Grupo Supervielle S.A. — 2019 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2019; this is an annual report, not a standalone fourth-quarter filing. Grupo Supervielle is an Argentina-focused financial-services holding company, principally comprising Banco Supervielle and consumer-finance, insurance, asset-management and brokerage businesses. Financial statements are audited, prepared under IFRS and inflation-restated under IAS 29 to December 31, 2019 pesos. IFRS 16 was adopted in 2019 without restating comparative figures, which may affect comparisons.
Financial results and condition
Amounts below are in billions of Argentine pesos unless stated otherwise. Income-statement and balance-sheet comparisons are based on the filing’s inflation-adjusted IFRS figures; regulatory capital figures are prepared under Central Bank rules and may not be directly comparable.
| Metric | 2019 | 2018 | Change / note |
|---|---|---|---|
| Net financial income | 30.5 | 31.4 | Down 2.9%; net interest income fell 50.6% to 9.9, partly offset by stronger fair-value financial results. |
| Net service-fee income, including insurance activities | 7.7 | 8.2 | Down 6.0%. |
| Net operating income | 27.9 | 26.3 | Up 6.3%, after loan-loss provisions and inflation-accounting results. |
| Net loss attributable to parent shareholders | (2.2) | (4.7) | Loss narrowed; loss per share was Ps.4.7 versus Ps.10.2. |
| Total assets | 148.7 | 218.0 | Down 31.8%. |
| Loans and other financing, net | 88.0 | 118.8 | Down 25.9%. |
| Deposits | 89.0 | 146.0 | Down 39.0%. |
| Total liabilities / shareholders’ equity | 125.2 / 23.4 | 191.9 / 26.1 | Equity attributable to parent was 23.4 in 2019. |
| Cash and cash equivalents at year-end | 27.9 | 72.3 | Down 44.3; the cash-flow statement shows a 44.3 decrease in cash equivalents during 2019. |
- Margins and costs: Reported net interest margin was 21.0% versus 17.0%; the 2019 definition includes exchange-rate differences and net gains or losses on currency derivatives. Efficiency ratio was 62.7% versus 61.8%. ROAE was (9.2%) and ROAA (1.1%), improved from (16.2%) and (1.9%) respectively.
- Credit quality: Non-performing loans were 7.4% of total loans versus 4.1%; cost of risk rose to 7.5% from 5.4%. Allowances were 7.1% of loans and coverage of non-performing loans was 96.0%, down from 147.2%. Loan-loss provisions were 7.7, slightly below 8.0 in 2018.
- Liquidity and capital: Loans-to-deposits reached 106.5%, versus 86.6%. Pro forma LCR was 150.3%, versus 173.4%. The Bank and CCF reported excess regulatory capital of 4.4; Tier 1 capital/RWA was 10.8%, and pro forma consolidated total capital/RWA was 12.1%. The filing also presents a different 15.6% regulatory-capital ratio under another calculation; investors should confirm the applicable definition.
- Borrowings: Year-end balances included 9.0 of financing from the Central Bank and other financial institutions, 6.1 of unsubordinated negotiable obligations and 2.1 of subordinated obligations. IFRS 16 lease liabilities were 0.95 at year-end; opening 2019 lease liability was 1.35.
- Cash flow: Operating activities used 2.4 in 2019, compared with 8.2 provided in 2018; investing activities used 1.3 and financing activities used 14.9. The filing attributes a large part of the cash-equivalent movement to exchange-rate and inflation effects.
Material changes versus the prior comparable period
- Net loss narrowed by 2.5, primarily as the inflation-accounting loss declined to 5.4 from 9.3 and income-tax expense fell. These gains were partly offset by higher funding costs, weaker net fee income and lower net financial income.
- Interest expense rose 30.3% to 34.9 while interest income fell 4.3% to 44.8. Management cited higher deposit costs and a 30.8% decline in average loan volumes; the yield on peso loans increased with market rates.
- Financial results from Central Bank securities increased, but the repricing of short-term Argentine government securities after the August 2019 debt reprofiling weighed on results. Exchange-rate differences on gold and foreign currency turned to a 0.3 loss from a 1.7 gain.
- Loan balances, deposits and total assets contracted materially. The filing describes reduced credit demand, a recession and fourth-quarter balance-sheet deleveraging; private-sector dollar deposits in Argentina also fell sharply after the August primary election.
- Asset quality weakened overall: corporate-loan NPLs increased to 8.7% from 1.1%, while consumer-finance NPLs improved to 17.2% from 19.4%. The group’s overall NPL ratio nevertheless rose to 7.4%.
Outlook, management commentary, risks and unusual items
- Management priorities: Digital transformation, customer acquisition and cross-selling, operational efficiency, improved offerings for target segments, and development of new products. SMEs moved from Corporate Banking to Personal and Business Banking on January 1, 2020. Management stated cash flows and available cash were expected to fund 2020 commitments and capital expenditures, but did not provide quantitative earnings guidance.
- COVID-19, subsequent event: The filing, signed April 30, 2020, says the pandemic and lockdown were disrupting operations and that the ultimate impact was highly uncertain. Risks include rising loan defaults and provisions, asset impairment, lower fee income, reduced credit demand and cybersecurity exposure from remote work. Government measures included delayed loan payments, temporary fee restrictions, credit-card refinancing and a dividend-distribution suspension through June 30, 2020.
- Argentina risks: High inflation, recession, peso depreciation, renewed exchange controls, sovereign-debt restructuring and government intervention create substantial market, credit, funding and valuation risks. Argentine CPI inflation was 53.8% in 2019; real GDP contracted 2.2%. The government’s external-debt exchange offer was pending at the filing date, and Supervielle disclosed that its holdings of certain government notes were affected by maturity reprofiling.
- Funding and liquidity: Deposits are the principal funding source, but a significant portion is short term. The loans-to-deposits ratio exceeded 100% at year-end, and deposits fell substantially. Management said it did not expect pandemic-related liquidity constraints, but this was an expectation, not a guarantee.
- Contingencies and unusual items: A 0.5 provision for restructuring was included in year-end provisions of 0.68. The Bank disclosed a covenant issue involving non-performing-loan and coverage ratios under an IDB facility, with potential cross-default exposure to FMO/Proparco loans; it obtained IDB waivers in February and April 2020, the latter extending terms through May 31, 2020. The filing describes ordinary-course litigation, including class actions, but no proceedings expected to have a material adverse effect. The group paid 0.47 in dividends in 2019; future distributions depend on regulatory and exchange-control conditions.
- Reporting and controls: The auditor issued an unqualified opinion on the IFRS financial statements and internal control over financial reporting; management also concluded controls were effective as of year-end.
Most important facts for investors to verify
- Whether the sharp 2019 decline in assets, loans, deposits and cash reflects sustainable deleveraging or continued deposit and funding pressure; reconcile the cash-flow statement’s operating-cash outflow with management’s narrative.
- Subsequent NPL trends, particularly corporate borrowers, allowance adequacy and the effect of pandemic-era loan-payment relief and delayed classification rules.
- The status and terms of sovereign-debt restructuring, valuation and recoverability of government securities, and any further covenant waivers or lender actions.
- Capital and liquidity ratios under consistent regulatory definitions, including the reported 10.8%, 12.1% and 15.6% capital measures, and the sustainability of the 150.3% pro forma LCR.
- The impact of inflation, peso exchange controls, IFRS 16 and the 2019 restructuring provision on comparability, earnings, cash flows and distributable capital; also confirm dividend remittance access and the status of the COVID-related dividend suspension.