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Grupo Supervielle S.A. Reports 2Q20 Consolidated Results

2Q20 Net Income of AR$1.0 billion and Comprehensive net income of AR$1.3 billion

BUENOS AIRES–(BUSINESS WIRE)–Grupo Supervielle S.A. (NYSE: SUPV) (BYMA: SUPV), (“Supervielle” or the “Company”) a universal financial services group headquartered in Argentina with a nationwide presence, today reported results for the three-month and six-months periods ended June 30, 2020.

Starting 1Q20, the Company began reporting results applying Hyperinflation Accounting, in accordance with IFRS rule IAS 29 (“IAS 29”) as established by the Central Bank. For ease of comparison, figures for all quarters of 2019 have been restated applying IAS 29 to reflect the accumulated effect of the inflation adjustment for each period through June 30, 2020.

Management Commentary

Commenting on second quarter 2020 results, Patricio Supervielle, Grupo Supervielle’s Chairman & CEO, noted: “We took early and decisive action to achieve the three strategic goals established at the onset of the COVID-19 pandemic. First, we acted rapidly to protect the well-being of our employees and our customers. We also supported several initiatives in the communities where we operate to help mitigate the impact of this health crisis. Second, we established protocols to ensure the continuity of our operations, and third, we stepped up our digital transformation initiatives to leverage accelerated adoption in this new normal. Our strong level of liquidity and efficient operating structure are strengthening our capital base allowing us to navigate this complex environment.

During this time, we have continued to seamlessly support and serve our customers, whilst maintaining strict procedures to promote safe banking across all customer segments.

In this low touch economy, we are rapidly executing on our strategy of transforming our company into a cutting edge, cost efficient and agile player with the ability to continuously serve the evolving needs and aspirations of our customers. The use of digital channels consistently increased across our customer segments as we added new functionalities. For example, 70% of total time deposits in the quarter were made through digital channels, up from just 47% in January. We also saw significant adoption in mobile and home banking transactions which increased 66% and 50%, respectively since the end of 2019. Transactions at non-automated tellers declined to 6% of total transactions this quarter from 17% in 1Q20. Moreover, the use of our senior citizens app with face recognition increased 116% since February, as we incentivized the accelerated adoption of digital channels for this group of customers. Additionally, we are very proud of our involvement with regulatory authorities to facilitate a safer banking experience for senior citizens overall during this health crisis.

Among SMEs, another important customer segment, we are seeing the rapid adoption of e-checks and e-factoring. We also continue to support payroll and working capital needs of our SME clients through loans at preferential rates, which reached 7% of our loan book at quarter end.

Maintaining a prudent approach to risk management, during the quarter we increased provisions by nearly 36% sequentially as we continued to revise our expected loss models to adjust for the current economic outlook. Covid-19 specific anticipatory provisions accounted for nearly half of total provisions in the quarter. We are closely monitoring our loan portfolio and risk models and will continue to make requisite adjustments.

Looking ahead, with the positive resolution of the Argentine sovereign debt restructuring we expect negotiations with the IMF to move ahead and clear the way for new sustainable monetary and fiscal policies. The trajectory of the recovery remains uncertain and is largely dependent on the depth and duration of this global health crisis.

We will continue to execute on our goals during this period by safeguarding the health and safety of our employees and customers, offering the very best level and continuity of services, and ensuring the long-term sustainability of our business by continuing to prioritize the digital transformation of our Company,” concluded Mr. Supervielle.

Second Quarter 2020 Highlights

Profit before income tax of AR$1.2 billion in 2Q20 compared to AR$625.8 million in 2Q19 and AR$839.8 million in 1Q20 up 89.2% YoY and 41.0% QoQ. Excluding the impact of IAS29, Profit before income tax, would have been AR$2.0 billion in 2Q20, AR$1.6 billion in 2Q19 and AR$1.8 billion in 1Q20. QoQ improvement was explained by: i) a 16.2% increase in Net Financial Income due to higher investments in Central Bank securities and higher trading gains, while AR$ cost of funding decreased 870 bps, ii) a lower impact from inflation adjustment reflecting the deceleration in inflation in 2Q20 compared to 1Q20, and (iii) Personnel Expenses remaining almost flat (-0.7%) reflecting salary increases in line with inflation following the bargaining agreement between banks and unions for the quarter. These were partially offset by: (i) higher LLPs resulting from enhancing the expected loss models to capture a worsening macroeconomic scenario as a result of the extended Covid-19 lockdown Argentina imposed, (ii) a decrease in Net Service Fee Income due to lower credit card usage, higher costs of massive reprints of debit cards to deliver to our senior citizen customers in the early days of the lockdown, and regulations prohibiting charging ATMs fees and further repricing in all other fees until early 2021 that offset an improvement in brokerage and asset management fees, and (iii) an increase in Administrative Expenses mainly related to Covid-19 protocols across the Company’s branch network aimed at protecting its employees and customers and to ensure business continuity, increased armored transportation costs, and in connection with initiatives related to the acceleration of the digital transformation process.

Attributable Net income of AR$1.0 billion in 2Q20, compared to AR$854.3 billion in 2Q19 and AR$ 477.7 million in 1Q20, up 19.7% compared to 2Q19 and doubling 1Q20 level.

ROAE of 14.4% in 2Q20 compared with 12.9% in 2Q19 and 7.7% in 1Q20. ROAA of 2.0% in 2Q20 compared to 1.4% in 2Q19 and 1.0% in 1Q20.

Net Financial Income of AR$9.1 billion, down 5.3% YoY and up 16.2%, Net Interest Margin (NIM) of 23.5% was up 153 bps YoY, and 73 bps QoQ.

The total NPL ratio increased by 100 bps YoY but declined 60 bps QoQ to 6.1% in 2Q20. QoQ NPL performance reflects an improvement in all segments, but also 2Q20 continues to benefit from Central Bank regulatory easing amid the pandemic.

Loan loss provisions (LLP) totaled AR$2.3 billion in 2Q20, up 27.7% YoY and 36.1% QoQ. Covid-19 specific provisions amounted to AR$ 560 million during 2Q20. The Coverage ratio increased to 127.1% from 107.7% in 2Q19 and 99.6% in 1Q20. As of June 30, 2020 collateralized commercial loan portfolio reached 44% of total, and collateralized non-performing commercial loans increased to 66% of total, from 61% as of March 31, 2020 and 20% as of June 30, 2019.

Efficiency ratio was 61.9% in 2Q20 compared to 63.3% in 2Q19 and improving 230 bps from 1Q20.

Loans to deposits ratio of 63.4% compared to 73.1% as of June 30, 2019 and 68.1% as of March 31, 2020. AR$ loans to AR$ deposits ratio was 57.7% compared to 78.5% on June 30, 2019 and 62.3% as of March 31, 2020.

Total Deposits measured in comparable AR$ units at the end of 2Q20 declined 1.4% YoY and increased 10.8% QoQ to AR$158.6 billion. AR$ deposits rose 26.3% YoY and 15.4% QoQ.

Loans measured in comparable AR$ units at the end of 2Q20 declined 14.5% YoY and increased 3.2% QoQ to AR$100.3 billion. The AR$ Loan portfolio decreased 7.1% YoY and increased 6.9% QoQ.

Total Assets were down 5.8% YoY, but up 9.1% QoQ, to AR$226.6 billion.

Common Equity Tier 1 Ratio as of June 30, 2020, was 13.4%, compared to 13.3% reported as of March 31, 2020 and 11.9% reported as of June 31, 2019.

Contacts

Ana Bartesaghi

Phone 54 11 4324 8132

Ana.BARTESAGHI@supervielle.com.ar

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