EM LATAM CREDIT: Grupo Galicia: Q3 2025 Earnings – Negative
(GALIAR; Caa1/B-/NR)
• Argentina bank holding company for one of the country's top banks, Banco de Galicia y Buenos Aires, Grupo Galicia reported weaker profitability across all its businesses, lower net interest income QoQ and higher NPLs both QoQ and YoY but solid capitalization that left the credit profile intact.
• GALIAR Oct. 2028s were last quoted 6.86%, or T+337bp. That compares to eight months longer maturity Argentina’s Banco Macro (BMAAR; Caa1/NR/CCC+) recently issued June 2029 notes yielding 7.78%, or T+419bp. BMAAR’s earnings release is scheduled for tomorrow. We see a similar credit profile with a well-capitalized bank shifting to an increase in lending and away from debt securities investments and a challenging country’s monetary policy to navigate.
• Skyrocketing cost of liabilities and stricter reserve requirements due to a federal government on the defensive amid political instability led to a 10% decline in net interest income QoQ but was still 21% higher YoY. The YoY increase was due to a 90% increase in loans accompanied by a 41% decrease in the securities portfolio.
• The increase in the loan book led to an increase in loan loss provisions of 234% YoY and 23% QoQ which more than offset the increased net interest income and led to an overall decline in profitability. Non-performing loans (NPLs) were 6.8% in Q3, up from 5.5% in Q2 and 2.7% a year ago.
• Grupo Galicia completed the acquisition of HSBC’s banking operations late last year and had significant restructuring expenses this past quarter. Grupo Galicia’s Q3 ROE was -4.7% but excluding integration expenses was an ROE of 1%.
• Capitalization overall, including its fintech subsidiary Naranja X, was 21.1%, down from 22.3% in the previous quarter and down from 24.5% a year ago. At the bank level, the Tier 1 capital ratio was 21.8%, down from 23.2% the previous quarter and 26% a year ago. That compared favorably with a minimum regulatory requirement of 8.2% Tier 1 capital.
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FED: MNI Fed Preview - October 2025: QT, Or Not QT
MNI's preview of the October FOMC has been published - Download Full Report Here
- The Federal Reserve is overwhelmingly expected to cut the funds rate by 25bp for a 2nd consecutive meeting on October 29, bringing the target range to 3.75-4.00%.
- This will again be framed as a risk management cut, with the limited data available since the September meeting not disconfirming that the shift in the balance of risks had tilted toward labor market downside.
- Dissent to this decision should once again be limited to Gov Miran in favor of a 50bp cut.
- With limited new developments and official data to opine on, Chair Powell’s press conference will be eyed for affirmation that a December cut remains on track, as signalled by the most recent Dot Plot.
- He’s unlikely to give much away, but it would be surprise given the lack of data and relevant developments if he suggested that a further 2025 cut was in any greater doubt than it was 6 weeks earlier.
- Instead, we think focus in terms of action at this meeting will be on the balance sheet, with the Fed likely to announce an end to quantitative tightening amid diminishing reserve levels and nascent evidence of funding market pressures.
- We will also be watching for any news on the Fed’s communications framework, with an updated “Dot Plot” potentially unveiled at some point by year-end.
MNI’s separate preview of sell-side analyst summaries to follow on Monday Oct 27
RATINGS: Moody's Lowers France's Outlook To Negative, Maintains Aa3 Rating
Moody's has lowered its outlook on France to negative from stable.
- Moody's was expected to at least lower the outlook, so this is not a surprise - there had been some risks perceived of a downgrade to A1 (from Aa3) in the domestic and foreign currency long-term issuer and domestic-currency senior unsecured ratings.
- Per the Moody's release: "The decision to change the outlook to negative reflects the increased risk that the fragmentation of the country's political landscape will continue to impair the functioning of France's legislative institutions. This political instability risks hampering the government's ability to address key policy challenges such as an elevated fiscal deficit, rising debt burden, and durable increase in borrowing costs, thus leading to a more rapid weakening in France's key fiscal metrics than we currently expect."
- Both S&P and Fitch have already downgraded France’s sovereign rating to the single-A bucket this year.
USDCAD TECHS: Corrective Pullback
- RES 4: 1.4200 Round number resistance
- RES 3: 1.4167 50.0% retracement of the Feb 3 - Jun 16 bear leg
- RES 2: 1.4111 High Apr 10
- RES 1: 1.4080 High Oct 16 and the bull trigger
- PRICE: 1.4016 @ 16:33 BST Oct 24
- SUP 1: 1.3979/3907 20- and 50-day EMA values
- SUP 2: 1.3829 Bull channel base drawn from the Jul 23 low
- SUP 3: 1.3769 Low Sep 19
- SUP 4: 1.3727 Low Aug 29 and a bear trigger
USDCAD has pulled back from its recent highs. The trend condition is bullish and a move lower is considered corrective. Moving average studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on 1.4111, the Apr 10 high, and further out, scope is seen for an extension towards 1.4167, a Fibonacci retracement. First key support lies at 1.3907, the 50-day EMA. Support at the 20-day EMA lies at 1.3979.
