Grupo Supervielle S.A.

Good morning. Good morning, everyone, and welcome to the Grupo Supervielle Third Quarter 2021 and News Call. We apologize for the delay. This is Ana Bartesaghi, Pressure, and IRO. A slide presentation will accompany today's webinar, which is available in the Investor section of Grupo Supervielle's Investor Relations website. Today's conference call is being recorded. As a reminder, all participants Thank you very much. Thank you very much. To ask a question by voice, please press the raise your hand button located in the Zoom platform and press raise your hand again to withdraw your question. You can also send questions in written form via the Q&A box in the Zoom platform anytime during the call. We will ask you to limit yourselves to one question and a follow-up and then you can raise your hand again in another round. Speaking during today's call will be Patricio Supervielle, our Chairman and CEO, Atilio Herrera-Maini, Board Member, Leading Grupo Supervielle Sustainability Strategy, and Mariano Biglia, our Chief Financial Officer. Also joining us are Alejandra Spengler, Second Vice Chairman of the Board and Bank CEO, and Jorge Ramirez, First Vice Chairman of the Board, Alejandra Lawton, Board Member of Several Fruit Post Supervielle subsidiaries, will also be joining us for today's call. All will be available for the Q&A session. As a reminder, today's call will contain forward-looking statements which are based on management, current expectations, and beliefs, and are subject to a number of risks and uncertainties, including as a result of the COVID-19 pandemic. And I refer you to a forward-looking statement section of our earnings beliefs and recent filings with the SEC. We assume no obligation to update or revise any forward-looking statements to reflect new or changed events or circumstances. Today, Mariano Biglia, our CFO, will start the call discussing our performance as a reporter and our near-term outlook. Patricio Supervielle, our chairman and CEO, will follow with an update on our mid-term strategic issues. Afterward, Atilio Maria Dell'Oro Maini will provide an overview of the key elements of our ESG transition goals. Mariano Biglia, Chief Financial Officer.

Thank you, Ana. Good morning, everyone, and thank you for joining us today. Please turn to slide four of our earnings presentation. While we saw a rebound in economic activity to pre-pandemic levels this quarter, We continue to operate under challenging market conditions, with high inflation, negative real interest rates, and industry loans at historical lows and growing below inflation. In addition, central bank regulations continue to waive anonymity. We delivered sequentially improved results, reporting an attributable loss of 60 million pesos in 3rd June 2021 compared to 348 million pesos in the prior quarter. Thank you very much. Thank you very much. Patricio will provide shortly an update of our progress on our digital and channel transformation agenda, followed by Atilio who will present our key ESG milestones and goals. Now please turn to slide 5. We expanded our loan book by 5% frequently, growing above industry levels and recovering market share. Long growth was mainly driven by higher mandatory credit lines to SMEs, which rose to a final of nearly 20 billion pesos, accounting for over 30% of total loans this quarter, from a final of 14 billion pesos in the prior quarter. Short-term financing to corporate also contributed to long growth, along with strong origination in personal loans which reached a record high in October. U.S. dollar loans in original currency in turn declined 10% sequentially. Now, moving to funding on slide 6. The loan-to-deposit ratio remained relatively stable quarter-on-quarter at 53% with liquidity at solid levels. As deposits increased in the high single-digit sequentially, Driven mainly by institutional funding from liquidity management and corporate checking accounts. Core deposits were stable quarter-on-quarter. Dollar deposits in original currency were up 1.5% sequentially, accounting for slightly over 11% of total deposits. Turning to slide 7. Mint contracted 2 percentage points to 17 from 19% in the second quarter. While GDP growth returns to pre-pandemic levels allowing us to capture stand-alone growth, overall credit demand remains weak. This, together with a lower yield on inflation-linked mortgaged loans, given the exaggeration in the price index and regulatory controls, continues to exert pressure on me. Turning to asset quality on slide 8. Our strong underwriting and collection policies, together with improved economic conditions, allowed us to reduce a portion of the COVID-19 specific provisions created last year. As a result, download provisions declined to $1.4 billion from $2 billion in the prior quarter. In turn, cost of risk net improved to 3.5% from 5.7% in the second quarter. At quarter end, COVID-19 Antibody Provisions amounted to 1.6 billion pesos versus 2.4 billion as of June 30. Our total provisioning ratio stood at 6.6% in September, above the previous level of 6.4% posted in January 2020. The total NPR ratio for the quarter In Greek, training basis points sequentially to 5.5% but declined after peaking to 5.5% in July. The sequential increase was mainly driven by the consumer finance segment. As anticipated, we saw an increase in delinquency and installments were due after the expiration of the grace period, with the consumer finance and PR ratio reaching a peak of nearly 31% as quarter end. Concerning delinquency, we have tightened our credit policies as we do so that new originated loans have a fair rating. To another extent, NTL also increased to 5.1% from 2.2% at the bank's personal loan segment after the expiration of the great period and the mandatory reclassification of customers performing with Supervielle but not performing with other banks. By contrast, corporate SMEs and bank credit cards posted a sequential improvement in MPS ratios. Slide 9. Although cadence remains suspended due to sustained and immediate disability, on slide 9, we share our views on the main drivers of our business for the remainder of the year and 2022. Starting with respect to the remuneration loans, We expect to see growth in line or below inflation in 2021, both commercial and consumer loans, and above inflation in 2022. We also expect to end the year with deposits growing above inflation, fostered by effects of restrictions, and to a lower extent by interest rate growths and time deposits. We expect deposits to continue growing above inflation, driven by the same trend. With respect to assets quality, as anticipated, NPL speaks this quarter and are expected to remain stable or decline in following quarters. We don't expect coverage to decline as COVID-19 provisions are used for rebirth. Cost of risk, in turn, is expected to be below 2020 and 2019 levels, but in line with historical levels of 5-6%. In terms of margins, for the remainder of the year and 2022, We expect means to remain pressured by higher cost of funds resulting from the impact of the plural interest rates on time deposits and subsidized return loans. This would be partially offset by higher inflation together with credit demand anticipated to gradually pick up from historical loans. Personal and administrative expenses are likely to grow with inflation. while also reflecting additional restructuring costs and expenses as well as health care deficiencies from the execution of our digital and channel presiding. Higher turnover taxes and the extension of the turnover tax reach to the VIX and repos in the city of Buenos Aires will continue to negatively impact expenses. At the same time, the INICAP is expected to grow in line with inflation. Finally, we continue to expect capital and liquidity Thank you, Mariano. You heard Mariano present our financial results and views for the remainder of the year in 2022.

In this challenging context, we remain fully focused on advancing on our transformation strategy. Starting with the transformation of our branch channels, using best-in-class technologies to facilitate self-service banking and expand SME reach to the vision of everywhere and anytime banking. First, Digitized customers have increased consistently over the past two years and were up 76% since March last year. Second, keeping a strong focus on the customer experience, we recently deployed an upgraded version of the bank's mobile app, rated 4.4 in the Play Store and 4.3 in the App Store. Third, With the successful performance of our Virtual Hub MVPs for individuals in the province of France and Greece, we are starting to scale this hybrid model to other regions and segments and expanding our footprint while offering a superior customer experience combining the strength of our face-to-face approach with the high efficiency of our Virtual Hub. This also allows us to expand our footprint through our national territory with our leading branches. And fourth, in the past four months, we modernized and expanded services to SMEs and related segments in 11 branches that were previously solely dedicated to senior citizens. And we expect to convert four additional branches to multi-segment format before year end. Now please turn to slide 11. At the same time, we have been introducing technological innovation at our senior stages and branches, facilitated in self-service banking for this customer segment, which was the least advanced in terms of digital adoption. Let me share some examples of the success of these initiatives. To allow for extended banking hours and higher efficiencies, we enlarged our 24-hour lobbies The number of biometric cash dispensers located in these lobbies. As of September, cash dispensers in our 24-hour lobbies accounted for 53% of total cash dispensers up for around 24% before the pandemic and nearly 40% a year ago. As a result, the number of transactions as human traders declined sharply We are also seeing continuous adoption of our digital app dedicated to seeing the system through 90 days locked in customers through the app, increasing over 144% when compared to first year 2020. Please turn to slide 12. As you can see, We are also advancing on the right-sizing of our branch network. The introduction of best-in-class technologies to extend service hours, facilitating self-service banking in some branches while converting others to full service format is allowing us to enhance customer service and productivity. As a result, we closed one branch in second quarter and plan to close another 16 between the remainder of 2021 and next year, subject to central bank authorization. These initiatives have allowed us to lower headcount by nearly 6% year on year. Please now turn to slide 13. Our IT infrastructure strategy includes creating an API environment to accelerate service development and Time2Market to transform our customer journey. In the first nine months of the year, we added a total of 95 APIs and plan to add another 153 by the end of 2022. We are also advancing on the implementation of a data lake to become a data-driven enterprise while migrating technology to a hybrid multi-cloud to provide the flexibility to grow efficiently. By October 20, 20% of our technology was already migrated to the cloud and we expect to reach 30% by year end. With 70% of our technology anticipated to be migrated to the cloud by the end of year 2024. Please now turn to page 14. We are also making progress. On deploying our growth strategy for UDO and UDO Servicios. Next week, we are formally launching UDO mobile retail digital savings account that will enable us to grow our account base and attract low-cost funding at this subsidiary. After a successful soft launch in last August, UDO has already opened 230,000 accounts among current customers. Yudu Clients also have access to a wide range of digital banking services, insurance and wellness offerings and we will continue adding new features and services in the coming months. We also have made progress in our goal of diversifying revenue origination beyond Argentina by deploying well-being and health services under the B2C or B2B2C format in certain countries in Latin We are in this sense advancing with Grupo Asistir and Europe Assistance to implement in second quarter 2022 B2C well-being and health services in Paraguay. The offering will consist of health, dentistry, pharmacy, medical emergency, and veterinary services. Services will be marketed through the YouDo Wellness Marketplace which will host a variety of wellness services on the one platform offering customers a simple and convenient and seamless experience. Additional information on the progress of our digital KPIs and a more detailed description of all these initiatives and timelines can be found at the back of our earnings call presentation. In summary, we will While we saw improved activity in the water, near-term profitability is expected to remain impacted by overall weak credit demand, pressure, and needs, together with the constant investments required to continue building our ecosystem and execute our transformation strategy. This strategy allows us to retain and enhance our current customer relationships while attracting new digital clients and driving operational increases in the longer term when demand resumes. Now before opening the call to Q&A, let me turn the call to Atilio Dell'Oro, one of our board members and responsible for leading our ESG strategy who will provide an update of our initiatives and ambitions on this front. Atilio, please go ahead.

Thank you, Patricio. At Grupo Supervielle, we understand the need for a more long-term and more sustainable view of shareholder value creation. Until not long ago, a more philanthropic vision prevailed in our corporate social responsibility model. As of 2019, CSR is integrated into the group's core business through our responsible management model oriented towards sustainability. PSR is no longer a goal of contribution per year to NGOs. It is a way of doing business. We believe that how, not just what, matters in the business value creation process. In this new phase, we have assumed a commitment to grow sustainably, protecting the environment and pursuing our business strategy in a socially responsible manner. We believe that enhanced disclosure of non-financial information such as environmental, social, and governance-related factors satisfies the growing demand for an alignment of corporate's financial performance with the company's performance in non-financial factors. To develop our ESG strategy, we have defined our pillars and commitments shown on slide 15. In slide 60, we present our ESG recent and most relevant highlights. In terms of our environmental responsibility, we work to reduce the impact of our operations on the environment by implementing our responsible environmental management system. We have been measuring our carbon footprint since 2019, and we compensate our greenhouse emissions to protect In addition, we have implemented a plastic waste management program to eliminate single-use plastics, and we have reduced paper consumption by 46% compared with 2019. Note that 75% of the paper consumed internally is responsibly sourced paper to protect forest ecosystems. In connection with social responsibility, we focus on financial education, which is the gearshift of financial inclusion. More than 88,000 senior citizens' clients attended Digital literacy and financial education programs conducted in alliance with 21 universities in southern province and the city of Buenos Aires. 95% of transactions are conducted through our digital and automatic channels. Diversity is also a key aspect of our social responsibility. In 2021, we launched a comprehensive program to promote diversity We also work on more than 26 corporate philanthropy programs with focus on education, childhood, senior people, and civic strengthening initiatives. With respect to our responsibility with good governance, we believe a robust corporate finance is is key for guaranteeing a sustainable business model over the long term. Ernst & Young recently conducted a risk regulatory assessment and verified 97% compliance with the inventory of obligations applicable to Grupo Supervielle. The area of compliance monitors the correction prevention program and our whistleblowing hotline allows employees, suppliers, and trials We have defined quantifiable metrics for our sustainability initiatives. On slide 17, you will see the key and most relevant ESG goals for 2024. In relation to our environmental responsibility, we have set the following goals. We will continue to measure our carbon footprint, setting a goal of 6% reduction and 50% carbon compensation to protect millinery forests. And, on the other hand, a target of 45% of our total portfolio screened and analyzed through our environmental and social risk policy. With respect to our social responsibility, we have set the following goals. 33% of women in senior executive positions by 2024 and 120,000 people attending our financial education programs. Finally, our responsibility with good governance goals include publishing fully integrated sustainability reports by 2023 prepared according to the Global Reporting Initiative and in addition we aim to have Thank you, Atilio. At this time, we will be conducting the question and answer session. As a reminder, to ask a question, you need to be connected to the Zoom platform.

You will not be able to take your questions if you are connected from a phone line. To ask a question by voice, please pray to raise your hand button and press it again to withdraw your question. You cannot suspend your questions in written form via the Q&A box. We will ask you to limit yourself to one question and a follow-up after the question. One moment while we vote for a question. The first question comes from Ernesto Gamilondo at Bank of America. Please go ahead, Ernesto.

Thank you, Ana.

Good morning, Patricio, Mariano, Atilio.

Good morning, everyone. Thank you for your presentation and for the opportunity. My first question is on the political outlook in Argentina. After the midterm elections, I would like to know which do you think are the key challenges ahead and if you think there are potential key dates that we should be following. So that's my first question.

Well, first of all, there was a clear win of the opposition and what I believe that, I mean, the President has announced that in December, this December, they will present a multi-year economic program in order to have the approval of Congress. And what we expect, I mean, we know that there is a deadline with the IMS, so the There is a short time frame for the government to negotiate this multi-year plan in order to make it to have more sustainable fiscal policies, effects, more realistic also effects levels in order to enhance export-oriented industries and to strengthen the reserves of the central bank. What is not yet really clear is whether there is a clear line in the government in order to make this, let's say, a commitment for this economic plan. We will see. It's going to be an interesting period. But I think also the attitude, what is important is the attitude of the IMF, whether they will, let's say, allow for sort of a muddle through economic policy until 2023, or they will be strict in the sense that they want to have and a lessening of public expenditures and reduction of subsidies and so on. So this is, I think, what we are looking for. I don't know if you want to add something, Alejandro, on that. I think you've hit on most of the points, Patricia.

As you said, it's key to understand what the scope and the depth of the agreement with the IMF will be. And going back to Ernesto's question,

Thank you so much. Then just a second question on the FinTech competitive landscape. I will appreciate it if you can share with us who you see as the main players. The one I have on top of my mind is UALA. And how do you think you and your new digital initiatives are against the other syntaxes.

Okay. I think that, I mean, Wallah basically is focusing on providing solutions for people who don't have bank accounts and they are giving a value proposition on that. And But the main problem is that they don't have deposits. Now, this is the reason why they are applying for a banking license. In order to reach scale in Argentina, you need to have a license to get deposits. And you can see this, for instance, if you look at the size of... The funds that were collected by Mercado Pago in relation to the fund industry is nearly irrelevant. And they've been working on this. So this is an extreme example that the, let's say, only working with transactionality As a fintech player in Argentina, they're not able to reach, they need to have, let's say, a bank license in order to become a player in Argentina because of the restrictions we have in Argentina. In the case of UDO, UDO is transforming itself from a consumer finance operation Almost fully focused in providing financial services, credit cards and personal loans to people, customers who come to the Walmart, Changomas supermarket stores, to what now is a full digital service. Our main goal now will be to attract deposits, retail deposits, and this will have a significant impact for us to, I believe, to lower our cost of funds and to have a much more sustainable business. And I think it will impact a lot in the overall net income revenue and capital creation of Grupo Supervielle.

I don't know if you want to add something on the context, Alejandro? I think you mentioned the key issue of funding and access to funding. I also think that you do have done a terrific job at enhancing customer experience and putting together a very superior product offering. And I think those two things combined with the strength of the funding capability would make a very strong positioning in the market.

Thank you, Patricio and Alejandro. Very helpful.

Thank you, Ernesto. Our next question comes from Gabriel Nobrega. Hello, good morning, Gabriel. Please go ahead.

Sorry about that. I was having some technical difficulties. So thank you for the opportunity to ask questions. My first question is actually on loan demand. If you could elaborate further, what's driving this on higher demand, which we're seeing? I know that you're saying in your press release that it's undue to the government programs Gabriel, it's real that we are in a very low point

Thank you very much. We continue to serve them with different lines of credit, particularly pre-export financing. Also, there are enterprises that take advantage of subsidized loans to take leading lines where we are very strong in leading And for individuals, I think it's the same problem. A lack of appetite for long demand. What we see eventually is an interest in car financing because people see In Argentina, today, cars to be a protection of values. So, used car financing is driving a certain number of loans at the bank level and also at YouTube. I don't know if you want to add on that, Alejandro.

Oh, basically, I would mention that what we've seen Thank you very much. Thank you. The other focus is really supporting a pickup in some We believe that there is significant room for growth from, as Patricio pointed out, very low credit penetration levels.

In addition, in order to control, let's say, credit risk, A large, substantial part of our, for instance, in the case of individuals, a substantial part of our personal loans are given to individuals that collect their salaries in the bank. It's around 70% of all personal financing is with debiting their accounts at the bank. So this also lowers, let's say, and Adverse Selection. And for enterprises, for corporations, I also say, in addition, in compliment to what Alejandro mentioned, is that we continue to do a lot of cash flow-based financing, which is, by itself, you know, it's a way of controlling risk. But in section points, I think we need to wait A truly inflection point, I think we will reach it in 2023 with a political change, is my opinion.

Alright, that's very clear, thank you. And I actually have a follow-up from the previous question on the fintech landscape. I understand you talked about Wallah, and what I wanted to understand is that you show this That you have around 500,000 digital customers. But when you compare with Amala, they already issued more than 2 million prepaid cards. And so I wanted to understand here, is there a strategy from you to grow slower the number of clients, maybe try to monetize them faster? Or are you still aiming at adding clients in a faster manner in the coming quarters?

Go to us. Yes, you know, one thing that you have to bear in mind when you look at these figures, Gabriel, is whether these operations are making money or not and how long it will take to monetize all this customer acquisition. What we've seen in financial services is just recruiting clients is not enough to be able to have a sustainable strategy over time. This is why we emphasize in our strategy The ability of having the right funding, particularly in the Argentine environment. And secondly, trying to have a principle or an integral relationship across selling several products. We approach this segment with this more comprehensive view and we aim absolutely at having this relationship of several products with the right funding to be able to drive growth. We believe that the cost-to-income proportion will be much better and that the leverage we can have on our capital over the deposit base that we will capture will allow us to scale adequately with a very efficient model.

All right. Thank you so much.

Thank you, Gabriel. Our next question comes from Rodrigo Nestor from Air Partners. Hello, Rodrigo. Go ahead.

Good morning, and thank you for the opportunity. I have a question regarding the income tax rate. If you could explain part of the reasons behind the high-effective tax rate and what should we expect going forward, and then I have a follow-up.

Mariano, do you want to go on that?

Yes, sure. I can comment on that. Hello, Rodrigo. For the income tax rate, we have two main sources that increase the effective tax rate. You know, the statutory income tax rate is 35%, but there are certain differences between the statutory income statement and the income statement for tax returns. The main differences arise from the value of fixed assets acquired before 2016. Those differences are permanent, so they create an increasing cost as the income for income tax purposes is higher than our profit before income tax in our statutory income statements. And second, and probably more important, has to do with per-tax assets and taxes carried forward, which they are not, according to the income tax law, they are not adjusted and they don't accrue any interest. So we have, mainly as you do, we have 1.2 billion pesos in taxes Thank you very much. have a larger impact when profit before income tax is lower. Have we had, as last year, a profit before income tax of 4 billion pesos? This impact would only increase the purchase tax rate maybe from 35% to 40%, but when profit before income tax is lower, it has a greater impact and it can turn it up to 100% eventually.

Thank you. And then, if I may, I have a more strategic question maybe to Patricio. I would like to know very briefly what makes him more enthusiastic about the future of the industry and what concerns him the most about today's Argentina banking system?

Well, I think that the financial industry is bearing The cost of an economy which is not in equilibrium. Of course, what worries me is that a main business which is providing loans to the private sector Thank you very much. Thank you. And the lack of savings is also to do with the absolute lack of confidence in our currency. We have a confidence problem. We need to get clear signals for investment, clear signals for deregulation, clear signals for export industries, clear signals for having an equilibrium in a monetary situation. I mean, in monetary policies in order to have a currency that, I mean, that basically it gets to lower inflation. The part of enthusiastic. Pardon me? The first question was what makes you enthusiastic? What makes me enthusiastic is basically, I mean, my enthusiasm, I think, has basically... is related to let's say if I think if there is what we have seen on the political side now is that I think is that a request of the society to have a more pro-market political economy and I hope that they will, I mean the government will hear this request of the Thank you very much.

Thank you, Rodrigo. Our next question comes from Juan Ricardo Sinistro Calde at Scotiabank. Good morning, Juan. Go ahead.

Hi, good morning, everyone. Thank you for taking my question. I have two questions. One is related to NIMH and the second one related to the international expansion. So in terms of NIMH, you mentioned that you expect NIMH pressure to continue given the low demand and regulations. So my question there is, does this quarter reflect the full regulatory pressure or can we expect NIMH to go down in the coming quarters? And related to that, how is the bank working to limit the name pressure? And the second question related to international expansion, can you help us understand the strategy for expanding outside Argentina? Are there any goals that you can share with us? And also, can the group freely move capital outside the country with the current regulations?

Okay, let's first answer about the names. Mariano will help, but I would like to state that there is a pressure, there is a continuous pressure of names, and mainly to do with the punitive regulations of the central bank, but also it has a lot to do with the lack of demand of loans. When loans resume, it will help us definitely to have better means. But do you want to answer the first question on these, Mariano?

Sure, Patricio. Hello, Juan. Well, in effect, this quarter we are seeing the full impact of central bank regulations and also an adverse macroeconomic environment. So we have Very negative interest rates, with the leaks being a 38% interest rate, RIP was 36.5, and that compares with an inflation of more than 50% last month. So this leads also to a very low credit demand, and in that environment, we have regulated Thank you very much. So, regarding the second part of your question, what we can do to sustain and increase Tasnim in the future, we aim to grow in deposits, not regulated 10 deposits, but mainly, for instance, in savings accounts and corporate coverage accounts. We have We are seeing that also in the first part of the fourth quarter. So that is very important. Also then, we need to increase our loan portfolio as great demand presumes. We've seen in the last quarter, particularly the third year, We saw a growth of 5% in real terms, so we're getting a bit of a market share there. And it's still in the SMEs program, the subsidized loans that are mandatory, so it doesn't have still a very large positive income in NIM, but it's still a long road where we should We replace central bank instruments by loans to the private sector and that's what we intend to do in the future and we expect 2022 to be an area where we resume growth above inflation and that will lead us to increase needs.

In terms of the international expansion, that we want to pursue beyond, I mean, we're creating revenues beyond Argentina. At Yudu Servicios, which is basically a platform to deliver health services and also services, well-being services to individuals, we will start deploying We've reached agreements with two companies, Europe Assistance and Asistir is an Argentine company that provides health services. And Europe Assistance is more geared to well-being services in the home of an individual. So with both companies, we've reached an agreement to start deploying in Paraguay. in the second quarter of 2022. And basically what they are doing is they will be funding, they will be providing commercial funding which this is basically, we will use this funding in order to deploy digital marketing in order to attract customers and it's going to be like our first bridgehead in Latin America beyond Argentina. And from there on, we plan to continue to go to other countries. It's a business that, I mean, our goal there, our goal in Yudu Servicios is in three years from now to, let's say, to have 200,000 customers in five countries. So this will give us a million customers in three years. This is what we plan to get. And this is basically, just to give you an idea, in Argentina, with the same lines of business, we already have 320,000 customers that we developed So we believe that we can reach that and get revenues beyond Argentina. Then for Invertil Online, we are working on a business plan. We already said that we requested an authorization in the Central Bank of Uruguay to to provide regional investment services in Latin America, excluding Brazil, particularly for providing investment services in the U.S. market. And so we are working on the technological platform to deliver this. from Uruguay, with his license, a proper license in Uruguay. And in addition to, in order to start our deployment, we already have secured around $5 million that are already in a holding out of Argentina. So basically, Thank you, Juan. Our next

Question comes from Alejandra Aranda at Itaú. Hello, good morning, Alejandra.

Hi, good morning, and thank you for the opportunity. I have two questions, if I may. The first one is related to the cost. I mean, I was positively surprised by the performance this quarter, and given that the outlook is challenging on the income side, I was wondering what to expect going forward. especially given the right sizing that you've been doing.

Okay. Do you want to go on that then, Mariano?

Or you prefer? I can start and then Mariano can correct. Hello, Alejandra. We see lots of opportunities for enhancing our efficiency. Many have been triggered by The acceleration of the adoption of digital and automated channels throughout our branch network. The others come from the digital transformation process we've been discussing over the large quarters and all these boil down to a reduction in the total amount of headcount we need to operate and a reduction in the total amount of branches. We also see opportunities on the revenue side because The digital capabilities are giving us an opportunity to expand our footprint without actually having to deploy a physical branch network. So this combination is helping, as you've noticed, and we foresee this trend to continue throughout 2022.

Okay, but in terms of a level of efficiencies that we should be looking at for the next couple of quarters?

Well, you know, you've seen a 6% increase, sorry, decrease in headcount, and I think that we will probably be around that level moving forward.

Okay. Okay.

Yes, Alejandra also to... Compliments what Alejandro said also at Udo. Udo is also in the middle of a huge transformation from a consumer finance company where business was done mainly in the traffic of supermarkets and towards a full digital banking service. And that entails A change of the way we do business, even in the, for instance, the case of supermarket, the people that are in the supermarket, we will foster a much more, let's say, the way clients, they interact will be much more digital, and so this, we will see in 2022, A substantial efficiency in terms of headcount also at YouTube because of these transformations that we are working on. And so you will see this in, you know, overall Grupo Supervielle will have a significant reduction of headcount in 2022, besides the bank.

Thank you. If I may follow up on that. I mean, there's a huge demand for digital jobs and digitally native workers. How are you seeing the market there? How are you competing with the fintechs and also with the so-called blue labor with other companies from abroad coming and taking the opportunity to hire people

All right, that's a very good question. Alejandro, you need to ask on retention of talent, basically.

You're quite right, Alejandro. It's becoming more and more challenging, and yes, we are competing with fintechs, with big techs, and also with international companies that are hiring Argentine talent for work abroad. So it is becoming challenging. What we've done is basically first focus on the key areas where we're getting most attrition. This is basically digital talents, as you pointed out. We're working there on value proposition, and there are several aspects of the way that we work and the ability to address Different needs that our workforce has under these challenging times. So part of it has to do with adjusting the way we work at workplace. Second, as I mentioned before, the value proposition, adjusting it to market and keeping track on these changes, but also introducing other different alternatives In the way in which we compensate and in the way that we motivate. Some of these are basically out of focus groups that we do with the teams and also require a greater involvement in the digital transformation of some of the seniors of the organization to help the new talent navigate. So we think that this The problem will actually become greater over time because the transformation we're doing at Supervielle is getting more and more visibility. So we are getting prepared for it and we are having so far good success in retaining some of the cases that have been brought forward. But it is getting tougher going forward.

Okay, thank you. May I do a third one?

Yes, short one.

What's the minimum level that you feel comfortable in terms of coverage?

Yes, I can comment on that. As you know, we work with expected loss models according to IFRA. So, there's not like a magic percentage like to say 100% or 150. It will depend on the loan portfolio, on the mix of that portfolio, the outlook looking forward. You know, there's also a component of the expected loss that is the forward-looking We are comfortable with the level we have right now. We think it's adequate. We thought it was adequate to have a larger coverage in the past where we had less visibility and also the automatic risk coding was in play. So, moving forward, I would expect to probably decrease coverage as we progress. I feel comfortable using the COVID-specific provisions that we created during last year. Last year, we had 2.4 billion COVID-specific provisions. Now, they decreased to 1.6 million, and that should decrease in the future. Of course, always that the situation gets back to normal.

Okay, thank you.

You're welcome.

Thank you, Alexandra. Thanks for all your questions as well. We have reached today's question and answer session. Thank you for joining us today. Thank you for the interest in our company. We look forward to meeting more of you over the coming months and providing financial and business updates next quarter. In the interim, will remain available to answer any questions.