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 and six-month periods ended June 30, 2018. All figures presented throughout this document are expressed in nominal Argentine pesos (AR$) and all financial information has been prepared in accordance with IFRS in compliance with the adoption ruled by the Central Bank.
Second Quarter 2018 Highlights
- Attributable Comprehensive Income of AR$475.3 million down 10.8% YoY and 36.2% QoQ. ROAE of 12.6% in 2Q18 lower than 28.8% in 2Q17 and 20.6% in 1Q18. ROAA of 1.8% in 2Q18, decreasing by 150 bps YoY and QoQ.
- Attributable Net income of AR$270.7 million, down 46.4% YoY and 62.5% QoQ.
- NIM of 19.2% in 2Q18, contracted by 230 bps YoY and 40 bps QoQ. AR$ Loan portfolio NIM of 22.3% in 2Q18 decreasing by 520 bps YoY and 200 bps QoQ. This decrease is explained by the sudden increase of the Badlar rate in the quarter impacting the cost of funds both in the banking business portfolio and even more in the consumer finance portfolio, while loans will reprice on a lagged basis.
- Net Income from financial instruments and Exchange rate differences of AR$716.8 million up 19.8% YoY and down 11.0% QoQ. Sequential performance reflects the trading loss following a short FX position held by the trading desk at the onset of the AR$ devaluation.
- Efficiency ratio was 66.3% in 2Q18 compared with 65.7% in 2Q17, and 59.0% in 1Q18.
- Loans to deposits ratio was 101.8% in 2Q18 compared to 104.0% in 2Q17, and 119.7% in 1Q18.
- Deposits increased 76.7% YoY and 36.2% QoQ to AR$75.7 billion (FX neutral 24.2%). AR$ deposits increased 64.5% YoY and 31.0% QoQ, while foreign currency deposits (measured in U$S) increased 24.0% YoY and 5.3% QoQ.
- Loans increased 70.3% YoY and 14.1% QoQ to AR$75.8 billion (FX neutral 5.1%). AR$ Loan portfolio increased 51.3% YoY and 7.2% QoQ. Foreign currency loans (measured in U$S) increased 52.2% YoY and decreased 2.8% QoQ, while measured in local currency, increased 164.6% YoY and 39.4% QoQ.
- Highly atomized loan portfolio, with top 10 debtors as of June 30, 2018, representing 9.7% of the portfolio while top 100 debtors represent 25% of total portfolio. In addition, 49% of the SMEs and Middle Market loan portfolio is collateralized, and loans to payroll and pension clients represent 67.5% of total retail loan portfolio.
- NPL increased by 60 bps YoY and 40 bps QoQ to 3.6% in 2Q18. Consumer Finance Segment NPL was 18.0% in 2Q18 compared to 11.4% in 2Q17 and 15.7% in 1Q18.
- The Retail banking segment registered a 90 days delinquency ratio of 2.0% in 2Q18, well below its NPL ratio of 3.0% reflecting the 67.5% share of payroll loan clients. By contrast, the Consumer Finance Segment 90 days delinquency ratio was 17.2% in 2Q18, similar to its 18.0% NPL ratio. The difference between both ratios is due to Central Bank regulations.
- Cost of risk was 5.6% in 2Q18 mainly explained by a 21.4% Cost of Risk in Consumer Finance Segment, while the Bank’s Cost of Risk was 3.3%. Coverage increased to 89.9% in 2Q18 from 85.9% in 2Q17 and 89.7% in 1Q18, due to a 20 bps increase in the Bank´s coverage ratio from 131.5% in 1Q18 to 131.7% in 2Q18, while Consumer Finance's coverage decreased from 66.3% in 1Q18 to 64.0% in 2Q18.
- Proforma Consolidated Common Equity Tier 1 Ratio of 13.1% in 2Q18, down from 15.8% in 1Q18 mainly reflecting the acquisitions of MILA and IOL in 2Q18 and loan growth. AR$2.0 billion remained at the holding level for future capital injections. Equity to Asset ratio of 12.7% in 2Q18 compared to 10.7% at June 2017 and 15.7% at March 2018.
Commenting on second quarter 2018 results, Patricio Supervielle, Grupo Supervielle's Chairman and CEO, noted: “We are disappointed with the results for the quarter. While our macro assumptions for the year included stable foreign exchange, declining interest rates and decelerating inflation, the macro backdrop changed suddenly in the quarter resulting in a sharp currency devaluation, interest rate hikes and higher inflation that led to results well below our expectations. Despite the near-term challenges we are facing, our core business remains healthy, with asset quality in SMEs and Middle Market at historically low levels. Deposits performed well and continued to grow exceeding loan book growth.”
“During the second quarter our attributable net income declined 60% sequentially and below our expectations due to three key factors. First, our consumer finance business, which represents 11% of our loan portfolio, posted lower than anticipated margins as a result of the sharp increase in cost of funding along with higher loan loss provisions as disposable income deteriorated further due to the challenging economic conditions. While we started to tighten credit scores in this segment earlier in the year and continued to take an even more stringent approach to consumer finance lending throughout the second quarter, the drastic macro changes impacted financial results. Second, our banking business reported softer than expected margins from lagged loan repricing given the sudden and sustained rise in interest rates. This is a temporary effect as we expect this business to deliver improved performance in the coming quarters as longer-term assets are repriced to the new environment. Lastly, our trading desk had a short position on FX at the onset of the AR$ devaluation in addition to lower than anticipated trading results, which impacted our bottom line this quarter.”
“In this context we took decisive action. First, we further tightened credit standards throughout the Company. Second, we are implementing cost cutting measures. Third, we made the decision to streamline and change the management of our consumer finance operations. Effective August 24, 2018, the consumer finance units of Grupo Supervielle, which include: Cordial Compañía Financiera S.A., Espacio Cordial de Servicios S.A., Tarjeta Automática S.A., and the recently acquired car lending business Micro Lending S.A., will be led by Mr. Juan Martin Monteverdi, current CEO of Espacio Cordial de Servicios S.A. By combining the four companies under a unified leadership, we seek to drive increased operational efficiency, accelerate the offering of a wide range of consumer products, enhance customer experience, and increase cross selling. Fourth, based on the repricing dynamics of our portfolio, our banking business is anticipated to capture increased interest revenue from rate hikes.”
“However, we believe this will be insufficient to offset the weak results in the second quarter of the year, and the impact of higher cost of funds and lower loan growth in consumer finance. As a result, we are revising downwards our guidance for the year.”
“The Board, the executive team and I, remain fully focused on executing our strategy and closely monitoring economic dynamics. We are convinced of the resilience and strengths of our franchise, as well as our policies and practices and believe the growth potential for the financial sector in Argentina remains unchanged,” concluded Mr. Supervielle.
Financial Highlights & Key Ratios
|(In millions of Argentine Ps.)||% Change|
|INCOME STATEMENT||2Q18||1Q18||4Q17||3Q17||2Q17||QoQ||YoY||1H18||1H17||% Chg.|
|Net Interest Income||2,898.2||2,818.1||2,562.0||2,124.8||1,950.2||2.8%||48.6%||5,716.3||3,876.7||47.5%|
|NIFFI & Exchange Rate Differences||716.8||805.5||798.1||703.0||598.4||-11.0%||19.8%||1,522.2||935.3||62.7%|
|Net Service Fee Income (excluding income from insurance activities)||1,012.0||891.0||846.5||874.9||838.3||13.6%||20.7%||1,903.0||1,578.4||20.6%|
|Income from Insurance activities||145.3||148.7||148.3||108.0||112.8||-2.3%||28.8%||294.0||222.8||32.0%|
|Loan Loss Provisions||-989.2||-726.1||-606.3||-518.9||-442.8||36.2%||123.4%||-1,715.4||-803.6||113.4%|
|Personnel & Administrative Expenses||-2,760.9||-2,446.5||-2,604.5||-2,121.4||-2,060.1||12.9%||34.0%||-5,207.3||-3,995.3||30.3%|
|Profit before income tax||456.0||1,020.4||651.1||737.4||666.9||-55.3%||-31.6%||1,476.5||1,122.4||31.5%|
|Attributable Net income||270.7||722.6||467.6||556.2||504.3||-62.5%||-46.3%||993.3||796.1||24.8%|
|Attributable Comprehensive income||475.3||744.8||472.6||560.9||532.9||-36.2%||-10.8%||1,220.1||844.9||44.4%|
|Earnings per Share (AR$)||0.59||1.58||1.02||1.43||1.39|
|Earnings per ADRs (AR$)||2.96||7.91||5.12||7.17||6.94|
|Average Outstanding Shares (in millions)||456.7||456.7||456.7||387.3||363.8|
|BALANCE SHEET||jun 18||mar 18||dec 17||sep 17||jun 17||QoQ||YoY|
|Total Loans & Leasing||75,830.0||66,479.5||60,692.9||53,154.2||44,536.2||14.1%||70.3%|
|Attributable Shareholders’ Equity||15,345.4||15,114.2||14,369.6||14,032.8||7,490.6||1.5%||104.9%|
Average Attributable Shareholders’ Equity1
|Profitability & Efficiency|
|Net Interest Margin||19.2%||19.6%||20.0%||19.6%||21.5%||19.0%||20.4%|
|Net Financial Margin||17.4%||19.9%||20.0%||19.8%||20.6%||18.2%||21.2%|
|Net Fee Income Ratio||24.3%||22.3%||22.8%||25.2%||27.8%||23.3%||27.2%|
|Cost / Assets||10.9%||11.1%||12.6%||12.0%||13.1%||10.8%||13.2%|
|Liquidity & Capital|
|Loans to Total Deposits3||101.8%||119.7%||107.6%||112.7%||104.0%|
|Liquidity Coverage Ratio (LCR)4||133.0%||116.9%||113.9%||122.6%||126.5%|
|Total Equity / Total Assets||12.7%||15.7%||15.6%||17.2%||10.7%|
|Proforma Consolidated Capital / Risk weighted assets 5||14.5%||17.0%||19.6%||20.7%||13.0%|
|Proforma Consolidated Tier1 Capital / Risk weighted assets 6||13.1%||15.8%||18.4%||19.5%||11.6%|
|Risk Weighted Assets / Total Assets||78.8%||88.1%||80.1%||85.2%||88.2%|
|Allowances as a % of Total Loans||3.3%||2.8%||2.6%||2.5%||2.6%|
|Cost of Risk||5.6%||4.7%||4.4%||4.5%||4.4%||5.1%||4.2%|
|Retail Price Index (%)7||8.8%||6.7%||6.1%||5.1%||5.4%|
|Pesos/US$ Exchange Rate||28.86||20.14||18.77||17.32||16.60|
|Badlar Interest Rate (eop)||32.7%||22.6%||23.3%||21.8%||20.1%|
|Badlar Interest Rate (avg)||27.3%||22.9%||22.5%||20.8%||19.6%|
|Active Customers (in millions)||1.9||1.9||1.9||1.9||1.8|
|Access Points 8||376||340||326||324||321|
|1.||Average Assets and average Shareholder´s Equity calculated on a daily basis|
|2.||Total Portfolio: Loans and Leasing before Allowances. According to IFRS, this line item includes Securitized Loan Portfolio and loans transferred with recourse.|
|3.||Loans/Total Deposits ratio was restated in previous quarters due to the inclusion in the balance sheet of the securitized and transferred loans.|
|4.||This ratio includes the liquidity held at the holding company level.|
|5.||Regulatory capital divided by risk weighted assets taking into account operational and market risk. The regulatory capital ratio applies only to the Bank and CCF on a consolidated basis and does not include the liquidity held at the holding company level- The Proforma consolidated capital ratio, includes the liquidity retained at Grupo Supervielle level after the equity offering, which is available for growth. As of June 30, 2018, the liquidity amounted to Ps. 2.0 billion. This ratio has not been restated for 2017 quarters.|
|6.||Tier 1 capital divided by risk weighted assets taking into account operational and market risk. The regulatory Tier 1 capital ratio applies only to the Bank and CCF on a consolidated basis and does not include the liquidity held at the holding company level. The. Proforma Consolidated Tier 1 capital ratio includes the liquidity retained at Grupo Supervielle level after the equity offering, which is available for growth. As of June 30, 2018, the liquidity amounted to Ps.2.0 billion. This ratio has not been restated for 2017 quarters.|
|8.||The increase in the number of Access Points in 1Q18, reflects the opening of 1 bank branches located in Neuquen and the presence in 13 Walmart Stores. The increase in the number of Access Points in 2Q18, reflects the opening of 2 bank branches and 32 Mila branches.|
2Q18 Earnings Call Dial-In Information
|Date:||Friday, August 24, 2018|
|Time:||9:00 AM (US ET); 10:00 AM (Buenos Aires Time)|
1-877-407-0789 (U.S. and Canada), 1-201-689-8562 (International), 0-800-444-6247 (Argentina), or 0800-756-3429 (U.K.)
From Friday, August 24, 2018 at 12:00 AM US ET through Friday, September 7, 2018 at 11:59 pm US ET. Dial-in number: +1-844-512-2921 (U.S./Canada) or +1-412-317-6671 (international). Pin number: 13682751