Banks Improved Their Profitability, But Concerns Over Delinquency Persist: Key Insights from Recent Financial Statements

Amid the debate over increasing delinquency, Argentine banks completed the presentation of their financial statements for the second quarter of the year in August. The results from the major private entities showed a widespread improvement in profitability, supported by still high financial margins and various cost-reduction strategies. However, the quality of assets remains one of the main areas of concern, especially among entities with greater exposure to consumer credit, where the deterioration of portfolios continues to pressure delinquency levels.

To put this in perspective, a recent report from 1816 indicated (based on data from the BCRA's Central Debtors) that private credit delinquency rose slightly in July, after a pause in June. In the household segment, delinquency increased from 12.77% to 12.94%, in a context where banks continue to proceed with debt refinancings. For companies, it rose from 3.5% to 3.61%.

In this context, the financial statements of Grupo Financiero Galicia, Banco Macro, BBVA Argentina, and Grupo Supervielle generally showed better results than the previous quarter. At the same time, these entities began to show greater caution regarding credit growth for the rest of the year.

The picture, however, is not homogeneous. Banco Macro stood out for its profitability levels, Galicia showed a strong recovery compared to the first quarter, BBVA improved its results and maintained delinquency below the system average, while Supervielle returned to positive territory and showed an improvement in its portfolio quality indicators.

Galicia: Strong Recovery of Profits and Delinquency as the Main Challenge

Grupo Financiero Galicia reported a net profit of $258.3 billion in the second quarter, a jump of 264% compared to the first three months of the year and 12% year-on-year.

This improvement led to an annualized quarterly ROE of 11.3%, above the expected range of 8% to 10%. The result was mainly driven by lower funding costs, better returns from the public securities portfolio, lower provisions, and a reduction in losses from the monetary position.

Consolidated loans grew by 2% quarter-on-quarter and 5% year-on-year. However, within Banco Galicia, a mixed dynamic was observed: peso-denominated loans fell by 4% in the quarter, while dollar-denominated loans increased by 22%.

The main point of concern continues to be delinquency. Consolidated non-performing loans (NPL) rose to 10.6%, up from 9.6% in the previous quarter and 5.5% a year ago. In Banco Galicia, they reached 8.3%, while in Naranja X they climbed to 19.7%. One point to note is that the bank anticipates lower credit growth for the remainder of the year.

Banco Macro: Strong Profitability and Deterioration of Consumer Portfolio

Banco Macro reported a net profit of $206.8 billion, a 39% increase quarter-on-quarter and 4% compared to the same period in 2025. The annualized quarterly ROE reached 13.4%, above the estimates of 10% to 11%.

If early withdrawals and provisions for indemnities are excluded, the adjusted profit would have reached $221 billion, and the ROE would be at 14.3%.

Loans grew by 3% compared to the previous quarter, although they still showed a year-on-year decline of 5%. Similar to Galicia, the dollar credit showed greater dynamism than peso financing, with quarterly advances of 8% and 2%, respectively.

The downside was again in the quality of the portfolio. Delinquency increased from 5.4% to 6.25%, mainly due to the deterioration of consumer loans. The cost of risk, however, decreased from 8.9% to 6.9%. Macro also maintained high margins: the NIM stood at 24%, compared to 25.3% in the first quarter. After the good results of the semester, the entity raised its adjusted ROE forecast for all of 2026 from 8% to approximately 12%.

In contrast, it reduced its expectation for real credit growth to just 2%-5%, due to the impact of higher interest rates on financing demand.

BBVA: profits grew 45% and delinquency remained below the system

BBVA Argentina reported a profit of $131.6 billion, 44.6% higher than the first quarter and 65.2% greater year-on-year. The annualized quarterly ROE advanced from 8.3% to 12.2%, while the ROA increased from 1.2% to 1.8%. The improvement was mainly explained by lower monetary losses and a reduction in operating expenses.

Unlike other entities, BBVA showed a real growth of private loans of 2.1% quarterly and 13.1% year-on-year. Commercial loans advanced 3.3% in the quarter, and those aimed at the retail segment increased by 0.6%.

Foreign currency financing also stood out: dollar loans grew 39.7% year-on-year when measured in pesos. Delinquency increased from 5.60% to 6.09%, mainly due to credit cards and personal loans. However, it remained below the 7.22% recorded by the financial system in June. The cost of risk rose from 6.14% to 7.13%.

Supervielle Returned to Positive Territory and Advanced with Cost Cutting

Grupo Supervielle achieved a net attributable profit of $12.8 billion, reversing the loss of $18.2 billion recorded during the first quarter, although below the $18.2 billion obtained a year ago.

The reported ROE reached 4.4%, but the balance was heavily affected by extraordinary charges associated with its staff reduction plan. Excluding these items, the adjusted profit rose to $36.2 billion and the ROE reached 12.4%, well above the expected 5%-7%.

The bank reduced its workforce by 17.2% year-on-year, down to 2,815 employees, and expects the savings generated by the process to fully reflect in the results starting from the third quarter. Loans fell by 1.4% quarterly, although they increased by 8.9% year-on-year. Peso-denominated loans decreased by 3.6%, while those denominated in dollars increased by 6.3%.

Unlike Galicia, Macro, and BBVA, Supervielle showed a slight improvement in delinquency, which decreased from 5.6% to 5.5%. The cost of risk also fell, from 6% to 5.6%. Additionally, it recorded one of the highest margins of the period: the NIM climbed to 20.3%, compared to a forecast for the entire year of between 17% and 19%. The entity raised its adjusted ROE target for 2026 to between 8% and 10%, although it cut its credit growth forecast from 20%-25% to 10%-15%.

VALO: Record Results and Strong Growth in Corporate Credit

VALO closed the second quarter with a net profit of $25.536 billion, 73.3% higher than the first quarter and 36.6% above the same period in 2025. The entity described the period as its best quarter in terms of nominal results. The ROE stood at 17.9%, while net operating income reached $99.3 billion, with a quarterly growth of 23.6% and a year-on-year growth of 49.1%.

The improvement was accompanied by a greater contribution from new businesses and commissions. One of the main differentiators compared to the other analyzed banks was the quality of the portfolio. VALO maintained a delinquency ratio below 0.5%, which the entity attributed to a conservative credit origination policy.

At the same time, it showed strong expansion in corporate financing. Commercial Banking loans reached $939.084 billion, with a quarterly growth of 21% and a year-on-year growth of 65%. In foreign trade, the portfolio reached $66.460 billion, 8% more than in the previous quarter, driven by import financing.

In deposits, the total stood at $1.84 trillion, with a decrease of 1.1% compared to the first quarter but a year-on-year growth of 20.4%. Additionally, there was a change in the funding composition: peso deposits now represent 59% of the total, up from 47% in the previous quarter.

Overall, the balances of the five banks show a recovery in profitability during the second quarter, although with significant differences in credit evolution and, mainly, in portfolio quality. Despite the deterioration recorded in some segments, most entities expect delinquency to begin normalizing in the coming quarters, although the process may take longer than initially expected.

Meanwhile, credit in dollars continues to show greater dynamism, especially among companies and sectors linked to foreign currency generation. This growth occurs in a context where foreign currency deposits have already exceeded $40 billion.

The scenario is more challenging in pesos. There, a good part of the delinquency problems is concentrated, particularly in consumer lines, while the volatility shown by interest rates in recent weeks added pressure on financing demand. Although rates have begun to normalize, banks remain more cautious when granting new loans. In this context, it is worth highlighting a phrase from 1816 regarding delinquency that is worth keeping in mind: "The fact that there are so many people with irregular credits is relevant to consider the dilemma the Government is facing regarding whether to prioritize exchange rate stability or interest rate stability."

Thus, the challenge for the second half of the year will be to sustain the improvement in profitability while normalizing the quality of portfolios and gradually reviving credit in pesos, albeit in a much more gradual and cautious manner. The speed of this process will depend on the evolution of rates - avoiding episodes of risk - economic activity, and household incomes.