Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to the BBVA Francesis 4Q 'eighteen Results Conference Call. We would like to inform you that the event is being recorded and all participants will At that time, further questions or instructions will be given. 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 Francaise's annual report on Form 20F for the fiscal year 2017 filed with the U. S. Securities and Exchange Commission.
Today, with us on the call, we have Mr. Ernesto Gallardo, CFO and Mrs. Cecilia Acuna, Head of Investor Relations. Mrs. Acuna, you may begin your conference.
Thank you. First of all, sorry for the delay. We have a problem with the release in the New York Stock Exchange. Good afternoon, everyone. As usual, I will start with a brief summary on the most important topics of 2018, and then we'll be open to questions.
I'd like to make a brief review of the bank's performance. At the call, I'd like to remind you that since January 1, 2019, Pivotal reported in accordance with IFRS. Having said these, GBS results recorded an annual net net income of ARS 9,600,000,000 at the end of December, registering a 114.6% increase over the result of 2017, 28.5% average return on equity and 3.4% average return on assets. Net operating income amounted to ARS37.6 billion, increasing 56 0.5% compared to the previous year, while operating expenses amounted to ARS24,700,000, showing an increase of 34.5 percent during the period. Revenues were supported by the growth in net interest income, which increased 79.9% during the year, mainly due to the rise in interest rate, but net fee income results withdrew at a similar pace and by the results generated by foreign exchange difference within 2 quotes, the impact of the devaluation and foreign exchange transaction, all of which partially offset by the increase of provision for loan losses.
Regarding expenses, personnel expenses grew 30.3% in the year below inflation, mainly as a result of the forward payment of the solar increase, while administrative expenses grew 39.1% in the same period. Accumulating efficiency ratio was 49.6% at the end of 2018, registering a decrease compared to the 60% of 2017. In connection to the equity level, at the end of December, the private sector loan portfolio totaled ARS 181,400,000,000, maintaining similar levels to those of previous quarter and increasing by 42.2% in the last 12 months. As a clarification, as of the Q3, Volkswagen Financial Services is no longer recorded on a consolidated basis. So, including the above client portfolio, loan growth would have reached 47.9%.
Loan from holiday market share was 8.71%, showing an EBITDA of 40 basis points in the last 12 months. Credit growth was affected during the year by the devaluation of peso and high interest rates. Loans in peso increased 3.6% in the quarter and 22.3% in the last 12 months. 4.3% and 29.7% respectively, including Volkswagen portfolio, While U. S.
Dollar denominated loans decreased 2.4% in the quarter and increased 110 point 5% in the last 12 months, mainly due to expression to the new value of the currency. Meanwhile, measured in U. S. Dollar, they increased around 6% in both periods. At the end of December, the asset quality ratio of nonperforming loans over total loans was 1.92%, with a total ratio of 1.20% and 19.2%.
These indicators show some deterioration in the loan portfolio, mainly due to specific cases in the commercial portfolio. The total REIT reached 1.88%, recorded an increase of 17 basis points during the quarter. Total deposits amounting to ARS259.5 billion at the end of December, increased 5% compared to the previous quarter and 68.6% compared with the last quarter of 2017. Foreign currency deposits denominated in pesos remained stable during the quarter and increased 70% point 1 percent in the last 12 months. Deposits denominated in foreign currency increased 7.3% in the quarter and decreased 13% compared to the last quarter 2017.
Local currency deposits increased 8.3% in the quarter and 65% in the year. In November 2018, GEA Frances issued a bond linked to inflation for ARS784.3 million with 24 months maturity and 9.5% fixed rate. Later, on February 2019, issued 2 bonds in pesos, one for ARP 529 point 4,000,000 with 9 months maturity and a 6 43% interest rate and the other for ARS 1,000,000,000 with 18 months security and backlog rate last 6.25%. GBF Franches continues to show another quarterly level of solvency. At the end of December, the total capital ratio was 14.3%, similar to the ratio of September.
The Tier one ratio was 14.5%, and the excess capital over the regular story required capital was ARS 16,200,000,000. It is important to mention that the Board of BBN Francesca has resolved to propose to the shareholders meeting repayment of dividends in cash for a total amount of ARS 2,400,000,000. On February 31, 2019, with the reformer of the divestment committed and fuel by Criitmaneos del Cabo and its shareholders with the antitrust regulatory authority, the 51% of the bank's shareholding in 3 company were called. Thank you very much. We are now ready to answer your questions.
Thank you. The floor is now open for first questioner today will be Gabriel Nobrega with Citi. Please go ahead with your question.
Hi, Ernesto and Cecilia. Thank you for taking my question. Looking at your results, could you maybe talk a little bit more about what happened to your entry ratios? From which sectors are you actually seeing these untruthable pulpits? And is there any strategy that you should be implementing or to improve this?
And I'll make the second question afterwards. Thank you.
Okay, Javier, how are you? Mainly, the situation in the NPL ratios and the recovery is that we have we made more provision for Marina and Penuela. So we're not considering that situation. The NPL ratio would be reached 1.2%. So the company is restructuring the debt.
So it's because of that that we have that impact in this 4th quarter. We made a provision in the 3rd quarter actually that the company is nonperforming in this 4th quarter.
All right. That's very clear. Could you also maybe give us a bit more color on the strategy that you implemented in order to be able to increase around personnel expenses by only 20%. And this is a bit tough because being that inflation was above 45% and you're also having discussions with the banking union, I just want to understand which further strategies you have supplemented which were able to only increase 20% year over year? And also maybe if you could give some guidance on what you're expecting for the full year?
Gabriel, it was 30% personnel expenditures during the year. And lastly, Skipco, this year or last the previous year, 2019, the payment of the salary increase is warmer like in the summer when the inflation ended the year at 47.6%, but if you in the average was more close to 33%. So it's because of that. In the previous year, the situation was that the increase in salaries were retracted to January. That changed in 2018.
All right. That's very clear. Thank you.
You're welcome.
And our next questioner will be Alonso Garcia with Credit Suisse. Please go ahead.
Thank you for taking my question. Good morning, everyone. My first question is regarding asset quality. I just want to follow-up on this topic. What's the outlook you are expecting for NPLs and cost of risk for this year?
And especially, if you think that the exposure on the corporate segment, could you put pressure ahead thinking that it's for the remaining quarter, especially in the provisions line? And my second question is on the outlook for loan growth for GDiarmon. You can share your expectations, what segments should be driving growth this year? Thank you.
Okay. Hello, Alonso. I started with the second question. Probably, we are expecting loan growth close to inflation. We are expecting about 30% inflation, so loan growth could be more close to 32%.
And it will be in the similar segments that we saw last year in retail, mainly in credit cards and personal loans. We launched personal loans and crafted by inflation that has more demand. And then in the commercial side, where we have to weigh a little and see what happens with the rate. And regarding the NPLs, we had this Molinco de Nolas with 30% provisioning, and we have to see what happened with this specific company during the following months. The rest of the portfolio, we are seeing some deterioration in the ratios also in the retail portfolio.
We think that this Q1 probably will be the worst mainly because the is starting to discuss because the high inflation also in this 1st month of the year. We will see what happens by the end of the year. One thing that is important is that if we have to implement it, IFRS 9, right now, we have the good levels or the similar level of provisioning. So we not need to make any adjustments.
And our next questioner will be Santiago Petre with Kempenet. Please go ahead.
Yes. Hi. Hello. Could you please give us some color on the evolution of the net interest income. Could you please highlight us what belongs to the direct sector exposure, what belongs to the public sector exposure?
And how do you see this developing in 2019?
Santiago, how are you? We continue seeing high rates in this in the last days. So we probably the net interest income will remain at a very good level. We think that if the Central Bank continues maintaining the high reserve requirement would be both, part from the public bonds, the NLEICs or the Central Bank instruments and the rest of the private portfolio. We continue seeing in this 1st semester high rates.
And there looks to be no further questions. So this will conclude our question and answer session. At this time, I would like to turn the floor back over to Ms. Vasunia for the closing remarks.
Okay. Thanks again for joining us. I'm sorry again for the delay. And if you have any further questions, please contact us in our offices.