Banco Macro's Q2 2025: Contradictions Emerge on Loan Growth, Deposit Forecasts, Risk Costs, and ROE Expectations

The above is the analysis of the conflicting points in this earnings call

Guidance:

• Maintain 2025 ROE guidance at 8–10% (real).
• Q3 NIM expected to be ~100 bps lower than Q2 due to higher funding costs and reserve requirements.
• NPL ratio seen rising to 2.5%–3% by year-end; cost of risk ~4% in 2H25.
• 2025 loan growth guidance maintained at 60% (real); deposits +30% (real).
• Preliminary 2026 real loan growth guidance ~45%.
• Year-end 2025 Tier 1 ratio forecast ~28.75%.
• Funding strategy: grow peso/USD deposits, leverage securities book; $530M bond issued to bolster USD liquidity.
• Expect Q3 volatility; potential normalization in Q4 depending on election outcomes.

Business Commentary:

* Net Income and Revenue Growth: - Banco Macro reported a net income of ARS 149.5 billion for Q2 2025, up 209% sequentially. - This growth was driven by higher net interest income, net fee income, and lower loss related to the result from the net monetary position due to lower inflation.

• Loan and Deposit Growth:
• Total financials reached ARS 9.24 trillion, increasing 14% quarter-on-quarter and 91% year-on-year.

• Private sector loans increased 13% quarter-on-quarter, primarily due to loan growth experienced in the quarter.

• Interest Income and Expense:

• Interest income totaled ARS 1.1 trillion, up 18% quarter-on-quarter.

• This increase was due to a rise in both interest income and expense, with the latter increasing 28% quarter-on-quarter.

• Net Interest Margin:

• The bank's net interest margin, including FX, was 23.5%, higher than the previous quarter's 23.2%.

• This was due to an increase in interest income and a rise in interest expense, offset by a slight increase in the net loss related to the net monetary position.

• Asset Quality and Risk Management:

• The nonperforming to total financial ratio reached 2.06%, with consumer portfolio and nonperforming loans deteriorating by 100 basis points.
• This deterioration is linked to the high real interest rate environment, which makes it challenging for debtors to repay loans.

Sentiment Analysis:

• Net income ARS 149.5B, up 209% QoQ; NIM 23.5% vs 23.2% in Q1’25 and 19.9% in Q2’24; efficiency ratio improved to 33.9% from 38.2% in Q1’25. Management cautioned Q3 NIM will be modestly lower (~100 bps) amid higher funding costs and reserve requirements, and expects NPLs to rise to 2.5%–3% with cost of risk ~4% in 2H. 2025 ROE guidance held at 8–10% (real).

Q&A:

• Question from Ernesto María Gabilondo Márquez (BofA Securities): How will rate/auction volatility affect NIMs and asset quality, and can high-rate personal loans offset funding costs?
  Response: Expect a modest Q3 NIM decline due to higher funding costs/reserve requirements; asset quality to deteriorate, with NPLs rising toward 2.5%–3% by year-end.

• Question from Ernesto María Gabilondo Márquez (BofA Securities): Are you revising 2025 ROE guidance given the macro backdrop?
  Response: Maintaining 2025 ROE guidance at 8%–10% in real terms.

• Question from Ernesto María Gabilondo Márquez (BofA Securities): What is the expected cost of risk in the second half?
  Response: Cost of risk is expected to be about 4% in 2H25.

• Question from Brian Flores (Citi): Where do you expect your Tier 1 ratio to end 2025?
  Response: Around 28.75%, reflecting loan growth and cash dividend installments.

• Question from Brian Flores (Citi): How do you see retail loan quality for the system?
  Response: Deterioration likely continues in 2H; Macro expects up to ~3% NPLs by year-end and peers may fare slightly worse.

• Question from Yuri Rocha Fernandes (JPMorgan): With LDR rising and funding costly, what is your funding strategy and loan/deposit growth outlook?
  Response: Pay competitive but lower-than-peers rates, grow peso/USD deposits, use securities to fund loans, issued $530M bond; keep 2025 guidance: loans +60% (real), deposits +30% (real).

• Question from Yuri Rocha Fernandes (JPMorgan): Could reserve requirements ease ahead of elections?
  Response: Unclear; August hikes targeted excess peso liquidity; path depends on September elections—conditions may relax if outcomes are favorable.

• Question from Yuri Rocha Fernandes (JPMorgan): Can you quantify Q3 margin pressure?
  Response: Best estimate is ~100 bps NIM compression, mitigated by short-term asset repricing and higher corporate short-term lending yields.

• Question from Matías Cattaruzzi (Adcap Securities): Can you still reach 60% loan and targeted deposit growth in 2025 amid tighter liquidity?
  Response: Q3 should be softer, but expect Q4 pickup; maintaining 60% (real) loan growth and 30% (real) deposit growth guidance for 2025.

• Question from Matías Cattaruzzi (Adcap Securities): Any M&A plans given strong capital?
  Response: Open to opportunities but none active; decisions depend on price, branch overlap, and business fit.

• Question from Matías Cattaruzzi (Adcap Securities): Will loan mix shift away from consumer given rising NPLs?
  Response: No structural shift; remain a universal bank, but with tighter underwriting across consumer and commercial.