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, 2020
Filing Date: December 9, 2020
Business Overview: The Group is a financial holding company whose primary activity is investment in financial entities, including Banco Supervielle S.A. (commercial banking), Cordial Compañía Financiera S.A. (financial services), and Supervielle Seguros S.A. (insurance). The Group also operates in asset management, credit cards, and fintech sectors. Financial statements are presented in homogeneous currency (Argentine pesos) adjusted for inflation pursuant to IAS 29 and Argentine Central Bank regulations.
Key Financial Metrics
| Metric (in thousands of ARS) | Sept 30, 2020 | Dec 31, 2019 |
|---|---|---|
| Total Assets | 236,188,260 | 182,730,101 |
| Total Liabilities | 204,393,542 | 153,125,963 |
| Shareholders' Equity | 31,794,718 | 29,604,138 |
| Net Interest Income (9-month) | 25,087,084 | 6,455,812 (9-month 2019) |
| Net Service Fee Income (9-month) | 6,574,468 | 7,147,931 (9-month 2019) |
| Net Income (9-month) | 2,476,036 | (2,957,718) (9-month 2019) |
| Net Income Attributable to Parent (9-month) | 2,474,412 | (2,955,065) (9-month 2019) |
| Loan Loss Provisions (9-month) | (6,955,877) | (8,068,586) (9-month 2019) |
| Cash and Cash Equivalents | 31,389,606 | 34,232,005 |
Note: Comparative figures for 2019 have been restated to reflect the adoption of IFRS 9 and inflation adjustments (IAS 29) effective January 1, 2020.
Material Changes vs. Prior Period
- Profitability Turnaround: The Group reported a net income of 2.47 billion ARS for the nine months ended September 30, 2020, a significant improvement from a net loss of 2.96 billion ARS in the same period of 2019. This turnaround is largely attributed to a substantial increase in Net Interest Income (from 6.46 billion to 25.09 billion ARS) and a positive result from exposure to changes in the purchasing power of the currency (4.37 billion ARS gain vs. 5.64 billion ARS loss in 2019).
- Balance Sheet Growth: Total assets increased by approximately 29% to 236.2 billion ARS, driven by growth in deposits (up to 170.3 billion ARS) and loans to the non-financial private sector. However, loans and other financing decreased slightly to 98.2 billion ARS compared to 108.7 billion ARS at year-end 2019.
- Accounting Policy Changes: The Group adopted IFRS 9 (Expected Credit Loss model) and IAS 29 (Hyperinflationary economies) retroactively from January 1, 2019. This required the re-expression of financial statements in homogeneous currency and a change in the methodology for calculating loan loss provisions.
- Segment Performance: The Treasury segment was the primary profit driver with an operating income of 6.35 billion ARS, while the Individuals and Businesses segment reported an operating loss of 2.84 billion ARS, primarily due to loan loss provisions.
Guidance, Outlook, Risks, and Contingencies
- COVID-19 Impact: The Group operates in a complex economic context exacerbated by the pandemic. The Argentine economy faced a recession with an estimated GDP fall of 12.5% (as of August 2020) and high inflation (22.3% YTD). The Group has implemented sectoral analyses to adjust credit risk models for industries heavily impacted by the pandemic (e.g., tourism, entertainment).
- Regulatory Environment: The Argentine Central Bank has imposed strict exchange controls, restricting access to foreign currency for dividend payments and debt servicing. Additionally, the distribution of dividends by financial entities was suspended until December 31, 2020, pursuant to Communication "A" 7035.
- Financial Covenants: The Group holds international financing programs (e.g., with BID, FMO, Proparco). The Group previously failed to meet non-performing loan and coverage ratios but successfully obtained waivers from lenders (BID) extending the terms until December 31, 2020.
- Outlook: Management expects to continue contributing to the Argentine economy through credit origination in 2021. The Group monitors macroeconomic variables closely to mitigate risks to equity and financial stability.
Key Facts for Investor Verification
- Hyperinflation Adjustment: Verify the impact of IAS 29 re-expression on the comparability of financial results, as the Argentine economy is classified as hyperinflationary.
- Dividend Restrictions: Confirm the status of dividend distribution restrictions imposed by the Argentine Central Bank, which were in effect through December 31, 2020.
- Foreign Currency Exposure: Review the net position in foreign currency (Schedule L) and the impact of exchange rate volatility and controls on the Group's ability to service foreign-denominated debt.
- Credit Quality: Examine the breakdown of loan loss provisions by stage (Stage 1, 2, and 3) under the new IFRS 9 framework to assess the adequacy of reserves given the economic downturn.
- Subsidiary Performance: Note that while the consolidated group was profitable, key subsidiaries like Cordial Compañía Financiera S.A. and Tarjeta Automática S.A. reported net losses for the period.