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: Nine months ended September 30, 2023
Submission Date: December 26, 2023
Currency: Argentine Pesos (ARS) in homogeneous currency (adjusted for inflation per IAS 29 and BCRA regulations).
Grupo Supervielle is an investment holding company whose primary asset is its controlling stake in Banco Supervielle S.A. The Group operates through a diversified ecosystem including banking, consumer finance, insurance, asset management, and fintech services. The financial statements are prepared in accordance with IFRS as adopted by the Argentine Central Bank (BCRA), with specific exceptions regarding the impairment of non-financial public sector debt instruments.
Key Financial Metrics
| Metric (in thousands ARS) | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | Change |
|---|---|---|---|
| Net Interest Income | 158,511,042 | 133,710,032 | +18.5% |
| Net Service Fee Income | 40,600,044 | 37,169,001 | +9.2% |
| Net Operating Income | 194,646,663 | 170,395,282 | +14.2% |
| Operating Income (Pre-Tax) | 30,190,813 | (5,613,708) | Turnaround to Profit |
| Net Income (Parent) | 18,852,566 | (7,305,277) | Turnaround to Profit |
| Basic EPS (ARS) | 42.58 | (16.01) | Turnaround to Profit |
| Total Assets | 1,291,688,079 | 1,416,847,429 | -8.8% |
| Total Liabilities | 1,084,842,455 | 1,228,091,114 | -11.7% |
| Shareholders' Equity | 206,845,624 | 188,756,315 | +9.6% |
| Cash & Cash Equivalents | 122,417,540 | 95,486,562 | +28.2% |
Balance Sheet Highlights
- Loans and Other Financing: Decreased to 376,481,309 (from 474,817,180), reflecting portfolio adjustments and the merger process.
- Deposits: Decreased to 969,043,463 (from 1,112,285,329), impacted by high inflation and exchange rate volatility.
- Reverse Repo Transactions: Increased significantly to 179,914,458 (from 43,842,876), indicating a shift in liquidity management.
- Loan Loss Provisions: Expense was 14,046,694, a decrease from 20,709,392 in the prior period.
Material Changes vs. Prior Period
- Profitability Turnaround: The Group reported a net profit of 18.85 billion ARS for the nine-month period, compared to a net loss of 7.31 billion ARS in the same period of 2022. This reversal is primarily driven by higher net interest income and improved results from financial instruments.
- Asset Contraction: Total assets declined by approximately 8.8% year-over-year. This is largely attributed to the reduction in the loan portfolio and deposits, partially offset by an increase in reverse repo transactions and cash equivalents.
- Expense Management: Personnel expenses decreased to 76,027,466 (from 82,537,665), and administration expenses fell to 39,677,983 (from 43,393,981).
- Exchange Rate Impact: The Group recorded a negative result of 38,753,423 from exposure to changes in the purchasing power of the currency, compared to 28,590,032 in the prior period, reflecting the high inflation environment (103.2% accumulated inflation YTD).
Guidance, Outlook, and Risks
Management Commentary and Outlook
Management plans to continue contributing to credit generation for the Argentine economy in 2024. The Group is actively monitoring the volatile economic context, including the recent presidential election results (Javier Milei elected) and the subsequent policy shifts. The Group expects to maintain its strategy of offering innovative financial services across different population segments.
Key Risks and Contingencies
- Economic Volatility: Argentina faces high inflation (12.7% monthly in September 2023) and currency depreciation (97.60% vs USD YTD). The peso is expected to end 2023 at ARS 526.4/USD.
- Public Sector Exposure: The Group has significant exposure to the Argentine public sector (46% of total assets), including BCRA repos and Treasury bills. Note 1.1 states that non-financial public sector instruments are temporarily excluded from IFRS 9 impairment provisions.
- Regulatory Changes: The BCRA and National Securities Commission (CNV) have implemented new exchange rate regimes and restrictions on financial dollar purchases (MEP/CCL), impacting liquidity and market dynamics.
- Tax Contingency: The Group has ceased paying Turnover Tax on BCRA securities in Mendoza and Buenos Aires, citing constitutional immunity. Legal actions are pending resolution by the Supreme Court.
Unusual Items and Corporate Actions
- Merger Commitment: A definitive commitment was signed on June 8, 2023, for Banco Supervielle S.A. to absorb IUDÚ Compañía Financiera S.A. and Tarjeta Automática S.A. The merger is effective as of January 1, 2023, pending Central Bank approval. This simplifies the corporate structure and integrates consumer financing operations.
- Treasury Stock Program: The share repurchase program expired in September 2023. The Group acquired 11,093,572 Class B shares and 591,384 ADRs, representing 3.076% of share capital. The cost of treasury stock is 3,370,375 thousand ARS.
- Dividend Restrictions: While the Group is profitable, the holding of treasury shares restricts the distribution of unassigned results and free reserves up to the cost of the treasury stock.
Investor Verification Checklist
- Verify Inflation Adjustments: Confirm the methodology used for restating financial statements in homogeneous currency (IAS 29) and the specific inflation index applied.
- Public Sector Exposure: Review the concentration of assets in BCRA repos and government securities (approx. 46% of total assets) and the implications of the temporary IFRS 9 impairment exemption.
- Merger Status: Monitor the regulatory approval status of the merger between Banco Supervielle, IUDÚ, and Tarjeta Automática to ensure the integration of operations proceeds as planned.
- Turnover Tax Litigation: Track the outcome of the constitutional challenges regarding the Turnover Tax on BCRA securities, as a negative ruling could impact future profitability.
- Liquidity Position: Assess the sustainability of the deposit base given the high inflation environment and the shift toward reverse repo transactions for liquidity management.