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, 2019
Filing Date: August 28, 2019
Currency: Argentine Pesos (AR$) in thousands
Accounting Basis: Prepared in accordance with Argentine Central Bank (BCRA) regulations. While the Group is converging toward IFRS, it has not yet applied IFRS 9 (Impairment) or IAS 29 (Hyperinflationary Economies), which are required starting January 1, 2020.
Key Financial Metrics
| Metric | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 |
|---|---|---|
| Total Assets | 166,144,709 | 120,788,978 |
| Total Liabilities | 146,750,300 | 105,287,769 |
| Shareholders' Equity | 19,394,409 | 15,501,209 |
| Net Interest Income | 2,588,958 | 5,716,340 |
| Net Service Fee Income | 2,890,625 | 2,197,054 |
| Net Income from Financial Instruments (Fair Value) | 9,506,596 | 147,243 |
| Net Income (Period) | 2,492,758 | 1,038,240 |
| Net Income Attributable to Parent | 2,490,657 | 993,349 |
| Earnings Per Share (Basic & Diluted) | 5.45 | 2.17 |
| Cash and Cash Equivalents | 68,020,399 | 33,675,333 |
| Loan Loss Provisions | (3,103,756) | (1,715,355) |
Material Changes vs. Prior Period
- Profitability Surge: Net income attributable to the parent company increased by approximately 151% year-over-year (from AR$993 million to AR$2.49 billion). This was primarily driven by a massive increase in "Net income from financial instruments at fair value through profit or loss," which rose from AR$147 million to AR$9.5 billion.
- Net Interest Income Decline: Net interest income decreased significantly by 55% (from AR$5.7 billion to AR$2.6 billion), largely due to a sharp increase in interest expenses (up 211%) compared to interest income (up 62%).
- Balance Sheet Expansion: Total assets grew by 37.5% to AR$166.1 billion. Deposits increased by 18.7% to AR$112.6 billion, while loans and other financing grew by 1.6% to AR$80.0 billion.
- Increased Provisions: Loan loss provisions increased by 81% to AR$3.1 billion, reflecting higher credit risk provisioning.
- Cash Flow: Operating cash flow improved significantly to AR$22.2 billion (from AR$7.1 billion), while financing activities shifted from a net inflow of AR$6.8 billion in 2018 to a net outflow of AR$1.3 billion in 2019.
Guidance, Outlook, Risks, and Unusual Items
- Accounting Standards Transition: The Group is currently operating under BCRA rules but must adopt full IFRS 9 (Expected Credit Losses) and IAS 29 (Hyperinflationary Economies) starting January 1, 2020. Management notes that applying IFRS 9 would significantly alter reported equity and results. Applying IAS 29 would increase equity and comprehensive income significantly.
- Dividend Distribution: On April 26, 2019, shareholders approved the distribution of 2018 retained earnings, including cash dividends of AR$303 million and transfers to other reserves of AR$1.35 billion.
- Segment Performance: The Treasury segment generated the highest operating income (AR$990 million), followed by Retail Banking (AR$809 million). The Consumer segment reported an operating loss of AR$719 million.
- Regulatory Restrictions: Dividend distributions are subject to BCRA regulations regarding liquidity, solvency, and capital margins. Authorization from the Superintendence of Financial and Foreign Exchange Institutions (SEFyC) is required for distributions until June 30, 2020.
- San Luis Contract: The Bank continues to act as the financial agent for the Province of San Luis. A new auction for the financial agency agreement was announced in January 2019; the Bank submitted an offer in March 2019, and the award date was pending as of the filing date.
Investor Verification Checklist
- IFRS Impact: Verify the potential impact of the mandatory adoption of IFRS 9 and IAS 29 in 2020 on future reported earnings and equity, as current figures exclude these adjustments.
- Revenue Quality: Analyze the sustainability of the AR$9.5 billion gain from financial instruments at fair value, which drove the majority of the net income increase, compared to the decline in core net interest income.
- Credit Quality: Review the 81% increase in loan loss provisions and the classification of loans (Normal vs. High Risk/Uncollectible) to assess asset quality trends.
- Foreign Currency Exposure: Examine the net position in foreign currency (AR$492 million net asset position as of June 30, 2019) given the volatility of the Argentine Peso.
- Subsidiary Performance: Note that while the consolidated group is profitable, key subsidiaries like Cordial Compañia Financiera and Tarjeta Automática reported net losses for the period.