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: Three months ended March 31, 2020
Filing Date: June 22, 2020
Business Overview: Grupo Supervielle is a financial holding company whose primary activity is investment in financial entities, principally Banco Supervielle S.A. (99.90% indirect ownership), Cordial Compañía Financiera S.A., and Supervielle Seguros S.A. The group operates through a multi-channel platform offering banking, credit cards, insurance, asset management, and fintech services in Argentina.
Key Financial Metrics
All figures expressed in thousands of Argentine pesos in homogeneous currency.
| Metric | Q1 2020 | Q1 2019 | Dec 31, 2019 (Balance Sheet) |
|---|---|---|---|
| Net Interest Income | 7,030,079 | 1,894,110 | - |
| Net Service Fee Income | 2,060,910 | 2,220,812 | - |
| Net Income (Consolidated) | 453,759 | (1,354,866) | - |
| Net Income Attributable to Parent | 453,376 | (1,353,485) | - |
| Total Assets | 196,972,974 | - | 160,886,144 |
| Total Liabilities | 170,470,954 | - | 134,789,644 |
| Shareholders' Equity | 26,502,020 | - | 26,096,500 |
| Cash and Cash Equivalents | 36,702,801 | - | 30,176,040 |
| Loans and Other Financing | 88,783,824 | - | 95,833,522 |
| Deposits | 135,795,502 | - | 95,950,392 |
| Loan Loss Provisions | 6,323,551 | - | 6,320,892 |
Key Ratios (as of March 31, 2020):
- Liquidity Ratio: 27.03% (Cash/Deposits)
- Solvency Ratio: 15.55% (Equity/Liabilities)
- Return on Equity (ROE): 7.7% (Q1 2020) vs. -15.0% (Q1 2019)
Material Changes vs. Prior Period
- Profitability Turnaround: The Group reported a net income of 453,376 thousand pesos in Q1 2020, a significant improvement from a net loss of 1,353,485 thousand pesos in Q1 2019. This was driven primarily by a substantial increase in Net Interest Income (up 271% year-over-year) and a reduction in loan loss provisions (down 45% year-over-year).
- Balance Sheet Expansion: Total assets increased by 22.4% to 196.97 billion pesos, largely due to a 41.5% increase in deposits (to 135.8 billion pesos) and a 313.8% increase in "Other debt securities" (to 46.66 billion pesos), reflecting changes in liquidity management and investment portfolios.
- Accounting Policy Changes: The financial statements were re-expressed in homogeneous currency (constant currency) pursuant to IAS 29 and Argentine Central Bank Communication "A" 6651, effective January 1, 2020. Additionally, the Group adopted the IFRS 9 expected credit loss (ECL) model retroactively to January 1, 2019, with temporary exceptions for non-financial public sector debt.
- Segment Reorganization: Effective January 1, 2020, the Retail Banking sector was reorganized into an "Individuals and Businesses" area, transferring Small and Medium Size Companies (SMEs) from the Corporate Division to improve strategic focus.
Guidance, Outlook, Risks, and Unusual Items
- COVID-19 Impact: The pandemic led to mandatory lockdowns in Argentina starting March 19, 2020. While banking activities were deemed essential, branches operated with restrictions. The Central Bank implemented measures including loan maturity postponements, removal of punitive interest, and a suspension of dividend distributions until June 30, 2020. Management anticipates potential increases in credit loss provisions due to economic slowdown but notes mitigating factors such as reduced funding costs.
- Dividend Restrictions: Pursuant to Central Bank Communication "A" 6939, the distribution of dividends by financial entities was suspended until June 30, 2020. The 2019 fiscal year profit distribution was approved on April 28, 2020, allocating 426,000 thousand pesos to a reserve for future dividends and 3,831,933 thousand pesos to other reserves.
- Regulatory Covenants: As of December 31, 2019, the Group did not meet non-performing loan and coverage ratio covenants in its syndicated loan agreements with FMO and Proparco. A waiver was obtained from the Inter-American Development Bank (BID) on February 18, 2020, and extended to May 31, 2020, preventing acceleration of debt.
- Outlook: For the 2021 financial year, the Group expects to maintain its contribution to the Argentine economy through continued credit origination.
Investor Verification Checklist
- Hyperinflation Accounting: 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 indices used (INDEC National Consumption Index).
- IFRS 9 Adoption: Review the reconciliation of loan loss provisions under the new Expected Credit Loss (ECL) model versus the previous minimum provision standards, noting the temporary exclusion of non-financial public sector debt.
- Liquidity and Funding: Assess the sustainability of the 41.5% increase in "Other debt securities" and the reliance on Central Bank liquidity bills (LELIQ) within the portfolio.
- Credit Quality: Monitor the "High risk of insolvency" and "Uncollectible" loan categories in Schedule B, particularly in the context of the economic slowdown caused by the pandemic.
- Regulatory Compliance: Confirm the status of the waiver for the syndicated loan covenants with FMO/Proparco and the timeline for the resumption of dividend distributions post-June 30, 2020.