Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to BBVA Argentina's 2nd Quarter 2019 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 both companies' presentation. After the company's remarks are completed, there will be a question and answer session. At that time, further instructions will be given.
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 forward looking statements. Additional information concerning these factors is contained in BBVA Argentina Annual Report on Form 20F for the fiscal year 2018 filed with the U.
S. Securities and Exchange Commission. Today with us, we have Mr. Ernesto Gallardo, CFO Mrs. Ines Leungs, IRO and Mrs.
Cecilia Acuna, Investor Relations Manager. Ms. Acuna, you may begin.
Thank you. Good morning, everyone, and thanks for joining us today for discussions on BBVA Argentina's Q2 2019 results. On June 10, 2019, the BBVA Group globally adopted a single unit brand, BBVA. In Argentina, BBVA Frances is now BBVA. The corporate name is also changed to Banco BBVA Argentina, which has been approved by the Central Bank and will begin to be used once registered in the public registry of commerce.
I will now briefly comment on the most important topics of the quarter and then we will be open to questions. BRL Argentina's net income reached ARS 6,800,000,000 for the Q2 of 2018, a 16.9% increase compared to the previous quarter. Net income during the Q1 included the impact of the sale of 51% of the bank stake in Prisma, Mayo de Pago and the market valuation of the remaining 49%. Excluding such impact, the growth in the quarter would have been 74.1%. During the Q2 of the year, BBVA reached an average return on assets of 7% and an ROE of 58.4 percent.
Net operating income amounted to ARS 20,900,000,000, including ARS 3,200,000,000 accounting for as other operating income. Such amount is related to the result from the application of the inflation adjustment to the 2018 income tax calculation. At the same time, a provision for the same amount is accounted for in other operating expenses like Eter. Operating expenses reached ARS 12,100,000,000 included tax provision. Efficiency ratio for the quarter reached 34.2%, registered an improvement compared to the ratios of the previous quarter and the Q2 of 2018.
In terms of activity, the private sector loan portfolio totaled Ps. 180 6,600,000,000 remaining at a similar level compared to the previous quarter, while increasing 15.1% in the last 12 months. Including the Volpe and Financial Service portfolio growth, which has reached 1.1% and 19.9%, respectively. On a consolidated basis, including the diabetes, BBVA loans book reached an 8.5% market share, showing an increase of 27 basis points in the last 12 months. In the last quarter, credit growth devaluation of the peso and higher interest rates.
Loans in pesos, including Volkswagen, increased 4.7% compared with the previous quarter and increased 11.3% compared with the Q2 of 2018. Regarding U. S. Dollar loans expressed in pesos, it fell by 5.1% in the quarter and increased 40.3% in the last 12 months, mainly due to the reexpression of the new value of the currency. Measured in dollars, it fell in both periods by 3% and 4.6%, respectively.
Regarder retail loans, credit card finances grew 5.6 percent during the quarter and 36.4 percent annually, while mortgages loan reflected the impacts of inflation. Personal loans remained stable during the quarter and increased 18.1% in the last 12 months. Commercial loans fell 2 point 4% compared to the previous quarters, mainly due to the decrease in the foreign currency denominated portfolio. Compared to the Q2 of 2018, it grew 9.2%. At the end of June, the asset quality ratio measured as non performing loans over total loans reached 2.66% with a coverage ratio of 112.87 percent.
The cost of risk reached 2.5%, 41 basis points above last quarter, mainly due to some deterioration in the commercial portfolio. During the quarter, the provision for Molinha Canuela increased to 50% from 31% in the previous quarter. Total deposits amounting to ARS 285,200,000,000 at the end of June, increasing 2.3% and 47.9% compared to the previous quarter and the Q2 of 2018, respectively. Deposits in local currency grew by 2.7% and 34.5% compared to the quarters ending as of March 2019 June 2018, respectively. Foreign currency denominated deposits expressed in pesos grew 2% during the quarter and 65.9% in the last 12 months.
Measures in the currency of oil, they increased 4% and 12.8% in the same period respectively. At the end of June, BBVA had a total consolidated capital ratio of 16.7%, which ARS 103.6 percent over the minimum requirement. The Tier 1 ratio reached 16% and liquid assets accounted for 60.7% of the bank deposits at the end of June 2018. Thank you very much. We are now ready to answer your questions.
We will now begin the question and answer session. Our first question today will come from Gabriel Nobrega with Citi. Please go ahead.
Hi, Ernesto, Inez and Cecilia, thank you for the opportunity to ask questions. What I would like to further understand is about the MXN 3,200,000,000 gain that you booked in your other operating income during this quarter. I understand that this is similar to what was done in 2016 2017, but I would just maybe like to understand why have you done this again? And also what could be the timeframe for the decision to come out so that we will know if you will be able or not to reverse the provisions that you made in other operating income? And I'll make a second question afterwards.
Thank you.
Okay. Gabriel, how are you? As I explained you, we did this in 2016 2017. And is this because the income tax effective rate, if we consider the effects of inflation, is like on fixed category, it's more than 90%. So as the Central Bank or the regulator asked in 2017, we made a provision for the same amount.
So it's neutral, the effect in the net income. And in the future, we have a positive result for this situation, we will reverse it.
But just a follow-up here, Cecilia. What could be AAM timeframe for us to know when you will be able to revert this and have AAM positive result?
I don't know, probably in 6 years.
Okay. And as for my second question, looking at the M Sharpe peso depreciation that we are seeing today, could you just maybe remind us what is your exposure to foreign currency and also to inflation rates? And how do you expect this sharp depreciation to affect your results over the incoming months? Thank you.
Hi, Deborah. This is Ina speaking. Regarding the dollar position, we're in a loan position. To give you an idea, our loans in dollars represent approximately 36% and our deposit 47%. And regarding inflation, I'm sure you are familiar with what's going on with the primary elections.
We had a projection for this year around 40%. But definitely, given the scenario, we need to recalculate and see what's going to happen for the remaining months of the year.
All right. That's very clear. Thank you for the answers.
Our next question will come from Alunife Garcia with Credit Suisse. Please go ahead.
Good morning. This is Alonso Garcia. Thank you for taking my question. My question is, I just wanted to ask, I mean, probably it is early to ask you, but I don't know if you are seeing a deposit runoff in terms of peso deposit runoff in these first few hours after the electoral results last night. And probably if it's too early, if you anticipate this the risk of a significant deposit runoff after election result?
And my second question would be regarding we're already in the news some issues with the home banking platforms of some bank in Argentina given the large amount of transaction transactions that clients were trying to do. So if you could comment on these, if issues have been solved and if there is enough liquidity in banks to make to respond to this demand of FX? Thank you.
Hello. This is Ines speaking. Regarding your question, it's probably too early to say what's going to be effect on deposit withdrawals. What we can tell you is that we have a huge more than 50% liquidity in U. S.
Dollars between what we have in the branches, between what we have at the Central Bank at 0 interest rate, what we have of government securities. So we are prepared to respond with at least 0.5% of the dollar deposits. So we are not concerned about that. The bank and entire financial system has a very healthy position. We've been through all these experience in the past.
So we are prepared to respond in case we see a withdrawal of deposits.
The U. S. Dollar denominated loan portfolio is very short maturity.
Okay. And regarding the banking platform, the home banking platform have issued issues been solved already. Could you elaborate on the reasons for the issues?
No, nothing to be at least for now. We haven't heard nothing that is uncommon. Ordinary, this is a morning with typical situation, but nothing we should be
Our next question will come from Carlos Gomez with HSBC. Please go ahead.
Hi, good morning. Thank you for making the call in a difficult day. Two questions. The first one is going back to your ForEx position. I know you are balanced, I know you are very liquid, but can you give us, if you can, your net ForEx position as of now and what percentage of your regulatory capital is reduced?
We understand that it is limited and it cannot be too large. But if you can give us the net position, that will be great. 2nd, your NIM this quarter was extremely high. We understand that the rate was very elevated. But is there any extraordinary element in this NIM?
Is this a level of NIM that you think you could replicate in the coming 1 or 2 quarters? Or there was something extraordinary in the result? Thank you.
Hi, Carlos. Regarding the NIM, no, there is the effects of the high levels of leaks and the high rates. There is nothing extraordinary on that.
But again, if I look at the numbers Coromis Arlo, I think it goes from 17% to 25%, and that's a big jump. We understand that the leak is very high, but it didn't change that much from 1 quarter to the other. Why there's been increased so much for you?
The levels of the rates in peso for public instrument was from 49% to 64% and an average of ARS 44 1,000,000,000 to ARS 58.8. So we have high impact on that in the assets rate, but from 44% to 51%. So and we have a very good manage of prices in terms of liability because we are not paying corporate deposits at higher rates. I will send you the charge by email.
Okay. Thank you. And the ForEx?
In terms of Forex, we are under the limits that the Central Bank has. And we have around 10% of long position in U. S. Dollar, but this is changing every day as you can imagine. So we are I think that the most important thing to comment right now in this issue is that we are wrong.
We are not sure in U. S. Dollar. And considering the situation that we have, this is the right position to have to maintain right now.
Sure. And again, to remind us, the regulatory limit right now is 15% or 10%?
It's 5%, up to 5%, but depending on the different investments that you have, you can maintain you can achieve 30%. So there are you have other considerations in order to understand or to know exactly the maximum position you can have in ForEx. So I should say that you can go from 5% to 30%. And yes, we are a little bit above this 5%.
5%. So you're a bit above 5%, not above 10%.
Yes. Well, we're close to 10%.
Close to 10%.
Okay. But I am speaking right now, well, if we consider the position that we had at the end of June is more close to 5%.
Okay. Thank you.
This concludes the question and answer section. I would like to turn the floor back to Ms. Acuna for any closing remarks.
Okay. Thanks again to all of you joining us and do not hesitate to contact us directly for any further questions. Thank you.
Thank you. This concludes today's presentation. Thank you for attending and you may now disconnect.