Grupo Supervielle S.A.

Good morning, everyone, and welcome to the Grupo Supervielle first quarter 2022 earnings call. This is Ana Bartesaghi, pressure and IRO. A slide presentation will accompany today's webinar, which is available in the investor section of the Grupo Supervielle's investor relations website. Today's conference is being recorded. As a reminder, all participants If you want to ask a question, you need to be connected to a Zoom platform from any device. We will not be able to take your questions if you are connected from a phone line. Also, please make sure your name and last name appear in the Zoom platform you are using. 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 present form via the Q&A box in the Zoom platform, anytime during the call. We will ask you to limit yourself to one question and a follow-up, and then you raise your hand again in another round. Speaking during today's call will be Patricio Supervielle, our chairman and CEO, and Mariano Biglia, our new financial officer. Also joining us are Alejandro Stengel, First Vice Chairman of the Board, and Bancio and Sergio Macitello, our Chief Technology Officer. Alejandra Norton, Board Member of several of Grupo Supervielle's 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 We contain forward-looking statements which are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties. And I refer you to the forward-looking statement section of our earnings release 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. Patricio Supervielle, our chairman and CEO, will start the call discussing our key highlights for the quarter. Afterwards, Mariano Biglia, our CFO, will take a different look at our performance and near-term perspectives. Sergio Macitello, our chief technology officer, will then provide an overview of our digital transformation strategies. Patricio, please go ahead.

Thank you, Ana. Good morning, everyone. Thank you for joining us today. Now, please turn to slide four of our earnings presentation. While we saw continued growth in economic activity driven by a statistics carryover following the rebound last year, market conditions remain challenging with accelerated inflation, industry loans at historical lows, While central bank regulations continue to weigh on net interest margins. At the same time, the government's recent agreement with the IMF was a positive development that requires political consensus to increment it. Our bottom line remains negatively impacted by severance and personal charges in connection with headcount reductions to capture operating efficiencies of the bank and ad judo. Excluding these charges, we would have reported a net gain of 446 million pesos and an adjusted return on average equity of 2.9% compared to breakeven profitability in the fourth quarter. Other factors putting pressure on profitability include seasonally low credit demand, which is at historic lows, as well as regulatory flaws on interest rates on time deposits. And while the banking business reported positive return on average equity, results that you do were affected by high inflation and known loss provisions together with a deep personal reduction. Mariano will discuss this in more detail shortly. On the expense front, the efficiency ratio improved 200 basis points sequentially, although it remains highly impacted by a low revenue base. We also maintain an adequate capital base with a Tier 1 ratio of 13.8% at quarter ends, up 110 basis funds sequentially, while the liquidity remains strong, allowing us to navigate the current environment and implement our strategic transformation, supporting long-term sustainability. As a reminder, our capital base remains hedged against inflation through Real estate investments, mortgages and sovereign bonds. The digital and operational transformation that we have been undertaking is core to our goal of delivering long-term value creation. This explains lower profitability in the short term as we incur in higher costs including rightsizing operations, capturing efficiencies, cross-selling and acquiring customers. We are encouraged with the sustained progress on this front. Let me share a few highlights. For example, total digitalized clients were up 54% year-on-year as we continue to see increased digital adoption across personal loans, tank deposits, and insurance sales, while asset management retail customers doubled during the period, also showing higher engagement. This quarter, we also launched the first end-to-end digital onboarding in the market for entrepreneurs and SMEs and continue to add new features across the platform each quarter. As usual, we have included in the exhibits of our earnings presentations the progress we are making on our key digital and operational KPIs across the company. We are pleased to have Sergio Massitello, our Chief Technology Officer, joining us On today's call, he will share his views on the initiatives he has been leading on our digital transformation. As you may recall, Sergio joined our company towards the end of 2019. Before joining Supervielle, he was chief information officer at Naranja, a Grupo Galicia subsidiary. Before turning the call to Mariano, let me provide an update on our status as financial agent of the province of San Luis. As a reminder, in early 2017, the government of the province terminated this financial agency agreement and retained us to continue providing these services until now. On May 5th, we were notified by the government that they designated state-owned Banco Nacion as financial agent for the province. At quarter end, the share of payroll loans made in the province of San Luis employees amounted to 2.6% of the bank's total loan portfolio, while deposits made by the government of the province were only 0.7% of the bank's deposit base. We have been operating in San Luis for the past 25 years and have built a strong franchise in the More information on this can be found in our earnings report. With this, let me turn the call to Mariano. Please go ahead.

Thank you, Patricio. Please turn to slide 5. Several effects impacted our loan book this quarter, resulting in a sequential contraction of nearly 11%. The bank We saw seasonally weak loan demands in factories where we have a higher market share and a drop in loans in SMEs at subsidized rates. Accelerated inflation also eroded consumers' purchasing power, while corporate clients held strong cash positions. As you do, we tightened credit standards in a more challenging environment, resulting in a sharp reduction in loan origination. Now moving on to funding on slide 6. Total Argentine peso deposits increased nearly 3% sequentially as we exhausted liquidity management, increasing institutional funding, as well as the balance of central bank securities at quarter end, benefiting from higher spreads. Total liquidity levels were strong, both in pesos and dollars, with the loan-to-deposits ratio at 49%. In turn, core peso deposits posted a 4% seasonal decline, but increased Over 8% year-on-year. Turning to slide 7. Total net interest margin increased 90 basis points sequentially to just over 19% in the quarter. A couple of factors contributed to this improved sequential performance. First, the yield of PESO loans increased 230 basis points as we repriced our loan book and lowered subsidized loan volumes. Central Bank Securities, reflecting monetary policy rate hikes in the quarter. And lastly, higher inflation also drove higher peso need. These were partially offset by a 70 basis points increase in peso cost of funds, reflecting rises in minimum interest rates ruled by the Central Bank. Moving on to asset quality on slide 8. Our total NDR ratio The bank's NPL ratio remains steady at 2.6% in line with pre-pandemic and pre-recession levels, with cost of risk at 3.1% and coverage of 145%. By contrast, Yudu posted a 70 basis points sequentially deterioration in the NPL ratio, Reaching 20.4%, reflecting the impact of inflation on consumers' disposable income. Note that these high MPI levels reflect mainly the aging of delinquent loans that were deferred during the pandemic through regulatory easing. During the second quarter, with respect to write-off delinquent loans of customers who did not receive payments after the expiration The tier 1 capital ratio increased 110 basis points sequentially to 13.8% at quarter end, mainly explained by the inflation adjustment of capital where risk-weight assets increased below inflation. On slide 10, we share our views on the main drivers of our business for the full year. As we navigate a more challenging environment with accelerated inflation, we now anticipate low growth to slow down and remain in line with inflation in 2022, vis-à-vis our expectations-like growth in real terms on our previous earnings call. However, growth in real terms Thank you very much. Thank you very much. Thank you very much. Our perspective for fees is also unchanged from last quarter, with fee income from individuals anticipated to grow in line with inflation, while insurance income is likely to increase in real terms as premiums recover from the lower levels of the past two years. Similarly, we also maintain our views on operating expenses, mainly increasing above inflation reflecting the combination of incremental costs from the implementation During 2022, we plan to invest approximately 5.1 and 1.2 billion pesos in connection with digital and network transformation initiatives, respectively. Finally, views on capital and liquidity for 2022 are also unchanged, with a Tier 1 ratio anticipated at adequate levels ranging between 12 and 13%. As a reminder, 100% of our capital remains hedged against inflation. Now let me turn the call to Sergio Mazitello, our Chief Technology Officer.