Grupo Supervielle S.A. American Depositary Shares each Representing five Class B shares

Good morning, everyone, and welcome to Grupo Superviel's third quarter 2024 earnings call. I'm Ana Bartizaghi, pressure and IRO. Today's conference call is being recorded. As a reminder, all participants will be in listen-only mode. To ask questions during the Q&A session, ensure your first and last name appear on the Zoom platform. Questions can be asked by voice or through the Q&A box. Speaking today, we'll be participating our chairman and CEO, Gustavo Paco Manrique, Banco Superviel's recently appointed CEO, and Mariano Biglia, our chief financial officer. Also joining us for Q&A, Diego Pizzulli, CEO of Impacted Online. All will be available during the Q&A session. Before we begin, I'd like to remind you that today's call may be may include forward-looking statements which are based on management's current expectations and beliefs and subject to risks and uncertainties. For more details, refer to the forward-looking statement section in our earnings release and recent SEC file. Patricio, please go ahead.

Thank you, Anna. Good morning, everyone, and thank you for joining us today. Turning to slide three. Earlier this year, we began an heightened effort to drive targeted credit expansion. And today we are pleased to report that sustained loan growth momentum continued in the third quarter and into the fourth quarter today. Our loan book expanded 15% sequentially and 60% year-to-date in real terms, gaining 60 basis points in market share since the beginning of the year. Furthermore, higher margin retail loans, including personal and auto, gained share of our total portfolio. Total deposits were up in the high teens, mainly driven by U.S. deposits, which stand at a record high following the tax amnesty. Year-to-date, deposits gained 60 basis points in market share. Fee income also showed strong growth sequential. brokerage platforms. Asset quality remains strong with the non-performing loans ratio steady at a historic low. At the same time, net interest margin normalized reflecting lower inflation and the evolving interest rate environment. Now moving to an update of our business highlights. First, mobile transactions represented 56% of total transactions, cementing it as our leading channel and reflecting strong customer adoption. On the retail side, our loan book delivered exceptional growth, expanding 44% quarter over quarter. Car loans stood out, doubling in volume and reinforcing our position as the number two lender in this segment. also grew 42 and 41% respectively. These achievements highlight our commitment to delivering tailored financial solutions that meet the evolving needs of our customers, supported by a seamless digital experience. Second, our corporate loan book remains stable in real terms quarter over quarter and up 54% to date. Encouragingly, we observed a significant uptick in demand for US dollar-denominated loans in October, underscoring the momentum in key export-oriented sectors, particularly oil and gas, where we're offering attractive, tailored financial solutions. Third, Invertir Online continues to strengthen its position as the leading online brokerage platform in the country, contributing 21% of our total fee income in this quarter. we are pleased to report that our active clients reached a record 580,000, representing a 14% sequential increase with transaction volumes up 21% during the same period. This good performance reflects the strong appeal of our integrated digital services. Noteworthy, Invitee Online is playing a key role complementing Banco Superville in channeling channeling corporate debt issuances to its retail customer base. Moreover, assets under custody reached a record of $1.2 billion. Lastly, we continued to expand our insurance operation, achieving a 36% quarterly growth in car insurance. A key milestone this quarter was the launch of our digital insurance solutions for corporate clients through our virtual hub. which enhances our ability to meet the evolving needs of businesses while streamlining accessibility and services. Looking ahead, while profitability bottomed out in the third quarter as anticipated on our prior earnings goal, we are seeing a rebound in the fourth quarter and are on track to meet our full year guidance of 15% return on equity. Longer term, we see significant opportunities further deepen market penetration. Credit remains underutilized in Argentina, representing just 6% of GDP. At the same time, our ongoing focus on digital innovation and operational efficiency equips us to serve our clients more effectively and drive shareholder value. Our strategic initiatives, combined with our strong capital base, position us well to support Argentina's ongoing recovery. Before Mariano discusses the financial details of the quarter, I want to take a moment to formally introduce and welcome Gustavo Baco Manriquez, the new CEO of Banco Superviel, as well introduce Diego Pizzulli, who has been leading Inverti Online since July 2022 and will be available in the Q&A session. Banco Superviel is the largest operation We are pleased to welcome Paco, who assumed the CEO position in the bank on October 1st. As CEO, Paco brings over a decade of experience leading one of the leading private banks in Argentina, as well as a broad international experience. We have accomplished a lot over the past few years in positioning the bank to meet the evolving and changing customer banking needs. Paco will now steer the bank through its next growth phase. We are excited about the prospects ahead for the bank and look forward to working with Paco as we realize these opportunities. With that, let me turn the call over to Paco so that he can introduce himself and say a few words.

Thank you, Patricio, for that warm welcome. Good morning for all of you. It's a pleasure to be participating in my first earning call at Superbill. It's an exciting time for the banking sector in Argentina as the country continues its economic recovery. Here at Banco Superviil, we are well positioned to be a significant participant in the recovery. And I'm impressed with the high level of technology and human capital that we have here in the bank, which combined, which is strong capitalizations, plays the bank well to maximize the potential in Argentina. and I look forward to leading the bank through its next growth phase. While it's very early days, I just assumed my new position on October 1st, my near-term and long-term priorities will be focused basically pursuing growth initiatives while improving profitability. I have found very attractive opportunities to further expand our business leveraging our geographic footprint and position in key business segments. I expect to share a little bit more of my perspective when we present the four-quarter results, basically the next quarter results. Over the coming months, I look forward to meet you, our institutional shareholders, another member of the investment community, both here in Argentina and abroad. Now, let me turn call over Mariano to a review of all our financial performances.

Thank you, Paco. As anticipated in our prior call, we reported a lower ROE this quarter of 5% in real terms as we transitioned This was mainly driven by a 29% sequential drop in net financial income, reflecting the declining inflation and the yield on government securities and loans, partially offset by a lower cost of funding amidst a lower interest rate environment. As we transition from government securities to private sector loans, margins are reduced in this first stage and are expected to increase as we complete the transition and also grow in higher-marketing loans. operating expenses increased 2% quarter-on-quarter, impacted by severance charges reported in the quarter. Note that including these one-time charges, operating expenses would have declined nearly 5% sequentially. By contrast, ROE benefited from a 25% increase in net fee income, driven by good performances across all businesses, particularly brokerage and asset management fees. As we increase assets under management, contributed to profitability. This was complemented by a 35% decline in other net losses attributable to lower turnover tax and provisions for strategic initiatives, together with a 31% drop in inflation adjustment benefiting from lower inflation in the quarter. Turning to slide 6, we continue to shift our asset base towards a larger mix chart. By contrast, investment in government securities and central bank repos declined 17 percentage points sequentially to 23% of total assets. Loan growth was driven privately by a 44% increase in retail loans, reflecting our ability to capture rising credit demand across Argentina's improving economic landscape. Car loans remain the standout performer within retail. Moving on to slide 7, total deposits grew 17% sequentially, supported by a 90% increase in US dollar denominated deposits in original currency. Growth was largely driven by the recent tax amnesty program, which has driven significant inflows of funds into the financial system. Turning to slide eight, as anticipated, declining inflation has reduced the impact of inflation-linked instruments in our portfolio. Peso yields also came down, driven by a lower interest rate environment and the central bank's policy adjustment. This reflects the broader normalization of monetary policy, which has reduced the unusually high spread seen in prior quarters. These headwinds were partially offset by declining our funding costs in tandem with policy rate adjustments. As a result, net financial income declined 29% sequentially to 161 billion pesos. Looking ahead, growth in higher name lending products together with an increase in leverage are expected to positively contribute to improve net financial income. Turning to slide nine, The CET1 ratio declined 210 basis points sequentially to slightly over 19% at quarter level. This reflects sequentially higher risk with assets due to the continued acceleration of private sector loan growth, along with higher deductions on deferred taxes. Capitalization level provides ample flexibility to continue expanding our loan portfolio while maintaining a prudent approach to risk management. On slide 10, we discuss Argentina's evolving macroeconomic landscape. A key highlight this quarter was the successful tax amnesty program, which brought in over $20 billion in deposits. Importantly, inflation has eased more rapidly than expected, with 2024 projections now revised to show improvement to an annual rate of 120%, down from 127% in June. initiatives and fiscal discipline achieving a surplus of 0.5% as of October are driving a gradual economic recovery. Throughout the year, we have seen significant improvement across many of the key macro drivers. However, some challenges remain, the most important being growth in the central bank's net reserves, which remain negative. Additionally, maintaining public support continue to be rolled out and economic activity and employment recovered. To further support this recovery, a key milestone will be the lifting of FX restrictions. In conclusion, we are encouraged by the improving macroeconomic indicators and the progress made towards a more sustainable, open and competitive economic environment in Argentina. More specifically, the financial sector is in the early stages of recovery as demand continues to recover. To wrap up, let's look ahead at our perspectives for the remainder of 2024 on slide 11. Based on fourth quarter performance to date, we maintain our ROE guidance of 15% for the full year. As inflation continues to ease, we now expect peso loans for 2024 to expand between 70% to 80% in real term share of total loans. The NPR ratio is expected to remain below 1% this year and to start converting in 2025 to levels aligned with higher credit demand, up from the current historical lows. In turn, net cost of risk is anticipated to remain at 9 months 24 levels for the full year. Note that following the anticipated NIM contraction experience in 3Q, we expect mean for the first quarter to stabilize at three new levels. In terms of fee income, we expect repricing of the bulk of bank fees to individuals to lag inflation and thus to grow below inflation levels. By contrast, brokerage and asset management fees are anticipated to grow significantly above inflation as monthly active users and asset management increase. Lastly, as credit demand We now anticipate closing the year with a CET1 ratio between 16 to 18%, compared to our previous expectations of 17 to 20%. Looking ahead to 2025, we expect inflation levels to continue receding to around 30%, which together with growth in economic activity, employment, and salaries in real terms, will create additional opportunities for growth. In this environment, value. Listen or prepare remarks. We are ready to open the floor for questions. Ana, please go ahead.

Thank you, Mariano. 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. To ask a question, you need to press the raise your hand button and press it again to withdraw. You can also send your questions in written form via the Q&A box. We will ask you to limit yourself to one question and a follow-up, and then you can raise your hand and let it in another round. One moment when we call for questions. The first questions come from Ernesto Abidondo with Bank of America. Hello, good morning, Ernesto. Nice to see you.

Good morning. Thank you, Anna. And hi, good morning, Patricio, Gustavo, and Mariano. And good morning to all your team. And welcome, Gustavo. Thank you for the opportunity to ask the questions. My first question will be on your net interest income. So considering that all the Argentine banks are transitioning from lower investment securities, but at the same time to higher financial interest from a stronger long book expansion, when do you expect in your case that NII will return to a geo-vgeo growth? And for this assumption, how should we consider the evolution of the loan to deposit ratio and your capital ratio?

Hi, Ernesto. Thank you for your question. As you said, we are transitioning to changing the mix of our assets with growing our loan portfolio. First, as interest rates declined sharply during the first six months of the year, we increased also anticipated demand. We increased our loan portfolio 60% year-to-date and we continue expanding throughout the rest of the year. In this transition, So NIM has been decreasing, but we expect NIM to start recovering as we continue this transition, but also we review interest rates, which continue to decline, but at a lower pace. And we also transition within our loan growth to a higher rate in higher yield products. car loans, so that will balance the mix between individuals and corporates. And that will allow us to sustain a good level of NIM as well as inflation continues to decrease, which has also a lower impact in the inflation adjustment line item of the income statement. And then regarding capital,

as we continue to grow.

We are sorry. So, Mariano, I think you can go on. Okay. Can you hear us well?

Yes.

Yes, perfect. No, it's something technical.

Yes, we have lost connection. I'm sorry.

So, I was saying we will continue growing our loan portfolio, changing the mix in products, and also we will... Recording in progress.

...the leverage of the balance sheet. income. And then as we continue our low growth in real terms at high growth rates, we'll continue to use capital. So that's why we now project a capital ratio at the end of the year lower than the one we are reporting at the end of the third year. So if we go from 19 to between 17 and and we'll continue that trend depending on the level of growth we achieve, the demand we see for credit into 2025.

Thank you, Mariano. Just to follow up on this. So loan-to-deposit ratio remains kind of low for all the Argentine banks, given what you said, now this normalization, loan book expansion. how should we think about the evolution of this loan to deposit ratio? Should we expect, for example, next year to be at 60 and then 26 at 70? Just wanted to understand how should we think about the evolution of this?

Yes, you're correct, Ernesto. We expect that rate to continue to increase as we transition securities to loans so now we are close to 60% and during 2025 we expect to increase that ratio to levels of 70% and note also that that increase isn't as sharp as important as our loan growth because we will also be growing in deposits so we grow a loan at a higher base but we also grow in deposits so range of 70%. Perfect.

Thank you. And then for my second question is on your investment securities held to maturity. So given the impact of lower rates, inferior inflation, Is there a possibility that you'll have to recognize an impairment at some point? I don't know if you have talked to your external auditor and I don't know if they have recommended something about this.

No. Regarding securities that we held to maturity and according to IFRS, we approve the internal rate of return at the beginning of the instrument. So in the case of these inflation-linked bonds, the majority of them, because then we had also a trading portfolio, which is at market value, but the vast majority of our inflation-linked bonds are held to maturity, so that's according to the accounting standards, they accrue inflation, and we will continue doing that until maturity. recognize a loss if the bond is trading below its book value and we sell them but our intention is to keep that because that was a hedge against inflation which now seems like it isn't as necessary as before but it's still they are covering against inflation and any uptick in But also regarding our balance sheet composition, it's also important to remind that we are, through our long portfolio growth position, positioning our balance sheet long in fixed rates. So with inflation-linked bonds, we only cover our shareholders' equity, and then we are positioned in fixed rates in order to take any profits from interest rate declines.

Oh, perfect, Mariano. Thank you very much.

Thank you, Ernesto. Thank you. Our next question comes from Carlos Gómez López at HGVC. Hello, good morning.

Hello, good morning. First of all, welcome and good luck to Gustavo in his new role. We hope he's very, very successful here like he was in his previous one. So for the bank, I don't think you have given us your economic forecast for next year, not that anybody really knows. But what are you counting on in terms of GDP growth, inflation, the currency for 2025? And also, you mentioned that you will be consuming some capital, obviously, since you are growing so fast. I mean, if you are consuming about 2% of CET1 per quarter, I mean, that suggests that within, I would say, six quarters or so, you might want to add capital to your growing business. Is that a realistic conclusion?

Thank you. Let me take that. In terms of what we have seen in the third quarter compared to the second quarter, there was a huge increase in retail loan penetration. And we plan to continue to pursue on this trend in order to have a balance sheet.

This is for me? Thank you.

Hello. in order to have a balance sheet that is strong in terms of NIM creation. So basically, this is going to be a feature of... And I believe that with declining inflation, the credit penetration among individuals would be an expanding feature all the banking system, but in our case, it certainly will be the case. So, Marino, do you want to continue on adding on that, please?

activity that we expect also it will foster employment. And then regarding inflation, we expect this year to end at 120% and for next year we expect a level of 30%, which is a very sharp decline in inflation, supported by the last monthly inflation figures. And With that trend, we expect the interest rate to continue declining, maybe not as fast as this year,

Okay, and in terms of your capital needs?

Regarding capital needs, with our current capital, we can grow 100% in real terms. And although we foresee a very high growth for next year, which could be higher than 50%, maybe 60%, So clearly it will be lower than the end of this year. So it will lower than 17% next year because growth, we expect it to be very strong also. And we also expect to outperform the industry. But we are not expecting a need to raise capital in 2025.

Very clear. And again, good luck. Thank you very much.

Thank you, Carlos. Okay. Our next questions come from Brian Flores with Citi. Hello, good morning, Brian. How are you? Please go ahead.

Hi, Tim. Good morning. My first question is a follow-up on Carlos' questions because I think it's very important. You have grown year-to-date risk-weighted assets 180%, loans only 60%, right? Your tier one is at 19%. the systems ratio is at 34%. And as you have said, you have gained 60 bps in market share. So maybe a question for Paco, right? That is beginning here. You mentioned your priorities to grow. So, It seems that the position on capital is limited, right? So how are you thinking about growing from a strategic perspective? Can you mention the segments that you want to attack? And then also, I know, I'm sorry to insist on this point, but... I know Mariano mentioned you do not see any needs to raise capital on 2025. However, for example, Galicia just mentioned that they expect to end 2025 with the levels of tier one that you already have in 2024. So can you just maybe help us understand how could you continue gaining market share when everybody is overfunded and seems like in a better position to grow, just it will be great. And then I'll ask my second question. Thank you.

Thank you, Carlos. I've been here for 45 days. In this day, we are working very hard and very fast in order to define initiatives for the next year, in order to grow very fast and very deep. I have been looking all the areas because I want to make a huge growth in commercial size, commercial volumes, in terms of plan sueldo, payroll services accounts, also increasing our jubilados, provisional size also, and increase our saving accounts, and checking accounts. Basically that in the individual size. And also we want to increase our volumes, our position, and also market shares in corporate size. Basically in SME segment and also big corporate. So we are defining a very strong, very deep, and very extended plan in order to have all the initiatives All the plans in place in order to grow and present a plan for growing for the next year, I will present very quickly in the next quarter. So we are working on that.

If I may add, I would say that, as I said in a previous answer, we will focus in hiding loans. And this has been already... what we saw, the comparison between third quarter and second quarter, there is already, you can see some hints of the things we could do next year to make sure that our growth is not only strong, but also very profitable. So we can build capital and sustain our growth looking forward. We understand your comparisons you've made with other banks, but we are pretty confident that the way we are building at least in terms of a strategic plan, we'll make sure that the growth is sustainable.

One more thing, Carlos. I can't speak or explain more about this plan or this initiative because We are building up and there are strategic, but you will have a full disclosure and full explanation in the next quarter. But believe me, we are working on that. And I feel confidence to reach an excellent plan for the next year for the bank. So in a couple of months, I will show you the plan in the next quarter.

No, super clear. Thank you. Thank you very much.

I can't say more. So sorry, Carlos, but I can't say more.

No, don't worry. We'll, of course, touch upon that plan as soon as it is possible. My second question is on the investment platform, right? We know it's very successful and it's... Can you maybe elaborate a bit on what are the plans for this investment platform? Where do you see it maybe in the next, I don't know, 18 months? Because I know, obviously, real wages could also bring some tailwinds here, right? As people have more available income to... not only save, as you mentioned, increase deposits, but also maybe invest, right? So how are you thinking strategically about this initiative? Because we know it's very well positioned in the market. So it would be great to hear from you.

Thank you. Diego, do you want to answer that? Yeah, sure. Thank you, Graham, for the question. So in a more stable macroeconomic environment, we believe that some avenues growth for you all will come from our business in the USA securities. Today this is very frictional for Argentinians because of regulations, but it's something that Argentinians like and used to use a lot when we were able to offer that for them. We believe our retail customer will transition to a more invest and hold and also to invest in equities and sovereign bonds and decrease their exposure to effects in Argentina, rebuild, mainly saving dollars and thinking dollars. We believe that this will continue, but reduce the amount of dollars they are saving and start investing. That's our goal to show them the path to do that. Of course, we think that This nowadays is Dollar Map. In the future, we believe it could be another different vehicle or phone. So we're working on that too. We are also looking for our small business in private banking and SMBs. In private banking, we have a small but growing business and we want to expand the customers in that business and also small and medium business. We are looking for a streamlined operation. We are very close to launch 24 hours onboarding and also 24-7 cash management feature. So I'm a financial advisor for them to help them make financial decisions. So we believe that those will be the avenues. Also, we are working in investment as a service product. We are working very hard with the Superglobal Bank. They will be our first customer too. So we're thinking that product as a way to reach more customers, the customers that are not yet in yield, but we believe could be very well satisfied with our products. So this is something that we are very excited about too.

Let me, let me, a little bit. I think that it's very interesting that what we have built in terms of technology over the last year and a half in terms of an API infrastructure in the bank and in online that allow us to today to replace and substitute another technology provider that we had in the past in order for the cash in and cash out of customers. And what was done in a few minutes, now it's done in seconds. So it's an astounding performance. And this capability, I think it's very interesting because what Diego mentioned in terms of investments and service that they will provide to Banco Superdiel for our clients to transact in investment products, both individuals and corporates, this service, InvertiOnline will be able to replicate it in other institutions. So that's a strategic point. Another one is that the retail base of Invertio Online is so huge that it has become a relevant player in all distribution of capital market transactions, to the point that big corporations are already not only addressing a bank of super real to make distribution, but also directly Invertio Online to make distribution of capital. particularly dollar-denominated obligations or transactions. So I think this is quite relevant. And we believe that capital markets are in its infancy in Argentina, as well as credit. So we have a way forward, very interesting.

No, perfect. Super clear. And just a quick follow-up, Patricio, because as you speak of it, I can see your enthusiasm and your excitement. Do you think this is an asset that will always be part of Superville or is it on the table at some point to create value, spin it off, just thinking about this?

For us, what is on the table is what is the best If we believe that there is an opportunity to deliver value by, let's say, finding an investor directly online, a strategic investor, of course, we will consider it because this is part of our strategy to gain value. But let me just spell out something. As of today, 97% of clients of Inverted Online are clients from other banks. Only 2.5%, 3% of Inverted Online clients are bank of superior clients. So that gives you a flavor of the opportunities I had, not only in terms of cross-selling, but also in terms of Inverted Online continuing to be a disruptor in the financial system.

Perfect. Thank you. Thank you very much.

Thank you, Brian. The next question comes from Marina Mertens with Latin Securities. Hello. Good morning, Marina. How are you?

Hi, good morning. Thanks for taking my question. So I have a question regarding your loan book. So while the third quarter showed a slowdown in loan expansion, year to date, you still remain above the industry. Looking ahead, do you expect to continue outpacing the industry and gaining market share? And if so, which lines? I mean, you mentioned that you will continue to target the retail segment, but which lines in particular should we expect to see growth? And could we also see a rebound in the commercial segment?

Hi, Marina. Thank you for your question. Yes, regarding long growth, the lines that we expect to be more dynamically looking forward, our personal loans and car loans in the retail segment, but also we will continue growing on the commercial side, mainly our medium-sized corporates that we are targeting, also focusing on the key and more corporate client base. So far, we grew mainly in very short-term lending as factoring, but for the future, when economic rebounds in a second stage.

I would like to add something. Hi, Marina. In order to, in terms of oil and gas, we are increasing our capacity and our structure in Neuquén in order to capture more businesses and volumes in that sector. So we are increasing our participation, our focus over there.

Thank you.

Thank you, Marina. I don't know, Carlos, if I see your hand raised again. I don't know if you have a new question. No. No, I think not. Okay. Ladies, so I think we can end up our Q&A session today. Thank you for joining us. We appreciate your interest in our company. and we look forward to meeting more of you over the coming months and providing financial business updates next quarter.

I'd like to make a closing statement before you go. I would like to say that I'm very glad to be here in this room with my two partners, Diego Pizzulli, CEO of Invertio9, and Paco Manriquez, and CEO of Mango Super BL. I think that now we have a very strong management team with strong skills in order to build the strategy we need to deliver strong value in the next few years. I am conscious that as of today in the competitive scenario that we have where we compete with fintechs, neobanks, and traditional banks, we need to deliver value proposition on individuals, but also make sure that we continue building in a very good franchise on the corporate side. Diego and Paco, their interest is completely aligned the loan value creation, because they are both, let's say, beneficiaries of a strong stock option plan, which I think is also a feature of the philosophy we want to instill in the company in terms of the people that work here think as own business owners and they take decisions to deliver value. Thank you very much.

Thank you, Klaus. Okay, so have a nice day. See you next time, next earnings release or with you in many questions, many meetings we may have in the future. Goodbye.