible business actions regarding inclusion, financial education and environmental protection as part of its compromise with the country. I will now comment on the bank's Q4 2020 and full year financial results.
All figures mentioned here after are measured in current currency at the end of the reporting period, including the corresponding financial figures for previous periods provided for comparative purposes, unless otherwise noted. It is also important to mention that on February 9, 2021, through Communication A, 70 two-twenty 2, the Central Bank informed that it is admitted to retroactive application of modification and exposure of monetary results exposed in Communication A7211 for the December 31, 2020 financial statements. They later explained that the monetary result accrued from monetary concept at fair value through other comprehensive income, OCI, should be recorded in the corresponding accounts in the income statement of the period. Thus, retained earnings from periods should be adjusted to include monetary results that were accumulated in OCI as the date of application. It is important to mention that this measure was optional for implement as of December 2020, but through Communication A-seven thousand two hundred and eleven, this would be compulsory for all banks as of January 2021.
These changes have been applied to the accumulated financial statement as of December 20 pursuant to the regulation, reason for which orders have not been restated for the income statement in these earnings release, but will be restated during 2021. BBVA's Argentina full year 2020 net income, including inflation adjustment effects, totaled ARS 12,000,000,000, 38.9 percent lower than the ARS 19,700,000,000 posted a year ago. The year over year decrease is mainly explained by the impact of the pandemic by the sharp contraction of the interest rate as a consequence of the monetary policy implemented by the Central Bank and by the strong restrictions imposed to the FX market. Another factor that was also impacted in the results of 2020 is the partial collection and exchange of the Leliq, which has been restructured in August 28, 2019. On the expenses side, we were able to generate savings in operating expenses as a consequence of a better efficiency management.
It's important to mention that in the Q4 2020, a new provision for ARS 2,100,000 was supported. This decision goes in line with the continuity of the digital transformation process that the bank has decided to launch previously, which aims to generate higher efficiency and agility in decision making processes. We also experienced savings at the commission side, product of lower expenses in customer acquisitions during 2020. During the year, the bank presented a positive real return on equity of 11.8 percent and real return on assets of 1.8%, proving the bank's resilience. In the quarter, net interest income totaled ARS19.5 billion, 5.3 percent higher than the result posted in the Q3 of 2020 and ARS17.9 billion lower than the result posted a year ago.
In the quarter, interest income growth does not compensate for the greater increase in interest expenses, explained by the regulation of both active and passive rates and the lower interest income generated by credit card financing, mainly through the National AURADOCE program. During the Q4 of 2020, interest income totaled ARS 32,000,000,000, 10.2% higher quarter over quarter and 12.4% lower year over year. This quarter over quarter performance can be explained by the 266.4% increase in the other interest income line due to the higher income from active repos as a consequence of the increase in repo rates. Interest income was also benefited by higher income from said U. S.
Adjustment, mainly explained by the acceleration of the inflation during the quarter. Income from government securities fell 3.3% sequentially and 3.5% in the year over year comparison. This quarter over quarter decrease is explained by both a lower volume invested in Leliqs and a lower average rate in these instruments. Interest income from loans and other financing totaled ARS 15,600,000,000, decreasing 5.1% quarter over quarter. This is explained by the contraction in overdrafts, a direct consequence of the economic situation and credit cards affected by the Ora Dose programs.
This combined drop was partially offset by the increase in documents, thanks to higher seasonal activity towards the end of the year and higher average rate. In the Q4 of 2020, interest from time deposit represented 78.9 percent of the bank's total interest expenses, increasing 8 0.4% in the quarter. Net fee income amounted to ARS 2,800,000,000, 16.3% lower quarter over quarter. This contraction is explained by an increase in fee expenses as a consequence of a more aggressive approach towards client acquisition, which was not offset by the quarterly increase in fee income led by the increasing activity in the credit card use. Moving on to expenses.
During the Q4 of 2020, personnel and administrative expenses totaled ARS9.7 billion, decreasing both in the quarter and the yearly comparison, 2.6% 13%, respectively. Personal benefits contracted 4.8% in the quarter, reaching ARS 4,900,000,000. The savings is partially explained by the smaller structure and the higher quarterly and annual inflation that surpassed the salary increase as stipulated with the labor unions during the year. Administrative expenses remained almost unchanged, falling 0.3% in the quarter, part of savings generated in other administrative expenses that offset the seasonal increase in armored transportation services. For 2020, the accumulated efficiency ratio was 56.8%, above the 43.7% reported a year ago.
The increase is explained by a higher percentage increase of the income line, which does not offset the savings generated in the expenses line. Excluding the inflation adjustment included in the line, income from the monetary position, the accumulated efficiency ratio as of 2020, which had reached 45.1%. In terms of activity, the bank financing to the private sector totaled ARS290.3 billion, increasing 0.8% quarter over quarter and 5.9% year over year, both in real terms. BBVA Argentina consolidated market share over the private sector loans as of December 2020 reached 8.49% from 7.71% in the Q4 of 2019. Loans to the private sector in pesos increased 1.6% in the quarter and 15.6% in the year.
Dollar denominated loans decreased 5.3% quarter over quarter, measured in pesos and 14.3% measured in dollars, mainly driven by the contraction in demands of loans in foreign cards. Regarding the retail portfolio, including mortgages, pledge, consumer and credit card loans, these have increased 7.3% quarter over quarter and 6.1% year over year. In the quarter, the greater increase are reflected in pledge loans and credit card loans, the later boosted by our programs and greater seasonality. Conversion loans, including overdraft, discounted instruments, leasing, foreign trade and other loans, fell 7.3% quarter over quarter and grew 5.5% year over year. The quarterly decrease is mainly explained by a 20.8% decline in overdraft and a 15.5% decline in the loans for pre financing and financing experts.
This was partially offset by a 4.9% increase in discounted instruments as a consequence of higher commercial activity. In the Q4 of 2020, gross loans to deposit ratio was 61% compared to 70% a year ago. As of December 2020, asset quality measured as a total nonperforming portfolio over total portfolio reached 1.42%, 25 basis points higher than the previous quarter. The quarterly increase is mainly explained by an increase in the commercial nonperforming portfolio. This ratio is still positively affected by the temporary flexibility in Central Bank regulations regarding debtor classification during the COVID pandemic, which extended grace periods in 60 days before a loan is classified as nonperforming and suspends the mandatory reclassification of clients that have been an irregular performance with other institutions, but are regular performers within the bank.
These waivers are in effect until March 31, 2021. The coverage ratio allowance over total nonperforming portfolio decreased to 324.43 percent in the Q4 2020 from 355.26 percent in the previous quarter. This is explained by an increase in non performing loans, which is greater than the increase in allowances as a consequence of the implementation of impairment models and the continuity effect of waivers in force through central bank regulations regarding debt classification. Cost of rates, loans loan loss allowances over average total loans reached 4.85%, higher than the 4.61% recorded in the Q3 2020. This is mainly explained by an increase in non performing commercial performance.
Allowances for the bank in the Q4 2020 reflect expected losses driven by the adoption of the IFRS signed standards as of January 1, 2020, excluding debt instruments issued by the non financial government sector, which were locally temporarily excluded from the scope of such standards. In the 4th quarter, exposure to the public sector, excluding Central Bank Instruments, measured and aborts ended the total assets, reached 5.6%, above the 4.3% recorded in the previous quarter. Our total exposure to the public sector, excluding central bank notes, was ARS 38,300,000,000 above the ARS 28 billion in the previous quarter. On the funding side, private sector deposits as of the Q4 of 2020 totaled ARS 472,000,000,000, growing 7.8% quarter over quarter and 19.1% when compared with the Q4 of 2019. Private sector deposits in local currency were ARS 337,000,000,000, increasing 8 0.2% quarter over quarter and 41.2% year over year.
This is mainly explained by the growth of the investment accounts, checking accounts and to a lesser extent by the growth in saving accounts. Private sector deposits in foreign currency, measured in pesos, grew 6.7% in the quarter and contracted 14.3% when measured in dollars. As of December 2020, BBVA's transactional deposits, including checking and saving accounts, represent 66.6 percent of total deposits from 63.1 percent a quarter ago. BBVA Argentina consolidated MicroShare of Private Sector Deposits as of December 2020 reached 7.13%. In terms of capitalization, BBVA Argentina continues to show strong solvency indicators accounting an excess capital of ARS 57,100,000,000, entailing a total regulatory capital ratio of 20.2% and a Tier one ratio of 19.6%.
The bank's aim is to make the best use of this excess capital. The bank's liquidity ratio in pesos and dollars remained healthy at 60.6% and 85.1% of total deposits as of December 31, 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 Our first question is from Gabriel Nobrega with Citi. Please go ahead.
Hi, everyone. Good morning and thank you for the opportunity to ask questions. One thing that caught my eye during this quarter, sorry, was the rapid deterioration in your commercial loan book. And I think this is a bit surprising as the Central Bank has actually extended some of the flexibilizations into the end of March. And so first, I was just wondering, is there a specific sector?
Or was it related to a specific company? And if it was really related to a specific company, how are you provisioned for them? And I'll make a second question afterwards. Thank you.
Hello, Gabriel. How are you? Yes, the increase in NPL, it states in a particular case, a company from the oil and gas sector, San Antonio. The debt was for ARS 1,500,000,000. From that, MXN4.3 is dollar denominated.
And the company has already provisioned into Stage 3. So that's the particular case. Just to give you some other information regarding NPL, we believe the ratio is very well under control. The asset number we have for NPL, excluding Central Bank waivers, it's as of December in 1.82. So it's very well under control.
And we are projecting I'm sure that's an answer you would like to ask. We are projecting NPL towards the end of 2021 around 3.32%, mainly driven by commercial and the removal of the waivers imposed by the Central Bank.
Perfect. Thank you for the explanation. And then my second question, when we look at the provisions, even though you didn't report the full Q4, we see that it seems that provisions increased a lot. And so I was just wondering if the increase in provisions, is it because of this company, which you classified as on Stage 3? And also, as Guillaume just said, that you're expecting NPL to pick up and reach around maybe 3.3% by the end of the year.
Are you seeing any need for further provisions throughout the year? Thank you.
Okay. Just to be clear, in the press release, the only thing that we didn't discuss was the full P and L for the quarter. But there's a chart on provisioning by quarter. So you can see that information is available in the press release. Regarding the increase in provision, it is mainly to do with the change in the calculation of the parameters of IFRS 9, which is normally done at the end of the year, particularly it was in November.
Going forward, to give you more color on asset quality, the cover ratio, as you know, reached 3 24%. And we are seeing that ratio towards the end of the year moving towards 150%, mainly because of an increase on the denominator, the NPL. So that's our projection. And regarding cost of risk, we ended the quarter or the year in 4.89%, and we are projecting that ratio to go further down to 3.4%, mainly because of higher increase in the average loan book compared with the loan loans allowances. That as of December, you had a higher increase in the numerator rather than the denominator.
So it's going to be inverse the increases.
All right. Thank you very much for your answers, Inez.
You're welcome, Maria.
The next question comes from Carlos Gomez with HSBC. Please go ahead.
Hello, good morning, Inez. If we can go back to why exactly you are not disclosing the P and L because it's pretty extreme measures. And I don't think I completely understood what is the reason. Now I understand that you intend to publish full quarterly information in the coming quarters. Could you confirm that?
And will you be providing history? And second, regarding your expectations for this coming year in terms of growth, in terms of profitability. I know it's very hard and I know there are so many variables, but what is the general idea of what the bank expects relative to 2020? Thank you.
Carlos, thank you for your question. Okay. So basically, we did not disclose the P and L by quarter because there was an implementation of NORM Communication A7122 of Central Bank. That basically was a change in the way you were recognizing the effect of the inflation of all the bonds you had in how to collect and sell. As you know, we had the bonds in other comprehensive income.
And before the change in this recommendation, you were just accumulating the effect of the inflation since you acquired the bond, and you were only moving that negative effect into the P and L once you sold or defaulted the bond. That norm that recommendation changed, and it was not compulsory for all banks in December. So the Central Bank allowed it to make the change in December, the change that we did in our P and L, and it is compulsory for all banks as of January 2021. So as of January or as of Q1 of next year, you're not going to have these differences between the way our bank reports the information. So basically, what you did now is the accumulated effect you had of the inflation for that particular bond, you had to distribute it in the corresponding period.
You recognized some part of that loss in 2020 and another part in 2019. So basically, you increased you had an extra increase of your income, net income. For example, the variation because of the implementation of this re implementation was of Ps5.4 billion more in 2020, but Ps9.2 billion less in 2019. If we had shown the Q4 2020 information, it wouldn't have been comparable with the Q3 or the other quarters because you were not obliged to restate the previous quarter. Going forward, as the quarters are presented all historical quarters will be restated with the application of this new rule of implementation.
And it's going to be in line with all of the banks. You will not have more distortions when comparing with the other banks you cover. I hope I answered that question. I know it has been a complicated decision for us, but it was not accurate to show a 4th quarter with a full effect. But actually, you can do that calculation if you want.
You just need to take the 3rd quarter information you have to multiply it by the inflation of the quarter, which was 1.11%, And you subtract that to the accumulated results, and you can get a 4th quarter with full effect of the implementation of the re implementation. Going towards
project Sorry, sorry. Before you move on, obviously, this is complex. Obviously, this requires a lot of calculations. So could you please and could management please commit to providing us with that quarterly information in the future? And you mentioned that it affects the 2019 results as well.
So could we have 2019, 2020 both in nominal and in real time so that we can make comparisons? Because at this point, we are quite lost.
Nominal terms is impossible, Carlos, and none of the other banks are presented nominal information. The balance sheets in Argentina are presented adjusted by inflation, and all the figures we are providing are adjusted by inflation. Actually, the projections we're seeing for loan growth and deposits numbers I'm going to give you are adjusted by inflation as well because that's a local replementation. What we are going to do, IOPS provide the quarter information with implementation of the norm and the corresponding comparatives. Okay?
Okay. Thank you. And then, Auguste?
Okay. So going forward, projections. For loans, again, this is all projections on real terms. We ended the fiscal year 2020 with the loan book growing around 6 percent, growing above the system. And we are expecting for 2021 an increase of around 11% in real terms, growing above the system as well.
Our research department is seeing a contraction in loan for 20 21 in the system. That growth is going to be led by U. S. Dollar loans because the agribusiness should pick up and on a better less extend by the peso book. On total deposits, we ended the year growing around 19.5%.
That was flat compared to the system. And for 2021, we are expecting 10% growth and then growing above the system. And our research department is seeing also a contraction in deposit growth for the system in 2021. The currency, again, it's going to be led by the book in dollars more than the peso book. Regarding ROE and ROA, as you mentioned, it's difficult to predict and change rules and recommendations change very rapidly.
But we are seeing a decrease in the ROE and the ROA, probably to have. And that mainly has to do with the inflation. We're expecting inflation to go up to 50% in 2021 compared to a 36% you saw in 2020. So it's basically an effect of the inflation. The P and L should always in real terms now should behave very similar to what was 2020, but the decrease would mainly come from higher inflation affecting the net monetary position.
Okay. So similar nominal returns, so to speak, but lower real returns because of inflation?
Correct.
Thank you very much.
This concludes the question and answer session. At this time, I would like to turn the floor back to Ms. Lannoussay for any closing remarks. Thank you. This concludes today's presentation.
You may disconnect your line at this time and have a nice day.