Grupo Financiero Galicia ((GGAL)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call of Grupo Financiero Galicia painted a mixed picture of the company’s financial health and outlook. While there were positive notes on economic growth and improvements in inflation and private sector deposits, these were overshadowed by significant net losses, devaluation, interest rate volatility, and increased nonperforming loans. These challenges were primarily attributed to restructuring expenses and difficulties in maintaining asset quality.
Economic Growth in Argentina
The Argentine economy showed promising signs with a 5% year-over-year increase in September 2025, and a year-to-date economic expansion of 5.2%. This growth reflects a resilient economic environment, which could provide a supportive backdrop for financial institutions operating in the region.
Primary Surplus Achievement
Grupo Financiero Galicia reported a primary surplus of 0.5% of GDP in the third quarter, with an overall surplus of 0.1% of GDP. This was driven by a 32.8% year-over-year increase in revenues, indicating strong fiscal management and revenue generation capabilities.
Improvement in Inflation Rates
Inflation rates showed improvement with headline inflation at 2.1% in September and 2.3% in October, marking the lowest levels since July 2018. Over the last 12 months, inflation increased by 31.3%, suggesting a stabilizing economic environment.
Increase in Private Sector Deposits
Private sector deposits experienced significant growth, with peso-denominated deposits increasing by 5.6% during the quarter and 53% over the last 12 months. Dollar-denominated deposits also rose by 7.2% during the quarter and 38.9% over the last 12 months, reflecting strong confidence in the banking sector.
Projected Improvement in ROE
The company is optimistic about its future performance, expecting an improvement in return on equity (ROE) to 11% to 12% in 2026, with a long-term target of above 15%. This projection is based on anticipated improvements in margins and asset quality.
Net Loss in Third Quarter
The company reported a net loss of ARS 87.7 billion for the third quarter, largely due to losses from Banco Galicia and Naranja X, compounded by extraordinary restructuring expenses.
Devaluation and Interest Rate Volatility
The exchange rate averaged ARS 1,400 per dollar in September 2025, marking a 15.6% devaluation compared to June 2025. Peso-denominated interest rates experienced sharp fluctuations, with the average rate on private sector time deposits increasing by 16.5 percentage points.
Decline in Net Operating and Interest Income
Net operating income decreased by 23%, and net interest income fell by 10% compared to the second quarter, highlighting the financial pressures faced by the company.
Increase in Nonperforming Loans
The ratio of nonperforming loans to total financing rose to 5.8%, up 140 basis points from the second quarter, indicating challenges in asset quality.
Restructuring and Extraordinary Expenses
The quarter was marked by significant extraordinary restructuring expenses due to the merger with HSBC, totaling ARS 105.3 billion net of income tax, impacting the company’s financial results.
Forward-Looking Guidance
Despite the challenges faced in the third quarter, Grupo Financiero Galicia maintains a robust liquidity position with deposits reaching ARS 22.9 trillion, an 8% increase from the previous quarter. The company anticipates a recovery in 2026, projecting a return on equity (ROE) between 11% and 12%, driven by improved margins and asset quality. The bank expects nonperforming loans to peak by March 2026, with improvements as new, higher-quality lending portfolios are developed.
In summary, Grupo Financiero Galicia’s earnings call revealed a complex financial landscape with both positive and negative elements. While the company faces significant challenges, particularly with net losses and asset quality, there are also promising signs of economic growth and improved inflation rates. Looking ahead, the company is optimistic about its recovery and future performance, with strategic plans to enhance its financial standing.