Grupo Supervielle S A : 3T21 Transcripción

3Q21 Grupo Supervielle Earnings Conference Call Transcript

Slide 2

Ana Bartesaghi

Good morning everyone and welcome to the Grupo Supervielle Third Quarter 2021 earnings call.

This is Ana Bartesaghi, Treasurer and IRO.

A slide presentation will accompany today's webinar, which is available in the Investor section of Grupo Supervielle' s investor relations website. Today's conference call is being recorded. As a reminder, all participants will be in listen-only mode. There will be an opportunity for you to ask questions at the end of today's presentation.

If you want to ask a question you need to be connected to the zoom platform from any device. We will not be able to take your questions if you are connected from a phone line. Also, please make sure your name and last name appear in the zoom platform you are using. To ask a question by voice please press the "raise your hand" button located in the zoom platform, and press "raise your hand" again to withdraw your question. You can also send questions in written form via the Q&A box in the zoom platform anytime during the call. We will ask you to limit yourself to one question and a follow up and then you can raise your hand again in another round.

Speaking during today's call will be Patricio Supervielle, our Chairman & CEO; Atilio Dell´Oro Maini, Board Member leading Grupo Supervielle´ s sustainability strategy; and Mariano Biglia, our Chief Financial Officer.

Also joining us are Alejandro Stengel, Second Vice-Chairman of the Board and Bank CEO and Jorge Ramírez, First-Vice Chairman of the Board. Alejandra Naughton, board member of several of Grupo Supervielle' s subsidiaries will also be joining us for today's call. All will be available for the Q&A session.

As a reminder, today's call will contain forward-looking statements which are based on Management's current expectations and beliefs and are subject to a number of risks and uncertainties, including as a result of the COVID-19 pandemic, and I refer you to the forward-looking statement section of our earnings release and recent filings with the SEC. We assume no obligation to update or revise any forward-looking statements to reflect new or changed events or circumstances.

Today, Mariano Biglia, our CFO will start the call discussing our performance for the quarter and our near-term outlook. Patricio Supervielle, our Chairman and CEO will follow with an update on our mid- term strategic initiatives. Afterwards, Atilio Dell'Oro Maini will provide an overview of the key elements of our ESG strategy and goals.

Mariano Biglia, Chief Financial Officer.

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Slide 4

Mariano Biglia, Chief Financial Officer

Thank you, Ana. Good morning everyone. Thank you for joining us today. Please turn to slide 4 of our earnings presentation.

• While we saw a rebound in economic activity topre-pandemic levels this quarter, we continue to operate under challenging market conditions with high inflation, negative real interest rates and industry loans at historical lows and growing below inflation. In addition, Central Bank regulations continue to weigh on NIM.
• We delivered sequentially improved results, reporting an attributable loss of 60 million pesos in 3Q21 compared to a 348 million pesos loss in the prior quarter. This was mainly driven by lower loan loss provisions reflecting our strong underwriting and collection policies along with thepick-up in economic activity. Lower operating expenses also contributed to this performance while we continued to resize our branch network, accelerate headcount efficiencies and executing our digital and channel transformation strategy.
• Our comparable efficiency ratio, excludingnon-recurring severance payments and early retirement charges, improved to 71% this quarter from 72% in the second quarter, also significantly impacted by a low revenue base. Looking at the first nine months of the year and excluding non-recurring charges, expenses were down nearly 7% year-on-year.
• We also maintain a solid capital base with TIER 1 ratio of 14.1% atquarter-end and a strong liquidity to navigate the current environment and implement our strategic transformation.
• Patricio will provide shortly an update of our progress on our digital and channel transformation agenda, followed by Atilio who will present our key ESG milestones and goals.

Now, please turn to slide 5.

Slide 5

We expanded our loan book by 5% sequentially growing above industry levels and recovering market share.

Loan growth was mainly driven by higher mandatory credit lines to SMEs, which rose to a balance of nearly 20 billion pesos accounting for over 13% of total loans this quarter from a balance of 14 billion pesos in the prior quarter

Short-term financing to corporates also contributed to loan growth along with strong origination in personal loans which reached a record high in October.

US dollar loans in original currency, in turn, declined 10 % sequentially.

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Slide 6

Now, moving to funding on slide 6.

The loan to deposit ratio remained relatively stable quarter-on-quarter at 53%with liquidity at solid levels.

AR$ peso deposits increased in the high single digits sequentially, driven mainly by institutional funding from liquidity management and corporate checking accounts. Core deposits were stable quarter-on- quarter.

US$ deposits in original currency were up 1.5% sequentially, accounting for slightly over 11% of total deposits.

Slide 7

Turning to slide 7, AR$ NIM contracted 2 percentage points to 17% from 19% in the second quarter.

While GDP growth returned to pre-pandemic levels allowing us to capture some loan growth, overall credit demand remains weak. This, together with a lower yield on inflation-linked mortgage loans given the deceleration in the price index and regulatory controls continued to exert pressure on NIMs.

Slide 8

Turning to Asset Quality on slide 8.

Our strong underwriting and collection policies, together with improved economic conditions allowed us to release a portion of the Covid-19 specific provisions created last year. As a result, loan loss provisions declined to 1.4 billion from 2 billion in the prior quarter. In turn, cost of risk net improved to 3.5% from 5.7% in the second quarter.

At quarter-end,Covid-19 anticipatory provisions amounted to AR$1.6 billion, versus AR$2.4 billion as of June 30.

Our total provisioning ratio stood at 6.6% in September above the pre-pandemic level of 6.4% posted in January 2020.

The total NPL ratio for quarter, increased 20 basis points sequentially to 5.3% but declined after peaking to 5.5% in July.

The sequential increase was mainly driven the Consumer Finance segment. As anticipated, we saw an increase in delinquency as installments were due after the expiration of the grace periods with the Consumer Finance NPL ratio reaching a peak of nearly 21% at quarter end. To contain delinquency, we have tightened our credit policies at IUDÚ so that new originated loans have a better rating.

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To a lesser extent, NPLs also increased to 5.1% from 2.2% at the Bank´s personal loans segment after the expiration of the grace periods and the mandatory reclassification of customers performing with Supervielle, but non-performing with other banks.

By contrast, corporates, SMEs, and Bank credit cards posted a sequential improvement in NPL ratios.

Slide 9

Although guidance remains suspended due to sustained limited visibility, on slide 9 we share our views on the main drivers of our business for the remainder of the year and 2022.

Starting with Peso-denominated loans, we expect to see growth in line or below inflation in 2021 - both in commercial and consumer loans; and above inflation in 2022.

We also expect to end the year with deposits growing above inflation fostered by FX restrictions and to a lower extent by interest rate floors on time deposits. We expect deposits to continue growing above inflation driven by the same trends.

With respect to asset quality, as anticipated, NPLs peaked this quarter and are expected to remain stable or decline in the following quarters. We also expect coverage to decline as covid-19 provisions are used or reversed. Cost of Risk, in turn is expected to be below 2020 & 2019 levels, but in line with historical levels of 5 to 6%.

In terms of margins, for the remainder of the year and 2022 we expect NIMs to remain pressured by higher cost of funds resulting from the impact of the floor on interest rates on time deposits and subsidized rates on loans. This would be partially offset by higher inflation together with credit demand anticipated to gradually pick-up from historical lows.

Personnel and administrative expenses are likely to grow with inflation, while also reflecting additional restructuring costs and expenses, as well as headcount efficiencies from the execution of our digital and channel resizing. Higher turnover tax rates and the extension of the turnover tax reach to Leliqs and Repos in the City of Buenos Aires will continue to negatively impact expenses.

At the same time, Fee income is expected to grow in line with inflation.

Finally, we continue to expect capital and liquidity to remain at comfortable levels supporting long-term sustainability. As noted earlier, 100% of our capital is hedged against inflation.

Now let me turn the call to Patricio Supervielle, who will provide an update on our strategic initiatives. Patricio, please go ahead.

Slide 10

Patricio Supervielle, Chairman & CEO

Thank you, Mariano.

You've heard Mariano present our financial results and views for the remainder of the year and 2022.

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In this challenging context, we remain fully focused on advancing on our transformation strategy.

Starting with the transformation of our branch channels, using best in class technologies to facilitate self-service banking and expand SME reach with the vision of everywhere and anytime banking.

• First, digitized customers have increased consistently over the past two years and were up 76% since March last year.
• Second, keeping a strong focus on the customer experience we recently deployed an upgraded version of the Bank´s mobile App rated 4.4 on the PlayStore and 4.3 in the App Store.
• Third, with the successful performance of our Virtual Hub MVPs for individuals in the province of San Luis, we are starting to scale this hybrid model to other regions and segments and expanding our footprint while offering a superior customer experience combining the strength of ourface-to- face approach with the higher efficiencies of a virtual hub. This also allows us to expand our footprint through our national territory without needing branches.
• Fourth, in the past four months we modernized and expanded services to SMEs and related segments in 11 branches that were previously solely dedicated to senior citizens; and expect to convert 4 additional branches tomulti-segment format before year-end.

Now, please turn to slide 11.

Slide 11

At the same time, we have been introducing technological innovation at our senior citizen branches, facilitating self-service banking for this customer segment which was the least advanced in terms of digital adoption.

Let me share some examples of the success of these initiatives:

• To allow for extended banking hours and higher efficiencies, we enlarged our 24 hour lobbies increasing the number of biometric cash dispensers located in these lobbies. As of September, cash dispensers in our24-hour lobbies accounted for 53% of total cash dispensers, up from around 24% before the pandemic and nearly 40% a year ago.
• As a result, the number of transactions at human tellers declined sharply to 2% of total transactions from 11% a year ago, and from 22% before the pandemic.
• We are also seeing continued adoption of our digital App dedicated to senior citizens, with90-dayslogged-in customers through the App increasing over 140% when compared to 1Q20.

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