GGAL — Grupo Financiero Galicia S.A.

Summary of Grupo Financiero Galicia Q3 2025 Earnings Call

1. Key Financial Results and Metrics

• Net Loss: ARS 87.7 billion, primarily due to losses from Banco Galicia (ARS 104 billion) and restructuring expenses (ARS 105.3 billion).
• Return on Equity (ROE): -4.7% for the quarter; adjusted ROE without extraordinary expenses would have been 1%.
• Net Operating Income: Decreased by 23%, with net interest income down 10%.
• Loan Growth: Peso-denominated loans increased by 9.7% quarterly and 105.4% annually; dollar-denominated loans grew by 15.8% quarterly and 153.4% annually.
• Nonperforming Loans (NPL) Ratio: Increased to 5.8%, up 140 basis points from the previous quarter.
• Deposits: Totaled ARS 22.9 trillion, an 8% increase from the previous quarter, with a notable rise in dollar-denominated deposits.

2. Strategic Updates and Business Highlights

• The Argentine economy expanded by 5% year-over-year as of September 2025, with a primary surplus of 0.5% of GDP.
• The bank is focusing on improving liquidity and maintaining healthy solvency metrics despite the restructuring costs from the HSBC merger.
• The bank's market share in private sector loans increased to 14.8%, and deposits rose to 16.4%.
• The bank is adapting its lending strategy, focusing on shorter-duration loans and improving credit scoring to enhance asset quality.

3. Forward Guidance and Outlook

• For Q4 2025, management expects an improvement in profitability driven by margin recovery, with ROE projected at around 4% for the full year and 11%-12% for 2026.
• NPLs are expected to peak around March 2026, with a gradual improvement anticipated thereafter.
• The bank aims for a sustainable ROE between 15% and 20% in the long term, contingent on economic stability and loan-to-GDP ratios improving by 2% annually.

4. Bad News, Challenges, or Points of Concern

• The bank reported significant losses due to high restructuring costs and increased provisions for loan losses, reflecting deteriorating asset quality, particularly in personal loans and credit cards.
• The NPL ratio has worsened, indicating potential ongoing credit risks, especially in the retail segment.
• High volatility in the economic environment, including inflation and exchange rate pressures, poses risks to future profitability and operational stability.
• The bank's capital ratios have declined, with the total regulatory capital ratio at 22.1%, down 160 basis points from the previous quarter.

5. Notable Q&A Insights

• Management expressed confidence that the peak of NPLs would occur in Q1 2026, driven by improved underwriting standards and better performance from new loan originations.
• The bank is closely monitoring its loan-to-deposit ratio, currently around 100%, and does not foresee immediate constraints on growth due to deposit levels.
• There is a cautious optimism regarding the potential for external funding through debt markets, although the bank prioritizes deposit growth as its primary funding source.
• Future loan growth is expected to be around 25% in real terms for 2026, with a focus on commercial lending, particularly in sectors like oil and gas, agriculture, and mining.

This summary encapsulates the key points from the earnings call, highlighting both the challenges faced by Grupo Financiero Galicia and the strategic initiatives in place to navigate the current economic landscape.