Grupo Financiero Galicia S.A. — 2021 Form 20-F
Reporting period: Fiscal year ended December 31, 2021; filed April 25, 2022. This is an annual report, not a standalone fourth-quarter earnings release. The group is an Argentina-based financial-services holding company, led by Banco Galicia and also operating in consumer finance and digital banking (Naranja X), insurance, asset management and brokerage.
Accounting basis: Consolidated financial statements use IFRS and are restated under IAS 29 for Argentina’s hyperinflation. Reported amounts are generally in millions of Argentine pesos at December 31, 2021 purchasing power; the exchange rate was Ps.102.75 per US$1. Peso figures should not be read as nominal amounts or as freely convertible into dollars.
Key financial metrics
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Total assets | Ps.1,678,043 million | Ps.1,592,856 million | +5.3% |
| Net income | Ps.31,094 million | Ps.38,508 million | -19% |
| Net interest income | Ps.109,278 million | Ps.115,795 million | -6% |
| Net fee income | Ps.57,790 million | Ps.55,056 million | +5% |
| Net result from financial instruments | Ps.95,610 million | Ps.104,620 million | -9% |
| Expected credit loss allowance expense | Ps.23,263 million | Ps.52,874 million | -56% |
| Operating income | Ps.47,631 million | Ps.70,071 million | -32% |
| Return on assets / equity | 1.85% / 10.21% | 2.39% / 13.80% | Lower |
| Basic earnings per share | Ps.21.09 | Ps.26.33 | -20% |
| Cash and cash equivalents at year-end | Ps.641,961 million | Ps.571,797 million | +12% |
Net interest yield on interest-earning assets was 18.61%, down from 19.80%; the reported interest-rate spread was 13.54%, down from 16.05%. The filing does not provide a single consolidated revenue or operating-margin figure comparable to a non-financial company’s revenue and margin.
Consolidated net loans and other financing were Ps.744,434 million, down from Ps.794,608 million. Gross loans before allowances declined 7% to Ps.791,752 million. Total deposits were Ps.1,035,958 million, up about 1.5% from Ps.1,020,886 million. These balance changes are in inflation-restated pesos; Argentina’s CPI rose 50.9% in 2021.
Cash flow from operations was Ps.282,811 million, versus Ps.277,361 million; investing activities used Ps.8,418 million and financing activities generated Ps.8,429 million. Cash and cash equivalents increased Ps.70,164 million after the reported monetary loss related to cash equivalents.
At Banco Galicia, total assets were Ps.1,477,466 million, loans and other financing Ps.580,535 million, deposits Ps.1,040,723 million, and shareholders’ equity Ps.250,188 million. Regulatory computable capital was Ps.251,142 million against a Ps.85,244 million minimum; the total capital ratio was 24.12%, versus 22.92% in 2020. Consolidated shareholders’ equity attributable to Grupo Galicia was Ps.304,469 million.
Outstanding debt securities were Ps.54,248 million at year-end, down from Ps.58,456 million. Funding was predominantly deposits (62% of total). Most deposits and scheduled debt payments were short-term; the filing identifies several 2022 maturities. Banco Galicia reported Ps.677,775 million of total liquidity, including Ps.363,086 million for legal requirements and Ps.314,689 million of management liquidity.
Material changes versus prior year
- Net income fell 19%, chiefly as the monetary-position loss rose 55% to Ps.79,502 million and financial-instrument income declined 9%. Lower expected credit loss expense partly offset these pressures, falling to Ps.23,263 million from Ps.52,874 million; management attributed the decrease primarily to use of part of the additional COVID-19 provision recorded in 2020.
- Interest income rose 15%, but interest expense rose 32%, principally as deposit costs increased. Average loan balances contracted while average repurchase transactions expanded substantially.
- Net fee income increased 5%, supported by collections and deposit-account fees. Personnel expenses declined 3% and administrative expenses 4%, while other operating expenses increased 17%, including higher turnover taxes.
- The group’s public-sector exposure rose 48% to Ps.542,104 million, excluding BCRA deposits held for reserve requirements. Banco Galicia’s exposure was also described as approximately 37% of its assets and 216% of its shareholders’ equity.
- Digital adoption and consumer-card activity expanded. Naranja X reported 8.7 million authorized cards and higher annual transactions and consumption; Banco Galicia reported growth in digital transactions and a 51% increase in its SME loan portfolio.
Outlook, commentary and risks
Management described 2022 as challenging and expected slower Argentine growth, persistently high inflation, exchange-market pressure, and uncertainty around fiscal and monetary policy. It cited the IMF Extended Fund Facility agreement and its targets for reducing the primary deficit, limiting monetary financing, adjusting tariffs and accumulating foreign reserves. Management expected to maintain adequate liquidity, solvency, profitability and asset quality, but did not provide quantitative group earnings guidance.
Banco Galicia expected loan and deposit growth and anticipated improved business versus 2021 if macroeconomic assumptions held, while noting that inflation, regulated rates, foreign-exchange controls and dividend restrictions could constrain margins. Management expected higher financing and credit-loss provisions. Naranja X noted uncertainty about consumption, operations and access to capital-market funding. The group planned Ps.13,517 million of 2022 capital expenditures, principally for infrastructure and IT, and expected internal funds to be sufficient.
- Argentina exposure: inflation, peso depreciation, capital and foreign-exchange controls, fiscal deficits, sovereign and BCRA credit exposure, political and regulatory changes, and limited access to international financing.
- Banking and credit: deposit confidence and liquidity, short-term funding, interest-rate and maturity mismatches, borrower defaults, regulated fees and rates, and the adequacy of IFRS 9 loss allowances.
- Other risks: COVID-19 and future health disruptions, cybersecurity and operational failures, class actions, tax disputes, labor-cost pressures, and restrictions on subsidiary dividends. As a holding company, Grupo Galicia depends on subsidiary distributions to fund its own obligations.
The filing reports that Price Waterhouse & Co. S.R.L. issued unqualified opinions on the IFRS financial statements and internal control over financial reporting as of December 31, 2021. The auditor identified expected credit loss estimation as a critical audit matter, citing significant management judgment around macroeconomic scenarios and assumptions.
Investor verification priorities
- Confirm reported figures against the audited IFRS statements and notes, including IAS 29 restatement, comparative-period basis and the treatment of inflation effects.
- Reconcile the group, Banco Galicia and Naranja X loan, deposit, capital and public-sector exposure figures; the filing presents metrics at different consolidation levels.
- Review the size and composition of public-sector and BCRA exposures, related valuation assumptions, and potential sensitivity to sovereign repayment capacity.
- Assess credit quality and reserve adequacy, including the effect of COVID-related payment deferrals and the use of the 2020 additional allowance during 2021.
- Check 2022 debt maturities, refinancing access, foreign-exchange restrictions, and the actual timing and amount of subsidiary dividends and proposed Grupo Galicia distributions.