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Macro sees Argentine recession bottoming out, but rules out loan growth in 2019

Banco Macro SA thinks the Argentine economy is going through the "worst part of the recession" and that it should see a gradual improvement that would temper rising non-performing loan levels toward 2.0% by year-end.

In an earnings call to discuss quarterly results, CFO Jorge Scarinci said the share of NPL, which rose to 2.12% from 1.38% a year earlier, should be "at" or "near the peak" and would see a progressive decline as the slow-paced rebound takes place "from now on."

The Buenos Aires-based bank posted net income of about 7.03 billion Argentine pesos for the second quarter, more than doubling 3.14 billion pesos reaped in the prior-year period. The performance was largely founded on income from investments in high-yielding notes issued by the Banco Central de la República Argentina, as Argentine banks turn to treasury investments to compensate for negative loan activity. As of Aug.6, the yearly rate paid on Leliq notes averaged above 62.0%.

"As soon as we have credit demand coming, we are going to allocate funds into new loans instead of Leliqs," Scarinci said, though arguing that credit demand still looks "sluggish". "Loans are going to grow well below inflation this year and I would not be optimistic on a steep rebound in the second half of the year even with a positive outlook in politics," he said.

With upcoming primary presidential elections in Argentina on Aug. 11, Scarinci noted that a recovery in loan demand would most likely be driven by falling interest rates rather than the political landscape.

As of Aug. 7, US$1 was equivalent to 45.67 Argentine pesos.