Q2 2026 Grupo Supervielle SA Earnings Call
Speaker #2: This meeting is being recorded.
Speaker #3: Good morning and welcome to Grupo Supervielle's Q2 2026 earnings call. I'm Ana Bartesay, Treasurer and IRO. Today's conference call is being recorded. For the Q&A session, please ensure your full name appears on Zoom.
Speaker #3: You can ask questions by voice or through the Q&A chat box. Speaking today are Patricia Supervielle, our Chairman and CEO; Gustavo Paco Manrique, CEO of Anco Supervielle; and Mariano Biglia, our CFO.
Speaker #3: Diego Pisuli, CEO of Invertir Online, will also be available during the Q&A session. Before we begin, please note this call may include forward-looking statements.
Speaker #3: Please refer to our earnings release and SEC filings for further details. Patricio, please go ahead.
Speaker #4: Thank you, Ana. Good morning, everyone, and thank you for joining us today. The second quarter marked our return to profitability and further progress in transforming Supervielle.
Speaker #4: Most importantly, the changes to our operating model are beginning to translate into a structurally lower cost to serve. The right-sizing program is now largely implemented, and aligned to our current operating model.
Speaker #4: Reflecting the full quarterly salary savings already secured, structural return on average equity would have reached 14.4%, illustrating the earnings support provided by our leaner operating improvement.
Speaker #4: Margin benefited from funding costs declining faster than asset yields. Asset quality indicated indicators continued to move in the right direction with NPL formation declining for a second consecutive quarter, and cost of risk improving sequentially.
Speaker #4: While credit costs remained elevated, these trends reinforced our view that the peak is behind us, and our collection, refinancing, and underwriting initiatives are beginning to produce results.
Speaker #4: We peso credit demand still subdued; we continue to prioritize risk-adjusted returns over volume, while actively managing our funding mix and maintaining a strong liquidity position.
Speaker #4: We also made further progress across our ecosystem. The partnership with Aerolíneas Argentinas is one example of how we are strengthening the value proposition for identity customers.
Speaker #4: At Invertir Online, assets under custody reach $3 billion, reflecting continued traction with higher value clients and deeper investment relationships. Overall, we enter the second half with a structurally leaner platform, improving credit trends, and a stronger foundation for disciplined, profitable growth.
Speaker #4: Paco and Mariano will expand on this shortly. Let me turn briefly to the macro backdrop to put our second quarter performance in context. Conditions became more stable during the quarter, with sustained FX purchases since the start of the year moving net reserves into positive territory.
Speaker #4: Interest rates remained broadly stable, contributing to lower funding costs and margin recovery, while monthly inflation declined for 3 consecutive months. However, greater stability has not yet translated into a broad-based recovery and peso credit demand remains subdued.
Speaker #4: Policy momentum is improving visibly, with structural reform supporting a more predictable macro environment, and reserve accumulation reinforcing FX stability. Argentina is undergoing a transition toward an export- and investment-led growth model.
Speaker #4: Twenty-one RIGI projects have been approved, representing approximately $47 billion of planned investments, primarily in energy, mining, and infrastructure. This should create attractive financing opportunities across the broader value chain.
Speaker #4: Greater visibility of the government's financial plan for sovereign debt maturities in 2026 and 2027 has also reduced near-term refinancing uncertainty. Nevertheless, the recovery remains uneven.
Speaker #4: Looking ahead, continued progress will depend on consistent policy execution and further strengthening of the institutional framework. Maintaining fiscal discipline, advancing monetary normalization, and gradually removing remaining FX restrictions will be essential to reinforce confidence and contain volatility.
Speaker #4: Overall, the direction is constructive and should gradually support credit demand and asset quality. Supervielle enters this phase with gradually improving credit trends, a structurally leaner platform, and a solid capital formation.
Speaker #4: Paco will now discuss how the bank is positioning itself to capture these opportunities through disciplined, profitable growth. Paco, please go ahead. Thank you, Patricio, and good morning, everyone.
Speaker #4: Turning to slide 5, I will focus on how we are managing the bank today and where we see a strategic growth opportunity for the second half.
Speaker #4: On the balance sheet, prudence remains our priority. Peso loan demand was soft, and with system delinquencies still elevated, we chose not to chase volume.
Speaker #4: We maintain selective origination through transactional deposit across retail and corporate clients. And actively manage the funding mix. As margin normalized, every new loan must continue to meet our risk-adjusted return thresholds.
Speaker #4: On asset quality, delinquency and cost of risk improved sequentially, although both remain elevated. The collection, refinancing, and customer outreach initiatives launched in December are producing early results.
Speaker #4: While recent origination cohorts are performing meaningfully better, we will maintain this discipline as we gradually rebuild lending. On structural efficiency, the right-sizing plan is largely completed.
Speaker #4: It reflects the work we have been doing for some time to redesign the service model without compromising service quality. Analyze personal savings are approximately 42 billion, with the full quarterly run rate benefits starting in this third quarter.
Speaker #4: Turning to growth, our focus is on expanding the loan portfolio profitability through a targeted rate than broad-based approach. In retail, we are focused on expanding and deepening relationships across three priority segments: payroll, identity is our premium offer, and senior citizens.
Speaker #4: Our enhanced scoring capabilities allow us to identify the stronger customer and serve more of their transactional. Saving and credit needs through tailored products. In corporate banking, the strongest opportunities are in Vaca Muerta, mining and selected regional economies, where actively in more dynamic and US dollar loan demand remains strong.
Speaker #4: On partnerships, we recently reached an agreement with Flash Argentina S.A., a company that originated within the Mercado Libre ecosystem. Through which we will finance person-to-person vehicle transactions listed on Mercado Libre, starting in the fourth quarter of this year.
Speaker #4: In short, we are combining a leaner operating model, disciplined balance sheet management, and sharper customer selection to resume growth where we see good credit behavior and compelling economics.
Speaker #4: With that, I will hand the call over to Mariano, who will discuss our financial results and updated guidance. Thanks.
Speaker #1: Thank you, Paco, and good day to everyone. Turning to slide 6, attributable net income turned positive, reaching 13 billion pesos in the second quarter, a swing of more than 31 billion pesos when compared with the loss of the 18 billion pesos in the first quarter.
Speaker #1: Excluding 23 billion pesos in after-tax extraordinary severance charges, adjusted net income reached 36 billion pesos with adjusted ROE of 12.4%. The sequential recovery was driven mainly by stronger net financial income, lower inflation adjustment, and improving credit costs, together these factors more than offset softer fee income and modestly higher adjusted operating expenses.
Speaker #1: Slide 7 takes this analysis one step further by illustrating the earnings capacity of our streamlined cost base. After incorporating a full quarter of salary savings from the right-sizing actions of the second quarter, structural net income would have reached 42 billion pesos, equivalent to a structural ROE of 14.4%.
Speaker #1: Applying the same framework, structural net income for the first half would have totaled 53 billion pesos. The program reduced our workforce by 553 employees during the first half, including 262 in the second quarter.
Speaker #1: With these actions now completed, the structurally lower cost base should support continued improvement in efficiency and profitability. Turning to slide 8, total loans declined just over 1% sequentially, and increased nearly 9% year on year.
Speaker #1: Commercial lending edged higher, supported by U.S. dollar loans, which grew 6% in original currency. Retail loans, in turn, declined 2%, reflecting still soft demand and our selective approach to origination.
Speaker #1: As Paco discussed earlier, we expect retail growth to rebuild gradually as inflation declines, while maintaining disciplined credit criteria and a balanced profitable portfolio mix.
Speaker #1: Turning to asset quality on slide 9, our NPL ratio improved 10 basis points sequentially to 5.5%. Meanwhile, the financial system ratio deteriorated 60 basis points to 7.6%, placing our ratio 210 basis points below the industry.
Speaker #1: Quarterly NPL formation declined for the second consecutive quarter, and was approximately 20% below the fourth quarter peak, with retail formation down 21%. Net cost of risk eased to 5.6% from 6% in the first quarter, reflecting the early benefits of our collections and refinancing initiatives.
Speaker #1: Together, with disciplined risk adjusted origination. Importantly, recent origination cohorts continue to perform meaningfully better. Together, these trends reinforce our view that asset quality has entered a gradual improvement phase.
Speaker #1: Turning to slide 11, net financial income reached 295 billion pesos increasing 8% sequentially. Net interest margin expanded sequentially by 250 basis points to 20.3%, above our full-year guidance, as funding costs declined faster than yields on interest earning assets.
Speaker #1: Now, moving on to the outlook for 2026, we are updating our expectations to reflect first half performance and normalizing operating conditions. On loans, we are lowering real growth expectations to between 10% and 15%.
Speaker #1: This, however, is a pickup from the 7% decline experienced in the first half, driven by the initiatives Paco outlined. The mix remains skewed toward corporate lending with retail growth expected to resume as activity employment and disposable income improve.
Speaker #1: We are also raising our NIM guidance to a range of 17% to 19%, first half NIM of 19.7% benefited from the declining in finding costs while lagged asset repricing could waive on margin in the second half.
Speaker #1: As shown on the next slide, we now anticipate net fee income to decline between 5% and 8% in real terms, as softer activity waived on banking fees.
Speaker #1: Adjusted operating expenses are now expected to decline between 6% and 4%, a greater reduction than anticipated, reflecting our successful headcount right-sizing plan. We are now tightening our reported ROE expectation to between 2% and 4%, consistent with the larger-than-originally-anticipated headcount right-sizing.
Speaker #1: Excluding extraordinary severance charges related to the efficiency program, adjusted ROE is now anticipated to range between 8% and 10%. Importantly, this range does not yet reflect the full benefit of the ARS 42 billion in annualized salary savings, which will support the underlying cost structure into 2027.
Speaker #1: Finally, we are raising the CET1 guidance to a range of 12% to 14%, following softer loan growth. All other outlook metrics remain unchanged. This concludes our prepared remarks.
Speaker #1: We are now opening the floor for Q&A.
Speaker #2: Thank you, Mariano. At this time, we will be conducting the question the Q&A session. As a reminder, to ask a question, you need to be connected to a Zoom platform.
Speaker #2: To ask a question, please press the "Raise your hand" button and press it again to withdraw your question. You can also send your questions in written form via the Q&A box.
Speaker #2: We will ask you to limit yourself to one question and a follow-up, and then you can raise your hand again. The first questions come from Camila Acevedo with UBS.
Speaker #2: Camila, please go ahead.
Speaker #3: Okay. Sorry.
Speaker #2: Sorry, we have an issue.
Speaker #3: Avoid. No, es que no
Speaker #2: Sorry, because we are not able to allow some of the micros.
Speaker #3: No.
Speaker #2: Okay.
Speaker #3: No.
Speaker #2: Anfitrión.
Speaker #3: Y como anfitrión directo, porque creo que están las dos opciones.
Speaker #2: Sí, pero no me acuerdo porque tiene su máquina trabada.
Speaker #3: No, las dos opciones las tenemos.
Speaker #2: Sí, para mí lo que tiene que hacer es dar de baja la sesión.
Speaker #3: ¿Dar de vuelta?
Speaker #2: ¿Eh? Nunca nos pasó esto. Never happened this.
Speaker #3: Sí.
Speaker #2: Para mí, vos tenés que dar de baja tu sesión. está ahí viniendo con otra, mira.
Speaker #3: A ver.
Speaker #2: yes. No.
Speaker #3: Y a ver. Hi, Camila. Can you hear us?
Speaker #4: Yes, can you hear me?
Speaker #2: Yes, and so sorry, all of you.
Speaker #4: No problem.
Speaker #2: ID, so thank you, Camila, again. Please go ahead.
Speaker #4: No problem. Thanks, everyone, for the space for questions. I have a question on profitability and efficiency. The efficiency ratio improved to 63%, but would have been close to 52% excluding extraordinary severance charges.
Speaker #4: When does the company expect the full run-rate benefit of the ARS 42 billion in annualized personnel savings to be fully reflected in the reported efficiency metrics?
Speaker #4: And in profitability, given that the structural ROE reached 14%, how does management expect this trend to continue throughout the year, and what specific milestones should have should be met to sustain this recovery?
Speaker #4: Thanks.
Speaker #3: Mariano, do you want to answer this? Maybe I complement afterwards. Sure, Patricio.
Speaker #5: Hello, Camila. Thank you for your question. First, regarding efficiency and the capitalization of the savings from the retirement plan, we will start capturing the full benefits of this plan in the third quarter.
Speaker #5: As we largely finish the plan as of the end of the second quarter, those savings that we quantified as if they were captured in the first half of the year will already be captured in the reported SG&A and the reported net income in the third and fourth quarter of this year.
Speaker #5: So the efficiency, the reported adjusted efficiency for the following quarters, will be the same or almost the same and, of course, it will be much lower than in the first and second quarters of the year.
Speaker #5: Then, regarding ROE, as you said, and we showed on the presentation, the adjusted ROE when we account for when we exclude severance cost, but we also account for the savings as if we had made the efficiencies from the beginning of the year or the beginning of the quarter, the adjusted ROE would be 14.4%.
Speaker #5: Then, for the following quarters, as I mentioned, we will continue capturing the benefits of this headcount reduction. But also, on the other side, we think margins will be more pressured in the following quarters because, in the second quarter, we saw a reduction, a decline in the funding cost, which we captured very well to increase the NIM of our loan portfolio and also on the investment portfolio.
Speaker #5: But going forward, we will also see pressure on the asset side—interest-earning assets. So the NIM we saw in the second quarter maybe will be lower going ahead.
Speaker #5: So that will partially offset the benefits of cost savings, and ROE for the second part of the year will maybe be higher than in the first half, but lower if we only take the analyzed second quarter.
Speaker #5: So that's why we gave guidance of an ROE closer to 10% for the full year, adjusted. Just to complement and give some context on the operational side and looking into the future, we conducted a very successful efficiency program through this voluntary retirement program.
Speaker #5: And this didn't produce any type of disruption NPS continues to improve productivity. It's becoming higher. And basically, this the efficiency agenda is permanent. For us, we will continue to look in the future for opportunities to improve our cost to serve.
Speaker #5: However, you should not expect another step change of the magnitude we delivered in the first half of this year.
Speaker #4: That's super clear. Thanks very much.
Speaker #2: Thank you, Camila. Our next questions come from Ernesto Gabilondo with Bank of America. Good morning, Ernesto. Please go ahead.
Speaker #6: Thank you, Ana. Hi, good morning Patricio, Paco, and Mariano. Congratulations on your results, and thanks for the opportunity to ask questions. My question is related to your long road expectations, but for next year.
Speaker #6: This year is expected to be between 10% to 15%. You were expecting above 20% before. And I believe this is not specific to Supervielle.
Speaker #6: This is more for the industry. So, how should we think about loan growth next year? I don't know if you have started to participate in the financing of the VG projects.
Speaker #6: Are you already perceiving the announcements of the VG projects taking place? You mentioned these 21 projects. So, are they already taking place, or do you think this would be more tangible after the presidential elections next year?
Speaker #6: Again, all to understand, long growth trends for next year. Thank you.
Speaker #5: I will give you first the more short-term answer. Yes, the guidance is 10% to 15% for the full year. But at this stage, we are coming off from minus 7%.
Speaker #5: So this implies meaningful growth in the second half. But this is not a forecast that depends on a broad macro pickup. We are counting on a fourth-quarter surge in demand across a series of initiatives that we control.
Speaker #5: First, we completed a disciplined asset quality work in the first half. So, we know who are the good clients and which are healthy, and that allows us to conduct targeted campaigns on our better-performing retail segments.
Speaker #5: Second, we continue—and this is also maybe an answer to your earlier question—we continue to focus on the dynamic sectors of the economy, including export industries, mining, energy, and all the value chains around them, where dollar loan demand is real and growing.
Speaker #5: And third, we also have specific initiatives that we are launching this quarter. Particularly, Paco mentioned Flash, which is a new company that has grown or was born in the Mercado Libre ecosystem and is focused on P2P financing for auto loans.
Speaker #5: And, but on the retail side more broadly, demand will need inflation to continue declining and disposable income to continue improving. With that happening gradually, we expect growth to build progressively rather than surge.
Speaker #5: So our guidance for this year is what we can reasonably see and where we can act upon. Regarding next year, I think the business climate will definitely on the agenda of the really agenda it's going to be a major change in we are already the country has record export this year.
Speaker #5: But I think next year the trend will continue in this sense, so there will be lots of opportunities to finance the value chain of these dynamic industries.
Speaker #5: I am hopeful and I optimistic that this will also reflect in on the retail side with more let's say a better appetite for credit demand on the retail side.
Speaker #5: Of course, we will be entering an electoral year and this will also probably affect everything. But we are optimistic. And I think 2027 will be a very good year.
Speaker #3: And I say something, Patricio.
Speaker #5: Yeah.
Speaker #3: All Ernesto, how are you? All we know about the situation that we had in the first semester in terms of delinquency, in terms of long growth.
Speaker #3: So looking forward, the growth we are targeting in the second half and for the next year comes from our better performing retail segments. Also, we made significant adjustment in our credit scoring models.
Speaker #3: So we are believing that we have been placed a very good score. Also, the organic growth will come with the from a strategic sectors, energy, oil and gas, mining, as you mentioned about the regie, basically we support all the value chain for the regie, the main regie projects.
Speaker #3: It's basically our targeting is our size for the bank. So we are entering a new semester with the confidence that we have in place a new credit score and also the customer knows better their own payments and behavior.
Speaker #3: So, we are looking forward very well.
Speaker #6: Now, this is super helpful. Thank you very much, Patricio and Paco. And just so, all of the real projects that are taking place, Supervielle will look to finance all the value chains.
Speaker #6: So, you think this will be more visible in 2027—maybe after the presidential elections, removing the uncertainty. And that is when we will see all these projects become more tangible, right?
Speaker #3: Yes, yes. In 2027, we will see something, and then, of course, due to the election and during October. But yes, but yes, Ernesto, our target is the value chain of those Regie projects.
Speaker #3: Basically, that's our target, and our business proposition goes there.
Speaker #6: Perfect. Thank you very much, Paco.
Speaker #3: No worries.
Speaker #2: Thank you, Ernesto. Our next question comes from Pedro Leduc with Itaú. Good morning, Pedro. How are you? Please go ahead.
Speaker #7: Hi, Ana. Hi everybody. Thank you very much for the call. Congrats on the numbers. I would like to discuss a little bit about your names.
Speaker #7: I'm 24% this quarter. Very nice improvement. We know there were some unusual aspects about this quarter. But anyway, would like to take your brains a little bit and how do you see this level going forward.
Speaker #7: And trying to puzzle it together as well. Looking at it from a funding cost perspective, it was a nice improvement, but your mix in funding seems to have shifted a lot with institutional time deposits gaining a lot of share.
Speaker #7: I would imagine that they're not cheaper than the retail deposits, but maybe they offer more duration. So help us reconcile a little bit this funding mix shift with the better names, and how we should model it in the second half.
Speaker #7: Thank you.
Speaker #5: At a high level, what you saw in the second Q was active funding optimization where we adjusted both mix and the tenor of our funding to take advantage of relative pricing while our strategic focus on growing is always on growing franchise deposits that remain unchanged.
Speaker #5: So Mariano, maybe you can take us through the details of this funding strategy. And then how this also translates and how do you reconcile also into ROE and sustaining the names.
Speaker #5: Sure, Patricio. Hello, Pedro. Regarding the deposit mix, as Patricio said, we see a shift, but it's mainly from corporate to institutional deposits, not from retail.
Speaker #5: And this is mainly tactical, as we want to be more efficient on the cost of funding. If we go to institutional, it's because we see a lower cost of funding.
Speaker #5: Maybe compared to the largest corporates, this is not a reduction in BSME's balances, deposits. Or retail as I said before. So the same way we transition, which is tactical, we may transition back to corporates.
Speaker #5: And we don't change our strategy of gaining deposits from our core customers, both retail and corporates. And how this translates into NIMs and what we see going forward, we saw a very good NIM in the second quarter, which translated into good figures of ROE when adjusted for severance costs.
Speaker #5: This level of mean was achieved by capturing the lowering of the cost of funds. This also relates to the deposits mix and to tactical movements, and so that allowed us to increase spreads both in loans and our investment or bonds portfolio.
Speaker #5: So, seeing into the third quarter and the second half of the year, we see that interest rates will remain stable. And now we have a repricing on the asset side too.
Speaker #5: So names will be more pressured, as I also explained before, in the second half of the year. So maybe the name for the second half will be a bit lower, or a bit higher, than the first half of the year, but lower if you only see the second quarter in annualized terms.
Speaker #5: To complement, if you look at our balance sheet, on the loan balance sheet, almost 65% is today is corporates. And 35% is retail. So clearly, this has to do with the macro context and the subdued demand on the retail side.
Speaker #5: As I mentioned before, we know now, with all the procedures we have in place, strong underwriting standards, and the history of our own clients, we know where to target.
Speaker #5: So we are conscious that we want to grow on the retail side, but very responsibly, in order to help the name looking forward.
Speaker #7: Great answer, both. Thank you.
Speaker #2: Thank you, Pedro. We have a question now from Yuri Fernandez with JP Morgan. Good morning, Yuri.
Speaker #7: Hey, Ana, good to see you. Hello everyone. Also, congrats on the quarter. I have a follow-up on the names, because I got the impression from the Leduc answer that maybe the second half could be better.
Speaker #7: But your guidance points to 17% to 19% for consolidated margins. And if we were to assume the run rate you had in the first half, closer to 20%, that would indicate a major drop in margins.
Speaker #7: So what are we missing here on the names? Should it go down in the second half or should it remain should be more resilient?
Speaker #7: Just trying to understand, because I think the guidance indicates 17 to 19 on the margins. So, this implies in this drop, and then I can follow up.
Speaker #7: Thank you.
Speaker #5: Yes. Hello, Yuri. Yes, that's right. Our guidance for NIM is from 17% to 19%. So this implies lowering NIM in the following quarters when compared to the second quarter.
Speaker #5: If we look the first six months of the year, maybe we will see different dynamics for the second half because on the first half, we started with very high interest rates and a lot of volatility, which negatively impacted the name.
Speaker #5: So we are not expecting that scenario to repeat in the second half of the year. So maybe it will be higher than the first quarter and lower than the second quarter.
Speaker #5: So, not necessarily—I will correct that—not necessarily higher than the first half of the year, but it will have different dynamics. We don't expect that high volatility and a significant reduction in the funding costs. It will be more stable, but on the average of the semester, at a similar level.
Speaker #7: Okay. No, not clear. And then, if I may, just a similar exercise, but with cost of risk and asset quality. And congrats—I think NPLs are improving, the new NPL formation is improving.
Speaker #7: Then I have just a follow-up on coverage. If you can provide any kind of color. And similar exercise as margins on cost of risk because if you take the guidance of cost of risk of 5.3 and 5.8 and we plot the run rate of the first half, it implies a very broad range on the second half.
Speaker #7: It should run between 4.8% cost of risk and 5.8% cost of risk, right? This quarter has been tracking around 5.6%. So where should cost of risk be?
Speaker #7: Should it be closer to the low end of this kind of soft guidance, or should we still see a challenging outlook for asset quality, with cost of risk being a little bit higher?
Speaker #7: Thank you.
Speaker #5: Well, the cost of risk—we also saw an improvement there in the second quarter, and we expect to see further improvements in the third and fourth quarters.
Speaker #5: We are still in an environment where we have now seen a peak in the NPLs, and that also translates into lower loan loss provisions and lower cost of risk.
Speaker #5: But we are still in a period where mainly the SMEs were the ones who suffered in the first half of the year. Individuals were in the last part of last year, and that's when we changed our credit policies and reviewed our credit models.
Speaker #5: And then SMEs were more impacted. Now, for the second half of the year, we expect that to improve gradually and also to resume growth, as Patricio explained before.
Speaker #5: That will also help to lower the cost of risk. But we expect to see those dynamics, not much lower than 5%, although it might be held by growing on the corporate side, but when we resume growth also on the retail side, it will be more impacted.
Speaker #5: So on the average, we expect it to be within the range of 5.3, 5.8%, maybe of course we expect it to be on the lower range, on the lower part of that range.
Speaker #5: But still, with the visibility that we have, this is the range that we can give as guidance.
Speaker #2: Yes. I'm sorry, maybe if I may add, we decided not to change these two guidance for these two metrics this quarter, Yuri. Maybe that's mainly because NPLs and cost of risk are still high.
Speaker #2: But yes, maybe we could be expecting something to be closer to the lower end, but still at a very high level. So that's why this is maybe one of the only metrics we have not changed this quarter to be a bit more conservative.
Speaker #7: No, thank you, Ana. Thank you, Mariano. So, basically, just to summarize: Two things for risk-adjusted margins—maybe not as strong as this quarter, but you're very confident on the level of margins.
Speaker #7: They will not be as low as the first quarter. So something in between or maybe closer here. And cost of risk didn't revise the guidance, still challenging outlook, but things are slightly improving.
Speaker #7: So maybe the low end of the guidance of the 5.3. Does this summary make sense? Did I get the message correct? Mariano?
Speaker #5: Yes, it makes sense. Maybe we should have changed to be more optimistic, but this is what management thinks. However, I am more optimistic.
Speaker #5: We will see in the next quarter. We expect that it will improve the cost of risk.
Speaker #7: No, thank you, Patricio. It's Latin America, right? Argentina. So sometimes, being conservative is the right approach. Thank you very much, everyone.
Speaker #2: Thank you, Yuri, for being here. Our next question comes from Pedro at Latin Securities. Hello, good morning, Pedro.
Speaker #8: Hello, Ana. Hello, everyone. Thank you for taking this call. I wanted to ask on dollar lending. It's kind of 20% up year to date.
Speaker #8: I wanted to ask how much runway you see in this segment? And maybe link it with recent news you’ve seen, maybe regarding the brands and the press saying the government wants to attempt to change some regulations to allow banks to channel more of this dollar liquidity into credit.
Speaker #8: What do you think about that? Is there room to do it?
Speaker #5: I think that certainly, for individuals, it will not happen. Dollar loans for individuals will not happen because I think even the president of the central bank was clear on that.
Speaker #5: There has been very bad example very bad precedent or examples in I think in the Peruvian economy when they tried. But on corporations, I think that there is a possibility that some corporations that even though they are not exporters or suppliers to exporters, but they have strong business models that many of which have also they are linked to or they are revalued by dollars the way that they manage the business.
Speaker #5: Then certainly, there could be more demand on these new companies for the banking system, and we will consider it also. So, definitely, we will consider it.
Speaker #5: Because the country the landscape of the country is improving. We have we are at this stage in a record never seen this type of exports in the country.
Speaker #5: So dollars will be flowing, and next year I think it's going to be even better. So, on this side, you also see the current account of the economy is in good shape.
Speaker #5: So, I think there is a possibility—it's certainly on the agenda—to start to lend to more companies in dollars. I don't know.
Speaker #7: Give me one.
Speaker #5: Yeah.
Speaker #7: See? Give me one minute. Hola, Pedro. Thank you for your paper this morning. For me, if Argentina continues with the focus on the strategic projects, supported by strategic resources, I believe there is no limit for U.S. dollar loans.
Speaker #7: We have a big space for that. And as you know, we have huge initiatives going forward. So for me, in order to execute strategic projects, I don't see a limit in the near future.
Speaker #7: The opportunity and the room are very big. Perfect. Super clear. Thank you, Paco. Thank you, Patricia. Gracias, Pedro.
Speaker #2: Thank you, Pedro. We have a question now from Carlos Gómez López with HSBC. Hello, good morning, Carlos.
Speaker #9: Hello, and good morning. And congratulations, among other things, on your deposit growth—8%. That was quite good. Two questions. One is regarding the margin, and you expect the asset to reprice in the second half following the repricing of the liabilities.
Speaker #9: Does that apply to individual loans, or mostly to corporate loans? And have you already seen, by now—the end of the middle of August—a decline in spreads, either for corporates or for individuals?
Speaker #9: And second, I would like to touch on inverted online. I was looking at the numbers on page 10 of your report, and I see that the number of accounts has actually declined slightly.
Speaker #9: The income has actually halved two quarters ago. We understand this is cyclical, but we would like to know what your prospects are for this business to grow in the future.
Speaker #9: Thank you.
Speaker #5: All right. Do you want to answer the first part? Okay, sure. Hello, Carlos. Thank you for your comments and your questions. Regarding the first part of your question: margins, or the NIM, are starting to be more pressured because of asset repricing, mainly on the corporate side.
Speaker #5: On the retail side, we have longer-term loans such as personal loans and car loans, and we were more restrictive on origination. Due to the increase in delinquency, interest rates haven't been reduced as much as the cost of funding reduced.
Speaker #5: But on the corporate side, which are more short-term loans and it's almost two-thirds of our loan book, that's where we see the effect of these repricings.
Speaker #5: So yes, we have been seeing this since the end of the second quarter. We see it on a month-to-month basis, and also in the third quarter. The spreads on originations haven't been reduced.
Speaker #5: They are still the same. They are good spreads adjusted for risk, both for corporates and individuals. But from a balance sheet point of view, the repricing is faster on the corporate side.
Speaker #5: And then the second point of the question.
Speaker #8: Yes. Hi, Carlos. So regarding inverted online, something you we experience is that the decrease in activity in MAUs amongst the active user in the 90 days active users it's due to a normalization in Argentina so in our business when there is some volatility and economic volatility and it can be affects volatility some high inflation or even volatility in the interest rates we see a sharp increase in the activity and then opening accounts in yield we are comparing first quarter second quarter to first quarter in the first quarter especially in January part of February we have some volatility in the interest rates market and that drove an unusual activity.
Speaker #8: What we think or we see is that the underlying trend it's a more stable macroeconomic environment. So the numbers or the growth or the activity we see in the customers especially during second quarter it's more like the normal situation in Argentina where interest rates it's lower than it was in the past and with less volatility the inflation is going down and also the effects under control.
Speaker #8: So we think what we see in our platform is customer customers are staying in the platform are less active and they are shifting the behavior in the platform.
Speaker #8: They are capturing short-term opportunities, like the one I mentioned with interest rates. They are starting to shift to more investor-oriented investments, and we think it's, for the long term, it will make our business more sustainable. Also, we think it's a good thing because we are optimistic about the future in Argentina with the stabilization of the macro and the opportunities in the capital markets. We think that the nature of a broker is to be the place for investors to channelize their savings and investments. We think that what we are seeing is a more normal behavior that's kind of new in Argentina compared to the last years.
Speaker #8: If I might compliment, if you just see what happened in the first half of the year, the assets in custody for Invertir Online, as well as the assets under management for funds, have grown considerably.
Speaker #8: And this is not simply a revaluation of assets, but it's new money. It's new money coming from three types of clients that we are focusing on.
Speaker #8: Affluent enterprises and also IFAs. So, this change of behavior among investors that Diego mentioned is translating into more assets for Invertir Online. I think this is very healthy and hopefully it will continue.
Speaker #9: Okay, that's a very good explanation. What do you think the long-term growth rate for this business might be? I mean, you have what I think is 60,000 accounts right now.
Speaker #9: Where do you see yourself in three to five years?
Speaker #5: 60,000.
Speaker #2: 600,000.
Speaker #9: 600,000. Sorry, I took a zero off. Yes, 600,000.
Speaker #2: That's American.
Speaker #5: Yeah. We believe that the number is very good because we are roughly at the same amount of active accounts as we had in that period when volatility was higher.
Speaker #5: So that's why I said that we are not seeing customers leaving; we are seeing them shifting. We believe that, with normalization in Argentina, probably then 10% to 15% growth quarter over quarter would be reachable.
Speaker #5: Also, I think we have to start to look into the AUC and AUM, as Patricia mentioned, because the activity when you have investors instead of customers trying to capture short-term opportunities will be, perhaps, lower. But the AUC and the AUM in our asset management business will be growing, and that's the real metric we have to look at to see the health of the business.
Speaker #5: Something I didn't mention before is that we launched our asset management business about a year and a half or two years ago, and now we are close to $500 million in AUM in our three funds that are managed by our team.
Speaker #5: So that's part of what we are focusing on, and the AUC, as Patricia mentioned before, is growing also—not only because of our market effect, but also because of net new money we are seeing in every quarter.
Speaker #9: Thank you so much.
Speaker #2: Thank you, Carlos. I think we are running out of time. Anyway, I believe there is a question from our sales-side analyst, Brian Flores.
Speaker #2: Who asked, "What are your expectations in terms of return on equity and loan growth for 2027? What is needed, in your view, for loan growth to take off and be sustainable?"
Speaker #2: Is there any regulation or partnership with the government that could further drive growth ahead, or is it more dependent on organic demand-supply trends?
Speaker #2: Maybe this is the rest I think have been already answered, and then I will go back to someone on the other sales side who has raised his hand.
Speaker #2: We answer this one, and then we end with the other ones.
Speaker #8: We can answer it, both Mariano and I, but let me address the last part in terms of partnership or regulation with the government. I think there's an important or pending agenda on mortgages or securitization. The banking industry has been advocating for a broader role for the FTS, Fondo de Garantía de Sustentabilidad, which is a social security fund—what remains of the previous IFJ base.
Speaker #8: And this would help develop a securitization market for newly originating mortgages, drawing on models such as Peru, Chile, or of Fannie Mae or Freddie Mac.
Speaker #8: So definitely this is an agenda that it's very important in terms of also in terms of growth expectations next year definitely has Paco mentioned we have a complete focus in export industry we have specialists on commercial specialists that are dedicated for instance for oil and gas and we have expanded considerably our commercial team only for these industries and we also have people on the risk side dedicated and specialized in the new in these new industries just to give you an example of the focus we have.
Speaker #8: So, export financing and value chain financing will be an important agenda for 2027. In terms of the retail side, it will depend on the decline in inflation and on improving disposable income. But we are having—eventually, I am optimistic that eventually it will be a good year, 2027.
Speaker #8: I don't know if you want to add something on that. Well, I can complement about the '27 ROE. And in effect, loan growth will be a driver of ROE improvement for 2027 because, as I said before, for the second part of this year we know margins will be more pressured, but going into 2027 we expect to offset that with loan growth and, with it, the growth of the loan book—also a more balanced book between retail and corporates.
Speaker #8: Thus improving the mean and positively impacting the ROE. On top of that, we will also capture the full benefit of the right-sizing program that we carried out this year in the first half.
Speaker #8: And also reducing the cost of risk, so those will be the main drivers. We still haven't given the guidance for 2027, but if we end the year 2026 within our range, closer to 10% ROE, we would expect 2027 to be closer to 15% and transitioning into a longer-term ROE of more than 15%.
Speaker #2: Okay. There is a question from Federico Cavelli from ADCAP. Hello. Federico, please go ahead. And then we have a follow-up from another analyst.
Speaker #3: Hello everyone. Thanks for taking my question. I had a question regarding YOL. We've seen as you mentioned your assets under custody grow considerably. Year over year yet you're net income has decreased.
Speaker #3: I want to ask, how have you been monetizing this growing base, and how do you think normalized earnings for YOL should look in the future?
Speaker #8: So regarding the net income part of the growing in AUC as you mentioned it's part of a more sustainable business but it's less profitable like periods where high volatility where people operates more and with high margins.
Speaker #8: So part of the on the side of the revenue it's the shift between high transaction and high profitability to a more stable and long-term business with less margin but more sustainable.
Speaker #8: That's on the revenue side. On the cost side we made some investments that we expect to be generating new revenues and profits in the next quarters.
Speaker #8: But mainly to serve this customers Patricia mentioned before that for us are the core for our next year that it's developing our business in all the advised business like FAs, IFAs, the wealth management and also the SMEs.
Speaker #8: So we have made some investments in our platform to adapt new products and services for these kinds of customers, who are somewhat different from the ones we have for retail investors.
Speaker #8: And also we hire we have some increasing headcount mainly advisors for this business. So those were the two effects. That were in place. But we think that the investment it's not only paying off in the short term but will be in the future a good investment to a more sustainable business in keeping in mind that we think that the stabilization and normalization the economic variables in Argentina will allow the capital market in Argentina to expand.
Speaker #8: We think it's in the same sense, so we think we are making the right investments to capture that opportunity that will come in the future.
Speaker #3: Okay, thank you. And I have a follow-up question. You paid for YOL $48 million in 2018. What's the book value today?
Speaker #2: Book value is, more or less, a bit more than that I think.
Speaker #8: Yes. And we also have the goodwill included in our book value. But the price paid at that moment was mainly goodwill, which we booked in pesos. We translated that to pesos at the moment.
Speaker #8: And then we had a chat for inflation. And then we have the shareholders' equity of online, which accumulated profits throughout this year, so it has a higher equity value on a standalone basis.
Speaker #8: So, adding up the equity value and the goodwill adjusted for inflation, the total book value in the group's balance sheet is around, I would say, $70 million.
Speaker #2: But the equity is close to the same amount. The equity value. Net worth.
Speaker #8: The net worth, yes. But it's because of accumulated profits.
Speaker #2: Yes. Sure.
Speaker #3: Okay. Thank you and congratulations.
Speaker #2: Thank you Federico. We have a follow-up from Pedro Leduc from UEFITAU. Pedro, you wanted to ask any follow-up?
Speaker #3: Yeah. Just a quick one. Not particularly related to the quarter but there's been several media reports in Argentina about the authorities considering flexibilizing the use of dollar deposits onto lending.
Speaker #3: Yes. And I think you heard me.
Speaker #2: Yes. I'm sorry.
Speaker #3: Yeah. So if there was any first thoughts you have on that if more of the dollar deposits could be used to lending and I'm sure you are also close to the regulators so how that discussion has been unfolding.
Speaker #3: Any first thoughts or comments would be welcomed.
Speaker #8: I think we mentioned that already, that there's a possibility that there will be regulations allowing or giving more flexibility to lend dollars to corporations, and we will be very active on this.
Speaker #8: As a bank, we are positive, so certainly it will be on the agenda. And as I mentioned before, all the export-related industries are growing very fast, so that's also going to be a use of proceeds for the dollar deposits.
Speaker #8: Just bear in mind that dollar deposits have grown very fast over the past year. In our case, our franchise expanded our market share of dollar deposits quite considerably over the past year and a half, so we have a much stronger franchise, and it will allow us to be a strong player in the export-related industry.
Speaker #3: Okay. Thank you so much.
Speaker #2: Thank you Pedro. So I think now we've reached the end of the Q&A and of the earnings call. Once again I apologize for the inconvenience we had.
Speaker #2: We experienced at the beginning of the Q&A session. Thank you for being there as well and we look forward to meeting you in the incoming months and any additional question you may have.
Speaker #2: Please feel free to ask. Thank you.
