BUENOS AIRES, Argentina--(BUSINESS WIRE)--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 period ended March 31, 2024.
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.
Management Commentary
Commenting on first quarter 2024 results, Patricio Supervielle, Grupo Supervielle’s Chairman & CEO, noted: “We delivered a robust first quarter, reporting another record high ROAE of nearly 34% in real terms. This was driven by an unusually high Net Interest Margin (NIM) of 62%, sequentially improved efficiencies, and lower loan loss provisions.
While there is still much work to do, the policies implemented over the last five months are resulting in a gradual transition in Argentina. Previously plagued by high inflation levels, deep fiscal deficits, and a limited financial sector, the country is now experiencing declining inflation, a more orderly Central Bank, and a gradual resurgence in loan demand. This shift is expected to contribute to building a more sustainable, robust, and competitive financial system. In this context, we are strategically diversifying our asset portfolio, gradually shifting towards a larger share of private-sector loans and reducing our portfolio of large holdings of high-margin Central Bank Securities and Government Bonds. As this transition unfolds, we anticipate a gradual adjustment from our exceptionally high NIM levels experienced in recent quarters until loan demand reaches sufficient strength.
Importantly, we regained market share in loans this quarter. Our total loan book expanded by 2.6% sequentially in real terms, gaining 40 bps in market share as the macroeconomic and political environment began to normalize and confidence returned. Corporate loans saw a 60 bp share increase, while within retail loans, car loans market share expanded by 40 bps. More recently, Supervielle became the first private bank in the country to launch new 30-year mortgage loans, which were unavailable except during a short period between 2017 and 2018.
Asset quality metrics posted further sequential improvement, reflecting our focus on middle-market, corporate, and payroll loans in the current economic slowdown. As a result, the NPL ratio reached a historic low of 1.1% in the quarter and the coverage ratio improved to 264%.
We remain steadfast in our efforts to attract new clients and capture a higher share of wallet among SMEs and Corporates, while addressing customer pain points and improving NPS. During the quarter, we scaled our Virtual Hub service model for companies in the Entrepreneurs & SMEs segment seeking to achieve greater efficiency and enhance the customer experience.
Advancing on the retail front, we continued to expand our digital client base, which accounted for 64% of total clients, up 2 pps sequentially and 7 pps year-on-year. Today, 51% of transactions are completed through our App, compared to just 37% a year ago. We are confident that our Human Banking retail relationship model will continue to further enhance customer satisfaction, increase cross-selling, and strengthen NPS. The adoption of our 24/7 “Inversion Rápida” distinctive feature, unique among Argentine banks to effectively compete with the fintech world continues to see good traction, with customers up 25% sequentially. Our Insurance business remains pivotal within our financial ecosystem, solidifying its position through continuous expansion of our digital offering, exemplified by the launch of new life and home insurance products.
Our online retail brokerage platform, IOL, continues to perform well, gaining additional share and further consolidating its leading position. The new Crypto offering, launched in January in partnership with Ripio, gained good traction among existing IOL customers. While still in the early stages, we are seeing sustained growth in customers and transactions.
Lastly, we are proud to have recently received Gold recognition in The Country Awards for Financial Innovators in the Americas, presented by Fintech Americas, for our Virtual Hub Video Call service model. This award reflects innovative customer-centric service with our Human Banking philosophy.
Looking ahead, we firmly believe that lifting FX restrictions and passing necessary reforms through Congress are crucial steps towards resuming sustainable growth. We stand ready to capitalize on a sustained improvement in the macro environment supported by our strong 25% Tier 1 capital ratio and solid and agile foundation,” concluded Mr. Supervielle.
First quarter 2024 Highlights
PROFITABILITY
Attributable Net Income of AR$46.5 billion in 1Q24, compared to a net gain of AR$2.2 billion in 1Q23 and AR$34.1 billion in 4Q23.
The sharp YoY increase in Net Income reflects the successful execution of the Company’s strategic plan implemented in 2022 and 2023 to optimize operations, consolidate businesses, grow in profitable products and increase cross-sell.
ROAE increased to 33.8% in 1Q24 from 2.0% in 1Q23 and 26.9% in 4Q23. ROAA was 7.4% in 1Q24 compared to 0.3% in 1Q23 and positive 5.3% in 4Q23.
Profit before income tax increased to AR$72.4 billion in 1Q24 compared to a gain of AR$6.6 billion in 1Q23 and AR$61.2 billion in 4Q23.
QoQ performance is explained by: i) a 19.4%, or AR$23.1 billion decrease, in expenses, mainly due to lower personnel expenses as previous quarter reflected higher personnel expense provisions, and higher D&A mainly due to the impairment on the goodwill of Mila to reflect the business fair value, ii) a 2.4%, or AR$7.0 billion, increase in Net Financial Income reflecting high level on AR bonds gains and lower cost of funds following the lifting of floors on interest rate deposits, iii) a 39.7%, or AR$5.5 billion, decrease in Net Loan loss provisions as previous quarter reflected the impact of the Fx depreciation and the update of economic variables in the Company’s expected loss models, and iv) a 14.6%, or AR$ 7.4 billion, decline in other expenses net as the prior quarter recorded higher charges related to the year-end valuation of the Bank’s real estate assets at market value and a higher provision to execute several strategic initiatives in different business units. These were partially offset by the following performance: i) lower fees which lagged inflation in the quarter, and ii) a 34.6%, or AR$ 27.3 billion, increase in the loss from exposure to inflation given the 52% inflation in the quarter and higher net monetary assets.
Net Financial Income reached AR$299.1 billion in 1Q24 increasing 137.2% YoY and 2.4% QoQ. The QoQ performance is explained by: i) higher results from the sale of government securities previously recorded at amortized cost, ii) higher yield on higher volumes of inflation linked government securities capturing the inflation peak in December 2023 and January 2024, and iii) a positive impact from the lifting of floors on interest rate deposits resulting in a 744-bps decline in cost of funds while interest rates on loans increased 326-bps reflecting their longer maturity. These were partially offset by: i) weak credit demand in first months of the quarter although loan portfolio demand started to recover at the quarter-end, and ii) lower yield on Central Bank repos following the decline in interest rates. Adjusted Net Financial Income (calculated as Net Financial Income + Result from exposure to inflation) was AR$192.9 billion in 1Q24, increasing 82.5% YoY but declining 9.5% QoQ reflecting negative interest rates on real terms.
Net Interest Margin (NIM) reached 61.9% compared to 21.9% in 1Q23 and 62.2% in 4Q23.
The total NPL ratio was 1.1% in 1Q24 improving 300 bps and 10 bps from 4.1% in 1Q23 and 1.2% in 4Q23, respectively. The QoQ and YoY performances reflect the shift in loans to middle-market corporates and payroll customers along with significantly lower exposure to consumer loans, better retail customer behavior and the sale of delinquent retail loans, mainly open market.
Loan loss provisions (LLPs) totaled AR$8.0 billion in 1Q24, decreasing 30.2% YoY and 47.9% QoQ. Net loan loss provisions, which is equivalent to loan loss provisions net of recovered charged-off loans and reversed allowances, amounted to AR$8.4 billion in 1Q24 compared to AR$11.0 billion in 1Q23 and AR$13.9 billion in 4Q23.
The Coverage Ratio increased to 263.7% as of March 31, 2024, from 115.9% as of March 31, 2023, and 262.4% as of December 31, 2023.
Efficiency ratio improved to 34.0% in 1Q24, from 71.8% in 1Q23 and 43.4% in 4Q23. The QoQ performance was explained by a 14.7% decrease in total expenses and a 3.0% increase in Revenues mainly reflecting higher financial margin.
Loans to Deposits Ratio was 43.6% as of March 31, 2024, compared to 44.9% as of March 31, 2023, and 32.2% as of December 31, 2023, reflecting weak credit demand in recent years. The AR$ loans to AR$ deposits ratio was 46.1% as of March 31, 2024, compared to 45.9% as of March 31, 2023, and 34.8% as of December 31, 2023.
Total Deposits of AR$1,774.8 billion increasing 207.8% YoY and 14.6% QoQ in nominal terms. Total private sector deposits amounted to AR$ 1,683.8 billion and increased 207.1% YoY and 16.3% QoQ in nominal terms compared to industry growth of 170.7% YoY and 16.4% QoQ. In real terms, total deposits decreased 20.6% YoY and 24.4% QoQ while average deposits decreased 22.8% YoY but remained flat QoQ reflecting assets and liability management in a context of negative real interest rates and a tight monetary policy. Total private sector deposits decreased 20.8%, and 23.3% YoY in real terms. The leverage ratio (Assets to shareholder´s equity) decreased 210 bps to 4.6x from 6.7x as of March 31, 2023, and 140 bps from 6.0x as of December 31, 2023.
The QoQ and YoY performance of AR$ industry deposits in real terms reflect the impact of negative interest rates in real terms together with the use by importers of their peso deposits to pay the Bopreal bonds issued by the Central Bank to address their commercial debt.
Foreign currency deposits (measured in US$) amounted to US$ 305.5 million, increasing 7.3% YoY and 2.9% QoQ while industry FX deposits increased 5.4% YoY and 7.0% QoQ. As of March 31, 2024, FX deposits represented 15% of total deposits.
Total Assets down 17.8% QoQ and 12.9% YoY, to AR$ 2,572.0 billion as of March 31, 2024. Average AR$ Assets decreased 1.0% QoQ.
The QoQ performance mainly reflects a 33.8% decline in Repos & Central Bank Securities on asset & liability management following the industry trend. This was partially offset by QoQ increases of: i) 8.2% in Government securities, and ii) 2.6% in Loans to the private sector, which started to gain traction in March following the sharp decline in market interest rates and the lifting of floors on Deposit interest rates by the Central Bank. This gradual mix-shift in assets towards a larger share of private-sector loans while reducing the Company’s portfolio of large holdings of Repos with the Central Bank is expected to continue during the remainder of 2024. Average dynamics showed a different trend in the quarter compared to 4Q23 with average volumes of Repos & Central Bank Securities increasing 25.1% and the average loan portfolio declining 21.2% as loan growth picked-up towards the end of March.
The YoY performance reflects weak credit demand in the context of high inflation and high nominal interest rates in the period. YoY, Average AR$ Assets decreased 17.9%.
Loans expanded 198.9% YoY and 55.5% QoQ in nominal terms to AR$774.6 billion. In real terms, gross loans decreased 22.9% YoY but increased 2.6% QoQ gaining 40 bps in market share in March 2024 (taking into account the daily average balance of loans of the financial system). YoY performance was impacted by weak credit demand during last twelve months in a context of YoY inflation at 287.9%. QoQ performance reflects an acceleration in the origination of corporate loans mainly for working capital credit lines and foreign trade lines at quarter-end following the declines in market interest rates and inflation. On March 11, 2024 the Central Bank lifted the floor on time deposit interest rates, reduced the monetary policy interest rate. All passive and active market interest rates declined following this decision. On the retail front, car loans origination increased in the quarter, while other retail credit lines continued to reflect weak credit demand impacted by the decline in consumption and high nominal interest rates during most of the quarter.
Common Equity Tier 1 Ratio as of March 31, 2024, was 24.7% increasing 370 bps and 1,000 bps when compared to December 31, 2023, and March 31, 2023, respectively.
