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, 2019
Filing Date: July 16, 2019
Currency: Argentine Pesos (AR$) in thousands
Accounting Basis: Prepared in accordance with Argentine Central Bank (BCRA) regulations. The Group is in a convergence plan toward IFRS but currently waives IFRS 9 (Impairment) and IAS 29 (Hyperinflationary Economies) until January 1, 2020. The Group adopted IFRS 16 (Leases) effective January 1, 2019.
Key Financial Metrics
| Metric | Q1 2019 | Q1 2018 | Dec 31, 2018 (Balance Sheet) |
|---|---|---|---|
| Net Interest Income | 1,218,298 | 2,818,105 | - |
| Net Service Fee Income | 1,431,733 | 1,039,729 | - |
| Net Income from Financial Instruments (Fair Value) | 4,587,752 | 656,522 | - |
| Loan Loss Provisions | (1,892,999) | (726,126) | - |
| Operating Income | 748,670 | 1,020,449 | - |
| Net Income (Period) | 589,529 | 737,783 | - |
| Net Income Attributable to Parent | 589,133 | 722,634 | - |
| Total Assets | 163,849,311 | - | 141,115,541 |
| Total Liabilities | 146,063,340 | - | 123,945,364 |
| Shareholders' Equity | 17,785,971 | - | 17,170,177 |
| Cash and Cash Equivalents | 64,486,861 | - | 46,976,558 |
| Deposits | 109,676,796 | - | 94,906,014 |
| Loans and Other Financing | 79,458,694 | - | 78,791,903 |
| Earnings Per Share (Basic & Diluted) | 1.29 | 1.58 | - |
Material Changes vs. Prior Period
- Net Income Decline: Net income attributable to the parent company decreased by approximately 18.5% to AR$589.1 million in Q1 2019 compared to AR$722.6 million in Q1 2018.
- Net Interest Income Compression: Net interest income dropped significantly by 56.8% to AR$1.2 billion, driven by a 339% increase in interest expenses (AR$6.7 billion) compared to a 72% increase in interest income (AR$7.9 billion).
- Trading Gains Surge: Net income from financial instruments at fair value through profit or loss increased dramatically by 599% to AR$4.6 billion, largely offsetting the decline in net interest income. This was primarily driven by income from securities issued by the Argentine Central Bank.
- Provisioning Increase: Loan loss provisions more than doubled to AR$1.9 billion, reflecting higher credit risk provisioning.
- Balance Sheet Expansion: Total assets grew 16.1% year-over-year (comparing Q1 2019 to Dec 2018), with a notable increase in deposits (15.4%) and cash equivalents (37.3%).
Guidance, Outlook, Risks, and Unusual Items
- Outlook: Management expects to maintain its contribution to the Argentine economy's growth through credit origination in 2019. No specific numerical guidance was provided.
- Accounting Risks (IFRS Convergence): The Group notes that applying IFRS 9 (Expected Credit Losses) and IAS 29 (Hyperinflationary Economies) starting January 1, 2020, would cause equity and results to differ significantly from currently reported balances. The Argentine economy is considered hyperinflationary under IAS 29 standards, but restatement is currently waived.
- Dividend Distribution: On April 26, 2019, shareholders approved a cash dividend of AR$303 million for the 2018 fiscal year. Dividend distribution is subject to BCRA regulations regarding liquidity and solvency.
- Regulatory Environment: The Group operates under strict BCRA regulations. Restrictions on dividend distribution apply if liquidity or solvency is jeopardized or if minimum capital margins are not met.
- Segment Performance: While Retail Banking and Treasury segments remained profitable, the Consumer segment reported a net loss of AR$253 million, and Corporate Banking reported a slight loss of AR$4.5 million.
Key Facts for Investor Verification
- IFRS Adoption Timeline: Verify the impact of the mandatory adoption of IFRS 9 and IAS 29 effective January 1, 2020, on future reported equity and earnings.
- Central Bank Exposure: Confirm the sustainability of the high returns from "Liquidity Central Bank Bills" which drove the surge in trading income.
- Credit Quality: Monitor the trend in loan loss provisions, which doubled year-over-year, and the classification of loans in "High risk of insolvency" or "Uncollectible" categories.
- Hyperinflation Impact: Assess the potential volatility in financial statements once IAS 29 restatement for inflation is applied in 2020.
- Dividend Policy: Review BCRA communication "A" 6464 regarding the requirement for prior authorization for dividend distributions until March 31, 2020.