Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to Banco Macro's first quarter 2022 earnings conference call. We would like to inform you that 1Q22 press release is available to download at the investor relations website of Banco Macro, www.macro.com.ar, forward slash relaciones dash inversores forward slash. Also, this event is being recorded, and all participants will be in 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 instruction will be given. Should any participant need assistance during this call, please press star zero to signal the operator. It is now my pleasure to introduce our speakers. Joining us from Argentina are Mr. Gustavo Manriquez, Chief Executive Officer, Mr. Jorge Scarinci, Chief Financial Officer, and Mr. Nicolás Torres, IR.
Now I will turn the conference over to Mr. Nicolás Torres. You may begin your conference.
Thank you, Dave. Good morning, and welcome to Banco Macro's first quarter 2022 conference call. Any comment we may make today may include forward-looking statements which are subject to various conditions, and these are outlined in our 20-F, which was filed to the SEC, and it's available at our website. First quarter 2022 press release was distributed yesterday, and it's also available at our website. All figures are in Argentine pesos and have been restated in terms of the measuring unit current at the end of the reporting period. As of the year 2020, the bank began reporting results applying hyperinflation accounting in accordance with IFRS/ IAS 29, as established by the Central Bank of Argentina.
For ease of comparison, figures for previous quarters have been restated applying IAS 29 to reflect the accumulated effect of the inflation adjustment for each period through March 31st, 2022. I will now briefly comment on the bank's first quarter 2022 financial results. Banco Macro's net income for the quarter was ARS 6 billion, 51% lower than the fourth quarter of 2021, but 7% higher than the results posted one year ago. The bank's first quarter 2022 annualized ROE and ROA of 9% and 2.2% respectively remained healthy and showed the bank's earnings potential.
Net operating income before general, administrative, and personal expenses in the first quarter of 2022 was ARS 64.2 billion, ARS 6.5 billion higher quarter-over-quarter due to higher income from financial instruments at fair value to profit or loss, higher FX gains, and lower loan loss provisions. On a yearly basis, net operating income increased 11% or ARS 6.4 billion due to higher net interest income and higher net fee income. Operating income after general, administrative, and personal expenses was ARS 36.5 billion, 41% or ARS 10.6 billion higher than the previous quarter, and 24% or ARS 7.2 billion higher than in the first quarter of 2021.
In the quarter, net interest income totaled ARS 41.9 billion, 1% or ARS 498 million higher than the result posted in the fourth quarter of 2021, and 13% or ARS 5 billion higher than the result posted one year ago, as a result of different regulations adopted by the Central Bank that set caps on lending rates and floors on deposit rates. In the first quarter of 2022, interest income totaled ARS 68.8 billion, 4% or ARS 2.8 billion higher than in the fourth quarter of 2021, and 2% or ARS 1.1 billion lower than the previous year.
Within interest income, interest on loans decreased 1% or ARS 494 million quarter-on-quarter due to a 4% decrease in the average volume of private sector loans, which was partially compensated by a 202 basis points increase in the average lending rate. Interest income decreased 2% or ARS 798 million year-on-year. In the first quarter of 2022, interest on loans represented 49% of total interest income. Net income from government and private securities increased 16% or ARS 4.8 billion quarter-on-quarter due to higher income from government securities. Compared to the first quarter of 2021, net income from government and private securities increased 8% or ARS 2.5 billion.
In the first quarter of 2022, income from repos totaled ARS 432 million, 78% or ARS 1.5 billion lower than the previous quarter, and 87% or ARS 2.8 billion lower than the result posted a year ago. In the first quarter of 2022, FX gains, including bets in derivatives, totaled a ARS 3.1 billion gain, 66% or ARS 1.2 billion higher than the fourth quarter of 2021, and 63% or ARS 1.2 billion higher than the previous year due to the bank's long dollar position and the peso depreciation during the quarter.
In the first quarter of 2022, interest expenses totaled ARS 26.9 billion, a 9% or ARS 2.3 billion increase compared to the fourth quarter of 2021, and decreased 18% or ARS 6 billion on a yearly basis. Within interest expense, interest on deposits increased 10% or ARS 2.3 billion quarter on quarter, mainly driven by a 217 basis point increase in the average interest rate paid on deposits, while the average volume of private sector deposits increased 1%. On a yearly basis, interest on deposits increased 18% or ARS 5.5 billion. In the first quarter of 2022, interest on deposits represented 96% of the bank's financial expenses.
In the first quarter of 2022, the bank's net interest margin, including FX, was 22.8%, higher than the 19.1% posted in the fourth quarter of 2021, and the 17.4% registered in the first quarter of 2021. In the first quarter of 2022, net fee income totaled ARS 10.2 billion, ARS 48 million higher than the fourth quarter of 2021. On a yearly basis, net fee income increased 11% or ARS 1 billion. In the first quarter of 2022, net income from financial assets and liabilities at fair value through profit or loss totaled ARS 6.4 billion gain, 57% or ARS 2.3 billion higher than the previous quarter. This increase is mostly related to higher income from investment in equity instruments.
On a yearly basis, net income from financial assets and liabilities at fair value through profit or loss increased 9% or ARS 627 million. In the quarter, other operating income totaled ARS 3.3 billion, 42% or ARS 959 million higher compared to the fourth quarter of 2021. On a yearly basis, other operating income increased 28% or ARS 704 million. In the first quarter of 2022, Banco Macro's personnel and administrative expenses totaled ARS 15.3 billion, 15% or ARS 2.8 billion lower than the previous quarter, as personnel expenses decreased 13% while administrative expenses decreased 19%. On a yearly basis, personnel and administrative expenses decreased 7% or ARS 1.2 billion, showing the strict cost control policies adopted by the bank's senior management.
As of the first quarter of 2022, the efficiency ratio reached 29.6%, improving from the 27.4% posted in the fourth quarter of 2021. In the first quarter of 2022, expenses decreased 14%, while net interest income plus net fee income and other operating income increased 9% compared to the previous quarter. In the first quarter of 2022, the results from the net monetary position totaled ARS 28.9 billion loss, 64% or ARS 11.3 billion higher than the loss posted in the fourth quarter of 2021. Due to higher inflation observed in the quarter, which was 586 basis points above the fourth quarter of 2021 level, up to 16.1% from 10.21% in the previous quarter.
In the first quarter of 2022, Banco Macro's effective tax rate was 21%, and more information is provided in note 20 in our financial statements. In terms of numbers, the bank's financing to the private sector totaled ARS 371.8 billion, decreasing 8% or ARS 33.3 billion quarter-on-quarter, and 8% or ARS 30.5 billion lower year-on-year as a consequence of weak loan demand within commercial loans, documents and others stand out with a 20% and a 29% decrease respectively. Meanwhile, within consumer lending, personal loans decreased 3% while credit card loans decreased 2%. Within private sector financing, peso financing decreased 8% or ARS 32.2 billion, while US dollar financing decreased 13% or $23 million.
It is important to mention that Banco Macro's market share over private sector loans as of March 2022 reached 7%. On the funding side, total deposits totaled ARS 629.5 billion and increased 1% or ARS 5.9 billion quarter-on-quarter, and 4% or ARS 31.7 billion year-on-year. Private sector deposits decreased 3% quarter-on-quarter, while public sector deposits increased 20% quarter-on-quarter. The decrease in private sector deposits was led by demand deposits, which decreased 10% or ARS 33.6 billion quarter-on-quarter, while time deposits increased 6% or ARS 15.9 billion. Within private sector deposits, peso deposits increased 1% or ARS 4.3 billion, while U.S. dollar deposits decreased 16% or $173 million.
As of March 2022, Banco Macro's transactional accounts represented approximately 49% of total deposits. Banco Macro's market share over private sector deposits as of March 2022 totaled 5.6%. In terms of asset quality, Banco Macro's non-performing to total financial ratio reached 1.64%. The coverage ratio measured as total allowances and expected credit losses over non-performing loans and reserves or backed deals totaled 163.2%. Consumer portfolio non-performing loans improved 5 basis points, down to 1.35% from 1.4% in the previous quarter. While commercial portfolio non-performing loans deteriorated 177 basis points in the first quarter of 2022, up to 2.77% from 0.99% in the previous quarter, mainly due to a specific SME client who showed signs of credit deterioration.
In terms of capitalization, Banco Macro had a net capital of ARS 236.3 billion, which represented a total regulatory capital ratio of 38.5% and a Tier 1 ratio of 33.7%. It should be noted that pursuant to the resolutions adopted at the general and special shareholders meeting held on April 3, 2022, and the authorization granted by the Superintendencia of the Central Bank of Argentina, and communicated last May 12, and pursuant to the resolutions adopted by the board of directors at its meeting held yesterday.
2022, the bank will pay a cash dividend in the amount of ARS 9.9 billion, equivalent to ARS 15.44 per share, and that corresponds to installments one through six. The bank's aim is to make the best use of its excess capital. The bank's liquidity will remain more than appropriate. Liquid assets to total deposit ratio reached 93%. Overall, we have accounted for another positive quarter. We continue showing a strong financial position. Asset quality remain under control and closely monitored. We keep on working to improve more our efficiency standards, and we keep our well-optimized deposit base. At this time, we would like to take the questions you may have.
At this time, we're going to open it up for questions and answers. If you would like to ask a question, please press star one on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. One moment please for the first question.
The first question comes from Juan Recalde with Scotiabank. Please go ahead with your question.
Hi, thank you for taking my question. My question is related to the profitability outlook for the rest of the year. Do you think that we have reached a bottom in terms of the ROE inflation-adjusted terms in the first Q 2022? Because inflation is expected to decelerate, but so that should help profitability coming in the rest of the year. On the other hand, you had, I think, a benefit from the Prisma sale in this quarter and also a sizable gain, FX gains. That would be my first question related to the profitability outlook for the rest of the year.
Hi, Juan. This is Jorge Scarinci answering. How are you? It is not very easy to forecast what will happen in terms of profitability for the year, regarding that we are having the inflation is accelerating or at least has been accelerating in the first four months of the year. According to some local economists, the range for inflation for this year goes from 65%-75%. I could say going forward, and of course, it will depend on how the economy also evolves, that we think is going to be positive, +2%, approximately in terms of real terms. We believe that could be kind of a bottom. We are forecasting ROE adjusted by inflation to be ranging between 10%-12% in 2022.
Again, it depends on many issues, many variables. It is not a clear picture to forecast profitability in Argentina this year at least.
That's helpful. One follow-up, if I may. You mentioned that now inflation is expected to be from like 65%-75% this year. With that in mind, how do you see loan growth evolving or loan growth for the full year in 2022? If you can comment on whether you think that consumer loans are gonna continue outperforming commercial loans, or how should we think about the dynamics in terms of consumer versus commercial loans?
Well, one, the focus for the 65%-75% is not from us, it's from local economy. Regarding your question in terms of loans performance for this year, we believe that the loan book is going to be slightly below inflation and maybe two-three percentage points below the inflation for the year. We believe that the composition is that consumer growth will be maybe outpacing commercial loans in 2022.
That's helpful. Thank you for the comments. I understand it's hard to make predictions in this context.
Thanks.
Our next question comes from Carlos Gomez-Lopez with HSBC. Please go ahead with your question.
Hello, good morning, and thank you for the presentation. My first question refers to your exposure to the public sector, like all the banks who have been recently getting more involved in the central bank bonds and government paper. Is there a limit that you want to set as to how much exposure you want to have to one or the other? The second is, given that you have accumulated all this capital, there is no immediate use for it. Loans have actually been declining for the last two years. Maybe possible use of the capital might be to repurchase the stake that ANSES still has in the company. Would you consider approaching them, and do you think that that could have any possibility of success? Thank you.
Hi, Carlos. How are you? Good to hear from you. On the first question, in terms of exposure to the public sector, you know that when you commented on that all the banks here are maybe increasing that exposure. From a regulatory point of view, we can go up to 75% of our equity in terms of lending to the treasury. That is not including lending to the Central Bank. As of, I would say March, we were slightly below about 65% in terms of our exposure to the treasury. But it's very important for us, it's very important to differentiate the risk between Central Bank and the treasury. When you look back in our history, the Central Bank never defaulted here in Argentina, so for us, are different risk.
In terms of how we split the exposure to the Central Bank and the Treasury, we are up to the max that we can go in terms of the Central Bank. Again, from a regulatory point of view, we can have the exact number of LELIQs as the number of time deposits that we have on the previous month. In that sense, we are at the maximum. Little by little, we want to switch from the risk from the Treasury to the Central Bank as much as we can. Going forward, the idea is to maybe slightly reduce the exposure to the Treasury. In terms of your second question, honestly, we haven't approached it, the answer is in terms of maybe buying back that exposure.
When we did that in the past, many years ago, they didn't want. We believe that at these prices, it would not be reasonable for them to sell. Honestly, as far as I know, we haven't approached them to ask if they are maybe willing to sell. That's the answer there.
Okay. Thank you very much.
You're welcome.
Our next question comes from Rodrigo Nistor with AR Partners. Please go ahead with your question.
Hi, good morning, and thank you for the presentation. In this scenario of 70% of higher inflation for the year, what's the bank's strategy to minimize the negative impact on your P&L and protect your equity?
Hi, Rodrigo. How are you? That is what we try to do every single day. It is not easy because you know that there are not many instruments where we can allocate the liquidity in order to protect the equity. Also we have a regulation from the Central Bank that put some caps on, for example, how long dollars we can hold up to zero right now. What we are trying to do is to go maybe as far as we can in terms of dollars through basically some dollar-linked bonds that there are in the market, and then on the inflation-adjusted bonds issued by the Treasury. It's not very easy.
Again, all the banks have a net positive monetary position, and when you adjust that by inflation, you have a monthly loss, as you have noticed in our P&L and also similar other banks. It is not very easy to modify or to change abruptly the composition of that net positive monetary position. We have to deal with that. It's not an easy task here in Argentina with that level of inflation and with some caps on regulatory issues that where we can allocate the money.
Okay, thank you. A quick follow-up. Given that you have competitive funding costs, credit demand remains very weak, and as it was mentioned before, the exposure to the public sector and maybe the central bank is growing. Is there a reference rate level that will offset or significantly reduce the negative impact of inflation? Do you have that in mind?
Yeah, I think that we need to have some maybe higher nominal rates, but because the current level of rates are negative in real terms. Apart from that, because of the floor rate that we are supposed to pay on the time deposits, the margins here are really narrow. In order to beat this inflationary environment, we'll also need maybe higher nominal rates, but also maybe some wider margins. It's not only in terms of rates.
Okay. Thank you. That was helpful.
You're welcome, Rodrigo.
Our next question comes from Nicolas Riva with Bank of America. Please go ahead with your question.
Thanks very much, Jorge, for taking my questions. My first question, if you can comment on your liquidity in dollars. You have a page in the press release where you talk about the foreign currency position, and I see ARS 46 million or a bit more than $400 million in dollar deposits held in Argentina and abroad. If you can comment if most of that is held offshore. You recently paid a peso-linked bond, which was payable in dollars for the equivalent, I think of about $30 million. Do you have any other relevant dollar liabilities for the rest of this year and for 2023, aside from the coupon payments on the 2026s?
Finally, on the 26s, did you buy back any of the 26s in the first quarter, and is that something that you would consider doing? If you do, would you need approval from the Central Bank to buy back some of the 26s? Thanks.
Hi, Nicolás. How are you? No, in terms of the liquidity in dollars, you know that we have 100% liquidity. I mean, in terms of the deposits that we have in dollars, they are backing either pre-finance to export that are at a very low level, and then deposits at the Central Bank of Argentina. That is completely hedged. In terms of the other dollars, I mean, those are the commercial dollars, the ones that you mentioned before. The financial dollars, I mean, when you look at the 2026, the $400 million we have as a liability, those are deposited abroad in the correspondent banks.
100% liquidity in both commercial and financial dollars, which have been maintaining these levels for many years, and we are willing to continue maintaining them. In terms of second question. Yes, we paid the peso-linked bonds, and we do not have any important due payments in 2022 apart from the coupon of the 2026. Your third question, no, we haven't bought any 2026. Yes, we will have in the case that we raise it, we have to ask for permission to the Central Bank.
Awesome. Thanks so much, Jorge. Just one follow-up on the first answer. The about $400 million offshore that you have, that's basically reserved for the maturity in the 2026s. You haven't used basically the proceeds from the 2026s, and that's reserved for that.
Yes. I mean, money is fungible, but in this case, yes, we have $400 million abroad that are as a counterpart of the $400 million liability that is on the 2026. Yeah.
Perfect. Thanks very much, Jorge.
You're welcome, Nicolás.
Again, if you have a question, please press star then one. Our next question comes from Robert Gilman. He's a private investor. Please go ahead with your question.
My first question is the dividends that are being paid, how much will that be in US dollars for the dividend payment?
Hi, Robert. How are you? We are going to send to our depository bank that they are going to deposit the dollars in the account, so it depends on the exchange rate the day that they receive the money. Honestly, I cannot say you right now exactly the amount of dollars.
My second question is, do you intend to pay another dividend in the near future?
Yes. These are the first six installments that we are paying all together, and there are other six installments more that are going to come, 1 per month in the next six months.
Thank you.
You're welcome, Robert.
There are no questions at this time. This concludes the question and answer session. I will now turn the conference over to Mr. Nicolás Torres for final considerations.
Thank you all for your interest in Banco Macro. We appreciate your time and look forward to speaking with you again. Have a good day.
Thank you, Dave.