Executive Summary / Key Takeaways

• BBVA Argentina (NYSE:BBAR) is strategically expanding its private sector loan portfolio, consistently outperforming the market and solidifying its position as the third-largest privately-owned bank in Argentina amidst a normalizing macroeconomic environment.
• The bank's robust digital transformation and strategic adoption of artificial intelligence are central to its competitive differentiation, driving significant digital customer acquisition and sales, and enhancing operational efficiency.
• Despite a quarter-over-quarter decline in Q2 2025 net income to ARS 59.6 billion (7.6% ROE), driven by bond write-downs and higher loan loss allowances, the bank's net interest income and foreign exchange gains showed resilience, supported by active pricing management and cost control.
• Management projects real loan growth of 45% to 50% and deposit growth of 30% to 35% for 2025, with ROE expected in the low double-digits, underpinned by an anticipated 5.5% GDP growth and disinflation converging to around 28% by year-end.
• Key risks include a systemic deterioration in retail non-performing loans and potential liquidity concerns from restrictive monetary policy, though BBAR maintains strong asset quality relative to the system and ample liquidity.

A Legacy Forged in Argentina's Evolving Financial Landscape

Banco BBVA Argentina S.A. (BBAR) stands as a cornerstone of Argentina's financial system, with a history stretching back to its incorporation in 1886. Operating initially as BBVA Banco Francés S.A., the institution rebranded to Banco BBVA Argentina S.A. in July 2019, a period that also marked a temporary pause in its corporate bond issuances. This long-standing presence has endowed BBAR with deep local market expertise, a critical asset in Argentina's often-volatile economic cycles. The bank's strategic evolution has seen it adapt to significant shifts, notably embracing hyperinflation accounting from January 1, 2020, in response to Central Bank regulations.

BBAR's overarching strategy is firmly anchored in expanding its private sector lending and deposits, a pivot away from historical public sector exposure. This strategic reorientation is evident in the increasing proportion of loans to total assets, which rose from 32% in Q4 2024 to 58% in Q2 2025. This focus positions BBAR to capitalize on Argentina's ongoing macroeconomic normalization, characterized by sustained fiscal balance, tight monetary policy, and a gradual relaxation of foreign exchange restrictions. These broader industry trends are anchoring expectations and fostering a significant disinflationary trend, creating a more conducive environment for credit expansion and investment.

Digital Prowess and AI as a Differentiator

In an increasingly digital financial world, BBAR has strategically positioned itself through significant investments in technology and digital channels. The bank's new global strategy for the 2025-2029 cycle explicitly prioritizes leveraging accelerators such as artificial intelligence (AI) for efficient data processing. This focus is critical as digitalization has transitioned from a competitive advantage to a market standard, necessitating a redefinition of differential value against new unregulated players and disruptive technologies.

The tangible benefits of this technological drive are evident in BBAR's operational metrics. By June 2025, new customer acquisition through digital channels reached an impressive 84.5%, up from 83.5% a year prior. Furthermore, retail digital sales, measured in units, hit 95% in Q2 2025, representing 90% of the bank's total sales in monetary value. While specific quantitative metrics for AI's direct impact on efficiency or cost reduction are not detailed, the strategic intent is clear: AI is being deployed to enhance data processing, streamline operations, and ultimately redefine the customer experience. This technological roadmap is foundational to BBAR's competitive moat, enabling more efficient customer acquisition, improved service delivery, and a stronger market position in a rapidly evolving digital banking landscape.

Outperforming in a Rebounding Economy: Financial Performance and Operational Strength

BBAR's financial performance in the first half of 2025 reflects both the opportunities and challenges of Argentina's economic transition. In Q2 2025, the bank reported inflation-adjusted net income of ARS 59.6 billion, a 31.1% decrease quarter-over-quarter, resulting in a quarterly Return on Equity (ROE) of 7.6% and Return on Assets (ROA) of 1.2%. This decline was primarily attributed to a drop in net income from the write-down of assets at amortized cost, stemming from a voluntary exchange of government bonds in January 2025, and a deterioration in loan loss allowances. However, these impacts were partially offset by improved income from foreign exchange and gold gains, driven by increased activity following the partial lifting of FX controls on April 14, 2025. Net interest income (NII) in Q2 2025 increased 3.1% quarter-over-quarter to ARS 591.8 billion, with interest income outpacing expenses due to improved loan income and CER/UVA adjustments.

Looking at the broader trend, BBAR's accumulated ROE for the first half of 2025, while not explicitly stated, is on a path towards management's low double-digit guidance. In Q1 2025, inflation-adjusted net income was ARS 81.6 billion, an increase of 16.2% quarter-over-quarter, yielding an ROE of 11.5% and ROA of 2%. This earlier quarter saw substantial improvements in fee income and NII, coupled with lower operating expenses. For the full year 2024, BBAR's net income was ARS 357.7 billion, a marginal 0.4% decrease from 2023, with an annualized ROE of 12.5% and ROA of 2.5%. The 25.8% real-term fall in operating income in 2024 was largely due to declining NII from lower average market rates and reduced income from CPI-linked bonds, alongside lower foreign exchange gains. However, improvements in personnel and turnover tax expenses provided a partial offset.

The bank's efficiency ratio has remained stable, at 56.5% in Q2 2025, consistent with 56.3% in Q1 2025. This reflects proactive efficiency measures, including a 4.8% quarter-over-quarter drop in administrative expenses in Q2 2025 due to cost savings in areas like armor transportation and advertising, and lower provisions from the elimination of the PAIS tax. The Net Interest Margin (NIM), which was 50% in 2023, has normalized to 19.1% in Q2 2025, reflecting the transition from high-yielding securities to loans and the aggressive decline in monetary policy rates. However, the adjusted NIM, which includes the net monetary position, has shown stabilization and even an increase in Q2 2025, indicating improving spreads.

Strategic Credit Expansion and Market Leadership

BBAR has demonstrated remarkable success in expanding its private sector loan portfolio, consistently outpacing the market. Its market share of total private loans rose by 107 basis points, from 10.54% in June 2024 to 11.61% in June 2025. As of March 2025, BBAR was positioned as the third-largest local privately-owned bank in terms of consolidated private loans. The peso loan portfolio expanded by 43% year-to-date in H1 2025, significantly faster than the system's 39%, while total private deposits grew 32%, surpassing the system's 17% growth.

The loan book's real growth in Q2 2025 was broad-based, with overdrafts increasing 34.6%, other loans (including floor plan business) up 26.9%, credit cards rising 8.4%, and consumer loans growing 11.6%. Foreign currency-denominated loans also saw a 23.6% quarter-over-quarter increase, primarily driven by a 23.5% growth in export financing and refinancing, buoyed by the lifting of foreign exchange controls. The commercial portfolio now represents 58.1% of the total portfolio, up from 54.1% a year ago, reflecting a strategic focus on this segment.

On the funding side, total deposits reached ARS 17 trillion in Q2 2025, increasing 12% quarter-over-quarter. The bank's consolidated market share of private deposits reached 9.64%, a notable increase from 7.5% a year prior. Time deposits, particularly in pesos, showed strong growth, increasing 34.8% quarter-over-quarter in Q2 2025. The bank's liquidity remains robust, with liquid assets at ARS 6.4 trillion in Q2 2025, representing 48.7% of total deposits.

Competitive Positioning: A Global Network with Local Acumen

BBAR operates in a competitive Argentine banking market alongside prominent players such as Banco Macro , Grupo Financiero Galicia , and Banco Santander Río (part of the global Banco Santander, TICKER:SAN). BBAR's competitive edge is multifaceted, stemming from its established brand, extensive global network through BBVA, and deep understanding of local regulatory nuances.

Compared to Banco Macro (BMA), BBAR's global ties offer a unique value proposition in cross-border financing, potentially attracting multinational clients and providing greater stability in relationship banking. While BMA may exhibit strong domestic retail efficiency, BBAR's operational execution for corporate clients and its strategic adaptability in volatile markets are notable strengths. Against Grupo Financiero Galicia (GGAL), BBAR's global economies of scale can translate into materially lower operating costs for high-volume transactions, enhancing its efficiency. BBAR's focus on stability and regulatory compliance also positions it strongly in corporate finance, contrasting with GGAL's more innovation-driven approach. While GGAL might lead in fintech integrations, BBAR's established brand in corporate banking and its risk management capabilities provide a distinct advantage. When compared to Banco Santander Río (SAN), BBAR's historical expertise in Argentine economic cycles allows for more tailored solutions for local businesses and potentially greater efficiency in local regulatory navigation. While Santander Río may lead in technological innovation speed due to its global resources, BBAR's operational resilience and diversified revenue sources contribute to cash flow stability.

BBAR's consistent outperformance in credit segment growth and its position as the third-largest privately-owned bank underscore its strong market standing. The bank's non-performing loan ratio of 2.28% in June 2025 remains below the system average of 2.55%, reflecting its prudent credit risk management and high-quality portfolio origination. This disciplined approach is a key competitive differentiator, particularly in a market prone to economic fluctuations.

Outlook and Risks: Navigating Growth with Prudence

BBAR's management maintains a confident outlook for 2025, projecting real loan growth of 45% to 50% and deposit growth of 30% to 35%. The ROE is guided to be in the low double-digits, a normalization from the abnormally high levels seen in early 2024. These projections are based on BBVA Research's macroeconomic assumptions, including a 5.5% GDP growth for Argentina in 2025 and an inflation rate converging to around 28% by year-end. The exchange rate is expected to stabilize around ARS 1,400 by year-end 2025, growing in line with inflation thereafter. The capital ratio is anticipated to be around 17% by year-end 2025, influenced by dividend payments and the growth in risk-weighted assets from increased credit activity.

Despite the positive outlook, several risks warrant attention. A publicly known deterioration of non-performing loans (NPLs) has been observed across the system, particularly in the retail segment (credit cards and consumer loans), which aligns with the overall systemic trend. BBAR's NPL ratio, while increasing, starts from historically low levels and remains below the system average, with commercial NPLs showing very good performance. Management acknowledges a "scenario a bit more complicated in terms of NPLs" but remains "comfortable in this level" and committed to its credit growth strategy. Another risk stems from the government's restrictive monetary policy, which could lead to liquidity concerns. However, BBAR possesses excess liquidity and views this as a provisional challenge. Interest rate volatility, while potentially impacting short-term credit demand, is also seen as a temporary phenomenon. The bank's strategy of converting floating-rate securities into longer-maturity fixed-rate instruments helps mitigate the impact of declining interest rates on its NIM.

Conclusion

Banco BBVA Argentina is executing a compelling investment thesis, leveraging its deep historical roots, robust digital infrastructure, and strategic focus on private sector credit expansion to capture growth in a normalizing Argentine economy. The bank's consistent outperformance in loan and deposit market share, coupled with its disciplined asset quality management, underscores its operational effectiveness and competitive strength. While facing systemic challenges such as NPL deterioration and monetary policy-induced liquidity dynamics, BBAR's proactive risk management, strong capital position, and commitment to technological differentiation position it favorably. The anticipated macroeconomic stabilization, combined with BBAR's strategic initiatives and management's prudent guidance, suggests a resilient and growth-oriented trajectory for the bank, making it a compelling consideration for discerning investors seeking exposure to Argentina's financial sector.