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-month period ended March 31, 2021.

Starting 1Q20, the Company began reporting results applying Hyperinflation Accounting, in accordance with IFRS rule IAS 29 (“IAS 29”) as established by the Central Bank. According to Central Bank regulation until December 31, 2020, the Other Comprehensive Income also reflected the result from the changes in the purchasing power of the currency results on securities classified as available for sale. Through communication "A" 7211, effective January 1, 2021, the Central Bank established that the monetary result of items measured at fair value with changes in Other Comprehensive Income should be recognized in profit or loss under the line item "Result from exposure to changes in the purchasing power”. As this change in the accounting policy was applied retrospectively to all comparative figures, figures for all quarters of 2020 have been restated applying this new rule. This report also includes Managerial figures which exclude the IAS29 adjustment for 1Q21, 4Q20, 3Q20, 2Q20 and 1Q20.

Updated details with regard to the Argentine government’s social aid, monetary and fiscal measures to mitigate the economic impact of the Covid-19 pandemic can be found on page 44.

Management Commentary

Commenting on first quarter 2021 results, Patricio Supervielle, Grupo Supervielle's Chairman & CEO, noted: “After a year into the pandemic, we are currently navigating the second wave of Covid-19. During this challenging time, we continue to support our client base and ensure our teams and clients remain protected and well-served, while closely monitoring the impact this health crisis is having on our business.”

“In this critical context, overall system credit demand again decelerated during the quarter with loans growing below inflation and loans to GDP contracting during the past three years to 9.6%. Also, since Q1 we are contending with higher turnover taxes, mainly from -but not limited to- the City of Buenos Aires While we continue to monitor credit risk very closely, coverage was over 205% at the end of March.”

“As anticipated, NIM remained under pressure during the quarter impacted by weak loan demand together with regulatory caps and floors on interest rates. During this period, we continued to exercise liquidity management to protect our financial margin and reinforce our strategy to protect our capital in a high-inflationary environment. Our capital is hedged against inflation through real estate investments, mortgages and sovereign bonds.”

“We continued to make significant progress in our transformation, along three fronts: i) enhancing the customer experience including improving critical customer journeys, ii) advancing the digital transformation of our branch network and channels, which include 19 branches that are fully automated and, iii) progressing on developing a modern technological architecture with capabilities to connect to third parties.”

“At Supervielle, we expect loan growth to improve in the second half of 2021 in line with inflation. In parallel, we are enhancing our funding base through scaling digital accounts across our business segments, the payments platforms IUDU Pago and MODO, as well as our cash management business. These initiatives, together with anticipated growth in higher margin loans, are expected to allow us to support our financial margin.”

“On the macro front, while inflation remained high in recent months despite soft domestic demand, the hike in global commodity prices since mid-2020 has provided an increase in foreign currency flows. This has allowed the Central Bank to reverse the downtrend in international reserves and lower the risk of a near-term currency devaluation. Despite lower than planned subsidy reductions, the fiscal front has been strengthened by pensions and public salary adjustments, increased taxes and export duties. Looking ahead, while commodity prices are expected to continue to provide additional fiscal revenue, an economic recovery remains dependent on the pace of the rollout of the vaccination program, the resumption of IMF negotiations that are most likely to take place after the mid-term elections in October and the resumption of business confidence.”

“We remain focused on our long-term objective of driving sustainable growth. The digital transformation, including evolving our branch and channels model across the organization enhances our competitiveness and underpins our ability to continue to deliver shareholder value once loan demand resumes.” concluded Mr. Supervielle.

First quarter 2021 Highlights

Following the retrospective application of the Central Bank communication A 7211 effective January 1, 2021, figures for all quarters of 2020 have been restated.

Attributable Net income of AR$189.3 million in 1Q21, compared to AR$646.7 million in 1Q20 and AR$946.2 million in 4Q20.

Excluding the impact of IAS29, Attributable Net income would have been AR$2.9 billion in 1Q21 compared to AR$1.5 billion in 1Q20 and AR$3.9 billion in 4Q20.

QoQ performance was explained by: i) a lower financial margin resulting from the increase in cost of funds impacted by regulatory minimum rates on time deposits and by a higher share of remunerated deposits, while higher yields on loans could not offset the increase in cost of funds due to weak credit demand and credit lines granted at subsidized rates, ii) lower average loan portfolio and lower volumes in Central Bank Securities holdings and Repo transactions, iii) higher turnover taxes from the City of Buenos Aires and other Provinces, iv) higher LLPs when comparing with a prior quarter with a low provisioning level, and v) the impact of inflation adjustment reflecting accelerated inflation in 1Q21 compared to 4Q20 as inflation adjusted portfolio assets reprice with a lag of 30 to 45 days. These were partially offset by lower seasonal administrative expenses and an income tax gain.

ROAE of 1.8% in 1Q21 compared with 7.5% in 1Q20 and 9.4% in 4Q20. ROAA of 0.3% in 1Q21 compared to 1.0% in 1Q20 and 1.3% in 4Q20.

Excluding the impact of IAS29, 1Q21 ROAA would have been 4.4% compared to 3.5% in 1Q20 and 6.6% in 4Q20.

Profit before income tax of AR$159.3 million in 1Q21 compared to AR$1.1 billion in 1Q20 and AR$1.1 billion in 4Q20.

Excluding the impact of IAS29, Profit before income tax would have been AR$2.0 billion in 1Q21 compared to AR$1.8 billion in 1Q20 and AR$4.2 billion in 4Q20.

Net Revenues of AR$11.8 billion in 1Q21, compared to AR$13.0 billion in 1Q20 and AR$12.6 billion in 4Q20, down 8.9% YoY and 6.7% QoQ.

Net Financial Income of AR$10.0 billion down 6.1% YoY and 8.8% QoQ. Net Interest Margin (NIM) of 19.3% was down 350 bps YoY, and 90 bps QoQ.

The total NPL ratio was 3.4% in 1Q21 improving 330 basis points YoY and 30 basis points QoQ. The QoQ NPL decline was mainly due to an improvement in non-performing corporate loans in the quarter, while NPLs in other products to individuals had variations in different directions that offset each other.

Loan loss provisions (LLP) totaled AR$1.4 billion in 1Q21, down 39.1% YoY but up 20.2% QoQ. The level of provisioning reflects the Company’s IFRS9 expected loss models. The Coverage ratio increased to 205.2% from 99.6% in 1Q20 and 191.5% in 4Q20. As of March 31, 2021, collateralized commercial loans were 41% of total, relatively stable from 43% as of December 31, 2020. As of March 31, 2021, collateralized non-performing commercial loans increased to 82% of total, from 80% as of December 31, 2020 and 61% as of March 31, 2020.

Efficiency ratio was 71.9% in 1Q21, compared to 64.2% in 1Q20 and 71.5% in 4Q20. The QoQ performance was mainly driven by lower revenues while expenses declined 6.1%. Excluding non-recurring severance payments and early retirement charges, the 1Q21 and 4Q20 efficiency ratio would have been 66.3% and 65.1% respectively.

Loans to deposits ratio of 54.8% compared to 66.8% as of March 31, 2020 and 61.8% as of December 31, 2020.

Total Deposits measured in comparable AR$ units at the end of 1Q21 increased 9.1% YoY and 6.4% QoQ to AR$214.7 billion. AR$ deposits rose 14.9% YoY and 7.7% QoQ. The QoQ increase in AR$ deposits was mainly driven by an increase in institutional funding, while core peso deposits declined largely due to seasonality and in line with industry performance.

Loans measured in comparable AR$ units at the end of 1Q21 declined 10.6% YoY and 5.6% QoQ to AR$117.7 billion.

Total Assets were up 4.4% YoY and 3.9% QoQ, to AR$293.3 billion as of March 31, 2021. The QoQ performance reflects higher holdings of Central Bank instruments partially offset by the 5.6% decrease in loans. 1Q21 Average AR$ Assets were down 2.9% or AR$6.9 bn QoQ due to liquidity management.

Common Equity Tier 1 Ratio as of March 31, 2021, of 13.8% remaining unchanged from 4Q20 and increasing 50 bps from 13.3% reported as of March 31, 2020.

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