Yuri Fernandez

Yuri Fernandez asked about the capital outlook, specifically if the CET1 ratio would remain around 11% in 2026 given prudential adjustments (49.66, operating risk) and capital consumption from 9.5% portfolio growth and retained profit.

Answer

Investor Relations Officer André Carvalho stated that CET1 is expected to remain around 11% throughout 2026, with regulatory measures already computed. He noted that interest on equity (IOE) is projected to increase from BRL 14.5 billion in 2025 to BRL 15-16 billion in 2026, absorbing portfolio growth. EVP and CFO Cassiano Scarpelli reiterated the 11% baseline with potential fluctuations. CEO Marcelo de Araújo Noronha emphasized capital discipline, constant DTA review, and confidence in surprising positively on CET1 and common equity, despite the 14.67 regulation's heaviest years being 2026-2028.

Yuri Fernandez questioned Grupo Financiero Galicia's confidence in the NPL peak occurring in Q1 2026, given previous shifting predictions (Q2, then Q3). He asked about the leading indicators driving this confidence, such as lower loan yields, economic improvement, or underwriting lessons. He also inquired how the expected loss model would work, specifically if lower provisions are anticipated due to expected improvement or if incurred loss provisions are still necessary, clarifying the difference between the two.

Answer

Gonzalo Fernández Covaro (CFO, Grupo Financiero Galicia) explained that NPL predictions involve both controllable actions (stricter customer scoring, reduced limits, monitoring new origination vintages showing better behavior) and uncontrollable market factors. He acknowledged the difficulty in precise prediction due to external volatility. He clarified that the expected loss model initially books reserves for new lending based on past portfolio behavior, meaning a reduction in the cost of risk will be gradual, as it takes time to prove that new customers are behaving better than older ones before provisions can be significantly reduced.

Yuri Fernandez sought clarification on the confidence behind the Q1 2026 NPL peak forecast, asking about leading indicators, underwriting lessons, and the role of the expected loss model in provision trends.

Answer

Gonzalo Fernández Covaro (CFO, Grupo Financiero Galicia) explained that the NPL peak forecast is based on controllable factors like improved customer scoring, reduced lending limits, and monitoring new origination vintages which show better behavior. He acknowledged external economic factors can impact forecasts. He also clarified that the expected loss model initially books reserves based on past portfolio performance, meaning cost of risk reduction is gradual as new, better-quality lending proves its performance over time.