Hello, welcome to the Fourth Quarter 2022 Earnings Release Call. My name's Francois, and I will be your coordinator for today's event. Please note this conference is being recorded, and for the duration of the call, your lines will be on listen only. However, you'll have the opportunity to ask questions. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero and you'll be connected to an operator. I will now hand you over to your host, Pablo Firvida, to begin today's conference. Thank you.
Thank you, Francois. Good morning and welcome to this conference call. I will make a short introduction, and then we will take your questions. Some of the statements made during this conference call will be forward-looking statements within the meaning of the safe harbor provisions of the U.S. Federal Securities laws, and are subject to risk and uncertainty that could cause actual results to differ materially from those expressed. According to the Monthly Estimator of Economic Activity, EMAE, the Argentine economy recorded a 1.2% year-over-year contraction during December, ending 2022 with an economic recovery of 5.2%.
During the Q4, the primary fiscal deficit reached 1% of GDP, and for 2022, this figure stood at 2.4% of GDP. This implied a reduction against 2021's 3% deficit, result that was explained by revenues increasing 75.7% during 2022, whereas primary spending rose 70.5%. The Consumer Price Index recorded a 17.3% increase during the Q4 and reached a 94.8% annual variation in December 2022. This entailed an acceleration against 2021's inflation of 50.9%, hitting its highest mark in 30 years. On the monetary front, the Argentine Central Bank expanded the monetary base by ARS 1.10 trillion in the Q4 and by ARS 1.55 trillion throughout the year, recording a 42.4% increase in 2022.
Meanwhile, the exchange rate averaged ARS 172.9 per dollar in December, a 20.4% increase against September average. When compared to December 2021, the Argentine peso underwent a 41.1% devaluation. In December, the average rate on peso-denominated private sector time deposits for up to 59 days stood at 70%, a similar level to the average recorded in September and 35.4 percentage points above the December 2021's average. Private sector deposits in pesos averaged ARS 15.2 trillion in December, increasing by 23.4% during the quarter and 96.8% in the last 12 months.
Time deposits in pesos rose 21.4% during the quarter and 119.7% in the year. Peso-denominated transactional deposits increased 25.6% during the Q4 and 78.9% in year-over-year terms. Private sector dollar-denominated deposits amounted to $15.8 billion, increasing 5.9% during the quarter and 2.9% in the last 12 months. During December, peso-denominated loans to the private sector averaged ARS 6.7 trillion, increasing 15% in the quarter and 67.6% when compared to December 2021.
Private sector dollar-denominated loans amounted to $3.5 billion, recording a 2.9% contraction during the Q4 and a 15.5% reduction when compared to December 2021. Turning now to Grupo Financiero Galicia. Net income for 2022 amounted to ARS 51.5 billion, 20% lower than in the previous year, which represented a 1.7% return on average assets and an 8.8% return on average shareholders' equity. The result was mainly due to profits from Banco Galicia for ARS 44.6 billion, from Galicia Asset Management for ARS 6.1 billion, from Naranja X for ARS 2 billion, and from Galicia Seguros for ARS 1.8 billion.
Going to the Q4, net income amounted to ARS 22.3 billion, up 27% from the year-ago quarter, mainly due to profits from Banco Galicia for ARS 20.3 billion, from Galicia Asset Management for ARS 1.6 billion, from Galicia Seguros for ARS 559 million, and from Naranja X for ARS 215 million. This profit represented a 2.9% annualized return on average assets, and a 14.8% return on average shareholders' equity. Banco Galicia net income for the quarter was 39% higher than in the year-ago quarter, and the net operating income increased 49%, mainly due to the increase in the net results from financial instruments.
Average interest earning assets were up 3%, reaching ARS 1.9 trillion, mainly due to an 81% increase in the average volume of government securities in pesos, offset by a 57% decrease in the average volume of other interest earning assets in pesos. In the same period, its yield increased 27 percentage points, reaching 63.3%. Interest-bearing liabilities increased 2% from the Q4 of 2021, amounting to ARS 1.6 trillion. This increase was due to a 22% increase in the average balance of peso-denominated time deposits, offset by decreases of 17% in saving accounts in pesos, and 14% and 21% in dollar-denominated saving accounts and time deposits, respectively.
During this period, its cost increased 24.4 percentage points to 45.4%. Net interest income plus net results from financial instruments for the quarter increased 35% from the same quarter of 2021 due to higher results from securities issued by the Argentine Central Bank as a result of higher volumes and rates. Net fee income increased 9% from December 2021, mainly due to a 45% increase of fees on collections and a 7% increase of fees on credit cards. Gains from gold and effects quotation differences were 397% higher from the year ago quarter, including the results from foreign currency trading.
Other operating income increased 73% due to the 173% increase in other adjustments and interest on miscellaneous receivables as a consequence of devaluation of securities granted in guarantee. As regards provision for loan losses, the amount for the quarter was 108.48% higher than those recorded in the same quarter of 2021, reaching ARS 11.8 billion. Personnel expenses were 31% higher than in the Q4 of 2021, primarily due to an increase in salaries and its impact on the annual bonus, and to a 3% increase of staff. While administrative expenses remain at similar levels, although fees and compensation for services increased 88%.
Expenses for maintenance and repair of goods and IT decreased 30%. The income tax charge was 50% lower than in the Q4 of 2021, with an accumulated effective tax rate of 16% during 2022. The bank financing to the private sector reached ARS 1.08 trillion at the end of the quarter, down 12% in the last 12 months, mainly due to a 17% decrease of peso and dollar-denominated loans, offset by a 164% increase in other financing in dollar. Net exposure to the public sector increased 22% year-over-year.
Excluding the exposure to the central bank, net exposure represented 15% of total assets, compared to 11% as of the end of the Q4 of 2021. Deposits reached ARS 2.12 trillion, 5% higher than a year before, mainly due to a 7% increase of deposits in ARS, offset by a 3% lower balances of deposits in dollars. The bank's estimated market share of loans to the private sector was 11.8%, 39 basis points lower than at the end of the year ago quarter. The market share of deposits from the private sector was 10.6%, 29 basis points lower than in the same quarter of 2021.
The bank's liquid assets represented 106.8% of transactional deposits and 57.6% of total deposits. Up from 97.4% and down from 60% respectively from a year before. As regards asset quality, the ratio of non-performing loans to total financing ended the quarter at 2.15%, recording 122 basis points improvement as compared to the 3.37% of the Q4 of the prior year. At the same time, the coverage with allowances reached 226.3%, up from 176.9% recorded a year ago.
As of the end of December 2022, the bank's total regulatory capital ratio reached 25.6%, increasing 147 basis points from the end of the same quarter of 2021. In summary, in a very challenging and volatile macro environment, Grupo Financiero Galicia was able to keep asset quality, liquidity, and solvency metrics at very healthy levels. To generate profits in spite of the significant impact of the very high inflation of the quarter. We are now ready to answer the questions that you may have. Thank you.
Thank you, Pablo. As a reminder, if you'd like to ask a question or make a contribution on today's call, please press star one on your telephone keypad. If you change your mind and want to withdraw your question, please press star two. Please ensure your lines are unmuted locally as you'll be prompted when to ask your question. Our first question comes from the line of Brian Flores from Citi. Please go ahead.
Hi, Pablo and team. Thank you for the opportunity to ask questions. My question is related to the rescheduling program announced by the Ministry of Economy just a few days ago. Is it reasonable to say that the baskets are earning somewhere around CER plus 4% on average? If this is the case, I just would like to understand what is the opportunity cost for you? In other words, what are you currently earning on the assets that you decided or are going to decide to exchange? If you could remind us the size of this exposure. Thank you very much.
Hi, Brian. Well, the exchange will take place tomorrow. There are two baskets in which we can choose. Each bank and even the public sector has different instruments to exchange. We have to see the prices and the amounts of each tranche that the Minister of Economy grants to each bidder. We know that the basket or the mix of each basket, the first one, has a 30% Boncer. This is a bond adjusted by CPI, with a coupon of 3.75% that matures in April. 40% of another Boncer with a 4% coupon that matures in October 2024, and another 40% of the Boncer that matures in February 2025 with a coupon of 4.25%.
The second one is similar, with the exception of, we have a dual bond that, for 30% of the total, that matures in February 2024. Our outstanding amount of bonds subject to this exchange is around ARS 290 billion. We have to see how much of that is taken by the Minister of Economy. According to the prices of these bonds and the prices of the new bonds, we expect that the net effect will be neutral.
We will be, of course, having a coverage of our net liquid net worth with these bonds, new bonds, with longer maturities that are adjusted by inflation. Really today it's hard to say what percentage of our exposure subject to exchange will be accepted and the final prices and the allocation of the two baskets. Of course, the intention is to participate.
Thank you, Pablo. If I can, just a quick follow-up. Is it expecting this neutral effect in the overall, is it reasonable to say that you might continue increasing your exposure to the public sector as the year goes on?
Well, this will keep, or increase slightly the government exposure. Our objective is to decrease, as a whole, gradually the exposure to not only the government, the National Treasury, but also the Central Bank. Actually, in January and February, although the numbers are not public, the total exposure to the public sector has been decreasing slightly. Meaning that if we enter the exchange, this means an increase? Not necessarily, because it's just a portion of our exposure to the public sector.
Super clear. Thank you very much.
You're welcome, Brian.
The next question comes from the line of Ernesto Gabilondo from Bank of America. Please go ahead.
Hi. Good morning, Pablo. Thanks for the opportunity to ask questions. My first question will be on how should we think about the market related income or the financial results that we noticed that more than tripled year-over-year. How sustainable is this number for this year? My second question is on your long-run expectations, considering we continue to see high inflation and high interest rates.
Related to this, how should we think about the normalization of the economy, if you compare it to the Macri's administration, having in mind that interest rate and inflations are at much higher levels, and also the country seems to have a lower level of reserves. My last question is on your ROE expectations. How should we think about the ROE for this year, and what will be, like, the key assumptions behind it? Thank you.
You're welcome, Ernesto. Well, first, if you look at the loan to deposit ratio between pesos and dollars, must be around 46%-47%. What we have, or what has been happening in the last couple of years, I would say, is that deposits, in pesos mainly, have been growing much more than loan demand in pesos. With these deposits coming in and the lack of loan demand, we invested this money in the LELIQs from the Central Bank, or repos at the Central Bank, and also government securities, and as I said, mainly adjusted by CPI.
This should be similar for 2023, as we really don't see a recovery in real terms in loan demand, mainly because we are forecasting a similar inflation for 2023 as 2022, in the order or between 100%, let's say, 94.8% was last year. With this high level of inflation, we don't see real loan demand. We will keep investing in LELIQs or government paper tied to inflation. It could happen that in certain points in deposits, interest rates for wholesale investors are very high, but we do not convalidate this interest rate, and perhaps we will be reducing some, in some way, both sides of the balance sheet deposits and the allocation on government exposure.
I- for financial results, I already explained also for loan demand, we are not seeing a real growth, perhaps inflation less 5% or so. Of course, this will be very sensitive to many, not only macroeconomic news, but also political news in a year full of provincial and national elections. The normalization, we have to see, who wins. Most of the political analysts are forecasting a change of economic regime, but as you said, inflation is higher than in 2015.
Also, reserves are not so strong. On the other hand, we have a good, I would say, middle term prospect looking at the oil and gas industry, mining, the agricultural sector, with exception of this year due to the drought. We have to see how first who wins and what type of normalization program they implement. Definitely it will have to be quick after the change of mandate, and the main objective will be to reduce inflation. We have to see what tools, laws or decisions the new government takes.
For this year, we are seeing similar ROE in the level of last year was 8.8% for the full 2022. This year, 2023, should be the same. We are forecasting some increase in net financial income also in taking together interest from the private sector and financial instruments, and also an expansion of fee income and a compression of administrative expenses. Let's say close to inflation while fees inflation plus 5 % points. As inflation will be similar or that is our expectation, the results from monetary position should be similar. As a whole and as a summary, we are seeing a similar 2023 to 2022. Nothing changing materially.
I'm super careful. Thank you very much, Pablo.
You're welcome, Ernesto.
Our next question comes from the line of Nicolas Riva from Bank of America. Please go ahead.
Hi, Pablo. How are you? Most of my questions have already been addressed, but just one question on my side. It's kind of a follow-up on what also Ernesto was asking before. Assuming there is a change in administration this year, at least at the federal level, and i nflation expectations and interest rates gradually normalize. How would that impact your real ROE for 2024? Because as you mentioned, the real ROE in 2022 and your expectation for 2023 is not bad at all, around 9%, I think, for the group or for the bank. If you can address just how the normalization of the economy would actually impact your ROE and your profitability for 2024. Thank you very much.
Hi, Nicolas. If inflation goes down, of course, the instant effect will be a less result from monetary position, what we call the results due to inflation. That is an instant effect. I would say that the main effect will be that interest rates will go down. As interest rates will go down, loan demand will rebound. As a whole for the economy, definitely inflation is very bad because companies don't have an investment horizon, individuals too, and everything is very short term and transactional. Definitely a macroeconomic plan that focus on lowering inflation is better and it will be better for our real ROE, definitely.
Thank you very much for this .
You're welcome, Nicolas.
We currently have no questions coming through. As a final reminder, if you'd like to ask a question, please press star one. We'll give it a few seconds. There are no further questions. I'll hand you back to Pablo to conclude today's conference.
Okay. Thank you very much, Francois. Thank you all for attending this call. If you have any further questions, please do not hesitate to contact us. Good morning and good afternoon. Bye-bye.
Thank you for joining today's call. You may now disconnect your lines.