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High interest-rate regime anchors Argentine major banks' Q2 results

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High interest-rate regime anchors Argentine major banks' Q2 results

The cumulative profit of Argentina's three largest listed banks in the second quarter of 2018 surged 60.37% year over year, as robust interest income, fueled by the high-interest rate regime in the country, kept mounting operating expenses at bay.

Aggregate net income for three of Argentina's biggest lenders — Grupo Financiero Galicia SA, Banco Santander Río SA and Banco Macro SA — came to 8.18 billion Argentine pesos in the three-month period, rising from 5.10 billion pesos in the prior-year quarter.

All three banks saw improvements in their individual profit, With Santander Río taking the helm in terms of growth with an 82.66% yearly gain. Meanwhile, Banco Macro and Galicia posted growth of 54.60% and 51.54%, respectively.

In addition, Santander Río was the only one which booked a rise in its return on average equity, which hit 28.95% in the second quarter. Galicia and Banco Macro's returns on average equity each fell to 24.59% and 24.92%.

Combined net interest income for the three banks doubled to 23.20 billion pesos in the second quarter. The lenders continued to benefit from the increases in the central bank's benchmark interest rate, which was raised by a combined 1,275 basis points in late April and early May to 40%. The banks' net interest margins also advanced in the quarter, with Banco Macro's improving about 7 percentage points to 15.28%.

Total operating expenses for the three banks came to 25.56 billion pesos in the period, up 68.27% from a year earlier, as high inflation continued to weigh on the costs of businesses in the country. The banks also tallied higher asset write-downs in the quarter, up 85.26% yearly to 4.78 billion pesos, bringing total expenses to 33.98 billion pesos.

All three lenders saw a rise in their provisions-to-average amortized loans ratio, with Galicia taking the lead at 4.13%. Meanwhile, Galicia was the only one that posted a year-over-year decline in its nonperforming loan ratio, which hit 2.97%.

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As of Sept. 10, US$1 was equivalent to 37.46 Argentine pesos.

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See a section for financial highlights for your bank. To do so, go to the company's profile on the website and then select "Financial Highlights" under the Templated Financials section on the left-hand panel. Here is an example for Grupo Financiero Galicia SA.

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