Business Context and Reporting Period
Company: Grupo Supervielle S.A. (Supervielle Group S.A.)
Filing Type: Form 6-K (Report of Foreign Issuer)
Reporting Period: Six months ended June 30, 2020
Filing Date: October 7, 2020
Business Overview: Grupo Supervielle is a financial holding company whose primary activity is investment in other companies, principally Banco Supervielle S.A. (a commercial bank), Cordial Compañía Financiera S.A. (financial company), and Supervielle Seguros S.A. (insurance). The Group operates through a multi-channel platform including physical branches, ATMs, and digital channels like InvertirOnline.
Key Financial Metrics
All figures are expressed in thousands of Argentine pesos in homogeneous currency (re-expressed for inflation per IAS 29).
| Metric | Six Months Ended June 30, 2020 |
Six Months Ended June 30, 2019 |
|---|---|---|
| Net Interest Income | 15,510,359 | 4,015,564 |
| Net Service Fee Income | 4,186,426 | 4,518,854 |
| Net Operating Income | 17,470,623 | 16,429,521 |
| Operating Income (Pre-Tax) | 2,023,697 | (39,941) |
| Net Income (Parent Company) | 1,499,975 | (571,952) |
| Total Assets | 226,550,647 | 169,775,152 (Dec 31, 2019) |
| Total Liabilities | 197,723,680 | 142,276,055 (Dec 31, 2019) |
| Shareholders' Equity | 28,826,967 | 27,499,097 (Dec 31, 2019) |
| Cash and Cash Equivalents | 35,416,245 | 31,797,894 (Dec 31, 2019) |
| Loans and Other Financing | 95,711,142 | 100,984,231 (Dec 31, 2019) |
| Deposits | 158,604,239 | 101,107,381 (Dec 31, 2019) |
Key Ratios (as of June 30, 2020):
- Liquidity Ratio: 22.33%
- Solvency Ratio: 14.58%
- Return on Equity (ROE): 11.1% (annualized)
Material Changes vs. Prior Period
- Profitability Turnaround: The Group reported a net income of 1,499,975 for the six months ended June 30, 2020, a significant improvement from a net loss of 571,952 in the same period of 2019. Operating income turned positive (2,023,697) from a loss of 39,941.
- Net Interest Income Surge: Net interest income increased by approximately 286% year-over-year (from 4,015,564 to 15,510,359), driven by a substantial decrease in interest expenses (from 21,451,228 to 11,018,334) while interest income remained relatively stable.
- Balance Sheet Expansion: Total assets grew by 33.4% compared to December 31, 2019, primarily due to a 56.9% increase in deposits (from 101,107,381 to 158,604,239) and a significant increase in "Other debt securities" (from 12,122,179 to 64,450,082).
- Loan Portfolio: Loans and other financing decreased slightly by 5.2% compared to year-end 2019.
- Accounting Policy Changes: The Group adopted IFRS 9 (Expected Credit Loss model) retroactively from January 1, 2019, and began re-expressing financial statements in homogeneous currency (inflation-adjusted) as of January 1, 2020, pursuant to Argentine Central Bank regulations.
Guidance, Outlook, Risks, and Unusual Items
- COVID-19 Impact: The pandemic led to mandatory lockdowns in Argentina, shifting operations to digital channels. The Central Bank implemented measures including loan maturity postponements, subsidized credit lines for SMEs, and a suspension of dividend distributions for financial entities until December 31, 2020.
- Dividend Restrictions: Pursuant to Central Bank Communication "A" 7035, the distribution of income by financial entities is suspended until December 31, 2020. Consequently, no dividends were paid during the period despite the approval of a distribution plan for 2019 results in April 2020.
- Credit Risk Provisions: Loan loss provisions for the six-month period were 3,931,578. The Group utilizes a three-stage impairment model under IFRS 9. A sectoral analysis was applied to assess default risk for sectors heavily impacted by the pandemic (Real Estate, Entertainment, Tourism).
- Outlook: Management expects to maintain its contribution to the Argentine economy through credit origination in 2021. The Group anticipates that reduced funding costs and a stable liability structure will help mitigate liquidity restrictions.
- International Financing: The Group holds a USD 80 million syndicated loan from FMO and Proparco. Waivers were obtained from the Inter-American Development Bank (IDB) regarding non-performing loan and coverage ratio breaches for the period ending December 31, 2019, extended through December 31, 2020.
Investor Verification Checklist
- Inflation Adjustment: Verify the impact of the re-expression of financial statements in homogeneous currency (IAS 29) on the comparability of historical data and the specific inflation index used (INDEC National Consumer Index).
- IFRS 9 Adoption: Review the reconciliation of credit risk provisions between the previous regulatory standards and the new IFRS 9 Expected Credit Loss model, noting the temporary exclusion of non-financial public sector debt.
- Dividend Policy: Confirm the status of the dividend suspension mandated by the Argentine Central Bank and its effect on cash flow and shareholder returns through 2020.
- Deposit Concentration: Analyze the concentration of deposits, noting that the 10 largest customers held 29.5% of the total deposit portfolio as of June 30, 2020.
- Foreign Currency Exposure: Assess the net foreign currency position, which showed a net liability of (137,813) in thousands of pesos as of June 30, 2020, primarily in US Dollars.