Grupo Supervielle S.A. (NYSE:SUPV); (BYMA:SUPV), (“Supervielle” or the “Company”) a universal financial services group headquartered in Argentina with a nationwide presence, today reported results for the three and nine-month periods ended September 30, 2018. All figures presented throughout this document are expressed in nominal Argentine pesos (AR$) and all financial information has been prepared in accordance with IFRS in compliance with the adoption ruled by the Argentine Central Bank.

Third Quarter 2018 Highlights

• Attributable Comprehensive Income of AR$874.5 million, up 55.9% YoY and 84.0% QoQ. ROAE of 22.4% in 3Q18 higher than 20.7% in 3Q17 and 12.6% in 2Q18. ROAA of 2.7% in 3Q18, decreasing by 40 bps YoY and increasing by 90 bps QoQ.
• Attributable Net income of AR$867.4 million, up 56.0% YoY and 220.4% QoQ. In 3Q18, AR$120 million additional voluntary loan loss provisions were made to increase the Coverage Ratio to 94.0% from 89.9% in 2Q18.
• Net Financial Income of AR$4,386.2 million up 55.1% YoY and 21.3% QoQ reflecting increases in asset and deposit volumes, together with increased interest rates, mitigating to some the extent the higher cost of funding and increased levels of non-remunerated minimum reserve requirements.
• NIM of 20.9% in 3Q18, expanded by 130 bps YoY and 170 bps QoQ. NFM of 18.2% in 3Q18, contracted by 160 bps YoY and expanded by 80 bps QoQ. NIM expansion combines an increase in AR$ Investment portfolio with higher Central Bank notes rates, partially offset by a lower AR$ Loan portfolio NIM. The latter decreased by 340 bps YoY and 100 bps QoQ, down to 21.3% reflecting higher cost of funds while loans continued to reprice on a lagged basis.
• Efficiency ratio improved to 59.3% in 3Q18 from 63.5% in 3Q17, and 66.3% in 2Q18.
• Loans to deposits ratio was 85.8% in 3Q18 compared to 112.7% in 3Q17, and 100.2% in 2Q18, mostly due to the overall growth in deposits especially in wholesale deposits which funded higher investments in Central Bank securities 7 day high-margin Leliqs.
• Deposits increased 106.0% YoY and 28.4% QoQ to AR$97.2 billion (FX neutral 15.9%). AR$ deposits increased 88.0% YoY and 21.3% QoQ, while foreign currency deposits (measured in U$S) increased 8.2% YoY and 2.9% QoQ.
• Loans rose 56.9% YoY and 10.0% QoQ to AR$83.4 billion (FX neutral 0.3%). AR$ Loan portfolio up 32.8% YoY and 4.1% QoQ. Foreign currency loans (measured in U$S) increased 15.4% YoY and decreased 10.6% QoQ, while measured in local currency increased 172.6% YoY and 27.7% QoQ.
• Total assets increased 79.2% YoY and 21.0% QoQ to AR$ 146.1 billion, outpacing loan growth, mainly due to larger holdings in Central Bank securities (Leliqs) coupled with higher levels of regulatory minimum reserve requirements.
• NPL increased by 60 bps YoY and 10 bps QoQ to 3.7% in 3Q18. NPL creation decreased to AR$ 0.96 billion in 3Q18 from AR$ 1.0 billion in 2Q18, including a AR$ 187 million decrease in NPL creation in the consumer finance business, partially offset by increases in retail and corporate segments.
• The Retail banking segment registered a 90-day delinquency ratio of 2.1% in 3Q18 (slightly deteriorating from a 2.0% in 2Q18), well below its NPL ratio of 3.2% reflecting the 67.6% share of payroll and pension clients. The difference between both ratios is due to Central Bank regulations.
• Cost of risk was 5.9% in 3Q18. Excluding the AR$ 120 million additional voluntary loan loss provisions made to increase coverage, cost of risk would have been 5.3%, 30 bps below 2Q18 cost of risk. Coverage increased to 94.0% in 3Q18 from 85.2% in 3Q17 and 89.9% in 2Q18.
• Proforma Consolidated Common Equity Tier 1 Ratio of 12.5% in 3Q18, decreased by 60 bps QoQ from 13.1% in 2Q18, impacted by the AR$ devaluation at the end of September. AR$2.0 billion remained at the holding level for future capital injections. Equity to Asset ratio of 11.1% in 3Q18 compared to 17.2% at September 2017 and 12.7% at June 2018.

Commenting on third quarter 2018 results, Jorge Ramirez, Grupo Supervielle's CEO, noted: “We reported solid results even in the face of the increasingly challenging macro environment. Net income for the quarter more than tripled sequentially and increased over 50% year-on-year.

While total assets expanded 21% sequentially, loan growth decelerated in line with industry trends. We also further reduced our exposure to the consumer finance segment in the quarter, which now represents less than 10% of our total portfolio and is more aligned with current market conditions. Mitigating the effects of current market dynamics of recent steep interest rate increases and higher non-remunerated minimum reserve requirements, we significantly expanded our AR$ denominated deposit base in the quarter, up 21% sequentially. We did this particularly in Sight Wholesale Deposits to fund investment in high-margin 7-day Central Bank securities. This, along with the continued repricing of our loan book mainly in the corporate portfolio, allowed us to achieve an 80 basis points increase in net financial margin reaching 18.2% in the quarter.

We are also pleased to see that the initiatives implemented earlier in the year are delivering good results. The NPL ratio remained relatively stable sequentially despite a more difficult economic backdrop and a slowdown in loan growth as we further tightened credit scoring standards throughout the Company. While our consumer finance business saw NPL creation decrease sharply in the quarter, a contraction in loans to this customer base drove a 50 bps QoQ increase in this segment’s NPLs. Taking into account current market conditions, we decided to step up coverage to 94%.

Furthermore, we reported sequential improvement of 700 basis points in the efficiency ratio down to 59.3%. We accomplished this by quickly streamlining the business and maintaining tight control on costs even as we faced additional expenditures associated with the reorganization of the consumer finance business.

We are closely monitoring credit quality as we continue to face a difficult economic backdrop. We remain confident that perseverance in correcting macroeconomic imbalances will bear fruit and are optimistic about the long-term potential of the banking industry in Argentina, the strength of our Company and our ability to adapt our business model to a rapidly changing environment,” concluded Mr. Ramirez.

Financial Highlights & Key Ratios

(In millions of Argentine Ps.)												% Change
INCOME STATEMENT		3Q18		2Q18		1Q18		4Q17		3Q17		QoQ		YoY		9M18		9M17		% Chg.
Net Interest Income		2,722.9		2,898.2		2,818.1		2,562.0		2,124.8		-6.1%		28.1%		8,439.2		6,001.5		40.6%
NIFFI & Exchange Rate Differences		1,663.4		716.8		805.5		798.1		703.0		132.1%		136.6%		3,185.6		1,638.3		94.4%
Net Financial Income		4,386.2		3,615.0		3,623.6		3,360.1		2,827.8		21.3%		55.1%		11,624.8		7,639.8		52.2%
Net Service Fee Income (excluding income from insurance activities)		1,026.9		1,004.9		884.6		846.5		874.9		2.2%		17.4%		4,551.9		3,218.4		41.4%
Income from Insurance activities		183.1		145.3		148.7		148.3		108.0		26.0%		69.5%		477.1		330.8		44.3%
Loan Loss Provisions		-1,122.5		-989.2		-726.1		-606.3		-518.9		13.5%		116.3%		-2,837.9		-1,322.5		114.6%
Personnel & Administrative Expenses		-3,045.2		-2,760.9		-2,446.5		-2,604.5		-2,121.4		10.3%		43.5%		-8,252.6		-6,116.7		34.9%
Profit before income tax		1,027.6		456.0		1,020.4		651.1		737.4		125.3%		39.4%		2,504.0		1,860.3		34.6%
Attributable Net income		867.4		270.7		722.6		467.6		556.2		220.4%		56.0%		1,860.7		1,352.2		37.6%
Attributable Comprehensive income		874.5		475.3		744.8		472.6		560.9		84.0%		55.9%		2,094.7		1,405.8		49.0%
Earnings per Share (AR$)		2.01		0.59		1.58		1.02		1.43
Earnings per ADRs (AR$)		10.03		2.96		7.91		5.12		7.17
Average Outstanding Shares (in millions)		456.7		456.7		456.7		456.7		387.3
BALANCE SHEET		sep 18		jun 18		mar 18		dec 17		sep 17		QoQ		YoY
Total Assets		146,122.7		120,789.0		96,569.6		92,202.4		81,557.9		21.0%		79.2%
Average Assets1		128,633.2		104,287.2		90,832.7		85,498.9		73,226.9		23.3%		75.7%
Total Loans & Leasing		83,378.1		75,830.0		66,479.5		60,692.9		53,154.2		10.0%		56.9%
Total Deposits		97,185.5		75,672.7		55,540.2		56,408.7		47,170.8		28.4%		106.0%
Attributable Shareholders’ Equity		16,220.0		15,345.4		15,114.2		14,369.6		14,032.8		5.7%		15.6%
Average Attributable Shareholders’ Equity1		15,638.9		15,044.8		14,490.1		14,188.7		10,824.9		3.9%		44.5%
KEY INDICATORS		3Q18		2Q18		1Q18		4Q17		3Q17						9M18		9M17
Profitability & Efficiency
ROAE		22.4%		12.6%		20.6%		13.3%		20.7%						18.4%		22.3%
ROAA		2.7%		1.8%		3.3%		2.2%		3.1%						2.6%		2.8%
Net Interest Margin		20.9%		19.2%		19.6%		20.0%		19.6%						19.9%		20.2%
Net Financial Margin		18.2%		17.4%		19.9%		20.0%		19.8%						18.1%		20.7%
Net Fee Income Ratio		21.4%		24.3%		22.3%		22.8%		25.2%						22.6%		26.7%
Cost / Assets		9.7%		10.9%		11.1%		12.6%		12.0%						10.4%		12.7%
Efficiency Ratio		59.3%		66.3%		59.0%		68.2%		63.5%						61.4%		66.5%
Liquidity & Capital
Loans to Total Deposits3		85.8%		100.2%		119.7%		107.6%		112.7%
Liquidity Coverage Ratio (LCR)4		132.1%		139.0%		116.9%		113.9%		122.6%
Total Equity / Total Assets		11.1%		12.7%		15.7%		15.6%		17.2%
Proforma Consolidated Capital / Risk weighted assets 5		13.8%		14.5%		17.0%		19.6%		20.7%
Proforma Consolidated Tier1 Capital / Risk weighted assets 6		12.5%		13.1%		15.8%		18.4%		19.5%
Risk Weighted Assets / Total Assets		70.5%		78.8%		88.1%		80.1%		85.2%
Asset Quality
NPL Ratio		3.7%		3.6%		3.2%		3.1%		3.1%
Allowances as a % of Total Loans		3.5%		3.3%		2.8%		2.6%		2.5%
Coverage Ratio		94.0%		89.9%		89.7%		88.0%		85.2%
Cost of Risk7		5.9%		5.6%		4.7%		4.4%		4.5%						5.4%		4.3%
MACROECONOMIC RATIOS
Retail Price Index (%)8		14.1%		8.8%		6.7%		6.1%		5.1%
UVA (var)		10.0%		7.5%		6.9%		4.9%		4.3%
Pesos/US$ Exchange Rate		40.90		28.86		20.14		18.77		17.32
Badlar Interest Rate (eop)		43.3%		32.7%		22.6%		23.3%		21.8%
Badlar Interest Rate (avg)		37.1%		27.3%		22.9%		22.5%		20.8%
TM20 (eop)		44.1%		33.9%		22.6%		23.7%		22.8%
TM20 (avg)		38.7%		28.6%		23.4%		23.4%		21.6%
OPERATING DATA
Active Customers (in millions)		1.9		1.9		1.9		1.9		1.9
Access Points9		368		368		340		326		324
Employees10		5,281		5,451		5,406		5,320		5,222		-3.1%		1.1%

1. Average Assets and average Shareholder´s Equity calculated on a daily basis

2. Total Portfolio: Loans and Leasing before Allowances. According to IFRS, this line item includes Securitized Loan Portfolio and loans transferred with recourse.

3. Loans/Total Deposits ratio was restated in previous quarters due to the inclusion in the balance sheet of the securitized and transferred loans.

4. This ratio includes the liquidity held at the holding company level.

5. Regulatory capital divided by risk weighted assets taking into account operational and market risk. The regulatory capital ratio applies only to the Bank and CCF on a consolidated basis and does not include the liquidity held at the holding company level- The Proforma consolidated capital ratio, includes the liquidity retained at Grupo Supervielle level after the equity offering, which is available for growth. As of September 30, 2018, the liquidity amounted to Ps. 2.0 billion. This ratio has not been restated for 2017 quarters.

6. Tier 1 capital divided by risk weighted assets taking into account operational and market risk. The regulatory Tier 1 capital ratio applies only to the Bank and CCF on a consolidated basis and does not include the liquidity held at the holding company level. The. Proforma Consolidated Tier 1 capital ratio includes the liquidity retained at Grupo Supervielle level after the equity offering, which is available for growth. As of September 30, 2018, the liquidity amounted to Ps.2.0 billion. This ratio has not been restated for 2017 quarters.

7. Cost of risk in 3Q18, excluding the AR$ 120 million additional voluntary loan loss provisions made to increase coverage, was 5.3%.

8. Source: INDEC

9. The increase in the number of Access Points in 1Q18, reflects the opening of 1 bank branches located in Neuquen and the presence in 13 Walmart Stores. The increase in the number of Access Points in 2Q18, reflects the opening of 2 bank branches and 32 Mila branches.

10. The decrease in the number of employees in 3Q18 reflects the reorganization process in the consumer finance business

View source version on businesswire.com: https://www.businesswire.com/news/home/20181115006082/en/

Ana Bartesaghi
ana.bartesaghi@supervielle.com.ar
+5411 4324 8132

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