Grupo Supervielle S.A.

Good morning, everyone, and welcome to the Grupo Supervielle first quarter 2024 conference call. This is Ana Bartesaghi, treasurer and IRO. Today's conference call is being recorded. As a reminder, all participants will listen on the phone. If you want to ask questions at the end of our presentation, 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. and the Zoom platform you are using. You will be able to ask a question by voice or send questions in written form via the Q&A box in the Zoom platform anytime during the call. Speaking during today's call will be Patricio Supervielle, our chairman and CEO, and Mariano Biglia, our chief financial officer. Also joining us is Alejandro Stengel, first vice chairman of the board and CEO of 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 a forward-looking statement section of our news 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, please go ahead.

Thank you, Ana. Good morning, everyone. Thank you for joining us today. Starting with a discussion of the quarter results on slide three. We are pleased to have started the year delivering robust profitability and market share gains in loans. At the same time, we maintain healthy asset quality metrics Profitability achieved another record high ROE of nearly 34% in real terms. This good performance was driven by an unusually high net interest margin of 62%, reflecting our effective asset and liability management and increased spreads. Our strong bottom line was also supported sequentially, improved efficiencies as we continue to improve The digital, virtual and automatic channels while transforming our branch network, establishing a solid base to drive higher productivity as growth resumes. In turn, a healthier loan mix following the shifting loans towards middle market corporates and payroll customers where we have reciprocity with our transactional products together with significantly lower exposure to consumer loans and tight credit scoring contributed to the NPL ratio hitting another record low of 1.5%. So how have we been able to achieve our good results? Let me provide a brief overview of the progress we have made across and many more. Starting with SMEs and corporate, we are firmly committed to attracting new clients and expanding our share of wallet. To accomplish this, we are focused on enhancing the corporate experience, improving our net promoted score and driving operational efficiency. During the quarter, we successfully scaled our virtual half service model to cater the companies in the entrepreneurs and SMEs segment, which received gold recognition in the country's award for financial innovators in the Americas presented by Fintech Americas. On the back of improved dynamics, we're actively developing products tailored to highly attractive export-oriented value chains, such as oil and gas, mining and agribusiness, while keeping a strong focus on selectively tapping regional economies and with attractive prospects. On retail, digital client base have expanded significantly, now comprising and many more, reflecting the strong adoption of our digital wallet. Over half of our retail transactions are now completed through our app, a remarkable increase from just 37% a year ago. Moreover, our pioneering 24-7 Inversión Rápida feature YOL, our online retail brokerage platform, continues to The new crypto offering, introduced in January, in collaboration with Ripio, has been well received by existing customers, and while it is still in its early days, we are seeing consistent growth in both customers and transactions. Our efforts to drive remaining close to our customers continue to bear fruit with bank branches and headcount down year-on-year by 12% and 4% respectively while further improving NPS. Turning to slide four, President Millet remains fully committed to achieving fiscal surplus and implementing bold structural reforms. While there is still much work to do, the policies implemented over the past five months are resulting in a gradual transition in Argentina to a more positive economic environment, conducive to a more sustainable, robust and competitive financial system. To date, interest withdrawals on time deposits have been lifted. The central bank has acquired $17 billion in reserves Measures were also taken to address the challenge related to importers, commercial debt, and unpaid dividends. And we are pleased to see that inflation is decreasing faster than anticipated. Despite the recessionary environment, it is worth noting that social support remains strong. In this context, the financial industry is experiencing a gradual resurgence in loan demand. However, passing the necessary reforms are crucial to resume sustainable growth and attracting investors. At Supervielle, we have a strong capital base and solid agile foundation that positions us well to resume growth as demand continues to recover. Now, moving to slide five. Reflecting anticipated macro improvements, The share of central bank repos over total assets declined seven percentage points to 33%, while loans expanded their share by six and many more. As this transition unfolds, we anticipate this positive loan growth trend to continue as demand continues to recover while NIMH adjusts gradually from the exceptionally high levels experienced in wisdom waters and converging to and others. Turning to an overview of our loan book performance on slide 6. Total loans were up 3% sequentially in real terms, while we gained 40 basis points in total market share as the economic environment began to normalize and confidence returned. Reflecting our focus on lower risk segments accounted for 64% of our total loan, while retained loans represented the remaining 36%. Corporate loans saw a 60 basis points share increase in the first quarter. For the remainder of the year, we expect to maintain our focus on SMEs and mid-market clients, placing particular emphasis We are expected to grow above retail loans. Within retail loans, we are selectively tapping lower risk segments. Reflecting this, we're expanding our share of car loans by 40 basis points in the quarter. More recently, we became the first private bank in the country to relaunch new 30-year mortgage loans. and return to adding mortgage products to our portfolio is an attractive value proposition in today's market. We're also scaling car, personal and credit card loans. We're optimistic that there is room for further growth once inflation and nominal interest rates decrease. With this, let me turn the call to Mariano. Please go ahead.

Thank you, Patricio, and good day, everyone. Now let's turn our attention to slide seven. which provides an overview of our performance for the quarter. Net income increased to nearly 47 billion pesos Thank you very much. resulted in a 40% sequential decrease in net loan loss provisions. Other net losses declined 15%, mainly reflecting valuation adjustments of real estate to market value in 4Q23 and higher provisions for strategic initiatives. All these more than offset As shown on the left chart of slide 8, we have been diversifying our asset base, gradually shifting towards a larger share of private sector loans while significantly reducing our holdings in central bank securities. On the right, you can see the composition of our commercial and retail portfolios at quarter end, where we have gained share across most loan products. Followed closely by mortgages at 32%, personal loans at 24%, and car loans accounting for 9% of the total retail book. Moving on to slide 9. Net financial income increased sequentially in the low single digits and nearly 140% year-on-year to 299 billion pesos, with NIMH practically stable sequentially at an unusually high. Following the lifting of floors on time deposits and decreasing interest rates, cost of funds posted a sharp sequential drop of over 740 basis points. In turn, interest rate on loans increased over 300 basis points mainly due to a higher adjustment of inflation-linked corporates. and a higher yield on increased volumes of inflation-linked government securities capturing the inflation peak in last December and January. Turning to slide 10, our successful strategy execution has contributed to further improving the efficiency ratio reaching 34%, down from 43% in the prior quarter and over 70% a year ago. The sequential improvement in efficiency was mainly driven by exceptionally high mean driving revenue growth, while we also continued to reduce personnel and administrative expenses. Turning to slide 11. Capitalization strengthened further in the quarter, with the tier one ratio expanding 370 basis points sequentially to nearly 25% at the quarter end. The increase in capitalization reflects strong results, along with inflation adjustment of capital and taxes efficiencies from the merger of U2 into the bank, which more than offset growth in risk-weight assets. Now, moving on to our perspectives for 2024, on slide 12. Considering the recent trends discussed, We have updated our perspective on the following line items. When we continue to expect peso laws to grow above inflation, we now see credit demand recovering gradually, starting in the second quarter as inflation eases. In terms of deposits, while expectation for peso deposits remain unchanged, growing slightly above inflation, total denominated deposits are now anticipated to increase in their original currency. With respect to fee income, In terms of profitability, we are increasing our ROE expectation for the year to approximately 15%, up from the 10% discussed in our prior call. For the remainder of the year, we expect to see a softer second Q reflecting negative interest rates, Thank you, Mariano. At this time, we will be conducting