Grupo Supervielle(US:SUPV)2019-11-09 07:07Financial Data and Key Metrics Changes - Total assets declined nearly 4% sequentially due to liquidity management in U.S. dollars and lower holdings of Central Bank securities [17] - Net financial income decreased nearly 20% sequentially to ARS 5.3 billion, primarily impacted by a ARS 2 billion loss from mark-to-market accounting on the investment portfolio [21] - The pretax loss for the quarter was ARS 117 million compared to a gain of ARS 1.6 million in the prior quarter, but excluding the debt reprofiling, pretax profit would have been ARS 1.9 billion, a 23% sequential increase [32] Business Line Data and Key Metrics Changes - The loan book increased nearly 7% sequentially, driven by a 17% increase in U.S. dollar-denominated loans, while in original currency, the U.S. dollar-denominated loan book contracted 14% [18] - Consumer finance loans contracted nearly 4% sequentially and 22% year-on-year, while retail loans increased just over 4% sequentially due to higher credit card volumes [18] - Net service fee income rose 9% sequentially, reflecting strong performance in bundled services and credit card divisions [23] Market Data and Key Metrics Changes - U.S. dollar-denominated private sector deposits declined 42% sequentially, with a slight deceleration in October, showing a 10% decrease in line with the industry [16] - The Argentine financial system experienced a 31% sequential decline in U.S. dollar-denominated private deposits, yet remained highly capitalized and liquid [14] - Total industry loans to the private sector grew just 9.5% quarter-on-quarter, primarily due to FX depreciation impacts on commercial loans [15] Company Strategy and Development Direction - The company is focused on maintaining liquidity and controlling expenses amid a challenging macro environment, with a Tier 1 capital ratio of 11.8% [10][33] - Management emphasized the importance of digital transformation and efficiency improvements to compete against fintechs and other banks [62] - The company is well-positioned to capture growth in consumer lending if the new administration promotes internal consumption [37] Management's Comments on Operating Environment and Future Outlook - Management noted significant macro uncertainty due to the presidential elections and the impact of debt reprofiling on financial results [7][12] - The company expects a potential recovery in the economy, leveraging its long operating history across different economic cycles [11] - Management anticipates that interest rates may begin to decline, which could stimulate loan demand in the first half of the following year [43] Other Important Information - The total non-performing loan (NPL) ratio increased to 6.9%, with corporate loans NPL ratio rising to 7.2% [28] - Coverage for non-performing loans was reported at 86.1%, deemed adequate given the increased collateralization levels [29] - The efficiency ratio deteriorated to 70%, but would have improved to 53% excluding the impact of debt reprofiling [31] Q&A Session Summary Question: Expectations regarding the next administration policies - Management indicated uncertainty about the new government's policies but noted a potential market-friendly stance and focus on internal consumption [36][37] Question: Future of securities gains and interest rates - Management acknowledged that current gains are likely at a peak due to declining interest rates and anticipated lower yields on securities [40] Question: Impact of SME directed loans on net interest income - Management suggested a high likelihood of SME directed loans being implemented, but the impact on net interest income remains uncertain [46][47] Question: Coverage levels for delinquent companies - Management confirmed that delinquency was primarily from two companies, with coverage levels deemed adequate despite not being 100% [52] Question: Measures to defend margins against new reserve requirements - Management is streamlining liquidity and managing NPL exposure to recover liquidity for better-performing investments [90]