Q1 2022 Grupo Supervielle SA Earnings Call
Speaker 1: 2024 cost. This cannothigh pressure and irro a SL precessation. We have already explain, wor out which is available. Impact of pressure: we look year to con back later pressure.
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Speaker 1: Speaking during totoday's call will be ases per real, our terman and feel and manoedia. Our financial Officer also joinus seer firstied chaman of the worldard and manfeel and custoityy below our Chief technology Officer.
Speaker 1: alicand, runauton port, member of several loco perers subsidiary will also be joining us for today's call. All will be available for a QA sionsas a reminder.
Speaker 2: To today's call. We contain forward-looking statements which are based on management, current pectations, I beliefs, and are subject for a number of risks and uncertainties.
Speaker 1: And I will refer you to a forward-looking statement. Action of our ets release and with the filing with ious.
Speaker 2: We have still no obligation to update or revise any forward-looking statements to reflect new or change ents or the constant.
Speaker 1: As we to iz our Chairman, CEO will start call discussing our key highlights for ID quarter.
Speaker 2: So wards marianoisia, our CFO . We take a different look at our performance and near-term perspective.
Speaker 1: cus to Mer develop. Our chipf technology Officer will then provide an overview of our digital transformation service.
Speaker 1: aice young. Please know about that.
Speaker 3: Thank you, Anna. Good morning everyone. Thank you for joining us today. Now please turn to stack Co of our earnings presentation.
Speaker 3: While we saw continued growth in economic activity, driven by our statistics studryover following the rebound last year, market conditions remain challenging, with accelerated inflation, industry loans at historical loans, while Central Bank regulations continue to wei on net intored markets.
Speaker 3: At the same time, the government's recent agreement with the IMF was a positive development that requires politficult and sensus to implement.
Speaker 3: Our bottom line remained negatively impacted by several and personal chargers in connection with headcomong with actions to capture operating efficiencies of the bank and azildo.
Speaker 3: Excluding these charges would have reported a net gain of 44 of 146 million pesels and an adjusted return on average equity of 3%, compared to breakeven profitability in the fourth quarter.
Speaker 3: Other factors putting pressure on profitability includes.
Speaker 3: Sees seasonally low credit demand, which is at historic flows, as well as regulatory flows and interest rates on time deposits, and while the banking business reported positive.
Speaker 3: Return on average equity. Results, as you do, were effected by high inflation and known loss provisions, together with a deep personnel reduction.
Speaker 3: Mariana will discuss this more detail shortly.
Speaker 3: On the expense front, the efficiency ratio improved to a UE new basis points sequentially, although it remains highly impacted by a lower revenue base.
Speaker 3: We also maintain an adequate capital base, with a Tier one ratio of 14% of the quarter end up one hundred ten basis points sequentially, while liquidity remains strong, allowing us to navigate the current environment and implement our strategic transformation supporting long-term sustainability.
Speaker 3: As a reminder, our capital base remain hedged against eflation. Prove real estate investments, mortgages and solid bonds.
Speaker 3: The digital and operational transformation that we have been undertaking is core to our goal of delivering long-term budget creation.
Speaker 4: These explains lower profitability in the short term, as we incur in higher costs, including rightsizing operations.
Speaker 3: Capturing efficiencies, cross-selling and acquiring customers.
Speaker 3: We are encouraged, but with the sustained progress on this front. Let me share a few highlights, for example.
Speaker 3: Total digitalized digsi clients were up 54% year-on-year as we continue to see increased in set adoption across personneal loans timeam deposits.
Speaker 4: In UN insurance sales, while asset management retail customers doubled during the period, also showing higher engagement.
Speaker 4: This quarter, we also launched the first end-to-end digital loan boarding in the market for entrepreneurs and SMEs and continued to have new features across the platform each quarter.
Speaker 4: As usual, we have included in the exhibits of our earnings presentations of progress we are making on our key diigital and operational KPIs across the company.
Speaker 4: We are pleased to have seirum miteo, our Chief counnoity Officer, joining us on today's call.
Speaker 4: He will share his usew on the initiatives he has been leading on our digital transformation. As you may recall said, he join our company towards the end of 2019. before joining to prevail, he was Chief information Officer at naranka, a group of valicia subsidiary.
Speaker 4: Before turning the call to Mariano, let me provide an update on our status a financial agent of the province of Sun weks.
Speaker 4: As a reminder, in early 20, 20 thousand and seventeen, the government of the province terminated this financial agency agreement and retain us to continue providing these services until now. On mayfif, we were notified by the government that is designated.
Speaker 4: State-owned bankconassu on as financial ag for the problems.
Speaker 4: At quarter end, the share of payroll loans made the province of sanduy's employees amounted to put 3% of the bank total loan portfolio, while deposits made by the government of the province were on the zero 1% of the bank's deposit base.
Speaker 4: We have been operating in incentandues for the past 25 years and have built a strong franchise in the private sector business which we plan to continue. serry.
Speaker 4: More information on this can be found in our earnings report. With this, let me turn to call to Mariano: Please go ahead.
Speaker 5: Thank you, my is your return to Slide five.
Speaker 5: Several other sites impacted along this quarter, resulting in an O construactction of nearly the Q1 1%.
Speaker 5: About we saw seasonly with long demand in santoring where we have a higher market share and it roblyin noun as a need at subsidized rates.
Speaker 5: Accelerated inflation also roed that consumers for chasing power, while corporate clients has strong cash positions, as you do. We tightened credit standard in a more challenging environment, resulting in a sharp reduction in loan origination.
Speaker 5: Now moving on to funding on slight SA.
Speaker 5: Soon AR ad ized pacee of depolicies increased nearly 3% sequentially, as well. sibility management, increasing executional funding, as well as the balance of Singer bank security at foram benefing from higher spreads.
Speaker 3: Total liquidity levels were strong, both pressels and dllters, with a loan-to-deposits radio at fourteennine percent.
Speaker 3: inturn. corporated deposits posted a 4% seasonatic CL but increase over 8% year-on-yearturning to Slide sevenllar.
Speaker 3: Total net interest margin increased 90 basis points sequentially to just over 19% in the quarter.
Speaker 3: A couple of factors contributed to this improved equation performance. First, the yield of be loans creid: 230 basis points as we repred the loan book, a lower subsid' store volume.
Speaker 3: Second the decrease in the spread on Central Bank securities reflecting monitorary quality rate highs in the quarter and last feed higher inflation also drove higher piany.
Speaker 3: These were partially offset by a 70 basis points increase in pres cost of 10, reflecting risices in new interest rates- GRE by the Central Bank.
Speaker 3: moing on to other poy on side pate.
Speaker 5: Our 2000 and year F radio remained stable at 4% sequentially, with coverage at work C than sever percent.
Speaker 5: The banking beia radio, who remains steady at 3%, in line with briven demics and prerecession levels, with cost of risk at 3% and coverage of 100 or 45%.
Speaker 3: By contract. Due to PO to the 70 basis pointing, sequential deioration in the mbl radio reaching 20%, reflecting the impact of inflation on consumers. subothort of the lineer.
Speaker 5: Note that this height mbr radios. The level reflects mainly the agent of the lual loans that were differred during the mandanic through regulatory.
Speaker 5: During the second quarter. We respect to write out the input loch of customers who did not resume payment after the expiration of the 12 -month grace periods roed by the centrer bank. Now moving on to capitalization on the Slide nine.
Speaker 5: The Tier one capital radio increased one hundred and ten basis pointts sequentially to 14% of quarter end, mainly explained by the inflation adjustment of capital, where brik- we assets- increased below inflation.
Speaker 6: On flide 10, we share our views on the main drivers of our business for the full year.
Speaker 5: As we navigated a more challenging environment with accelerated inflation. We now anticipate loan growth to sell down and remaining line with inflation in 2022 is a be of expectations like growth in real terms or GRE earnings call. However, growth in real terms could be lower. Is addual inflation work to accelerate about 55 percentin addition, given foreign exchange restrictions and interest rate flow, some time deposits- we now expect deposits to growing in line with inflation.
Speaker 3: Our use on other quality remain unchanged from our prior call, with loan loss provisions expected to grow about twenty-twenty one levels reflecting loan growth where go of risk is anticipated to remain at single levels of last year.
Speaker 5: Like where the total NPL radio is expected to remain stable at 2021 elevel.
Speaker 3: We also continue to expect NIM to increase slightly about 2021 levels, with the margin increasing in real terms. Several factors are expected to contribute to these performance.
Speaker 3: First as a same improvement in the fundament of seric in the close of last year, a keepybuildilar of our strategic plan.
Speaker 5: Second margin should also benefit from the impact of iron inflation on inflation and adjusted assets, including government bonds and mortgages.
Speaker 5: And lastly, the continued net positive effect from the increase in interest rate by valies over our bank.
Speaker 5: As a reminder, more detail Central Bank Relations can be fing in our cardance reports.
Speaker 3: Our perspective for fees is also changed from last quarter, with fee income from individuals anticipated to grow in line with inflation, when insurance income is likely to increase in real terms as premiums recover from the lower levels of the past two years.
Speaker 5: Similarly, we also maintain our views on operating expenses.
Speaker 3: Mainly increasing above inflection, reflecting the combination of incremental costs from implementation, our higitaltransformation strategy, continued healthcome efficiencies and customer acquisition costs.
Speaker 3: duringing 2022, we plan to invest approximately five point one and one point two billion vessels in connection with digital and net quter transformationed initiatives respective, lyfinally finally, D on capital liquidity for 2022 are also changed with a Tier one radio andantipbated at alvois levels ranging between 12 and 13%. As a remainder, one hundred percent of our capital remains hed again in flationnow let me turn the call to seatic dato or Ty technology also.
Speaker 1: Thank you, ano. Please let close to slike a virualas. You may know, at the bank we continue with our full dy escape transformation process. It means in customers and the focus and also the technology as an enl of our business.
Speaker 1: So that's why we think, in many cases, in technology with powerpro. This transformation is complex and includes much more than what we can see on the surface.
Speaker 1: Mainly, it's a cultural and transformation, a new way of doing things. That involves processes, managing risk people technology data innovation, et cetera.
Speaker 1: Today I want to focus on the technoies that this we are following VC and.
Speaker 1: The result will not, and how this preateacy evidence judge the scale bus iness communindication of value for our clients.
Speaker 1: Please side number are pin.
Speaker 1: We are have in taking many it decisions based on the objective was accelerate in our time to market all time to B.
Speaker 7: That's why we realanize, and today we have more than fifxty.
Speaker 1: It sps called an emary superiic team.
Speaker 1: Group in 11 tries are also including six centers of excerts. But to are famid days.
Speaker 5: It's a key success factor is the empowerment and the autonomy that we have given to the teams, all the superial teams.
Speaker 7: Our strategy of microservic building APIs continues inteations for continued delivery and the clou miation of the neighbors for these operating model.
Speaker 1: Currently we have more than 340 APIs that were developed in the last uronic half.
Speaker 5: But I would try a better conct. We have the teams and the talent to continue with its stret.
Speaker 5: The D leg that allow us to become, as our agreement organization under the is three FAM, 60 degrees, customer viewand support by advanced analytics and artificial finlious modeers apply to the business of strategy.
Speaker 1: Today we can say that we have more than 19 masil earning more than implement, for example, the best offer for each of the clients and it's proud to buy or to implement campaigns to maintain our lives one we take any, for example, probability for CF.
Speaker 7: But all of these couldn't T be posit without the digital channel availability. That's why we also focus on our operational and technology continuency program. Getting has a result more than 100% of availability in our digital channels.
Speaker 1: We continue executing our turnourne to the cloud as implementing a continuous migration of solution and the a MO under a muliclogoud strategy.
Speaker 8: With the aim of achieven CRE activity facxilility, but also, as a consequence, reducing a pering colums. This is not a lift andship of application. This is a part of real detecting applications. To be wellnative, to really take advantage of these knowledge, I would objective is to have 70% of our volume in clound by M twentitally. fourand finally, I want to talk about talents and partners. We have made contact with the best it partners that have given us the best ideas andtechnoledlogy and practies, such as stateat of us, IBM and micrers.
Speaker 8: But digital current is take to our confiration process. That's why we have approached comprehensive current program which GOS along with a see the strategy and, for example, the skill in our teams: bring people from the market when we think its necessarytoday we are one of the most attractive funds for digital talrent here in a gentina and with compete four resources, with technology compans which of course has given us a new charge. This littlegrow to a random forteen.
Speaker 6: Today we can say that we have a digital bank. With the, a tradditional bank, we can multiply the number of clients at the low operating costs, thanks to the different technologist technological enighbors and a team of people that we can say they have a human banking mindsour. Up includes almost for the services we provide to individuals and companies, but also can be considered a digital world, that little our clients perform every day to lead construions, such as, for example, to pay with a humanure coal at the Mer, chant with a simple friction and client experience.
Speaker 1: Through our digital worldlet that we have to a more than reconduomit in Southern users, or through our self service terminter, our clients.
Speaker 8: concerlt concern through a video call, for example, making their update to their life isia. All these features have enabable a bank with national presence without the need of having physical branch.
Speaker 1: Our view to have is a reality, including many points of Compass to persist our customer, for example, with try integrated to the channels which facilitate introduction on frequent productence with an ificial inteation rure EFF.
Speaker 1: But also our to help invited us to Re afthink our service model. Make it it possible to today to access to one of our 50 account executives, builtually with a video of conference solution integrated to the up, to the homebanking, to the atmswe are the only one offer solution here in certainethink, from your home, business or anywhere with connectivity of clients, can make transfer service payments investments, SA balances among and any other orelation having more than to hand and three thousand introductions since we launch is allowsus to reach more customers. A GRE wayso next steps.
Speaker 1: We continue. We will continue to for our living organisation, joourneing more information of our clients, understanding them with new capabilities for the deduptions of our Bu, help continue with our, our API bankking strategy and our payments and the service or embuildded finance strategy, befine the to be businessed there. And also improving and continues working on our useerof experied dital and market an architecture as an enlel for this colleagand. Of course, our TE also working on innovation, as you can see before. So this goes along with an it strategy plan that go to together with the digital performmance and soformance. Thank you.
Speaker 2: Thank you, you. Now we come to you and our spe come from on door myichael, America. Please, Thank you and try. Good morning, but please you Mariano, soir you and good morning to everybody.
Speaker 9: Thank you for your presentation. My first question is on the political outlook. Can you share with us where are the latest political events or any potential regulation that could be impacting positively or negatively the banking sector and also related to these? I know that is is still soon, but I will appreciate your thoughts on who are on whoom are you seeing, as a potential President, presidential candidates? And then your second question on you do and the consumer finance segment. Considering the higher rates and high inflation, when do you think you do start to show positive numbers? Thank you.
Speaker 4: ok good morning have M So I will track transfer first person and media and then 100 twocomplement. But after the agreement with letter of intention of the MF with the government which is a positive step we it is becoming more clear that in the government there are two factunions. And so this is given I think some concern in terms of the how swift and how plastic implementation how yes the.
Speaker 3: Swift implementation of the IMF agreement will take place in particularly, for instance, when you have a scenario of higher inflation. So this is training a little bit in the market, this straining the policy implementation.
Speaker 3: Medium term. I think the personally is my personal view. I think it's positive to have, let's say, for in next election, a clear division of view, or by you have on one side of view of let's continue draggving the feed dragving, dragving the structural reforms and not implementing structural reforms which, which is unfortunately something that has has happened in the last deccase in Argentina, or in the other side, another view which is let's tackle the inflation, let's reduce the sze of the government, let's reduce the taxes. I think this is going to become more clear and the tension in the government, in my opinion, will help this clear division of use next year for the electorrate.
Speaker 3: So I don't know if you have to compleliment conne good morning Chang is. But if telling an I think but this's sort of summarize this extension would see but the general trend is that we think that there will be an effort from the current administration and we see it in the backing of the President's of the President's backing to the finance that Minister MR womanman in trying to be as CLO as possible to the I IM F targets. The second question was about potential presidential candidates and basically the opposition basically is talking about several candidacies and we think it's still a bit early to determine which of these would actually make it to the finishing nine We seen declarations by but we reach into some degree MR or as you elaborate and within the.
Speaker 3: Expected eflation and consensus efpect inflation in from different sectors and this is negative for the industry and particularly negative for the consumer finers.
Speaker 10: Because it affects. It affects the capacity of individuals to take loans, it affects the disposable income and also tenors are not high because of nominality, nominal rates. So this is.
Speaker 3: thisin combination with higher underwriting standard- stricter underwriting standards that we implemented in 2021 and continue to implement in 2022- makes more challenging to find customers taking the say.
Speaker 3: New and new customers taking credit cards the? U do business, and this, this is one side. The other thing is thatwe have, in 2022, implemented in the first quarter a very deep reduction in personnel: around twotwenty-five percent of all personnelities.
Speaker 3: Has been. Basically, there was our severance of 25- about 20% of personnel- and we will continue this capptural efficiencies in the rest of the year and PE in this sense in order to make have a much, much more efficient franchise. So, looking forward, the scenario is is challenging and we are trying to make sure that this franchise turns profitable. So, in one way or the other, we we will take measures in order to make it profitable by two thousand and 20- three Thank you very much, but this year and now it's very helpful.
Speaker 2: thankyouninghello, good morning and thank you for the presentationfirst of all, Thank you, as always, for the quality of of your financial presentation and the detail in your numbers. I noticice that you have included eveven, all the average of requirements and all the obligations to landend the particular sectors, and that that's very detailed and very difful. So thank you very muchice for that. My question, thinking about profit, ability: obviously higher, as you mentasured, higher inflation makes it more difficult to run the business. We have seen that your result has been wored with a higher inflation in this quarter, but from what your describing and what the market aspects, we could see higher inflation going into the rest of the year.
Speaker 11: Should be there for respect- that because of ininterestase adjustment, your reporttive number we continue to be negative and perhaps lar and negative. Then it is today and my question is: in the future, if the distition continues for another couple of years, are the shareholders of superbial willing to, if necessarary, recapitalize the bank if it needed a capital to maintain where we wait, to maintain the capital until we wait for better timesthank.
Speaker 4: Okay I will ask myiano answer the question. But first give me my value first audience is true. We don't have do not have it with the profitability. But since we decided in 2020 and this was.
Speaker 3: Implemented already: thousand and 21: two to take a hit on short term profits because of the implementation of the transformation of the franchise and also the transformation of the network and the capturing of efficiencies in 2021 . All this is continuing two thousand and twent, 2020 two and we expect that the results will take place. We will obtain all the rewards of all these efforts in terms of short term profits in two thousand and 23. you might say that it's possible that in two thousand and 23 loans will start to grow, So there will be also a consumption of capital in and thousand and 23. So we believe that, combined both the two things combined in two thousand and 23.
Speaker 3: We might have a reduction of your one capital to welve percent and that will allow us still to continue competing and growing with.
Speaker 3: Is P? O and capital. So we we believe that all the measures we take in part in order to execute a much more efficient franchise in the next two years see, this is what you, I Don. You want to conider R? Es on twentthousand and Twenty two on your views.
Speaker 12: Yes were're. Yes, as you se, inflation is an imcru for the business as it reduers, which is in power of increvers and the of the income. So it's a headwind for loan growth and but also, on the cost side, a particularly personular cost increase. We will inflation. So So our we tking this well first, very important to H that we are hedging against inflation. So the loss that we have of the network military position.
Speaker 13: thirties of said through different means, but by the achjustment of inflation, of nonmonetorary assets, may real estate, but but also the formons and mortgages that are just by flation to UA. So also, as interest rates are increased by the Central Bank, we are taking profits of higher margin and higher spread liquidity management and then, as per icials we are also, we shall negative results this quarter. But if we did that, the nonrequiring cost positive, So it noton requiring costs. Referred to efficiencies. We are main or head comees where we will use 7% at the bank level and almost nine 9% for the whole group come that, including you do were maj the major of efficiency.
Speaker 13: Of 25% reduction in the last 12 months, So that will allow us to work with a lighter structure going forward. Also, we are incurring costs in acquiring customers. You know, in this context, when you acquire customers, you not only have the typical accusisition costs of lacest benefits, of cash flows or expenses, but you also typically start the relationship credit card that would think in India growth, particularly in this environment with inflation and cap on interest rates in this broct particular.
Speaker 13: So as we work on on this front, that we are quite more prior and start to prosell them and start having also deposits. That will allow us to increase our margin and have positive results.
Speaker 13: Tr a higher rule and thedelighter tractleokay. Thank you.
Speaker 2: Hello everybody. For the perent of ask questions, I have one here regarding the margins, actually a follow up, because you were discussing what is the look for rates. You see, everybody knows like lities has been increasing every almost. So where do you see a leak and how that benefits are business? What should we expect? Because I see LO growth being somewhat like last and I guess it makes sense increasing in real terms why your deposits are growing and most of the banks's liquidity has been allocated to government security. So my question is what is the lel of the leakue and how the leakue help your margins for this year and also on margins? The second question here is regarding the products. I recall there were several, you know mon at or remaining rate caps and we start a system flexibilization and you discussed in the release.
Speaker 14: How that can help you should to improve this profitability. In the second half it positaltory. Thank you, but are yes deary while resuing the lief atpl ation will inbrief. During the first quarter the Central Bank started to increase R as they had been flat for all to joy one now ral bank started to.
Speaker 13: In P rates L increase last week or very recently. So they are trying to catch up with inflation So that at some point that can benefit us because we also have increases, increasing cost of funding, So so that will benefit from the, the Li liability management side also. Right now there is a difference between the interest rate at oneveday and 30 days.
Speaker 13: So that allows us to increase of spreads and at some point offset, as you said, the decrease in the low growth in the first quarter. firstcus is the some seasonality was the peral. Higher grow volumes that increase in the first quar of the following year. But also with decrease the loans at subitized spate. So that's where the decre in versuins, but the increase, the interest margyear.
Speaker 15: We believe, although we now estimate a higher inflation that originally expected, with real inflation around 65%, although that's very high we expect.
Speaker 13: Inflation month, inflation starts slowing down. So in that context probably the centrber one will have this last, that interest rate high.
Speaker 3: To be that the last of theyear, if that is the scenario. Of course we cannot assure that that that scenario. Although we might not not see interest rate decreases, we want see also to increase. So in a more stable interest rate environment we will be able to increase our loan portfolio also with thedecreasing FL.
Speaker 16: Let me complement what mariian has said with a couple of things. First, one of our strong leaders is a cost of funding.
Speaker 16: And we have. We are focusing with all the technological transformation, we we have expanded and providing cash management services through corporations and in a lot of impact in terms of the transactctionality companies have in the bank and with this we see, we saw, we ablices to.
Speaker 16: The last year a huge impact in terms of collections and payments pay back made by cooperation, our clients in our bank, and so we start to see- and we are focusing on on our share of checking accounts at our franchise with we. We saw that in the last quarter of 2021 we've already started to increase our share and the focus in 2022. We continue on this focus and we believe that it's going to help us to achieve a Med of planundning and therefore help in our financial markets. The other thing is concerning senior citizens. Senior citizens are our largest individuals in terms of segments and is we are with these individuals, with senior citizens. They are typically depositors of savings accounts and time deposits.
Speaker 16: Time deposits, they have a floor becausecost of regulation- and this is very punitive for our franchise- that because this time deposits forus, they don't allow us to basically to reduce the cost of funding. When you have a scenario when there is no longan demand, typically the bank would pay less particpically for for very minor and aupromize time deposits, which is what we typically would do and we've been doing priorors. So as long as this continues, this is this will affect, of course, continue to affect the cost of funding for this particular franchise, but we believe that at a certain point in time this regulation with this appear and it will make it more sustainable for us and provide more scope for a wider financial margins.
Speaker 17: I compment, Thank you, think about today somebody. Just a follow-up loan growth: what is the expected? I guess the body message was that margin should is likely improve. Right like, keep these likely improving the margins. I guess that was the the message. So just checking loan growth So we can assume you like maybe an I growing is likely above volumes or something like that. Right, I guess that would be a base case.
Speaker 6: Yes correct. Yes, inflation and alities is aheadav for lowan growth. That's why we expected a PRI order. We expected to grow above inflation, that now we have brseen a growth.
Speaker 13: Of the peso portfolio. In line with inflation, you are 65% the inflation. The loan demand will be, with little able, definitely weaker. So we expect us.
Speaker 15: As demand starts to recover a very, very slightly being flsure level to recover the downturn with had of the first quarter. But we probably the when inpressure not growing real terms.
Speaker 14: Okay no, Thank you. Thank mar, not Thank about ition. Thank you, Thank you. Our next question comes from RO on from our partners. Please only overhead.
Speaker 18: Hi how are you good morning? Thank you for the opportunity.
Speaker 19: So you are on going restructuring process, reshap in your consumer finance business and investing in technology- I am assuming- to be ready for a brighter future. So what kind of Argentina do you have in mind when you invest? What should Argentina look like? So your current strategy is successful? And then a follow up related to my previous question. So how do you maximize profitability or maybe reduce your negative impact of this?
Speaker 19: Nonrecurrent expenses. Your transformation Mat ures. Thank you.
Speaker 20: Good morning. I love your question. Let' let's start from the current situation of argentin. I'm sure you're aware that the level of loans to DP is very small. It's around nin percent, when you would typically find many of our neighbors at at least fify percent and in a case of yearia, even beyond that to close to 90%.
Speaker 9: So the starting point is from a very low level of loans to GB, which gives you an idea of the huge potential we have. Historically, we've been closer to levels in recent history up to 25% of loans to GDP. I am always referring to loans to the private sectorso the first thing you consider when you look at the Argentine financial systems is that it'is extremely transactional and very, very small, and it has a huge potential to grow and to be a great dynamic force in the growth of the argentinea Co. So, with this said mon, and with this perspective in mind, is that we've been undergoing significant investments that you mentioned, and we tried to focus on a couple of key dimension. The first is to growp the customer experience and make sure that our customers, both individuals and SMEs, have the best possible experience.
Speaker 16: In our digital transformation the second is that' we've increased our capability of customer acquisition with all our onboarding initives digital onboarding initiatives and this is allowing us to scale quickly of what we call our digital trends and also increasing significantly. The.
Speaker 16: The potential of serving them in areas where we don't have a physical network and through innovation also as cu pointtaage or earlier, reducing our time to market, while at the same time we make considerable investments in our network to increase the possibility of self-service and cross-selling. And all this is leading to increasing efficiencies which, when times get better with, allows to capture all this in very positive long-term value creationvery much that was really clearand gener on.
Speaker 2: I pleasemorningmorning Thank you for taking my question I have two questions. one is say follow up on long growth. So I see that you expect in long growth around 65%. So in line with inflation for 2020 two and that would imply an acceleration in long growth. So my question is what segments do you expect to to leadave. The long growth acceleration is it going to be corporate. Laws. You do or the reta the retail portfolio of the bankso. That's the first one in terms of long growth per segment and the second one is related to the ffectx or the exchange rate. So in terms of the blue chip how do you I know this is hard to forecast.
Speaker 21: If I know it's curarity to see, it will bethe print story. But how do you see the blue chip ball in in in the next, over the next year or even, to yes, over the next 12 months or even before, into 2023, before the elections? Do you think that the government can do something to keep the blue chap effects close to 200 PES? You just low one thing for questions regarding low grow with expect to see low growth of the, the commercial portfolio under retail portfolio of the, the commercial portfolio we saw can, we saw we growth last year. We expect that to some raubber recovering. Then we also, as I mentioned earlier, we have from seasonality, particularly in the factoring.
Speaker 13: Portfolio of the short-term financials where we need. We typically grow more in the last quarter of the year then in the retail segment also. The perters signg of the band show a declining real terms in the last three years.
Speaker 3: So we also expect that to reallyly recover. And then you mentioned- you do and as you do, we being cautious on the low world, because we we want to grow healthier instead of from.
Speaker 3: soinstead of just growing volumes with a higher risk. In this particular segment, ituation can reduce significant weget.
Speaker 13: As POS of the income of vid one So we are having tighter ready singard So lower on that side will be lower than we would expect last year.
Speaker 15: Then regarding the ch rate, mind viewas you said, that's very difficult to forecast, but let me tell you about the the piece exchange exchange rate.
Speaker 13: Because at the end of the day you have the evaluation of efficitionent exchange rate and pickup the with the rate you officually just exchange rate. We think that it will be lower than inflation. So we will see theevaluation of the baso and, although at higher rate the last year, we are seeing our evaluation of around for 4% monthly but 40 year. That will be lower than inflation and on top of that you have a pickup with the rate that is hard to forecast. I believe the main component of the gap is the confidence is the government and at the domestic currency. So, based on the confidence, we saw some, some moments of very, very low confidence were pickup when to 100%.
Speaker 13: That was reduced certainventy percent or we are in inflation valuation but which is operate in steing, whether it will give short or widing that. With the better of the confidence, the government what will come for? 20 20, three. Let me's complement on that a couple of things, of course. If the noises in the government in concerning the implementation of the IMF's been sold and then Q you see, are an, an implementation of the measures that were with with the IMF will, is this will improve confidence on the other side, there are also what there is also what is happening today in the world markets in terms of price, in inflation and commodity prices.
Speaker 22: We've seen increasing commodity prices last year and that continue this year, and the terms of exchange- that is, the difference of price of exports, price of imports for Argentina's economy- have improved and, according to recent fication by the world bank, in terms of terms of exchange, we haveyou have to go back to the second world war to see the same terms of exchange than today. This this, with this focus of the world bank, Argentina this year should increase its foreign exchange reserves around one billion by end of year, So they will be able to achie one of one of the commitment they had with the imma. So I think this will help reduce a little bit.
Speaker 17: Let's say the tension in the market and and maybe help with rit. Of course we cannot make any proredvisions. thatut, Thank you. And one follow up is, if I may, in terms of the bank branch budship rationalization.
Speaker 21: And here the number of branches has been stable. But my understanding is that you intended to close some branches. So at any update we related to to the center back authorization for in terms of branch branches. closuresand hand if we want to wer thatalso talking about we have again what we are doing actually is a consolidation of brans. As you know. We started the process where the two networks that we had one focus on senior citizens and the other one the typical traditional branch. We brought these two branches together and in that process identified a series of branches that were relatively close within the relevant market area of each other. This said to a first stage of consolidation and as we pointed out we have.
Speaker 17: A request to a central bank to consolidate 16 of our branches, which is standing for our rise on timemoving forward. We see similar opportunities in second Stage during this year, where we continue to observe that there are several branches that we could consolidate, basically also leveraging a hub and spoke model that we think would be useful. This will be rolled out during this year and is always spending a central bank approval.
Speaker 17: In addition to that there are also as you know because of the transfer of the business in centes that we will bebasically.
Speaker 3: Announced in this call. I mean this tranferort business to bankconon that has been basically requested by and the government of sunes. This is given it, given us an also an opportunity to to in that particular province to maintain our all our private business franchise with clients, which is very strong, but all the or the say the franchise, the small branches in the provinces that were linked to, basically to maintaining the finance, the financial agents contract.
Speaker 3: Will probably in indiccase. The negotiations will go forward and succeed with panconasion. We will transfer those, So turn wards.
Speaker 17: If you will see, we expect that 2023 will be a very we have a much different Fran, different franchise in terms of network for all per real and all efficient. one and this to thank you. That very clear.
Speaker 2: Thank you one Ladies and learn comments. We have reach the end of today's joinning ation. Thank you for joining us today'. Thank you for your questions. We appreciate your interesting our company. We look forward to meeting more of you with the coming months and providing financial business update next quarter.
Speaker 23: In thedam will remain available. plancer any westtern that to laupbuy. Have a good day.