Grupo Supervielle S.A.

Good morning everyone and welcome to the Grupo Supervielle for Porter and ERN 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 Grupo Supervielle's investor relations website. Today's conference call is being recorded. As a reminder, all participants will be in listen-only mode. There will be an opportunity for you to ask questions at the end of today's presentation. 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 answer questions if you are connected from a phone line. Also, please make sure your first and last name appear in the Zoom platform you are using. To ask a question by voice, please press the raise your hand button in the Zoom platform and 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 yourself 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 at CIO, and Mariano Biglia, our chief financial officer. Also joining us is Alejandro Stankel, first vice chairman of the board and CEO at Banco Supervielle. All will be available for the Q&A session. As a reminder, today's call will contain forward-looking statements based on management's current expectations and beliefs and subject to several risks and uncertainties. I refer you to the forward-looking statement section of governance release and recent filings with the SEC. 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 the key highlights of your report and progress on your information initiatives. Afterwards, Mariano Biglia, our CFO, will take a deeper look at our performance and near-term perspectives. This will be followed by a Q&A session. Patricio, please go ahead.

Thank you, Ana. Good morning, everyone. Thank you for joining us today. Now, please turn to slide three of our earnings presentation. 2022 was a transformational year for the company in which I'm pleased to report that we have achieved substantial advances in executing on our key strategic pillars, progressing on our return to profitability and building the bank of the future. With inflation, Your inflation peaked at 95%, the highest point since 1991. Pressuring costs and margins. We made significant headway to boost productivity throughout the year by rationalizing our operations while further enhancing the customer experience. Let me take you through how we accomplished this. By completing the integration of our consumer finance client base and back office into Banco Supervielle and full merging UDU into the bank on schedule, we are capturing a major source of efficiency in a sector that has suffered greatly from the challenging macro environment. With this, a total of 14 billion and nearly 200,000 clients were transferred to the bank while we reduced headcount at Udo by 96%. In turn, those customers now enjoy access to an extensive array of financial services and products through a seamless omnichannel experience. In line with our current focus on prioritizing cross-hailing and engagement among our customer base of acquisition. We recently terminated our agreement with Dorinca, which operates the Tango Plus retail chain. Second, we made significant progress in rightsizing and transforming our branch network as we pursue our vision of becoming the bank of the future. The dissent produced a total of 27 branches during the year, including 18 that serviced government employees in the province of San Luis and the closure of nine branches that were already approved by the regulator. We expect to receive authorization to close another 20 branches during the first half of this year. Today, we operate a modern and more efficient network with greater self-service space and virtual apps that allow us to expand our reach and productivity while offering a convenient banking experience. These two initiatives resulted in a 21% reduction in headcount, which we expect will contribute significantly to drive higher operating leverage this year. At the same time, we continue to expand our customer base and drive cross-selling opportunities to increase our share of ordered target customers. I will provide more color on this front shortly. Mariano will review our financial performance in more detail shortly. While we are taking the necessary steps to optimize operations and remain on track to achieve profitability by the close of the second Q23, overall weak industry loan demand together with one-time U2 rationalization charges resulted in a net loss of nearly 800 million pesos for the quarter. Excluding these one-time events, we delivered an adjusted pre-tax We close the year with a Tier 1 capital ratio of 13% as anticipated. As a reminder, our capital base is safeguarded against inflation and has sufficient liquidity to withstand the present macroeconomic challenges. As we look to the coming year, it is expected to be another challenging on the macro front for us. We continue to advance on executing on us are key strategic pillars and are prioritizing customer engagement, monetization, and cross-selling opportunities over customer acquisition to gain further share of wallet and profitability among our current customers. We also remain focused on protecting asset quality and improving funding while our lower cost structure is anticipated to drive higher operating leverage and significantly improve the financial performance in 2023. Thus, we remain on track to achieve profitability towards the close of second Q23 and positive inflation adjusted return on equity this year, assuming a macro environment in line with current market consensus. Now, please turn to page four. Our efforts to enhance the customer experience, drive customer acquisition, digital adoption and funding among our retail customers have yielded Great results. We expanded our retail plan base by 92,000 times, or nearly 7% year-on-year. This good performance reflects our success in digitization with digital retail customers now accounting for more than half of our total customers, up from 38% a year ago. The ease of use of our app, evidenced by our high ratings, 4.0 in the Play Store and 4.6 in the App Store are contributing factors to this growth, and we are proud of these high scores. We're also delighted to see increased customer engagement and cross-selling, with the penetration of digital and automatic personal loans increasing by 11 percentage points year-on-year at 34%. Similarly, the total of insurance policies sold rose 15% in the year. while the share of car insurance policies fall through our digital target channels reached 50%. Our personal finance management platform also continues to be in traction as we add new products and making money market investments available 24 per 7. Assets under management increased nearly 140% year on year with the number of retail customers in our BFM app by 59% contributing to improve customer visibility. Our goals for the year in terms of our retail customer base include gaining additional share of wallet while prioritizing profitable products. We also seek to increase profitability among existing customers through higher engagement and cross-sell. As shown on the first chart of page five, During the year, we expanded our SME and corporate customer by 13%, increasing our market share by 25 basis points to 5.31%, measured by the number of customers. This was achieved even as we reduced the branch network, which together with improving NPS across all segments, serving SMEs and corporates, further validates that customers are embracing our digital offering. Rationalization of the branch network is allowing us to optimize operation. Our efforts to capture share of wallets are also paying off as we increase cross-selling. Going forward, insurance is a significant growth opportunity. Number of insurance policies sold was up 50% year on year, with entrepreneurs and SME customers increasing their penetration by 40%. Bear in mind that penetration today stands at only 7%. We also expanded our sharing in payroll services by 15 basis points to 2.6% and in foreign trade by over 70 basis points to nearly 4%. In terms of funding, our emphasis on transactionality has enabled us to increase our market share in side deposits by 18 basis points to nearly 2%. Especially, the percentage of customers using transactional products rose to 95 nearly 95% by year end up from close to 52% in December of 2021. During the current year, we plan to continue working towards gaining share of wallet and driving cross-selling opportunities among current corporate and SME customers with the goal of becoming their principal bank further contributing to expanding sustainable funding. In sum, we focus on those areas which we can control and have positioned us stronger for the current year. With this, let me turn the call to Mariano. Please, Mariano, go ahead.

Thank you, Patricio, and good day, everyone. Let's turn to slide six. Results for the quarter were impacted by one-time items in connection with the merger of U2, as Patricio mentioned earlier. When looking at our results on a sequential basis, The main factors behind this sequential performance include First, net financial income declined 7% for 2 billion pesos, reflecting the full impact of cost of funds from the increase in market rates in the prior quarter, together with a lower return on inflation-adjusted instruments. Recall that this quarter compares against a strong third quarter, which benefited from higher market rates on our investment portfolio versus a weaker second quarter. Second, loan loss provisions increased 23% by 600 million with asset quality across all segments in line with third quarter levels, except for consumer finance, A 4% increase in personal expenses for 500 million pesos reflecting additional one-time severance charges at the bank and UDU from the health care reduction. And fourth, a 9% increase in administrative expenses for 900 million pesos as cost savings achieved in the quarter were more than offset by the impairment of UDU's goodwill and fixed assets. On December 14 of last year, We announced our intention to merge UDU with the bank. Although this decision needs to be approved by UDU's shareholders meeting to be held this coming April, we have already successfully transferred all of UDU's loan portfolio and clients to the bank. We also shut down UDU's retail savings account digital app and are now offering clients an account through the bank. By completing this process, as per IFRS, we did recognize and wrote off UDU's At the same time, the merger of UDU into the bank will allow the bank to use tax-loss carry-forwards originated by UDU, which couldn't be used by this company on a stand-alone basis. By recognizing this tax asset, we reported a tax gain of 3.1 billion pesos in the fourth quarter. In sum, we're excluding one-time We delivered an adjusted pre-tax profit of nearly 150 million pesos. Turning to slide 7. Our loan portfolio grew below inflation as increasingly higher nominal interest rates following the rising inflation dampened overall credit demand across all business segments. Overall loan growth was fairly in line with the industry trend sequentially. As shown on the chart to the right, the loan composition remains fairly unchanged sequentially. Total Argentine peso deposits increased below inflation but outperforming the industry average. Core deposits posted a seasonal sequential increase but declined against year-end 2021 levels