Business Context and Reporting Period
Company: Grupo Supervielle S.A. (Supervielle Group S.A.)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Nine months ended September 30, 2018 (Unaudited)
Business Overview: The Group is an investment holding company whose primary activity is investing 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 recently acquired Micro Lending S.A.U. and InvertirOnline S.A. to expand into fintech and micro-lending sectors.
Accounting Standards: Financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the Argentine Central Bank. The Group has not applied IAS 29 (Hyperinflationary Economies) due to a specific Executive Decree, despite Argentina meeting the criteria for hyperinflation.
Key Financial Metrics
| Metric (in thousands of ARS) | 9 Months Ended Sept 30, 2018 |
9 Months Ended Sept 30, 2017 |
|---|---|---|
| Net Interest Income | 8,439,218 | 5,993,955 |
| Net Commission Income | 3,393,536 | 2,739,125 |
| Net Income from Financial Instruments (FVPL) | 2,884,654 | 1,511,269 |
| Net Operating Income | 13,493,389 | 10,003,623 |
| Loan Loss Provisions | (2,837,880) | (1,322,492) |
| Net Income (Continuing Operations) | 1,909,862 | 1,371,075 |
| Total Comprehensive Income | 2,144,032 | 1,424,712 |
| Net Income Attributable to Parent | 1,860,737 | 1,352,236 |
| Total Assets | 146,122,704 | 80,816,544 |
| Total Liabilities | 129,867,020 | 66,750,760 |
| Shareholders' Equity | 16,255,684 | 14,065,784 |
| Cash and Cash Equivalents | 46,992,617 | 19,435,665 |
Material Changes vs. Prior Period
- Revenue Growth: Net interest income increased by approximately 41% year-over-year, driven by higher interest rates and loan portfolio expansion. Net commission income rose by 24%.
- Profitability: Net income attributable to the parent company increased by 38% to ARS 1.86 billion. This was supported by a significant increase in income from financial instruments at fair value through profit or loss (FVPL), which more than doubled.
- Balance Sheet Expansion: Total assets grew by 81% to ARS 146.1 billion. Loans and other financing increased by 36% to ARS 82.2 billion, while deposits grew by 72% to ARS 97.2 billion.
- Provisions: Loan loss provisions increased significantly by 115% to ARS 2.84 billion, reflecting the economic environment and portfolio growth.
- Acquisitions: The Group consolidated results from new acquisitions in 2018: Micro Lending S.A.U. (acquired May 2018) and InvertirOnline S.A. (acquired May 2018).
Guidance, Outlook, Risks, and Unusual Items
- Outlook: Management expects to maintain its contribution to the Argentine economy through continued credit origination in fiscal year 2019.
- Dividend Distribution: On April 24, 2018, the Shareholders' Meeting approved the distribution of 2017 earnings, including cash dividends of ARS 243.7 million and the constitution of reserves totaling ARS 2.19 billion.
- Hyperinflation Risk: While the Argentine economy met the criteria for hyperinflation (cumulative inflation >100% over three years) as of July 1, 2018, the Group did not apply IAS 29 adjustments due to Executive Decree 664/03. This creates a risk that reported figures may not fully reflect the erosion of purchasing power.
- Regulatory Risks: The Group is subject to strict capital and liquidity requirements by the Argentine Central Bank (BCRA). Dividend distributions are contingent upon meeting these solvency and liquidity ratios.
- Unusual Items: The transition to IFRS in 2018 resulted in significant reclassifications and adjustments to equity and income, particularly regarding the valuation of financial instruments and the treatment of goodwill.
Investor Verification Checklist
- IFRS Transition Impact: Verify the specific adjustments made during the transition from local GAAP to IFRS, particularly regarding the valuation of financial assets and the treatment of goodwill.
- Hyperinflation Accounting: Confirm the implications of not applying IAS 29 despite the hyperinflationary environment and how this affects the comparability of financial statements.
- Loan Portfolio Quality: Review the breakdown of loan loss provisions and the classification of the loan portfolio (Normal, Under Observation, With Problems, etc.) to assess credit risk exposure.
- Acquisition Integration: Assess the financial performance and integration progress of the newly acquired entities (Micro Lending S.A.U. and InvertirOnline S.A.).
- Liquidity Position: Analyze the Liquidity Coverage Ratio (LCR) and the composition of cash and cash equivalents to ensure sufficient liquidity to meet obligations.
- Dividend Restrictions: Review the specific regulatory restrictions on dividend distributions imposed by the Argentine Central Bank.