Q4 2022 Grupo Supervielle SA Earnings Call
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This meeting is being recorded.
Good morning, everyone and when it comes to <unk>.
Our reporter at year end 'twenty.
Gosh.
Hi, crush for Nio, a slide presentation, which accompanies the release, where we not which is available at investors extra.
<unk> Investor Relations website.
Today's conference is being recorded.
As a reminder, all participants with E L B malls.
Could be an opportunity for us to ask questions at the end of two eight presentation. If you want to ask a question to be connected to a small desk from from any device.
Not be able to answer of what it does is you are connected somewhat okay alright.
So please make sure your first and last name at the exits that organization.
Oscar with some by voice lease spread duration unnamed at supercuts com, a great deal and again towards our Yoplait.
When hustles and western seem to be the norm you know the Q&A box anytime during the call. We'll ask you to emit yourselves to one question and ask for the one on 95 ratio at 18 and thought about it.
During today's call it will be faster.
<unk>, our chairman and CEO and Mike <unk>, our Chief Financial Officer.
Also joining us on the effect as far as Vice chairman of the board and here at Viacom and yet.
Or would be available for the Q&A session.
As a reminder, today's call will contain forward looking statements.
Based on the management's current expectations and beliefs are subject to several risks and uncertainty.
And refer you to a forward looking statement extra ordinaries release, and recent filings with ESG.
Yes.
He will no obligation to update or revise any forward looking statements to reflect changed its event structure.
But he is but again, our chairman and CEO will start the call discussed Mickey I'd like.
And progress on your Illinois information age.
Afterwards by Dan <unk>, our CFO will take a deeper look at our performance in EMEA.
Yes.
It would be followed by a Q&A session at the ratio is lower.
Okay.
Thank you Ana good morning, everyone. Thank you for joining us today.
Please turn to slide three of our earnings presentation.
2022 was a transformational year for the company, which I'm pleased to report that we have.
<unk> substantial advantages in executing on our key strategic pillars is progressing on a return to profitability and building the bank of the future.
With inflation.
You have inflation ticking up 95% the highest points used 90, 91 breastfeeding costs and margins.
We made headway significant headway to boost productivity throughout the year by rationalizing our operations, while further enhancing the customer experience then can take you.
Cool hope we accomplish.
<unk>.
By completing the integration of our consumer finance database and back office into the Microsoft related and for merging you do into the bank on schedule. We are encountering a major source of efficiency in our sector.
That hasn't suffered greatly for the challenging macro environment.
With this total of 14 billion.
In pesos nearly 200000 patents, what tranches of the bank, while we reduced headcount actually loop by 96%.
In turn those customers knowing joy.
As to an extensive array of financial services and products through a seamless omnichannel experience reporting.
In line.
With our current focus on prioritizing cross selling of engagement.
Our customer base acquisition, we recently terminated our agreement with <unk>, which operates the tango plus retail chain.
Second we made significant progress in right sizing and transforming our branch network as we pursue our vision of becoming tobacco in the future.
<unk> group produced a total of 27 branches during the year, including AP that salaries government embracing the promise of San Luis and the closure of nine branches that were already of Copel <unk>.
We expect to receive authorization to close another 20 branches with the first half of.
Easter.
Today, we operate a modern a more efficient network greater sales and service space and vehicle apps at lowest to expand our reach and productivity, while offering a convenient banking experience.
These two initiatives resulted in a 21% reduction in head count, which we expect will contribute significantly.
Higher operating leverage this year.
And at the same time, we continued to expand our customer base and drive cross selling opportunities to increase our share of wallet target customers I will provide more color on the strong shortly.
By the annual review.
Our financial performance more in detail shortly but while we are taking the necessary steps to optimize operations and remain on track to achieve profitability by the close of the second Q3 overall weak industry loan demand together with one time you do recognize isn't charges resulted in a net loss of nearly 800.
<unk> million business for the quarter.
Closing these one time events, we delivered an adjusted pretax profit of nearly 116 bps in the quarter, while NIM at almost 22% in Npls.
Three 7%.
We closed the year with a tier one capital ratio of 13% as anticipated.
A reminder, our comparable basis safeguarded against inflation and have sufficient liquidity.
Typically that's done resident macroeconomic challenges.
As you look to the coming year it.
It is expected to be another challenging macro problems.
We continue to advance on executing on us key strategic pillars, and are prioritizing customer engagement monetization and cross selling opportunities as our customer acquisition to gain further share of wallet and profitability. Among our current customers. We also remain focused on protecting us.
Quality and improving funding while.
Lower cost structure is anticipated to drive higher operating leverage and significantly improved.
Financial performance in 2023.
We remain on track to achieve profitability towards the close of second Q3 and positive inflation adjusted return on equity.
Sure.
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.
Yielded great results.
We expanded our retail client base by 92000 times or nearly 7% year on year.
This was performance reflects our success in Digitization with digital retail customers no 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.
Four zero in place Tau and $4 60 ups are contributing factors to this program and we are proud of these high schools.
We're also delighted to see increased customer engagement engagement and cross selling to the penetration of digital and other marketing personnel enrollments increased by 11 percentage points year on year, 34%.
Similarly, the total insurance policies sold rose, 15% in the year, while the share of car insurance policies sold through our digital channels.
50%.
Our personal finance management platform.
Also continues to gain traction as we add new products and making money market investments available available 24%.
Assets under management increased nearly 140% year on year with the number of retail customers the <unk> up.
By 559% contributing to the improved customer prospect.
Goals for the year in terms of our retail customer base includes gain additional shelf audit, while prioritizing profitable products. We also seek to increase profitability profitability among existing customers through higher engagement and cross sell.
As shown on the first chart of page five during.
During the year, we expanded our SME and corporate customer by 13%.
Increasing our market share by 25 basis points to five 571% measured by the number of customers.
This was achieved even as we reduce the branch network, which together with improved NPS across all segment segments, serving Smes and corporates further about it is that customers are embracing our digital offering.
Russia and optimization of the branch network is allowing us to optimize operations.
Our efforts to capture share of wallet are also paying off as we increased processing going forward insurance is a significant growth opportunity.
The 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%.
Okay.
We also expanded our surety and payroll services by 50 basis points to two 6% and foreign trade by over 70 basis points to nearly 4%.
In terms of funding.
<unk> has enabled us to increase our market share in sight deposits by 18 basis points nearly 2%.
Especially the <unk>.
<unk> of customers using transactional product rose to 95, nearly 95% by year end up from close to 52% in December .
Yes.
During the current year, we plan to continue working towards gaining share awarded and driving cross selling opportunities among current corporate and SME customers with the goal of becoming a principal bank further contributed to expanding sustainable packaging.
In some.
We focus on those areas, which we can control and our position is stronger political Garnier. This let me turn the call to Mariano.
Thank you Patricia 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 you do.
Earlier.
When looking at our results on a sequential basis, we reported a net loss of nearly 800 gig as vessels for the quarter compared to a net loss of six.
Some of your business with third quarter.
The main factors behind the sequential performance.
First.
The financial income declined 7% or two video vessels, reflecting the full impact of cost of funds.
From the increase in market rates to the prior quarter together with a lower return, but a pleasure that adjusting to it.
Yeah.
Recall that this quarter compare us against the strong third quarter, which benefited from higher market rates on our investment portfolio versus a weaker second quarter.
Cycle.
Provisions increased 23% by $600 million.
Asset quality across all separate language.
Quarter.
Except for consumer finance, which suffers.
From deteriorating macro conditions.
February we are no longer originating new customers, new consumer finance credit cards.
Hello, Matt.
So.
Our sales and clinical personnel expenses of our pipelines are real vessels, reflecting an additional one time severance charges at the bank and Youtube.
Production.
And for.
And 90% of operating a research expenses four nine times at retail vessels as cost savings achieved in the quarter were more than offset by impairment of users goodwill.
Yes.
For.
Silver 14 of last year, we announced our intention to merge with the bank.
There is additional room to be approved by you lose just sort of medium to be does this come April .
Have already successfully transferred all of Q2's loan portfolio of clients to the bank.
We also shut down retail savings accounts.
Now offering clients and accounts for the bank.
By completing this process as perhaps an idea forest with gives us overnight a road of users grow financial assets that were a link with those cash flows.
Total write offs of nonfinancial assets Alex.
Generated an amortization of the remaining assets accounted for 2 million vessels, which produced a loss in the fourth quarter 2022.
Total debt, we recorded an impairment of goodwill totaling seven has averaged 2 million tests.
Yes.
At the same time.
Roger is alluding to the bank will allow the bank to use tax loss carryforward was originated by into with global yields by somebody on a standalone basis.
By recognizing this success.
But that gain frameworks, Brian medium vessels in the fourth quarter.
When excluding one time charges totaling more than 5 billion pesos.
This quarter, which was nearly $2 8 million of regulatory burden in those assets, but with the merger and two or three bigger vessels and severance cost to capture a breaking the efficiencies across the business.
We delivered an adjusted pretax profit of nearly 150 million vessels.
Turning to slide seven.
Our loan portfolio grew below inflation, presumably higher alumina and interest rates following the rifle nature.
Overall ready to run across all business segments.
Overall loan growth was fairly in line with industry trends.
As shown on the chart to the right the loan composition remained unchanged sequentially.
Starting this quarter due to low would be good.
Personal vehicles retail segment.
Moving on to funding on slide eight.
So the Argentine peso deposits increase below inflation, but outperformed the industry average.
Deposits posted a seasonal sequential rate of decline.
Year end, turning to water levels in a highly inflationary economy.
Total royalty.
Focus on strengthening our low cost deposit base continues to yield positive results.
By the nearly 20 basis points year over year increase market share in corporate site deposits.
Turning to slide nine.
Net financial income for the quarter remained unchanged year over year and was down nearly 7% sequentially to 27 vessels.
Our net interest margin for the quarter was relatively stable sequentially at 21.
6% full year net interest margin was up 230 basis points to 19, 8%.
Net interest margin for both the quarter over year.
Mainly driven by interest rate hikes throughout the year political higher inflation levels.
In terms of volumes interest, earning assets for the year.
It's 7% with a lower share of loans, reflecting over a weak demand partially offsetting the higher weight of data.
Good morning.
Yeah.
Okay.
At this time.
Reflecting our focus on asset quality, the total NPL ratio preventative equation stable at three 7%.
An improvement in NPL ratio for commercial loans, offset an 80 basis point decrease in Mcs ratios individual loans added back.
The latter mainly reflected a slight uptick in delinquency and Oklahoma open racks.
It has been progressively tightening credit standards.
Ah remain attentive to protect us.
Net loan loss provisions increased to 83% sequentially, reflecting increases in the consumer finance portfolio with net cost of risk up 200 basis 240 basis points to five 2%.
Brown.
For Q2.
Those those provisions were down nearly 25% with a stable cost of risk.
Ill.
Now turning to page seven.
Efficiency was significantly impacted by onetime charges, resulting from the merger.
And are you moving into right type of integration leverage as we announced with our box to regain profitability.
As shown on the right side of the slide.
We reduced headcount by 31% year over year, mainly due as well as the pandemic, let's sit on that.
As a result.
Net expenses for the quarter were up in the high single digits wages decline both year over year and sequentially.
Now moving on to capitalization.
As shown on slide 12, we closed the year with a tier one ratio of 13% at the middle of our expected range of 12, 5% 13, 5% for cleaning tools.
For a sequential basis, our tier one ratio contracted 120 basis points mainly reflect.
Two parameters of accelerated amortization it goes nonfinancial assets related to the merger with.
With a roadmap of 40 basis points.
Well, Greg that shows by tax loss carryforwards, we could lead towards the emergency room, which reduced the net loss for the quarter otherwise adaptive workouts.
These actions also increased from higher investments in digital transformation initiatives, which were executed at center.
During the quarter. We also continued executing our share buyback program.
Today, we completed 86% of the program invested one seven figure vessels equivalent to 3% of the capital startup the company at an average price of <unk>.
135 space.
Lastly, and increasingly of risk weighted assets more than offset by inflation are testaments of CASM.
Slide 13.
Before opening to CNA presenter Slide 14 to review our perspective for <unk>, which include returning to profitability by the close of cyclical Q2, three and reaching positive adjusted <unk> for the full year 2020.
Let me start with the bigger macro picture.
With the market consensus for annual inflation, reaching nearly 100% from prior estimate of 26% and GDP expected to remain flat compared to 49% growth before.
As part of Central Bank Survey published this morning.
We have adapted our view so they don't have deposit growth.
We now expect our <unk> to grow in line or slightly below inflation, but before we expected to see growth in language.
Hey, Jim.
In terms of deposits.
Now expect deposits to increase in line with inflation.
Earlier, we were seeing a pickup in deposits grow and slightly above inflation.
Yield due to changes in its expectations or on other metrics remain unchanged from our prior quarter views that will do a weak recovery.
With respect to asset quality we.
Anticipate loan loss provisions and net cost of risk for 2023 to remain stable.
Last year with the NPL ratio increasing in the first quarter is relatively unchanged by year end.
So higher delinquency Brito customer system right.
N.
This has continued into January and February .
But this is this good result, higher NPL ratio in the coming quarters at the moment, we maintain our view that we would close.
With NPL ratios in line with year end 2012.
<unk> is expected to remain at 2022 and others.
Our views regarding fee income caused for the bulk of spices productivity. It was anticipated to refract language inflation, while ensuring <unk> is expected to decrease in real terms of three years to recover from the shortfall.
'twenty through 'twenty two.
Operating expenses are expected to increase significantly lower a pleasure reflect for the right type of initiatives implemented in our braking never actually have eight into the company over the past couple of years.
Overall during turning to <unk>, we expect to achieve total cost savings of $5 3 billion of vessels and potential power.
Two two.
Reflecting immediately put to use over the past two years.
This mainly includes preclude expected savings of $3 7 billion vessels from the merger of <unk> into the banks want bigger vessels through the right sizing of our friendship.
In terms of it investments related to our HR transformation. These costs are expected to grow below inflation.
Lastly, we expect to close the year with a tier one ratio at adequate levels, ranging between 12, 45% and 13, 5% by year end 2020.
Recall that 100% of our capital remained steady.
Okay.
And we're ready to open the floor for questions.
Please go ahead.
Thank you Mariano at this time well be conducting a question and answer session.
As a reminder.
And you need to be connected.
We would not be able to take your questions.
Yeah.
Catholic some by voice.
Price ratio hadn't banked on that.
It's always strong you might have.
And your question they can pump begin a Q&A box.
Yield to meet.
One question that I don't know why.
Thank you.
You know that.
One moment final final question.
Yeah.
Yeah.
Okay.
Some comes from having Domino with bank.
Please go.
Our head.
Thank you Anne.
Good morning, Patricio Marianne on tool your team.
For your presentation.
My first question will be how do you see potential normalization of the Argentine economy.
How fast do you think.
We can see the normalization.
And how would you compare it against the macro <unk> administration.
See you doing that today.
Argentina face is kind of your inflation.
Interest rates and a lower level of reserves.
Okay.
Thank you Ernesto.
I will try to answer this question.
Today on them.
The is normalization has to take into consideration as you mentioned.
In Argentina, we are suffering.
<unk> 1991.
As well as <unk>.
We are much more stricter foreign exchange controls.
We went through.
In 2015.
Hum.
If you look on the international side also.
The fact that there are interest rates nominal interest rates.
Much higher.
The higher.
To have many years. This is this is more challenging for countries such as Argentina.
The War Ukraine.
And as well as.
The spike.
Worried inflation commodity prices.
Hi, Bob.
Fortunately with the drought.
It's more complicated for Argentina. So this is a quite a challenging scenario. So regarding the changes we expect we first of all we believe that there will be more consensus there is more political consensus two to apply a shelf set up eight.
Rather than a graduate approach.
That means that.
B.
It is to be expected that the changes will include not only measures.
And seek notice on on the monetary and fiscal <unk>, but also for instance on.
On the neighborhood calls, which absolutely necessary having setbacks.
It's you have to expect appropriate.
222 exits the foreign exchange control, we'd take time, and that's that part with <unk>.
I would guess that our weakest with a team that's going to be quite quite well.
And with that with the.
Deregulation and liberalization of foreign exchange controls.
Then to changes in the regulatory changes will move com in sync a synchronized with with all the changes in that in.
Not in the business and also the normalization of fiscal policies and so on so it was gonna be synchronized I'm gonna be southern.
I hope you.
Answer your question, yes, perfect. Thank you very much.
Yes.
Second question related to your market related revenues position.
I was wondering how would you see it tends to <unk> balance sheet. This year, considering that inflation and rates will continue at a high level.
So should we continued to see strong market related revenues.
Again.
Will your position there I mean, the leaves no facts and do a bond so.
Anything you can share on that will be very careful.
I don't know.
Sure.
Yes.
Okay.
As Mike pointed out in terms of what we see in terms of guidance.
<unk> deposits.
And grow in line with inflation loans will supposedly at interest rates below inflation.
And.
And in that context, we see therefore there.
The portion of <unk>.
Government bonds, particularly central Bank notes.
Continue to be a significant part of our balance sheet.
Jim.
We also think that.
We we are in a good position to face this situation given the cost reductions that we've made so the impact of our hips that's.
Inflation will have on our cost base with the farm much.
And then what we have in our cost base is during 2022 so in a very difficult context.
We.
As a result to hit somewhere in the mid <unk>.
The 12 five to $13 five capitalization around 13% of Capex of which is where we stand right now.
I don't know if I address your question on Mexico, if not please let me know.
Yes, thank you very much.
Yeah.
Thanks, Tom.
Our second question comes from Carlos Gomez.
A key high causing us to go ahead.
Hello, Good morning can you hear me.
Yes got it.
We can tell you.
Thank you very much for the presentation predictor presentation and for taking our questions.
My question is also about the prospects for the future.
Look back at.
The last two years of results.
Because of their very high inflation, you have hot to yourself.
Looks like that the comprehensive income level.
Now youre gearing for a possible change someone at some point.
Some point, we know that that demand will come back.
Your capital ratio is adequate but one has the feeling that you would be doing better.
More capital in the bank.
Would you consider perhaps doing some preemptive recapitalization too.
To prevent any possible probably in the future and to be in a better position to be ready to grow when the demand comes back would you consider injecting more capital in the bank at this point.
Uh huh.
Okay I understand your question as it relates to a capacity of growing.
With our capital levels.
We believe got pushed.
First of all all the changes we've been conducting.
Over the past couple of years in particular.
But in the last year or even transformational year that allow us to do to make <unk>.
Michigan had ma'am.
Didn't you guys headway in.
Reducing on the cost side.
The 21% reduction in that.
Head count.
The.
The 20.
27 branches that were either.
Transfer.
For clothes and merged.
And in addition.
We also expecting an additional 20 branches that we expect to close by the first half of this year. All of these is a major swing in cost and is a way of capital creation.
On the revenue side.
We believe that.
It depends.
Demand loan demand.
And loan demand will come.
When.
The consumer confidence improves we.
We don't believe this will happen this year.
We believe that it might have been maybe in the second half of 2024. So this is gonna be a difficult year for us but.
We believe that once your question, Doug when demand picks up.
And we have sufficient capital to compete and to provide to our customers.
Hi.
Because we have we are we are we are working in.
The bank in a transformation that is going on on all the strategic pillar of it so not only working on cost quality and on also on the cost of funding.
Improving the cost of funding working on efficiency that are working on maintaining the credit quality at working in digital adoption. All of this is allowing us we'd allow us we expect to be able to compete with our capital and growth when.
When things arise when there is a change in the expectation.
I Hope I understood your answer your question.
You have answered my question, but again, the fact is that the.
Capital ratios.
Great.
We know that when Argentina at them around the demand is not for 10% growth is 400% growth and at that point, you will need the capital and also the fact that you don't have a lot of success with salaries.
It's also affecting the way that the.
This result is coming now.
With inflation again, I'm, just suggesting that perhaps.
You know Doug recapitalizing, the bug in anticipation of demand coming.
Coming through might.
It might be something that you think you might want to consider.
Thank you very much.
Yeah.
Thanks, a lot thanks.
So we have I would say Nick.
Q&A box.
It comes online.
Hello.
Two questions one maybe we answered that as one of them.
On the line.
I would like to play in terms of what costs are carrying on with less amount.
Nonrecurring.
So even with that.
At this time no no.
Thank you.
Yes.
We want to get these questions, Yes, you spoke about Israel.
Another one.
Regarding cost and Capex.
That's why I regret.
Not requiring less TR.
We incurred a.
Severance costs from 2010.
Two with adults.
The amount of 75 vessels.
That's in a year, where we reduced.
So the 1% the head count.
More than 90%.
All business unit.
This is something that will be required from a current of course.
The reservoirs, we didn't know dropped to zero in 2023, but they will be significantly lower.
Because it was struggling a little bit already.
But also our asset balances, we expect to have two Delaware.
Okay on the coast so that does.
And a big important savings opportunity.
On that front.
And also.
In the <unk> business unit.
Where we will get there.
I think both segments financial services.
In 2022, you look at doses of eight vessels before taxes or corporate video visuals net of taxes.
So again.
This segment, which has already been reduced.
Sure.
And of course, the operational costs.
<unk> dramatically reduce their minds to the bank and we're keeping the customers.
This is this is still a segment that is study.
The challenge.
Next year, so David doses with no dropped to zero.
Again, there with the.
It's very important to opportunity for operators and those costs are and I will say that.
One of the major shifts.
<unk> of avoiding that nonrecurring costs that were no recovery in 2022, but they weren't looking for Nokia and we wouldn't have to the critical 2023, and that's allowing us.
To return to a positive Roe.
Together with our or.
What other initiatives are there on the revenue side and other.
Cost savings initiatives.
Yes.
But with these two items.
Uh huh.
Got it.
Okay.
Color on how to execute.
Okay.
Okay.
Okay.
And then the second question.
That's weird.
Any of these type costs.
Listening.
Hum.
And then yes.
During 2019.
Yes, well regarding NEC <unk> digital.
Already emerged as a biomarker for those surfing farmout processes remain.
The operational side.
Update.
Uh huh.
Of the cost.
That's already taken place.
All of these customers.
Or within the retail segment.
And we have also stopped originating.
In Asia, the retail stores.
Seniors.
February .
But give the yeah.
Afterwards.
Yeah.
The transfer from you to the buyer.
Active offering.
Surveys whenever you'll services goodbye.
In that context, we will reduce dramatically.
And of course, all of these operational mentioned before.
On the cost of risk side.
This is a segment that's clearly suffered another 2022 and also the insurance in 2023 and bus.
Is that the lower wave, but it shifts and it used to have now.
Around 6% of our loan portfolio.
Thank God.
By studying the new originator of customers at work.
It started really with a credit card.
Periodically with Brazil, with personal loans and insurance. So we discuss in this context, where this particular context and noga repayment so far.
I still think the originating the clients, where we know their behavior.
Yeah, I think what it <unk>.
We expect to.
So to make those those customers.
Buster and reduce the impact in the cost of risk that's why all sorts of yogurt.
Of the growth, we expect cost of risk I think the.
<unk> to be stable.
A year.
Great.
Yeah.
Hey.
Hello.
She.
<unk> I don't know if it comes from day one.
Okay.
I think we are right at the end of today.
Yeah.
Then in the Q&A session.
Thank you for joining us today, we have the same.
Now as a company, we look forward to meeting more fuel.
And for mining.
I think that's important.
Maintain we remain available.
Any questions.
Thanks.
Okay.
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