Delivering improved profitability of AR$22.5 billion in 4Q23 and AR$51.4 billion in FY23 with ROE at 26.9% and 16.7% respectively.
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 twelve-months period ended December 31, 2023.
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.
Management Commentary
Commenting on fourth quarter 2023 results, Patricio Supervielle, Grupo Supervielle’s Chairman & CEO, noted: “We closed the year with a strong quarter delivering record high ROAE of 27% in real terms, even as we navigate a complex macro and political environment characterized by high inflation, market volatility, and weak loan demand. NIM spiked to an unusually high level in the quarter, mainly driven by a significant sequential increase in net financial income supported by our nimble asset and liability management capabilities in the context of the sharp peso devaluation in December and the strong performance of Argentine bonds. Share gains in low-cost corporate sight deposits also contributed to this good performance. NIM still remained unusually strong in January 2024.
Noteworthy, the NPL ratio continued to improve, reaching a record low of 1.2%, reflecting a shift in loans to middle-market corporates and payroll customers along with significantly lower exposure to consumer loans, together with the tightening of credit scoring standards throughout the year. In turn, the coverage ratio increased to 262%.
For the full year, ROE in real terms improved to 17% from negative 5% in 2022. Higher profitability was mainly driven by 44% growth in Net financial income, while a healthier loan mix contributed to a 22% decline in loan loss provisions, further supported by a 5% reduction in operating expenses. Advancing on our transformation process, we evolved our organization by deepening our client-centric and product-focused operational model, enabling us to better address customer needs by strengthening our digital product culture and accelerating time to market. As we move towards becoming an increasingly digital bank, we continue to enhance our service model, improving digital, virtual, and automatic channels while transforming our branch network to deliver higher-value transactions to customers, while boosting cross-selling efforts. This has contributed to our improved NPS and positioned our Virtual Hub to become a highly efficient transactional channel. As a result, we consolidated 7 branches in the fourth quarter and 28 during 2023, leaving us with 137 branches, down from 183 when we started this process in 2020. In turn, we reduced our staff by 4% while advancing digital adoption and increasing the number of customers per branch by 17% during the year. This, together with the strong revenue performance, contributed to a sustained improvement in the efficiency ratio to 55%, down from 89% in 2022.
On the retail front, we continued to boost our competitive NPS while also driving sustained digital adoption, higher customer engagement, and cross-selling. Notably, the share of retail digital customers expanded by ten percentage points year-on-year to 62%. Furthermore, 64% of personal loans originated digitally, up from 34% a year ago, while digital sales of insurance products offered through both digital and non-digital channels increased to 26%, up from 10% in January 2023. We are also pleased with the strong adoption of our digital wallet. Between January 2023 to December 2023, the number of transfers soared from 3 million to 7 million, QR code payments increased from 25,000 to 250,000 and bill payments were up 84%. Also encouraging is the 9x year-over-year increase in retail customers embracing our money market fund through our App. This is a distinct service unmatched by other banks, with assets under management at year-end increasing 7x in nominal terms. These developments underscore our customers' trust and reliance on our platform to safeguard their transactional funds against inflation.
We are also achieving tangible results from our efforts to execute our strategic priorities for the corporate segment, recovering share in the second half and closing the year with a slight YoY share gain, as we attracted new clients and captured a higher share of wallet among SMEs and corporate customers while improving NPS in all segments for the second consecutive year. We completed our digital offering of working capital financing products during the year that were well-received, with digital transactions by SMEs in December accounting for 93% of factoring, 72% of commercial unsecured loans, and 52% of overdrafts just months after making them available. This has allowed us to continue expanding our market share in foreign trade transactions and sight deposit balances. Noteworthy, our banking subsidiary was recently ranked first by Euromoney´s 2024 Trade Finance Survey within the Best Service in Argentina, Foreign Trade category, and fifth within Latin America, reflecting our dedication to providing best-in-class tailored solutions to help our customers expand and develop their business internationally. Furthermore, our online brokerage platform, IOL, has become the leading online retail broker in Argentina delivering significant fee growth underscoring our ability to attract and retain customers. Monthly active users increased five-fold year over year to 271,000, while new accounts increased threefold and assets under management surged sevenfold, a testament to our commitment to sustainable growth and client satisfaction.
Looking ahead, while president-elect Javier Milei remains committed to achieving a fiscal financial balance and moving Argentina into an open market economy with a sustainable economic model, the government faces several near-term challenges, including obtaining support to advance the structural reforms and deregulation agenda and maintaining social support in a recessionary backdrop with high inflation. At Supervielle, we are well-positioned to meet the current challenges with our entire capital shielded against inflation and a loan book with exposure to highly attractive export-oriented sectors, including oil & gas, mining, and agribusiness. We have established a solid and agile foundation, and we are confident in our ability to drive robust expansion once the economy stabilizes and resumes growth. Our confidence is bolstered by our solid 21% Tier 1 capital ratio. Reaffirming our commitment to embedding sustainability at the core of our strategy, today we filed our 2023 integrated report, which reflects our engagement to transparency and disclosure and highlights the progress made towards advancing our ESG goals, and we encourage you all to read it,” concluded Mr. Supervielle.
Fourth quarter 2023 Highlights
Attributable Net Income of AR$22.5 billion in 4Q23, compared to a net loss of AR$2.5 billion in 4Q22 and a net gain of AR$14.5 million in 3Q23.
In FY23, Attributable Net Income was AR$51.4 billion compared to a loss of AR$13.7 billion in FY22.
The YoY swing in Net Income reflects the successful execution of the Company’s strategic plan implemented in 2022 and 2023 to optimize operations, consolidate businesses, grow in profitable products and increase cross-sell.
ROAE increased to 26.9% in 4Q23 from negative 3.4% in 3Q22 and positive 18.5% in 3Q23. FY23 ROAE reached 16.7% compared to negative 4.5% in FY22.
Profit before income tax increased to AR$40.4 billion in 4Q23 compared to a loss of AR$15.2 billion in 4Q22 and a gain of AR$23.3 billion in 3Q23. QoQ performance is explained by: i) 62.7%, or AR$54.2 billion, increase in Adjusted Net Financial Income (Net Financial Income + Result from monetary position) reflecting unusually high financial income on the investment portfolio even with a relevant decline in average volume, and a higher yield on loan portfolio while weak credit demand continued to impact volume, and ii) higher fees from the brokerage business at IOL and asset management. These were partially offset by the following increases: i) 16.0%, or AR$9.3 billion, in expenses, mainly due to higher personnel expenses reflecting the impact of inflation adjustment on personnel expense provisions, and higher D&A mainly due to the impairment on the goodwill of Mila to reflect the business fair value, ii) AR$ 16.6 billion in Other operating expenses reflecting the year-end valuation of the Bank’s real estate assets at market value and a provision to execute several strategic initiatives in different business units, and iii) 33.0%, or AR$2.3 billion, in Net Loan loss provisions.
Net Financial Income reached AR$192.6 billion in 4Q23 increasing 130.0% YoY and 64.9% QoQ. The QoQ performance is explained by a higher yield on lower investment portfolio volumes and higher interest earned on loans. These were coupled with a lower average balance of interest-bearing liabilities, resulting from assets and liability management, that reduced interest expenses. Adjusted Net Financial Income (calculated as Net Financial Income + Result from exposure to inflation) was AR$140.6 billion in 4Q23, increasing 94.9% YoY and 62.7% QoQ.
The total NPL ratio was 1.2% in 4Q23 improving 230 and 50 bps from 3.5% in 4Q22 and 1.7% in 3Q23, respectively. The QoQ and YoY performance reflect the shift in loans to middle-market corporates and payroll customers along with significantly lower exposure to consumer loans, better retail customer behavior and the sale of delinquent retail loans, mainly open market and former consumer finance customers.
Loan loss provisions (LLPs) totaled AR$10.1 billion in 4Q23, remaining flat YoY and increasing 51.3% QoQ. Net loan loss provisions, which is equivalent to loan loss provisions net of recovered charged-off loans and reversed allowances, amounted to AR$9.2 billion in 4Q23 compared to AR$9.7 billion in 4Q22 and AR$6.9 billion in 3Q23. The level of provisioning as of December 31, 2023, reflects the application of the IFRS9 expected loss models.
The Coverage ratio increased to 262.4% as of December 31, 2023, from 135.5% as of December 31, 2022 and 182.8% as of September 30, 2023.
Efficiency ratio improved to 43.4% in 4Q23, from 91.9% in 4Q22 and 51.7% in 3Q23. The QoQ performance was explained by a 44.8% increase in Revenues mainly reflecting a higher financial margin, partially offset by a 21.5% increase in total expenses. In FY23, the efficiency ratio improved to 54.7% from 79.7% in FY22, driven by a higher financial margin and increased fees together with cost efficiencies.
Total Deposits of AR$1,548.9 billion increased 182.9% YoY and 59.8% QoQ in nominal terms, compared to an industry growth of 171.3% YoY and 48.9% QoQ. In real terms, total deposits decreased 9.2% YoY, but increased 4.3% QoQ. The QoQ performance resulted from the higher share of sight deposits reflecting higher transactional deposits from corporate customers and year-end seasonality on saving accounts, while retail time deposits decreased 47%. Average deposits decreased 23.1% YoY and 23.2% QoQ, reflecting assets and liability management.
Total Assets increased 4.2% QoQ, and declined 5.0% YoY, to AR$ 2,063.1 billion as of December 31, 2023. The QoQ performance mainly reflects effective asset & liability management with Government securities and Repos & Central Bank Securities increasing sequentially AR$82.6 billion and AR$46.9 billion, respectively, while the average volume declined AR$8.3 billion and AR$310.7 billion, respectively. These were partially offset by weak credit demand which drove a 15.5%, or AR$ 88.1 billion, contraction in loans while inflation peaked in the quarter to 53.3%. Average AR$ Assets decreased 18.6% QoQ.
Common Equity Tier 1 Ratio as of December 31, 2023, was 21.0% increasing 417 bps and 805 bps when compared to September 30, 2023, and December 31, 2022, respectively. Tier 1 Capital Ratio reflects the Bank´s capital creation in 4Q23 on net results together with inflation adjustment of capital and IUDÚ tax efficiencies from the business consolidation which more than offset the expansion in Risk weighted assets and deductions.
ESG. Today the company published its 2023 Integrated Annual Report, which reflects our commitment to transparency and disclosure, providing stakeholders with a clear understanding of our ESG activities and progress and underscoring our dedication to sustainable practices and responsible business operations.
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