Ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to BBVA Fonseca's 1Q 'nineteen 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 section. 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 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 Froncesa's Annual Report on Form 20F for the fiscal year 2017 filed with the U.
S. Securities and Exchange Commission. Today with us, we have Mr. Ernesto Gallardo, CFO Ms. Ines Munoussay, IRO and Ms.
Cecilia Acuna, Head of Investor Relations. Ms. Acuna, you may begin your conference.
Thank you. Good morning, everyone, and thanks for joining us today for the discussions on BBVA Transnet's Q1 2019 results. I will now briefly comment on the most important topics of the quarter, and then we will be open to questions. In the Q4 of 2018, BBVA transfers reached a net income of CLP66 billion, 104.6 percent higher than in the previous quarter and 288.8 percent higher than the net income registered in the Q1 of 2018. This net income includes the impact attributed to the sale of the 51% of BBVA Francis participation in Prisma Mayor de Sao and the valuation of the remaining 49%.
Excluding these extraordinary results, net income of BBVA transfers reached ARS3.9 billion, 32.5 percent higher than in the previous quarter and 151.8% as the net income registered in the Q1 of 2018. During the Q1 of the year, the ROE reached 6.6% and the ROE 58.8% compared to 3.4% and 31.7% published in the previous quarter, respectively. Excluding Prisma's sales impact, the ROA would have reached 4.3% and the ROE 38.1%. Net operating income reached ARS 16,000,000,000, increasing 42.3% compared to the previous quarter and 98.7 percent compared to the Q1 of 2018. Operating expenses reached ARS 7,600,000,000, increasing 2.7% compared to the previous quarter.
This effect was mainly driven by a 5.5% increase in personnel expenses attributed to the salary negotiations with the labor unions and its compensation expense and was offset by 6.9% decrease in administrative expenses led by less expenses related to transport of value and less rent. The efficiency ratio in the quarter reached 37%, showing an improvement of around 142 basis points compared to the previous quarter. Regarding BBVA franchise activity, at the end of March 2019, the private sector loan portfolio totaled ARS185.3 billion, increasing 2.1% during the quarter and 32.9% in the last 12 months. These figures exclude qualifying financial services loans, which since the Q3 of 2019 are no longer included under card secured loans in the balance sheet. On a consolidated basis, including the rabies, that is, Volparian, Rombo and PSC, BBVA Transce Loans Group reached 8.6% market share, showing an increase of 30 basis points in the last 12 months.
In the Q1 of 2019, credit growth in Argentina was affected by the devaluation of peso and higher interest rates. Loans in pesos, including Volkswagen's portfolio, decreased 5.1% compared with the previous quarter and increased 12.3% compared with the Q1 of 2018. Regarding the U. S. Dollar loans expressed in peso, the macroeconomic situation resulted in a 16.9% increase in the quarter and 100 point 7.1% increase in the last 12 months, mainly due to the re expression of the new value of the currency.
Measured in dollars, they increased 2% during the quarter and decreased 4% on the annual comparison. With regards to loans to individuals, credit card and personal loans recorded a positive performance, while mortgages loans reflected the impact of the increase in inflation. Commercial loan growth was mainly due to the depreciation of the peso. At the end of March, the asset quality ratio measured as non performing loans over total loans reached 2.21 percent with a COVID ratio of 114.42 percent. The cost of risk reached 2.09%, 21 basis points above last quarter and due to some deterioration in the retail portfolio.
Total deposits reached ARS278.7 billion at the end of the 3rd quarter, increasing 7.4% compared to the previous quarter and 74.2% compared with the Q1 of 2018. Foreign currency deposits expressed in pesos grew 18.1% in the quarter and 139.5 percent in the last 12 months. Measured in dollars, they increased 3.5% during the quarter and 11% on the annual comparison. Local currency deposit increased 1.2% in the quarter and 47.2% compared with the Q1 of 2018. These effects were mainly driven by the fair adjustments on deposits, which offset saving accounts decrease in the quarter.
BBVA Frances continues to show another level of solvency. As of the Q1 of 2018, the total capital ratio was 15.3%, 101 basis points higher than in the previous quarter, mainly due to the result experienced during the quarter. The Tier 1 ratio reached 14.6 percent with an excess of capital of MXN 20,100,000,000. That ends our prepared remarks. We will be happy to take your questions.
We are now open to the Q and A.
Thank you. The floor is now open for questions. The first question comes from Gabriel da Nobrega with Citi. Please go ahead.
Hi, everyone. Thank you for the opportunity to ask questions. During the quarter, we saw that your NPLs continued to increase, while coverage decreased again. I know that this is greatly due to the deterioration and your exposure to willingness to this troubled corporate. So could you just please remind us what is your total exposure to this company?
And what coverage have you reached for it already?
Hello, Gabriel. How are you? Our exposure to Molino's Canola is 3% of the total debt. And as of March, the provisions are in line with the 30%.
All right. If you just allow me a follow-up here, do you expect to make more provisions throughout the year? And also, if you do expect to make more provisions for this company, where should we see your cost of risk in 2019?
Well, we expect to make higher provisions, probably up to 50% in this second quarter. And we have our expectations of NPLs by the end of the year is low to approximately between 2.5%, 2.6%.
All right. That's very clear. I also have a other question. Looking at the past 2 or 3 months, the Central Bank has issued a lot of new regulations for the banks. One that I'm confident most of my attention was actually on the shortening of the credit card settlement period from 19 days to 10 days.
Could you maybe talk us through what are the main impacts to your P and L from this new regulation, please?
Okay. Yes, we have an impact that we will try to compensate with some measures that we will take with our alliances. The impact is we consider a level of rate for Leliqs at approximately 5%. Considering some measures that we will expect to compensate this impact will be in line with MXN 1,200,000 for 20 19, the whole year.
All right. That's very clear. Thank you for your answers.
You're welcome.
The next question will be from Walter Chirvesio with Santander. Please go ahead.
Yes. Hi. Good afternoon. Thanks for the call. I have two questions.
One is related to the quite lower expenses interest expenses on current account deposits. In the last quarter in Q1, you got €1,900,000,000 decrease to €1,900,000,000 1,000,000,000 decrease to EUR 0.7000000000 almost. Why is how is that explained if you change the strategy on remunerated to current accounts or something? And the second point is that adding all personal expenses and administrative expenses had an increase of 29% in the quarter year over year, which is quite below inflation. And how do we explain that?
And what is your estimate for the rest of the year? That is from my side.
Okay. Hi, Walter. First, I'll start with the expenditures. This year, we expect in line with inflation by the end of the year. And the explanation compared with previous year is this is mainly in 2 parts.
The first is that according to IFRS, we there is a reclassification in the way that we accounted the rent. In the previous term, we are accounting an as a sign before, which you see in the rents line, there is a decrease. And now we see in the asset side. We amortize every month. That is one of the explanations of because the and it was a lower than inflations compared to the previous year.
And the second one regarding the lower rate for current accounts is explained by the Central Bank in February changed the reserve requirements. So in the context that for size account, the reserve requirements are higher, we pay less for remunerated current account.
Sorry, related to the regulated current account, is that something that changed in the Q1? That was different from the Q4? I don't remind that.
The central bank changed the way that the reserve requirements are in February at work. So we have that for a site deposit, 30% of the requirements have to be integrated in cash. And for the time deposit expense of the day is 17%. So for side deposits, the remunerated requirement but in cash is higher, we try to pay less for this carbon account remunerated carbon account.
Understood. Okay. Thank you very much.
The next question comes from Santiago Massini with AR Partners. Please go ahead.
Hi, everyone. Thank you for taking my question. I'm seeing that the credit losses more than doubled in the pace of quarter over quarter. And considering that the coverage went slightly down and NPLs EBIT slightly up, but not so much, I'm wondering how did the write offs moved during the quarter compared to the previous quarters? And what could be the explanation behind this sharp increase in credit losses in the Q1 of the year?
In this quarter, it may explain by the deterioration of the retail portfolio.
Okay. So that's it. I'd really do that. Okay. Okay.
Thank you.
The next question comes from Juan Alonso with Cowen. Please go ahead.
Hi. Thank you
for taking my question. I would like to ask if this year, like the 2 years before, you adjusted also the fiscal balance sheet for inflation related to the ongoing litigation with the FIP. And if that's the case, to what was the amount that you saved this year in tax income taxes? And what is the amount including the last 2 years on top of this one? Thank you.
Okay. The last 2 years was EUR 1,200,000,000 in the yes, around BRL 2,000,000,000. BRL 1,100,000,000 the 1st year and BRL 1,000,000,000 the second one. And this year, for 2018, we are analyzing the measures that we will take.
Okay. And also, if I may, if you could touch a bit about the impact on the inflation adjustment that you would need to post on the 20 F. How would that be, if you could give us any color? Thank you.
I don't have the figures on the local balance sheet for the Q1.
No. Yes, I was meaning about the 2018 results.
Tomorrow, we will fabric the 20th. So we have the 2018 figures adjusted by inflation.
Okay. Thank you. That's for me.
At this time, I'd like to turn the floor back over to Musa Cunha for any closing remarks.
Thank you. Thanks again to all of you joining us and do not hesitate to contact us directly for any further questions. Have a nice day.
Thank you. This concludes today's presentation. You may disconnect your lines at this time and have a nice day.