Grupo Supervielle S.A. (NYSE: SUPV) ; (BYMA: SUPV), (“Supervielle” or the “Company”) a universal financial services group headquartered in Argentina with a nationwide presence, today reported results for the three-month and nine-months periods ended September 30, 2020.
Starting 1Q20, the Company began reporting results applying Hyperinflation Accounting, in accordance with IFRS rule IAS 29 (“IAS 29”) as established by the Central Bank. For ease of comparison, figures for all quarters of 2019 have been restated applying IAS 29 to reflect the accumulated effect of the inflation adjustment for each period through September 30, 2020.
Commenting on third quarter 2020 results, Patricio Supervielle, Grupo Supervielle's Chairman & CEO, noted: “We delivered double digit ROAE in real-terms and continued to strengthen coverage this quarter while increasing our capital base and maintaining strong liquidity. This was achieved in an environment that continues to be difficult with stay-in-place restrictions to contain the pandemic, a recessionary macro environment and a changing regulatory framework.
Given the current market situation, we are balancing the profitability-risk equation through managing the credit cycle and leveraging our flexibility, which resulted in lower loan and deposit growth.
As we retain a cautious approach to managing credit risk, we continued to revise our expected loss models to adjust to the current economic outlook. Following further in-depth top down analysis of certain industries that we expect could be highly impacted by the pandemic, this quarter we made an additional AR$1 billion in Covid-19 anticipatory provisions which resulted in a 12% sequential increase in provisions. We are closely monitoring our loan book and risk models to adjust as required. Importantly, we continued to increase our coverage ratio reaching over 181% this quarter, from 127% in 2Q20 and 83% in 4Q19.
We are seeing sustained adoption of digitalization across our business in this low touch economy. I would like to highlight that our senior citizen customer base continues to make significant strides in terms of digital adoption resulting in an overall higher number of transactions through digital and automatic channels. SMEs also continued to rapidly embrace the digital adoption since July with e-checks nearly doubling while e-factoring increased by 60% during the same period. Transactions at non-automated tellers stayed relatively unchanged at 7% and significantly below the 17% of total transactions observed in 1Q20.
Amidst this health crisis, we remain focused on executing against our long-term goals of serving the changing needs of our customers while enhancing efficiency. We are evolving our business with continued progress on the implementation of the transformation of our branch network, deploying new branch service models, including advancing the conversion of our senior citizen branches to broaden our service capabilities and boost satisfaction and efficiency. This includes enhancing the user experience by leveraging our innovative biometrics for retirees and stepping up other technologies across branches while establishing a value proposition for SMEs in areas where we see potential to expand the customer base.
With the goal of delivering digital solutions that address personal finance needs while promoting financial education with tools that help in decision-making, earlier this week we launched IUDÚ, our digital banking services platform, which joins the Grupo Supervielle ecosystem to participate in the transformation of the financial services industry. In this first iteration, the IUDÚ App allows customers to obtain personal loans and credit cards. We expect to add retail savings and time deposit accounts in the first half of 2021, followed by a comprehensive suite of digital banking products and services to be added in the near-term.
Looking ahead, following the sharp contraction in GDP expected for the year, Argentine economic activity could see a recovery of around 5% in 2021, further supported by a resumption of IMF negotiations along with a series of governmental measures that tend toward fiscal restraint. Having said that, a path to recovery is still largely dependent on the depth and duration of this global health crisis, overall macro conditions and the regulatory framework.
We remain fully committed to taking the actions required to ensure the long-term sustainability of our business. Through executing against our strategy of transforming Grupo Supervielle and prioritizing our digital transformation to continue evolving our company into a cutting edge, agile and cost-efficient player that meet our customer’s needs, we believe we are on the right path.” concluded Mr. Supervielle.
Third Quarter 2020 Highlights
Attributable Net income of AR$859.6 million in 3Q20, compared to a loss of AR$2.3 billion in 3Q19 and a profit of AR$ 1.1 billion in 2Q20. Excluding the impact of IAS29, Attributable Net income would have been AR$1.9 billion in both 3Q20 and 2Q20, and AR$301.0 million in 3Q19.
QoQ performance was explained by: (i) higher LLPs as the Company continued to revise its expected loss models and made additional Covid-19 specific anticipatory provisions that resulted in increased coverage, and (ii) a higher impact from inflation adjustment reflecting accelerated inflation in 3Q20 compared to 2Q20. These were partially offset by: (i) a lower income tax charge, (ii) a slightly higher financial income resulting from higher volumes in Central Bank Securities investments, despite the increase in cost of funds, and higher trading gains, and (iii) lower administrative expenses following the Company’s cost control policy.
ROAE of 11.0% in 3Q20 compared with -33.6% in 3Q19 and 14.4% in 2Q20. ROAA of 1.4% in 3Q20 compared to -3.9% in 3Q19 and 2.0% in 2Q20.
Profit before income tax of AR$871.6 million in 3Q20 compared to a loss of AR$2.6 billion in 3Q19 and a profit of AR$1.3 billion in 2Q20.
Revenues were up 29.6% YoY and almost flat (0.7%) QoQ.
Net Financial Income of AR$10.0 billion was up 31.1% YoY and almost flat (+0.8%) QoQ. Net Interest Margin (NIM) of 21.2% was up 400 bps YoY, but down 230 bps QoQ.
The total NPL ratio was 4.5% in 3Q20 decreasing by 240 bps YoY and 160 bps QoQ. The QoQ NPL decline was mainly due to the write-off of a commercial loan that was delinquent since 3Q19.
Loan loss provisions (LLP) totaled AR$2.7 billion in 3Q20, down 5.2% YoY but up 11.6% QoQ. During the quarter the Company further revised its expected loss models to adjust for the current economic outlook and made AR$1 billion in additional Covid-19 specific anticipatory provisions that resulted in increased coverage. These anticipatory provisions made in 3Q20 reflect a further in-depth top down analysis on certain industries that could continue to be highly impacted by the pandemic. As of September 30, 2020, Covid-19 anticipatory provisions amounted to AR$2.5 billion. The Coverage ratio increased to 181.3% from 86.1% in 3Q19 and 127.1% in 2Q20. As of September 30, 2020, collateralized commercial loans were 45% of total, stable from 44% as of June 30, 2020. Collateralized non-performing commercial loans increased to 78% of total, from 66% as of June 30, 2020 and 55% as of September 30, 2019.
Efficiency ratio was 61.0% in 3Q20 improving 320 bps from 3Q19 and 90 bps from 2Q20.
Loans to deposits ratio of 60.6% compared to 85.8% as of September 30, 2019 and 61.7% as of September 30, 2020. AR$ loans to AR$ deposits ratio was 57.4% declining from 82.2% as of September 30, 2019 and remained stable compared to 57.2% as of June 30, 2020. US$ loans to US$ deposits ratio was 80.0% compared to 95.8% as of September 30, 2019 and 89.6% as of June 30, 2020.
Total Deposits measured in comparable AR$ units at the end of 3Q20 increased 22.1% YoY but decreased 2.7%. AR$ deposits rose 43.7% YoY and declined 1.6% QoQ. QoQ performance reflects seasonality and higher spending due the gradual relaxation of social distancing protocols. 3Q20 Average AR$ Deposits were up 10.4% or AR$13.6 bn QoQ.
Loans measured in comparable AR$ units at the end of 3Q20 declined 14.0% YoY and 4.8% QoQ to AR$102.8 billion. The AR$ Loan portfolio remained flat (+0.4%) YoY but decreased 1.2% QoQ. FX loans, measured in US$, declined 47.5% YoY and 19.3% QoQ.
Total Assets were up 6.5% YoY, but down 3.2% QoQ, to AR$236.2 billion as of September 30, 2020. 3Q20 Average AR$ Assets were up 9.5% or AR$17.5 bn QoQ.
Common Equity Tier 1 Ratio as of September 30, 2020, improved to 14.0%, compared to 13.4% reported as of June 30, 2020 and 11.8% reported as of September 30, 2019.
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