Key Takeaways
Grupo Financiero Galicia S.A. (NASDAQ: GGAL) reported a 66% year-over-year drop in first-quarter net income to ARS 66.5 billion, as rising loan-loss provisions and sluggish loan demand weighed on results.
"During the first quarter, financial margin partially recovered, efficiency improved, and the cost of risk declined," Pablo Firvida, head of investor relations, said. "However, loan demand did not rebound, and asset quality and the monetary loss related to inflation had a significant impact on profitability.”
The bank's nonperforming loan ratio rose to 7.7% from 6.9% in the prior quarter, while the net interest margin improved sequentially to 16.7%. Management lowered its full-year loan growth forecast to a range of 20% to 25% but reiterated its ROE guidance of 10% to 11%.
Shares fell 2.96% in premarket trading as investors reacted to the sharp profit decline and signs of continued pressure on asset quality. The results highlight the challenging macroeconomic environment in Argentina, with high inflation and interest rate volatility impacting the banking sector's performance.
Banco Galicia, the group's main banking unit, saw its net income improve by ARS 162.6 billion compared to the fourth quarter of 2025, driven by lower loan-loss provisions and cost-cutting measures. However, the digital banking arm, Naranja X, posted a loss of ARS 18.6 billion, though this was a 60% improvement from the previous quarter.
Despite the weak start to the year, Chief Financial Officer Gonzalo Fernández Covaro maintained the company's 2026 return-on-equity guidance in the low double digits. "We expect like a ladder, quarter after quarter, to improve net income for the group," Fernández Covaro said. Management expects Argentina's GDP to grow about 3% in 2026, with inflation ending the year around 28% to 29%.
The guidance maintenance suggests management is confident that a stabilizing macroeconomic backdrop and improving operational efficiencies will offset the first quarter's headwinds. Investors will be closely watching the upcoming quarters for signs of this sequential improvement.
This article is for informational purposes only and does not constitute investment advice.
