Banco Galicia Investor Presentation August 214
Agenda» The Argentine Economy»The Argentine Financial System»Banco Galicia»Annex 2
GDP % Change Economic Activity 12% 9 9% 8,8% 9,% 9,2% 8,4% 8,% 9,1% 8.% 8,6% 6.6% 8 6% 7 3% 3,1% 2,9% % -3% -6% -4,4%,1% -2.8%,9%.4% 2.8%,% -1.5% 6 5 4 Billons of Ps. -9% 3-12% -1,9% 21 22 23 24 25 26 27 28 29 21 211 212 213E 214E 2 Real GDP growth Official Figures GDP, 1993 constant prices Private estimates As of July 214. 3
% International Environment 4 Agricultural Commodity Prices 3 Real Exchange Rate 3 2 1.8 2 1 1.3 1 Dic-1 Jun-3 Dic-4 Jun-6 Dic-7 Jun-9 Dic-1 Jun-12 Dic-13 Dec 1=1. As of July 24, 214. 12 World GDP Growth 21 23 25 27 29 211 213 Bilateral (Ps./US$) Multilateral Annual Average. Adjusted by INDEC CPI until 26, and by private estimates since 27. As of July 214. 8 4-4 21 23 25 27 29 211 213E 214E Developed economies Emerging and developing economies World International Monetary Fund: World Economic Outlook, July 214. 4
Millions of US$ As a % of GDP Fiscal Performance 4 Fiscal Performance (Federal Government only) 25 2 13-2,2-1,3-2, -1,9-2, -13 Billons of US$ -4 1997 1999 21 23 25 27 29 211 213E 214E Overall Fiscal Balance as a % of GDP Overall Fiscal Balance (in millions of US$) -25 25. 2. Monetary Financing 5 4 15. 1. 5. 3 2 1 As a % of GDP 27 28 29 21 211 212 213E 214E Argentine Central Bank advances Use of international reserves Argentine Central Bank profits Total Argentine Central Bank financing (as % of GDP) - r.h.s. 5
Billions of US$ As a % of GDP Billions of US$ Sovereign Debt 2 Sovereign Debt 2 Projected annual debt payments (*) Foreign currency Pesos 15 15 1 1 5 45,6 17,9 12,2 1997 2 23 26 29 212 213 Gross public sector debt Public debt net of intra public sector holdings Public debt net of intra public sector holdings and International Financial Institutions 5 213 214 215 216 217 218 219 22 221 222 (*) Net of Central Bank advances, treasury bills and non-transferable bills held by Central Bank. 225 2 Debt stock 21 Pesos 5% Pesos indexed to CER 11% Debt by Currency 175 15 125 1 1997 1999 21 23 25 27 29 211 213 As of December 31, 213. Other 3% Euros 24% USD 57% 6
Billons of US$ As a % of GDP External Sector Performance 1,% 7,5% External Sector 12 1 5,% 2,5%,% -2,5%.8%.1%,% -,8% -1,4% 8 6 4 2 Billons of US$ -5,% 1997 1999 21 23 25 27 29 211 213 214E Current Accout (accrued basis) Exports Imports 5 Net External Asset Accumulation 2,5% -5,% -2,5% As a % of GDP -1 Source: INDEC 23 24 25 26 27 28 29 21 211 212 213E 214E -5,% 7
Monthly average in billions of Ps. Monetary Performance 16 Central Bank s FX Market Average Daily Intervention (In millions of Dollars)(*) 6 International Reserves (In billions of Dollars)(*) 8 45 3-8 15-16 Ene-4 Ene-6 Ene-8 Ene-1 Ene-12 Ene-14 Ene-4 Ene-6 Ene-8 Ene-1 Ene-12 Ene-14 21 Stock of Lebac (In billions of Pesos)(*) 7 M2 7% 18 6 6% 15 12 9 5 4 3 5% 4% 3% YOY % chg 6 2 2% 3 1 1% Ene-4 Ene-6 Ene-8 Ene-1 Ene-12 Ene-14 Ene-4 Ene-6 Ene-8 Ene-1 Ene-12 Ene-14 % (*) As of July, 214. 8
% % Inflation 5 CPI (end of period, annual variation) 4 Other Measures (12 months trailing variation) 4 3 2 1-1 41 37 26 24 23 21 19 18 16 12 1 6 4 1-2 -1-2 '97 '98 '99 ' '1 '2 '3 '4 '5 '6 '7 '8 '9 '1 '11 '12 '13 '14E 35 3 25 2 15 1 5 P B P I C C I C P I I W P I Dec-5 Dec-6 Dec-7 Dec-8 Dec-9 Dec-1 Dec-11 Dec-12 Dec-13 27.7 26.3 26.2 1.9 INDEC CPI until 26, and private estimates since 27. CCI: Cost of Construction Index PBPI: Producers Basic Prices Index CPI: Consumer Prices Index (*) IWPI: Internal Wholesale Prices Index As of June 214. (*) Published up to Dec 13. New index: Jan 14: 3.7 % - Feb 14: 3.4%. 9
Basis points over U.S. Treasury Country Risk Premium 4.5 4.372 2. From January 1, 27 4. 1.75 1.5 3.5 1.25 1. 3. 75 5 25 2.5 Ene-7 Ene-8 Ene-9 Ene-1 Ene-11 Ene-12 Ene-13 Ene-14 2. 1.5 1.562 1.74 Embi+ Embi+ Arg 1. 5 461 77 533 773 1.45 55 499 216 41 66 496 925 991 88 649 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 (2) Risk Premium (end of period) (1) As measured by the EMBI+ for Argentina except for the period between 22 and 24 when it corresponds to the spread over Treasury of the Boden 212 Bond. (2) As of July 31, 214. (1) 1
Agenda» The Argentine Economy»The Argentine Financial System»Banco Galicia»Annex 11
Sustained Growth in Financial Intermediation 7 6 5 4 3 2 1 7 6 5 4 3 2 1 23% 13% 21% 22% 25% 38% 4% Deposits from the Private Sector (in billlons of Pesos) 25% Loans to the Private Sector (in billions of Pesos) 43% CAGR: 22.7% 8% Dec-2 Dec-3 Dec-4 Dec-5 Dec-6 Dec-7 Dec-8 Dec-9 Dec-1 Dec-11 Dec-12 Dec-13 Jun-14 CAGR: 26.2% 22% 1% Dec-2 Dec-3 Dec-4 Dec-5 Dec-6 Dec-7 Dec-8 Dec-9 Dec-1 Dec-11 Dec-12 Dec-13 Jun-14 2% 3% 37% 27% 47% 29% 31% 28% 3% 32%(*) 24%(*) (*) Jun-14 vs. Jun-13 variation. CAGR: Dec-2 / Jun-14. As of June 3, 214. 12
% Private-Sector Loans and Deposit Growth Y-O-Y Monthly % Change Dec'6=1 8 59 7 54 6 49 5 44 4 39 3 34 2 29 1 24 19-1 14-2 Dic-3 Jul-5 Feb-7 Sep-8 Abr-1 Nov-11 Jun-13 9 Dec-6 Jan-8 Feb-9 Mar-1 Apr-11 May-12 Jun-13 Deposits Loans Deposits in Pesos Deposits in Dollars (In US$) As of June 3, 214. 13
But Still Low Financial Depth 68 58 In billions of constant Pesos (*) 3 25 26 24 As a % of GDP 48 38 28 2 15 1 22 21 19 19 18 19 19 19 16 17 17 17 18 18 18 1 8 9 1 11 13 12 12 13 15 16 17 16 18 5 8 Ene-97 Sep-99 May-2 Ene-5 Sep-7 May-1 Ene-13 Deposits from the Private Sector Loans to the Private Sector (*) Adjusted by INDEC CPI until 26, and by private estimates since 27. In millions of Ps. of June 214. ' '1 '2 '3 '4 '5 '6 '7 '8 '9 '1 '11 '12 '13E '14E Deposits from the Private Sector Loans to the Private Sector 1 Private and Public Sector Deposits (as a % of GDP) 1 Bank Private Credit (as a % of GDP) 8 6 4 2 5 4 37 28 25 19 19 8 6 4 2 66 56 32 24 22 18 14 Brasil Chile Uruguay Peru Mexico Colombia Argentina Chile Brasil Colombia Peru Uruguay Mexico Argentina As of December, 211. The World Bank. As of December, 211. The World Bank. 14
% % Increase in Interest Rates 28 Nominal Interest Rates (monthly averages) 18 Real Interest Rates (annual averages) (2) 24 12 2 6 16 12 8-6 4-12 Dic-4 Mar-6 Jun-7 Sep-8 Dic-9 Mar-11 Jun-12 Sep-13-18 2 22 24 26 28 21 212 214E (1) Private Banks 3-day time deposits rate, for deposits over Ps. 1 million. (2) Adjusted by INDEC CPI until 26, and by private estimates since 27. As of June 3, 214. BADLAR Private Banks (1) 15
Breakdown of Deposits by Currency and Type 1 By Currency (as a % of CA+SA+Time Deposits) 91% 1 By Type of Deposit (as a % of CA+SA+Time Deposits) 8 8 6 6 52% 4 4 48% 2 9% 2 Jun-1 Dic-2 Jun-4 Dic-5 Jun-7 Dic-8 Jun-1 Dic-11 Jun-13 Jun-1 Dic-2 Jun-4 Dic-5 Jun-7 Dic-8 Jun-1 Dic-11 Jun-13 Pesos CER Adjusted Foreign Currency Current Accounts + Savings Accounts Time Deposits Deposit data is not shown for the period January-March 22, because as a result of the devaluation and the pesification measures, figures are not homogeneous for that period. As of June 3, 214. 16
Change in the Composition of the Banking System December 21 March 214 Market Share Market Share Number Private-Sector Number Private-Sector Deposits (%) Deposits (%) Banking Institutions 86 1 66 1 Government-Owned Banks 13 3 12 35 Private-Sector Banks 73 7 54 65 - Domestic Banks 34 15 34 31 - Foreign Banks 39 55 2 34 17
NPLs / Total Credit % Improvement in Asset Composition and in Loan Portfolio Quality 6 Exposure to the Public Sector (*) 1% Composition of Loans 48 5 45 34 75% 74 57 3 15 18 23 24 19 15 13 16 13 11 1 9 9 5% 25% 26 43 2 21 22 23 24 25 26 27 28 29 21 211 212 213 May-14 % 2 Mar-14 (*) Not including Central Bank Paper. INDIVIDUALS COMPANIES 2 15 1 5 Loan Portfolio Quality 14.5 1.8 18 15 12 9 6 Loan Loss Reserves / NPLs As of May 31, 214. NPLs / Total Credit Loan Loss Reserves / NPLs 18
% Improvement in Profitability 15 R.O.A. and R.O.E 12 1 8 5-5 -,1 -,3-8,9-2,9 (22,7) -,5 (4,2) 7, 14,3 11, 19,2 24,4 25,3 25,7 29,5 13,4 1,6 2,3 2,8 2,7 2,9 3,4,9 1,9 1,5 39,8 5, 4-4 -1 (59,2) 2 21 22 23 24 25 26 27 28 29 21 211 212 213 May-14-8 16 ROA Efficiency ROE 8 12 57.1 6 46,2 8 7,5 4 % 4 2 42.4 2 21 22 23 24 25 26 27 28 29 21 211 212 213 May-14 As of May 31, 214. Efficiency Ratio Coverage of Administrative Expenses with Income from Services 19
Current Situation of the Financial System Strengths» High liquidity, with some reduction in Peso segment.» Peso-based intermediation with high proportion of transactional deposits.» Improved asset mix Increase in business with private sector. Opportunities» Low level of financial depth.» Increase in concentration. Challenges» Lack of long-term funding.» Reach a greater customer base - Bancarization.» Increase cross-selling of financial products. Threats» Domestic macro: Stagflation and balance of payments pressures.» Government intervention in financial and exchange markets.» Global crisis: shape of recovery.» Holdouts vs. Republic of Argentina : judicial outcome 2
Agenda» The Argentine Economy»The Argentine Financial System»Banco Galicia»Annex 21
Simplified Organizational Structure EBA HOLDING 58.% Votes 21.6% Shares 87.5% 12.5% 1.% Insurance 77% 97% 3% 95% 1% 1% 95% 5% 5% Collection Processing 22
Banco Galicia in Numbers Number of Branches Employees Clients (*) Bank 261 5,344 2,95 Reg. Credit-Card Cos. 26 5,447 4,512 CFA 95 1,139 518 Total 562 11,93 7,98 (*) In thousands. (**) 59 branches and 36 offices. June 214 (Consolidated figures) (**) US$ bn. Ps. bn. (8.13 Ps./US$) Assets 95.4 11.7 Net Loans 58.9 7.2 Deposits 58.7 7.2 Equity 8.2 1. 23
One of the Largest Banks Market share of Market share of private-sector deposits loans to the private-sector (1) Nación (P) 17,3% Nación (P) 14,9% Santander 9,5% Santander 8,9% Provincia (P) 9,1% Galicia (2) 8,2% Galicia 9,1% Provincia (P) 7,7% BBVA 7,3% Macro 7,6% Macro 6,6% BBVA 6,7% HSBC 4,9% HSBC 4,6% Credicoop 4,8% Ciudad (P) 4,3% Ciudad (P) 3,8% Patagonia 4,% Patagonia 3,6% Credicoop 3,6% % 2% 4% 6% 8% 1% 12% 14% 16% 18% 2% (1) Includes securitized loans and leasing. (2) Considering CFA, the Bank s market share of loans to the private-sector would be 8.8%. Source: Argentine Central Bank. (P) Goverment owned banks As of March 31, 214. % 2% 4% 6% 8% 1% 12% 14% 16% TOP 1 = 76 % TOP 1 = 7 % 24
Peer Comparison 12, Market Share of Private-Sector Deposits (%) 12, Market Share of Loans to the Private Sector (%) (1) 8, 8, 4, 4, - Santander Galicia BBVA Macro HSBC, Santander Galicia Macro BBVA HSBC +T.Reg.+CFA 12. Credit Cards Managed (in thousands) 8 Branches (number) 9. 6 6. 4 3. 2 - Santander BBVA Galicia Macro HSBC +T.Reg.+CFA (1) Includes securitized loans and leasing. Source: Argentine Central Bank (except for the regional credit-card companies). As of March 31, 214. Macro Santander Galicia BBVA HSBC +T.Reg.+CFA 25
Competitive Environment 1,5 Market Share of Private-Sector Deposits 9,5 8,5 7,5 6,5 5,5 4,5 3,5 2,5 Dic-7 Jun-8 Dic-8 Jun-9 Dic-9 Jun-1 Dic-1 Jun-11 Dic-11 Jun-12 Dic-12 Jun-13 Dic-13 Source: Argentine Central Bank. As of March 31, 214. 26
Broad and Growing Customer Base 5% Total: 7.9 million, 42% (1) of Argentina s economically active population 12.7% CAGR since December 2 Consumer Banking Total: 2,874,698 2% 24% Corporate Banking Total: 75,517 2% 9% Low Income Medium Income Prof. and Self-employed High Income In Process of Classification 9% 57% Agribusiness Corporations Small and Middle-Market Business 74% Regional Credit-Card Companies Total: 4,511,86 1% 21% CFA Total: 518,421 2% Low Income Middle Income 3% Middle/High Income 6% Low Income Middle Income Middle/High Income 77% (1) Estimated. As of June 3, 214. 27
Breakdown of Loans to the Private Sector Agribusiness 17% Individuals 38% Middle-Market Companies 16% Agribusiness 12% Individuals (Bank) 27% Middle-Market Companies 22% Large Corporations 21% Financial Sector 2% Large Corporations 15% Financial Sector 2% Individuals (CFA) 5% Individuals (Regional Credit-Card Companies) 23% Bank: Ps. 44.2 billion Consolidated: Ps. 61.4 billion As of June 3, 214 28
Billions of Ps. Loan Portfolio by Maturity 35 3 46% 25 2 15 28% 1 5 1% 14% <1 month 1-6 months 6-12 months 1-3 years 3-5 years >5 years 1%.3% Maturing within 1 year: 84.4%. US$-denominated loans: 6.6%. Consolidated figures, as of June 3, 214. 29
Billions of Ps. Funding Sources (non consolidated) Bank: Ps. 72.2 billions Credit Cards: Ps.14. billions CFA: Ps.2.2 billions Subordinated Bonds 3% Other(*) 14% Financial Entities 31% Merchants 43% Financial Entities 18% Deposits 51% Bonds 3% Deposits 8% (*) Includes among other: repos, financial institutions, collections on account of third parties, debt with merchants. Bonds 26% Bonds 31% Total Deposits Growth (consolidated) Bank Deposits Breakdown by Type 6 5 4 CAGR: 29% Savings accounts 22% 3 2 1 As of June 3, 214. 28 29 21 211 212 213 Jun-14 Checking accounts 26% US$ -denominated deposits: 7.%. Time Deposits 52% 3
NPLs / Total loans to the private sector Asset Quality 12% Acquisition of CFA 16% 1% 9.2% 14% 8% 6% 11.7% 12% 1% Loan loss reserves / NPLs 4% 4.% 8% 2% 2.2% 6% % 4% Dic-7 Jun-8 Dic-8 Jun-9 Dic-9 Jun-1 Dic-1 Jun-11 Dic-11 Jun-12 Dic-12 Jun-13 Dic-13 Jun-14 As of June 3, 214. NPLs / Total loans to the private sector Consumer (T. Reg. + CFA) NPL ratio Bank NPL ratio Loan loss reserves / NPLs 31
Total Capital Ratio (%) Excess Regulatory Capital and Total Capital Ratio 18 Minimum Requirement Ps. 6.6 bn Regulatory Capital Ps. 8.7 bn Excess Capital Ps. 2.1 bn / 31.9% 16 14.4% 14 12 Banco Galicia consolidated. As of June 3, 214. 1 Dic-7 Jun-8 Dic-8 Jun-9 Dic-9 Jun-1 Dic-1 Jun-11 Dic-11 Jun-12 Dic-12 Jun-13 Dic-13 Jun-14 32
% Millions of Ps. Billions of Ps. % Strong Profitability 1 Total Assets, Public Sector Exposure and ROA 5 15 Net Interest Margin - NIM 8 3,4 3,6 4 12 6 4 2,9,8 24.4 27.5 1,9 35.2 2.9 5.7 2,6 62,8 82,2 95,4 3 2 1 9 6 3 5,8 8,3 1,1 11,7 12,1 12,8 14,1 5,4 3,8 1,5 1.7 1.7 2,8 3,2 Total Assets Exposure to the Non-Financial Public Sector ROA 1, Efficency Ratio 2. Net Income and ROE 5 8, 6, 1.6 1.2 36,6 3,9 32,1 38, 4 3 4, 2,, 72,6 65,1 66,1 63,4 64,2 61,6 55,6 8 4 1,5 8,4 195 172 2,4 469 1,17 1,31 1.837 1.447 2 1 % Net Income ROE 33
Agenda» The Argentine Economy»The Argentine Financial System»Banco Galicia»Annex 34
Consolidated Income Statement 6M 214 2.835 7.554 1.15 38% 15% 4.199 4.719 1% 53% 62% 17 928 2% 12% 1.447 18% Net Financial Income Net Income from Services Operating Income Net Charge for Loan Losses Administrative Expenses Net Other Income/Losses Income Tax Net Income 2.212 Variation 6M 213 1.61 611 376 762 111 445 741 % Change 51 27 41 49 22 189 92 15 35
Consolidated Income Statement 2Q14 1.489 3.675 51 41% 13% 2.211 2.187 1% 57% 59% 11 383 3% 1% 673 17% Net Financial Income Net Income from Services Operating Income Net Charge for Loan Losses Administrative Expenses Net Other Income/Losses Income Tax Net Income Variation 1Q14-345 143-23 -131 % Change -14 11-5 -2 11 45-3 -13 222 31-163 -1 Variation 2Q13 59 35 895 139 42 71 117 29 % Change 37 26 32 37 23 237 44 76 36
Volume Growth & Productivity Improvement Variation Dec-2 Jun-14 Abs. % Employees 6,58 11,939 5,881 97 - Banco Galicia 4,57 5,344 1,287 32 - Regional Credit-Card Cos. 1,94 5,447 3,543 186 - CFA 1,139 - Other Subsidiaries 97 9 (88) (91) Distribution Platform Branches - Banco Galicia 229 261 32 14 - Regional Credit-Card Cos. 87 26 119 137 - CFA 95 Electronic Banking Transactions (1) (in thousands, per month) 4,996 49,638 44,642 894 Products Deposit Accounts (*) 1,63 2,884 1,821 171 Credit Cards (*) 1,596 11,223 9,627 63 - Banco Galicia (*) 498 2,692 2,194 441 - Regional Credit-Card Cos. (*) (Proprietary brands and others) 1,98 8,421 7,323 667 - CFA (*) 111 Debit Cards (*) 81 1,171 37 46 Client Base (* ) 2,13 7,98 5,967 296 (*) In thousands. 37
Tarjetas Regionales» Consumer finance to medium and low income segments.» Merchant acquirer and payment processing services provider to proprietary credit cards.» Largest credit card issuer in Argentina with over:» 3. million active accounts and 8.1 million cards issued.» 26 branches and 55 offices across the country.» 35% market share in purchase volume in the interior of Argentina (excluding the city and the province of Buenos Aires) and 14% nationwide.» Second largest merchant acquirer with over 23, affiliated merchants.» Largest independent payment processor with more than 139 million annual transactions. In millions of Ps. 6M 213 6M 214 Assets 1,835 14,642 Loans 1,229 13,57 Net Worth 1,997 2,52 Net Income 27 321 ROE 28.1% 26.3% 38
CFA Efectivo Sí» Consumer finance to medium and low income segments.» Leader in Personal Loans within consumer finance institutions.» More than 2 years in the market with strong brand:» 518,421 current clients (segment C1, C2, C3, D1) more than 1 million historical clients.» 418, loans granted in 213 and 16, during the first six months of 214.» Loans in pesos, no guarantee, fixed interest rate.» 95 branches (59 Branches and 36 Offices). In millions of Ps. 6M 213 6M 214 Assets 3,22 3,697 Loans 2,773 3,136 Net Worth 971 1,18 Net Income 77 72 ROE 15.6% 13.4% 39
Lines of Business June 214 (In millions of Ps. except percentages). It does not include accrued interest. Cash loans. Granted in branches. Payroll loans. Government employees, pensioners, military and members of mutuals. Loans for the acquisition of goods. Granted through retail merchants associated with CFA. Microfinance. Entrepreneurs and Self-employeed. Issuer of Visa and MasterCard credit cards. Cross-selling to current clients and to open market clients. 2,151 69% 413 13% 352 11%.3-219 7% Total 3,136 1% Issuer of debit cards associated with saving accounts and time deposits, for retired people and pensioners. Insurance (casualty, life, burial, purchase). 4