Grupo Supervielle(US:SUPV)2022-05-17 19:18Financial Data and Key Metrics Changes - The company reported a net gain of ARS 446 million excluding severance and personnel charges, with an adjusted return on average equity of 2.9%, compared to breakeven profitability in the previous quarter [6][8] - The efficiency ratio improved by 200 basis points sequentially, although it remains impacted by a low revenue base [8] - The Tier 1 capital ratio increased by 110 basis points sequentially to 13.8% at quarter-end, indicating a strong capital base [8][20] Business Line Data and Key Metrics Changes - The banking business reported positive return on average equity, while IUDU was affected by high inflation and loan loss provisions, leading to a deterioration in performance [6][18] - Total net interest margin increased by 90 basis points sequentially to just over 19%, driven by higher yields on peso loans and increased spreads on Central Bank securities [17] - The total NPA ratio remained stable at 4.3%, with the NPL ratio for the bank steady at 2.6%, while IUDU's NPL ratio deteriorated to 20.4% [18] Market Data and Key Metrics Changes - Total Argentine peso deposits increased nearly 3% sequentially, while corporate deposits posted a 4% seasonal decline but increased over 8% year-on-year [16] - Loan origination saw a sequential contraction of nearly 11%, attributed to seasonally weak demand and tightened credit standards [15] Company Strategy and Development Direction - The company is focused on digital and operational transformation to deliver long-term value creation, despite incurring higher short-term costs [9][10] - The digital onboarding initiatives and increased digital adoption are expected to enhance customer acquisition and engagement [10][76] - The company plans to invest approximately ARS 5.1 billion in digital transformation initiatives during 2022 [25] Management's Comments on Operating Environment and Future Outlook - The management highlighted the challenging market conditions due to accelerated inflation and regulatory pressures on net interest margins [5][21] - Loan growth is anticipated to slow down and align with inflation, with expectations of a challenging environment for consumer finance due to high inflation [21][47] - The management remains optimistic about the potential for growth in the Argentine financial system, given the low level of loans to GDP [74][75] Other Important Information - The company has been notified by the government of San Luis that Banco Nacion will be the designated financial agent, affecting a small portion of its loan portfolio [13] - The company is undergoing a restructuring process to enhance efficiency and profitability, particularly in the consumer finance segment [74] Q&A Session Summary Question: Political outlook and potential regulations impacting the banking sector - Management noted concerns regarding the political landscape and the implementation of the IMF agreement, which could affect the banking sector [40][42] Question: When will IUDU start showing positive numbers? - Management indicated that the scenario is challenging due to high inflation and stricter underwriting standards, but measures are being taken to improve profitability by 2023 [47][50] Question: Profitability outlook amid higher inflation - Management acknowledged the negative impact of inflation on profitability but emphasized that efforts to transform the franchise will yield positive results in the future [53][55] Question: Outlook for interest rates and their impact on margins - Management expects interest rates to continue increasing, which will benefit margins despite challenges in loan growth [61][62] Question: Loan growth expectations by segment - Management anticipates loan growth in both commercial and retail portfolios, with a cautious approach in the consumer finance segment [82] Question: Updates on branch rationalization - Management is consolidating branches and has requested approval from the Central Bank to close certain branches, aiming for a more efficient network [88][90]