Business Context and Reporting Period
Company: Grupo Supervielle S.A. (Foreign Private Issuer)
Filing Type: Form 6-K
Reporting Period: Nine months ended September 30, 2017 (Unaudited)
Submission Date: November 28, 2017
Currency: Argentine Pesos (ARS) in thousands
Grupo Supervielle S.A. is an investment holding company focused on the Argentine financial sector. Its primary assets are equity investments in controlled subsidiaries, including Banco Supervielle S.A. (commercial banking), Cordial Compañía Financiera S.A. (financial services), and Supervielle Seguros S.A. (insurance). The Group's strategy involves offering inclusive financial services across various population segments.
Key Financial Metrics
| Metric (in thousands ARS) | Sept 30, 2017 | Sept 30, 2016 | Dec 31, 2016 (Balance Sheet) |
|---|---|---|---|
| Total Assets | 78,957,704 | 44,433,743 | 53,206,042 |
| Total Liabilities | 64,657,606 | 38,020,202 | 46,274,491 |
| Shareholders' Equity | 14,300,098 | 6,413,541 | 6,931,551 |
| Net Income | 1,585,693 | 779,044 | - |
| Gross Financial Margin | 6,409,709 | 3,976,455 | - |
| Cash & Cash Equivalents | 19,183,995 | 7,035,373 | 9,688,554 |
| Loans (Net) | 47,835,751 | 34,896,509 | 34,896,509 |
| Deposits | 47,181,898 | 30,417,234 | 35,897,864 |
Key Ratios (as of Sept 30, 2017):
- Return on Average Equity (ROAE): 26.8%
- Liquidity Ratio: 40.7%
- Solvency Ratio: 22.1%
- Immobilization of Capital: 3.9%
Material Changes vs. Prior Period
- Profitability Surge: Net income for the nine-month period increased by approximately 103.5%, rising from 779,044 to 1,585,693. This was driven primarily by a 61.2% increase in Gross Financial Margin and a 43% increase in Service Fee Income.
- Balance Sheet Expansion: Total assets grew by 77.8% compared to the same period in 2016, largely due to a significant increase in Loans (up 37.1%) and Government/Corporate Securities (up 166.8%).
- Capital Increase: Shareholders' equity more than doubled year-over-year, increasing from 6,413,541 to 14,300,098. This was significantly bolstered by a capital increase of 5,848,354 during the period.
- Liquidity Position: Cash and cash equivalents increased by 172.7% compared to the prior year period, reaching 19,183,995.
- Loan Loss Provisions: Provisions increased by 64.6% to 1,219,889, reflecting portfolio growth and risk management adjustments.
Guidance, Outlook, and Risks
Management Commentary & Outlook: Management expects to maintain its contribution to the Argentine economy's growth through continued credit origination in fiscal year 2017. The Group reported a Return on Average Equity of 26.8% for the period.
Dividend Distribution: On April 27, 2017, the Shareholders' Meeting approved the distribution of 2016 fiscal year results (1,311,304), including cash dividends of 65,500, with the remainder allocated to legal and optional reserves.
IFRS Convergence: The Group is in the process of implementing International Financial Reporting Standards (IFRS). While currently reporting under Argentine Banking GAAP, subsidiaries are preparing opening financial statements as of January 1, 2017, for the fiscal year starting January 1, 2018. Reconciliations between Argentine GAAP and IFRS show adjustments affecting equity and net income, primarily due to deferred taxes, property revaluations, and loan origination fees.
Risks and Contingencies:
- Regulatory Restrictions: Dividend distribution is subject to Argentine Central Bank regulations, including capital adequacy requirements and liquidity constraints.
- Statistical Data: The filing notes the suspension of official inflation statistics by INDEC, creating uncertainty in macroeconomic assessments, though no inflation adjustment was applied to the financial statements for this period.
- Derivatives: The Group utilizes derivatives (futures and forwards) to hedge foreign exchange risk. Results from these instruments can be volatile.
- Legal/Contractual: The termination of the Financial Agent contract with the Province of San Luis was notified in January 2017, though the bank continued to act as agent pending a new selection.
Investor Verification Checklist
- Capital Structure: Verify the impact of the significant capital increase (5,848,354) on diluted earnings per share and future dividend capacity.
- Asset Quality: Review the 64.6% increase in Loan Loss Provisions and the classification of the loan portfolio (Schedule VI) to assess credit risk trends.
- IFRS Transition: Monitor the reconciliation tables (Note 22) to understand the potential impact of IFRS adoption on future reported equity and net income, specifically regarding deferred taxes and asset revaluations.
- Liquidity Composition: Analyze the composition of "Cash and Cash Equivalents," which includes significant holdings in Mutual Funds and Government Securities, to assess true liquidity availability.
- Subsidiary Performance: Confirm the contribution of key subsidiaries (Banco Supervielle, Cordial Compañía Financiera) to the consolidated net income, as the parent company's income is largely derived from equity earnings.