Goldman Sachs dissects Argentine banks’ Q2 recovery: Macro gets the buy, BBVA a sell despite highest ROE

Argentina’s banks head into Q2 earnings with profits up but loan books still lagging

Argentina’s top private banks are set to unveil second-quarter results that will show a clear rebound in profitability, but that improvement masks a deeper, less encouraging picture of sluggish lending and deteriorating asset quality. That is the central tension in a new research note from Goldman Sachs, which covers Banco Macro, Grupo Financiero Galicia and BBVA Argentina.

Goldman expects all three banks to report stronger earnings sequentially, driven largely by lower inflation reducing monetary-position losses and contributions from subsidiaries. However, the investment bank cautions that “the recovery in earnings is advancing faster than the normalization of credit and asset quality” – a gap that leads it to sharply different conclusions about the three stocks.

Banco Macro emerges as the top pick, with Goldman reiterating a Buy rating and a 12-month price target of US$105, implying roughly 26% upside at the time of writing. The note forecasts a 10% real quarter-on-quarter increase in recurring profit and a loan book expansion of 5%, while the cost of risk falls by 41 basis points to 7.7%. Crucially, Macro also enjoys a Tier 1 capital ratio estimated at 31.2%, far above its peers, which Goldman sees as a key buffer while system-wide asset quality remains under pressure.

Galicia receives a more cautious Neutral rating despite an expected jump in recurring ROE from 3.1% in Q1 to 8.4% in Q2. Goldman highlights that Galicia’s non-performing loan ratio is likely to stay at 9.6% – significantly higher than Macro’s and BBVA’s – and while the bank has “greater exposure to an Argentine macro recovery”, the short-term credit risks keep the recommendation neutral. The price target was lifted modestly from US$44 to US$46 but remains roughly in line with market levels.

BBVA Argentina presents the most striking paradox. Goldman forecasts that the bank will post the highest reported ROE among the trio at 12.2%, with net income surging 54% quarter-on-quarter. Yet the Sell rating and US$13 ADR price target are maintained, representing about 24% downside. The reason: net interest income is expected to contract 3% sequentially, the loan portfolio to stay flat, and the cost of risk to tick up further, raising doubts about the durability of the profit stream.

Why Goldman Sachs picks winners and losers inside Argentina’s banking recovery

Why Macro gets the Buy

Goldman’s bullishness on Banco Macro rests on a combination of superior capital strength and a comparatively contained asset-quality picture. A Tier 1 ratio above 30% gives the bank plenty of capacity to absorb credit losses without threatening its solvency or dividend capacity. Meanwhile, the projected decline in the cost of risk – even as non-performing loans edge up to 6% – suggests that provisioning is already reflecting the worst of the cycle. In a country where unpredictable shocks are the norm, that fortress balance sheet is the defining competitive advantage.

Galicia: recovery with a high credit-risk shadow

Galicia’s expected quarterly profit recovery is one of the strongest in the sample, yet Goldman’s analysts remain cautious because the rebound comes from a very low base and is overshadowed by an NPL ratio of nearly 10%. The bank’s high sensitivity to a macroeconomic turnaround could turn it into the biggest beneficiary of a genuine credit recovery, but the investment bank’s medium-term earnings cuts – 24% for 2027 and 28% for 2028 – signal that it sees more downside from operational costs and tepid income before that recovery materializes.

BBVA Argentina: a sell beneath a stellar ROE

The apparent contradiction of a Sell rating on the quarter’s most profitable bank illustrates Goldman’s core thesis: a good quarter does not guarantee a good investment case. With net interest income falling, a flat loan book, and a rising cost of risk, BBVA’s earnings quality looks weaker than the headline ROE suggests. The decision to trim 2027 and 2028 profit estimates by 15% and 17% respectively further indicates that the bank’s path to sustainable growth is slower than peers, making its valuation – at 8.9 times 2027 earnings – unappealing relative to the risk.

Valuation reality check

The competitive grading also reflects that Argentine bank multiples are no longer deep-value compared to the region. Macro trades at 8.6 times estimated 2027 earnings, Galicia at 8.7 times and BBVA Argentina at 8.9 times, against a median of 7.7 times for Latin American banks under Goldman’s coverage. The modest premium means that investors are already paying for a recovery, and any disappointment in credit normalization could quickly reprice the shares. Goldman’s message is clear: the next stage is not simply about earning more, but about proving that those earnings can be sustained by a genuine rehabilitation of the lending business.

What the Goldman rating split means for investors in Argentine banks

• Differentiate by balance-sheet resilience. Banco Macro’s 31.2% Tier 1 ratio provides a concrete safety cushion that Galicia and BBVA Argentina lack. In an environment where non-performing loans are still rising, that capital buffer directly limits downside risk to shareholders.
• Watch the NPL trajectory, not just the ROE. Galicia’s 9.6% problem-loan ratio and BBVA’s rising cost of risk are leading indicators of future provisioning charges that can eat into reported profits. A high ROE today may not be repeatable if credit costs continue to climb.
• Question the earnings quality. Much of the Q2 profit gain across the sector is driven by non-recurring factors such as lower inflation-linked losses and subsidiary income. Investors should track net interest income and loan growth closely to gauge whether the core banking engine is actually recovering.
• Price for proof, not promise. With all three banks trading above the regional median P/E, the market is already pricing in a recovery. Goldman’s explicit divergence between short-term earnings and medium-term forecasts – particularly the deep cuts for Galicia and BBVA in 2027-2028 – signals that only banks demonstrating genuine loan growth and improving asset quality can justify current valuations.