Grupo Financiero Galicia (NASDAQ:GGAL) reported second-quarter net income of ARS 258 billion, up 12% from a year earlier, as lower funding costs, stronger trading and securities results, and reduced loan-loss provisions supported profitability.
The company said its second-quarter return on average assets was 2.1%, while return on average shareholders’ equity was 11.3%. Banco Galicia contributed ARS 158 billion in profit, followed by Fondos Fima with ARS 38 billion, Naranja X with ARS 36 billion, Galicia Seguros with ARS 23 billion and Galicia Securities with ARS 8 billion.
Banco Galicia Results Improve Sequentially
Banco Galicia’s net income rose 211% from the first quarter and 21% from the second quarter of 2025. Firvida attributed the improvement to lower funding costs as interest rates declined, better results from government securities and derivatives, lower provisions for loan losses, and efficiency gains from the integration of Galicia Más, formerly HSBC.
Average interest-earning assets increased 6% sequentially to ARS 30 trillion. The increase reflected a 27% rise in peso-denominated government securities, a 37% increase in dollar-denominated government securities, and 9% growth in dollar loans. Peso loans declined 7% amid more selective underwriting and lower demand.
The yield on interest-earning assets declined 190 basis points to 21.1%, while the cost of interest-bearing liabilities fell 159 basis points to 10.1%. Net interest income decreased 3% from the prior quarter, as an 8% decline in interest income was partly offset by a 16% reduction in interest expenses, primarily related to deposits.
Net income from financial instruments increased 275% sequentially. The company said the result was driven by an 85% reduction in losses from derivative financial instruments, higher gains from the sale and valuation of government securities, and a recovery in private-sector securities results.
Banco Galicia’s financing to the private sector reached nearly ARS 25 trillion at quarter-end, up 4% sequentially. Dollar-denominated financing rose 19%, while peso financing fell 4%. Deposits totaled ARS 27 trillion, up 7%, with peso deposits rising 7% and dollar deposits increasing 6%.
The bank estimated its market share of private-sector loans at 15.1%, up 69 basis points from the first quarter, while its private-sector deposit market share rose 42 basis points to 14.3%.
Credit Quality and Capital
Provision for loan losses at Banco Galicia declined 8% from the previous quarter, which the company said reflected fewer loans entering Stage 3 and early signs of improving delinquency indicators. However, the nonperforming-loan ratio rose to 8.3% from 7.7% in the first quarter. Allowance coverage increased to 92.8% from 91.4%.
Banco Galicia ended June with a total regulatory capital ratio of 26% and a Tier 1 capital ratio of 25.9%, each 48 basis points higher than at the end of the prior quarter. Its liquid assets represented 93.1% of transactional deposits and 55.2% of total deposits.
At Naranja X, CFO Hernán García said the company expects its nonperforming-loan ratio to decline to roughly 16% to 17% by year-end from nearly 20% during the second quarter. He said short-term delinquency rates continued to decline and that coverage is expected to recover toward 100%. Firvida said Banco Galicia’s coverage ratio could reach approximately 95% in the next quarter and approach 100% by year-end.
Outlook Calls for Dollar Lending Growth
CFO Gonzalo Fernández Covaro said Grupo Financiero Galicia expects total loan growth of about 10% to 15% for 2026, with most of the expansion expected to come from dollar-denominated loans. Peso loan growth is expected to be limited in real terms.
The company sees opportunities in commercial dollar lending, particularly in oil and gas, as well as financing related to privatizations of state-owned companies. Fernández Covaro said the company expects personal-loan growth to improve in the second half, though it will continue to emphasize higher-quality customer segments and careful underwriting.
Grupo Financiero Galicia expects deposits to grow about 10% this year. Fernández Covaro said the company has managed deposit growth in line with lending demand and believes it can raise additional deposits as loan growth accelerates. The company also expects to use dollar-denominated commercial paper issuances to help fund dollar lending.
- Banco Galicia expects full-year 2026 cost of risk of approximately 8.3%, compared with 9.3% at the time of the call.
- The bank expects its nonperforming-loan ratio to decline modestly in the third quarter and reach about 6.3% by year-end.
- Management expects Banco Galicia’s full-year net interest margin to average about 16%, with pressure expected in the second half as inflation and interest rates decline.
- The company is targeting return on equity of about 10% for the full year and said it aims to exit the year near 12%.
For 2027, Fernández Covaro said the company is aiming for return on equity of about 15%, though formal guidance will be addressed later in the year. Over the longer term, management continues to target return on equity between 15% and 20%.
The company expects Banco Galicia’s efficiency ratio to remain below 40% in 2026, at around 39%, following restructuring actions tied to the HSBC acquisition. Management said it would aim for a longer-term efficiency ratio of roughly 37% to 38%, while continuing initiatives involving automation, artificial intelligence, staffing and branch optimization.
On the macroeconomic outlook, Fernández Covaro said the company expects Argentina’s inflation rate to be around 29% in 2026 and GDP growth to be about 2.6%. He also said management expects the exchange rate to be around ARS 1,600 per dollar at the end of 2026 and around ARS 2,000 per dollar at the end of 2027.
About Grupo Financiero Galicia (NASDAQ:GGAL)
Grupo Financiero Galicia is a diversified financial services holding company headquartered in Buenos Aires, Argentina. As one of the country’s largest private-sector financial institutions, the company provides a comprehensive suite of banking, insurance and investment products to individual, small-to-medium enterprise (SME) and corporate clients. Its operations span retail and commercial banking, asset management, leasing, factoring and pension fund administration.
The core banking segment offers deposit and lending services, credit and debit cards, payment solutions and digital banking platforms.
