UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
ANNUAL REPORT
PURSUANT TO SECTION 13
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31 2019, 2021
Commission file number 001-37777
GRUPO SUPERVIELLE S.A.
(Exact name of Registrant as specified in its charter)
SUPERVIELLE GROUP S.A.
(Translation of Registrant’s name into English)
REPUBLIC OF ARGENTINA
(Jurisdiction of incorporation or organization)
Bartolomé Mitre 434 5th Floor
C1036AAHBuenos Aires
Republic of Argentina
(Address of principal executive offices)
Alejandra Naughton
Mariano Biglia
Bartolomé Mitre 434 5th Floor
C1036AAHBuenos Aires
Republic of Argentina
Tel: 54-11-4340-3053
54-11-4340-3123
Email: Alejandra.Naughton@supervielle.com.ar
mariano.biglia@supervielle.com.ar
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class | Trading | Name of each exchange | ||
American Depositary Shares, each representing 5 Class B shares of Grupo Supervielle S.A. | SUPV | New York Stock Exchange | ||
Class B shares of Grupo Supervielle S.A. | SUPV | New York Stock |
*Not for trading, but only in connection with the registration of American Depositary Shares pursuant to the requirements of the New York Stock Exchange.
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
The number of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 20192021 was:
Title of class | Number of shares outstanding | |
Class B ordinary shares, nominal value Ps.1.00 per share | 394,984,134 |
Class A ordinary shares, nominal value Ps.1.00 per share | 61,738,188 |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐ No ☒
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated Filer | ☐ | Accelerated Filer | ☒ | |||
Non-accelerated Filer | ☐ | Emerging Growth Company | ☐ |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ☐ | International Financial Reporting Standards as issued
| Other ☐ |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
TABLE OF CONTENTS
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Item 5.C Research and Development, patents and licenses, etc. | | 161 |
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Item 8.A Consolidated Statements and Other Financial Information. | | 194 |
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Item 9.D Selling Shareholders | | 197 |
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Item 16.D Exemptions from the Listing Standards for Audit Committees | | 233 |
Item 16.E Purchases of Equity Securities by the Issuer and Affiliated Purchasers | | 234 |
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INTRODUCTION
INTRODUCTION
Certain Defined Terms and Conventions
CERTAIN DEFINED TERMS AND CONVENTIONS
In this annual report, we use the terms “we,” “us,” “our” and the “Group” to refer to Grupo Supervielle S.A. and its consolidated subsidiaries, including Banco Supervielle S.A., unless otherwise indicated. References to “Grupo Supervielle” mean Grupo Supervielle S.A. References to the “Bank” mean Banco Supervielle S.A. and its consolidated subsidiaries. References to “Tarjeta” mean Tarjeta Automática S.A. References to “SAM” mean Supervielle Asset Management S.A. References to “Sofital” mean Sofital S.A.F.e I.I. References to “CCF”“IUDÚ” mean CordialIUDÚ Compañía Financiera S.A. References to “Supervielle Seguros” mean Supervielle Seguros S.A. References to “Espacio Cordial” or “Cordial Servicios” mean Espacio Cordial de Servicios S.A. References to “InvertirOnline”“IOL invertironline” mean InvertirOnline S.A.U. and InvertirOnline.com Argentina S.A.U. (the latter renamed as Portal Integral de Inversiones S.A.U., with registration pending). References to “MILA” mean Micro Lending S.A.U. References to “Supervielle Productores Asesores de Seguros” mean Supervielle Productores Asesores de Seguros S.A. References to “Supervielle Agente de Negociacion” mean Supervielle Agente de Negociación S.A.
S.A.U. References to “Bolsillo Digital” mean Bolsillo Digital S.A.U.
References to “Class A shares” referare to shares of our Class A common stock, with a par value of Ps.1.00 per share, references to “Class B shares” referare to shares of our Class B common stock, with a par value of Ps.1.00 per share, and references to “ADSs” are to American depositary shares, each representing five Class B shares.
The term “Argentina” refers to the Republic of Argentina. The terms “Argentine government”government,” the “government” or the “government”“Government” refers to the federal governmentFederal Government of Argentina, the termterms “Central Bank” refersor the “Argentine Central Bank” refer to theBanco Central de la República Argentina, or the Argentine Central Bank, and the term “CNV” refers to the ArgentineComisión Nacional de Valores, orwhich is the Argentine securities and capital markets regulator. The term “ByMA” refers to the exchange Bolsas y Mercados Argentinos S.A., which is the Argentine securities exchange. The term “MAE” refers to the exchange Mercado Abierto Electrónico S.A.S.A, which is the Argentine electronicsecurities and foreign-currency trading exchange. The term “Argentine Capital Markets Law” refers to Law No. 26,831, as amended and supplemented. The term “Argentine Negotiable Obligations Law” refers to Law No. 23,576, as amended and supplemented. The term “AGCL”“Argentine General Corporations Law” refers to Argentine General Corporations Law No. 19,550, as amended and supplemented. The term “Argentine Productive Financing Law” refers to Law No. 27,440.27,440, as amended and supplemented.
“Argentine GAAP” refers to generally accepted accounting principles in Argentina and “Argentine Banking GAAP” refers to the accounting rules of the Central Bank. “IASB” refers to International Accounting Standards Board and “IFRS” refers to the International Financial Reporting Standards, as issued by the International Accounting Standards Board (“IASB”).IASB.
The term “GDP” refers to gross domestic product and all references in this annual report to GDP growth are to real GDP growth, thegrowth. The term “CPI” refers to the consumer price index and the term “WPI” refers to the wholesale price index.
The term “customers” refers to individuals or entities that have at least one of our products without any requirement of customer activity during any time period. The term “active customer” refers to customers that had activityactive product with us and made at least one transaction in the previous 90 days.
The term “Argentine banks” refers to banks that operate in Argentina. Unless the context otherwise requires, the term “financial institutions” refers to institutions regulated by the Central Bank. The term “Argentine banks” refers to banks that operate in Argentina. The term “Argentine private banks” refers to banks that are not controlled or owned by the Argentine federal governmentGovernment or any Argentine provincial, municipality or city government.
For information upfrom January 1, 2019 to December 31, 2017, the term “small businesses” refers to individuals and businesses with annual sales of up to Ps.40.0 million, the term “SMEs” refers to individuals and businesses with annual sales over Ps.40.0 million and below Ps.200.0 million, the term “middle-market companies” refers to companies with annual sales over Ps.200.0 million and below Ps.1.0 billion and the term “large corporates” refers to companies with annual sales over Ps.1.0 billion. For information since January 1, 2018, the term “small businesses” refers to individuals and businesses with annual sales up to Ps.70.0 million, the term “SMEs” refers to individuals and businesses with annual sales over Ps.70.0 million and below Ps.550.0 million, the term “middle-market companies” refers to companies with annual sales over Ps.550.0 million and below Ps.2.0 billion and the term “large corporates” refers to companies with annual sales over Ps.2.0 billion. For information since January 1, 2019,2020, the term “small businesses” refers to individuals and businesses with annual sales up to Ps.100 million, the term “SMEs” refers to individuals and businesses with annual sales over Ps.100 million and below Ps.700 million, the term “middle-market companies” refers to companies with annual sales over Ps.700 million and below Ps.2.5 billion and the term “large corporates” refers to companies with annual sales over Ps.2.5 billion. For information from January 1, 2021 to December 31, 2021, the term “small businesses” refers to individuals and businesses with annual sales up to Ps.300 million, the term “SMEs” refers to individuals and businesses with annual sales over Ps.300 million and below Ps.1.5 billion, the term “middle-market companies” refers to companies with annual sales over Ps.1.5 billion and below Ps.3 billion and the term “large corporates” refers to companies with annual sales over Ps.3 billion. For information since January 1, 2022, the term “small businesses” refers to individuals and businesses with annual sales up to Ps.300 million, the term “SMEs” refers to individuals and businesses with annual sales over Ps.300 million and below Ps.3 billion, the term “middle-market and large companies” refers to companies with annual sales over Ps.3 billion.
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PRESENTATION ofOF FINANCIAL and Other InformationAND OTHER INFORMATION
Financial Statements
This annual report contains our audited consolidated financial statements as of December, 20192021 and 2018,2020, and for the years ended December 31, 2019, 20182021, 2020 and 20172019 (our “audited consolidated financial statements”), which have been audited by Price Waterhouse & Co. S.R.L., Buenos Aires, Argentina, a member firm of PricewaterhouseCoopers, an independent registered public accounting firm, (“Price Waterhouse & Co.”), whose report is included herein.
We have prepared our audited consolidated financial statements under IFRS for the first time for our financial year ended December 31, 2018, with a transition date of January 1, 2017.
“Financial Reporting in Hyperinflationary Economies” (IAS 29) requires that the financial statements of an entity whose functional currency is one of a hyperinflationary economy be measured in terms of the current unit of measurement at the closing date of the reporting period, regardless of whether they are based on the historical cost method or the current cost method. This requirement also includes the comparative information in financial statements. Our audited consolidated financial statements are stated in the measurement unit current as of December 31, 2019.2021.
We are subject to the provisions of Article 2 – Section I – Chapter I of Title IV (“Periodical Reporting Requirements”) of the rules issued by the CNV according to General Resolution No. 622/2013, as amended and supplemented (the “CNV Rules”), and we are required to present our financial statements in accordance with the Argentine Banking GAAP. The Argentine Central Bank, through Communications “A” 5541, as amended, set forth a convergence plan towards the application of IFRS as issued by the IASB and the interpretations issued by the International Financial Reporting Standards Committee (“IFRIC”), for entities under its supervision, effective for fiscal years beginning on or after January 1, 2018, subject to the following exceptions:
● | Temporary exception from item 5.5 (Impairment) of IFRS 9 “Financial Instruments” for financial entities included in group “C” (as defined by the Argentine Central Bank). IUDÚ is included within this group “C” and, as a result, impairment losses for IUDÚ are measured in accordance with the Central Bank Rules (see “Item 4.B.Business Overview —Debt Classification and Loan Loss Provisions”); and |
● | Temporary exception from IFRS 9 “Financial Instruments” with respect to financial instruments of the public sector. |
Our consolidated financial statements contained in this annual report differ in certain material respects from our financial statements as of December 31, 2021 and 2020 and for the years ended December 31, 2021, 2020, 2019 and 2018 prepared in accordance with Argentine Banking GAAP and filed with the CNV.
Unless otherwise indicated, all financial information of our company included in this annual report is stated on a consolidated basis under IFRS and presented in terms of the measuring unit current at the end of the latest reporting period.
Overview of IAS 29
IAS 29 establishes the conditions under which an entity shall restate its financial statements if it is located in an economic environment considered hyperinflationary. This standard requires that the financial statements of an entity that reports in the currency of a highly inflationary economy shall be stated in terms of the measuring unit current at the closing date of the latest reporting period, regardless of whether they are based on a historical cost approach or a current cost approach. To this end, in general terms, the inflation rate must be computed in the non-monetary items as of the acquisition date or the revaluation date, as applicable. These requirements also comprise the comparative information of the financial statements.
In order to conclude on whether an economy is categorized as highly inflationary, IAS 29 outlines a series of factors to be considered, including the existence of an accumulated inflation rate in three years that is approximate to or exceedexceeds 100%. As of July 1, 2018, Argentina has reported a cumulative three-year inflation rate significantly higher than 100% and therefore financial information published as from that date shouldmust be adjusted for inflation in accordance with IAS 29. Therefore,Consequently, we have applied IAS 29 to our audited consolidated financial statements.
Effective January 1, 2019, we adopted IFRS 16 “Leases” using the simplified retrospective approach, so that the cumulative impact of the adoption was recognized in retained earnings at the beginning of the year starting on January 1, 2019, and the comparative figures were consequently not modified. Accordingly, certain comparisons between periods may be affected. See Note 10 to our audited consolidated financial statements and “Operating and Financial Review and Prospects—New Accounting Standards” for a more comprehensive discussion of the effects of the adoption by the Group of this and other new standards.
We are subject to the provisions of Article 2 – Section I – Chapter I of Title IV: Periodical Reporting Requirements of the rules issued by the CNV according to General Resolution No. 622/2013, as amended and supplemented (the “CNV Rules”) and we are required to present our financial statements in accordance with the valuation and disclosure criteria set forth by the Argentine Central Bank. The Argentine Central Bank, through Communications “A” 5541, as amended, set forth a convergence plan towards the application of IFRS as issued by the IASB and the interpretations issued by the IFRIC, for entities under its supervision, effective for fiscal years beginning on or after January 1, 2018. The convergence plan had two exceptions to the application of IFRS: (i) item 5.5 (Impairment) of IFRS 9 “Financial Instruments”, and (ii) IAS 29 “Financial Reporting in Hyperinflationary Economies”, both of which were waived until January 1, 2020, at which time entities will be required to apply the provisions of IFRS in full. We presented our local financial statements under these rules on February 21, 2020.
Our consolidated financial statements contained in this annual report differ in certain material respects from our financial statements as of December 31, 2019 and 2018 and for the years ended December 31, 2019, 2018 and 2017 prepared in accordance with Argentine Banking GAAP and filed with theCNV.
Unless otherwise indicated, all financial information of our company included in this annual report is stated on a consolidated basis under IFRS and in Argentine Pesos subject to inflation accounting adjustment, except for certainregulatory capital information, statistical information for years 2015 and 2016, information about the Argentine financial sector, and national statistical data, which is expressed following Argentine Banking GAAP in nominal historic Peso amounts (i.e., not adjusted for inflation).
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Overview of IAS 29
Pursuant to IAS 29, the financial statements of an entity whose functional currency is that of a highly inflationary economy, as mentioned above, should be reported measured in terms of the measuring unit current as of the date of the financial statements. All the amounts included in the statement of financial position which are not stated in terms of the measuring unit current as of the date of the financial statements should be restated adjusted applying the general price index. All items in the statement of income should be stated in terms of the measuring unit current as of the date of the financial statements, applying the changes in the general price index occurred from the date on which the revenues and expenses were originally recognized in the financial statements.
Adjustment for inflation in the initial balances has been calculated considering the indexes based on the price indexes published by theArgentina’s National Institute of Statistics and CensusInstitute (Instituto Nacional de Estadística y Censos or “INDEC”,“INDEC,” per its initials in Spanish). The Group determined to use the Internal Wholesale Price Index (IWPI) to restate balances and transactions until the year 2016. For November and December 2015, the Group used the average variation of the CPI of the City of Buenos Aires since during these two months there were no IWPI measurements available at a national level. From January 2017 onwards, the Group used the national CPI.
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The principal inflation adjustment procedures are the following:
Monetary assets and liabilities that are recorded in the current currency as of the financial position’s closing date are not restated because they are already stated in terms of the currency unit current as of the date of the financial statements. |
Non-monetary assets and liabilities are recorded at cost as of the financial position date, and equity components are restated applying the relevant adjustment ratios. |
All items in the consolidated income statement are restated applying the relevant conversion factors, as described in Note |
The effect of inflation in the Group’s net monetary position is included in the consolidated income statement, in the item “Results from exposure to changes in the purchasing power of money.” |
Comparative figures have been adjusted for inflation following the procedure explained in the previous bullets. |
Upon initially applying inflation adjustment, the equity accounts were restated as follows: |
o | Capital stock was restated as from the date of subscription or the date of the most recent inflation adjustment for accounting purposes, whichever is later. |
o | The resulting amount was included in the “Results from exposure to changes in the purchasing power of money” account. |
o | Consolidated Statement of Comprehensive Income were restated as from each accounting allocation. |
o | The legal reserve and other reserves in the statement of income were not restated as of the initial application date. |
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Certain Financial Data
The term “ROAE” refers to return on average shareholders’ equity, calculated based on daily averages. The term “ROAA” refers to return on average assets, calculated based on daily averages. ROAE and ROAA are frequently used by financial institutions as benchmarks to measure profitability compared to peers but not as benchmarks to determine returns for investors, which is affected by multiple factors that ROAE and ROAA do not consider.
Currencies and Rounding
The terms “U.S. dollar” and “U.S. dollars” and the symbol “U.S.$” refer to the legal currency of the United States. The terms “Peso” and “Pesos” and the symbol “Ps.” refer to the legal currency of Argentina.
We have translated certain of the Peso amounts contained in this annual report into U.S. dollars for convenience purposes only. Unless otherwise indicated, the rate used to translate such amounts as of December 31, 20192021 was Ps.59.895Ps.102.75 to U.S.$1.00, which was the reference exchange rate reported by the Central Bank for U.S. dollars as of December 30, 2019.31, 2021. The Federal Reserve Bank of New York does not report a noon buying rate for Pesos. The U.S. dollar equivalent information presented in this annual report is provided solely for the convenience of investors and should not be construed as implying that the Peso amounts represent, or could have been or could be converted into, U.S. dollars at such rates or at any other rate. The reference exchange rate reported by the Central Bank was Ps.66.635Ps.114.84 per U.S.$1.00 as of April 28, 2020.26, 2022.
Certain figures included in this annual report have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.
Market Share and Other Information
We make statements in this annual report about our competitive position and market share in, and the market size of, the Argentine banking industry. We have made these statements on the basis of statistics and other information derived from the Central
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Bank’s publications and other third-party sources that we believe are reliable. Although we have no reason to believe any of this information or these reports are inaccurate in any material respect, we have not independently verified the competitive position, market share and market size or market growth data provided by third parties or by industry or general publications.
In January 2007, the INDEC, which is the only institution in Argentina with the statutory authority to produce official nationwide statistics, modified the methodology used to calculate certain of its indices. On January 8, 2016, the Macri administration issued Decree No. 55/2016 declaring a state of administrative emergency with respect to the national statistical system and the INDEC until December 31, 2016. During this state of emergency, the INDEC suspended the publication of certain statistical data until it completed a reorganization of its technical and administrative structure capable of producing sufficient and reliable statistical information. Following the implementation of certain methodological reforms and the adjustment of macroeconomic statistics on the basis of these reforms, on June 15, 2016, the INDEC published the INDEC Report including revised GDP data for the years 2004 through 2015. As of the date of this annual report, the INDEC has resumed publishing certain revised data, including GDP, foreign trade, poverty and balance of payment statistics.
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Forward-Looking StatementsFORWARD-LOOKING STATEMENTS
This annual report contains estimates and forward-looking statements, principally in “Item 3.D“Item 3.D. Risk Factors,”, “Item 5.A “Item 5.A. Operating Results,”, and “Item 4.B“Item 4.B. Business Overview.Overview.” We have based these forward-looking statements largely on our current beliefs, expectations and projections about future courses of action, events and financial trends affecting our business. Many important factors, in addition to those discussed elsewhere in this annual report, could cause our actual results to differ substantially from those anticipated in our forward-looking statements, including, among others:
(i) | the ongoing |
(ii) | changes in general economic, financial, business, political, legal, social or other conditions in Argentina, including the performance of the |
(iii) |
fluctuations in the exchange rate of the Peso and inflation; |
(iv) | changes in foreign exchange regulations and exchange control measures implemented by the Central Bank and the Argentine government; |
(v) | changes in interest rates and the cost of deposits, which may, among other things, affect margins; |
(vi) | the impact of the new agreement with the International Monetary Fund (“IMF”) and the restructuring of the country’s sovereign debt with the IMF and the Paris Club; |
(vii) | unanticipated increases in financing or other costs or the inability to obtain additional debt or equity financing on attractive terms, which may limit our ability to fund existing operations and to finance new activities; |
(viii) | changes in capital markets in general that may affect policies or attitudes toward lending to or investing in Argentina or Argentine companies, including expected or unexpected volatility in domestic and international financial markets; |
(ix) | changes in government regulation, including tax and banking regulations; |
(x) | adverse legal or regulatory disputes or proceedings; |
(xi) | credit and other risks of lending, such as increases in defaults by borrowers; |
(xii) | exposure to Argentine government liabilities and fluctuations and declines in the value of Argentine public debt; |
(xiii) | increased competition in the banking, financial services, credit card services, asset management and related industries; |
(xiv) | a loss of market share by any of our main businesses; |
(xv) | increase in the allowances for loan losses; |
(xvi) | technological changes or an inability to implement new technologies, changes in consumer spending and saving habits; |
(xvii) | ability to implement our business strategy; |
(xviii) |
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(xix) | other factors discussed under |
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The words “believe,” “may,” “will,” “aim,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “forecast” and similar words are intended to identify forward-looking statements. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, the effects of future regulation and the effects of competition. Forward-looking statements speak only as of the date they were made, and we do not undertake any obligation to update publicly or to revise any forward-looking statements after we distribute this annual report because of new information, future events or other factors, except as required by applicable law. In light of the risks and uncertainties described above, the forward-looking events and circumstances discussed in this annual report might not occur and do not constitute guarantees of future performance. Because of these uncertainties, you should not make any investment decisions based on these estimates and forward-looking statements.
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PartPART I
Item 1.Identity of Directors, Senior Management and Advisors
Not applicable.
Item 2.Offer Statistics and Expected Timetable
Not applicable.
Item 3.Key Information
Item 3.A[Reserved]
Item 3.BCapitalization and indebtedness
Not applicable.
Item 3.CReasons for the offer and use of proceeds
Not applicable.
Item 3.DRisk Factors
Summary of Risk Factors
The following selected consolidated financial data should be read in conjunction with our audited consolidated financial statements and related notes beginning on page F-1,summarizes some, but not all, of the “Presentationprincipal risks provided below. Please carefully consider all of Financial and Other Information” section and the discussion in Item 5 “Item 5.A Operating Results” included elsewhereinformation discussed in this annual report. The selected consolidated statement of income data for the years ended December 31, 2019, 2018 and 2017 and the selected consolidated statement of financial position data as of December 31, 2019 and 2018 have been derived from our audited consolidated financial statements includedItem 3.D “Risk Factors” in this annual report which have been audited by Price Waterhouse & Co., member firmfor a detailed description of PricewaterhouseCoopers an independent registered public accounting firm. The selected consolidated statement of financial position data as of December 31, 2017 have been derived from our audited consolidated financial statements that arenot included in this annual report.
Our consolidated financial statements were preparedthese and presented in accordance with IFRS. We applied IFRS for the first time for the year ended December 31, 2018, with a transition date of January 1, 2017.
Our consolidated financial statements are presented in Argentine Pesos which is our functional currency.
IAS 29 establishes the conditions under which an entity shall restate its financial statements if it is located in an economic environment considered hyperinflationary. This standard requires that the financial statements of an entity that reports in the currency of a highly inflationary economy shall be stated in terms of the measuring unit current at the closing date of the latest reporting period, regardless of whether they are based on a historical cost approach or a current cost approach. To this end, in general terms, the inflation rate must be computed in the non-monetary items as from the acquisition date or the revaluation date, as applicable. These requirements also comprise the comparative information of the financial statements. Accordingly, the following selected consolidated financial data is stated in the measuring unit current as at December 31, 2019.
Solely for convenience of the reader, we have translated certain Peso amounts as of and for the year ended December 31, 2019 into U.S. dollars at the reference exchange rate reported by the Central Bank as of December 31, 2019 which was Ps.59.895 to U.S.$1.00. U.S. dollar equivalent information should not be construed to imply that the Peso amounts represent, or could have been or could be converted into, U.S. dollars at such rates or any other rate.risks.
Our consolidated financial statements contained in this annual report differ in certain material respects from our financial statements as of December 31, 2019 and 2018 and for the years ended December 31, 2019, 2018 and 2017 prepared in accordance with Argentine Banking GAAP and filed with theCNV.
Grupo Supervielle S.A. | ||||||||||||
For the year endedDecember 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
U.S.$. | Ps. | Ps. | Ps. | |||||||||
(in thousands of Pesos or U.S. dollars, as indicated) | ||||||||||||
Consolidated Income Statement Data IFRS: | ||||||||||||
Interest income | 747,885 | 44,794,595 | 46,790,036 | 34,250,524 | ||||||||
Interest expenses | (582,911 | ) | (34,913,451 | ) | (26,787,390 | ) | (12,782,957 | ) | ||||
Net interest income | 164,974 | 9,881,144 | 20,002,646 | 21,467,567 | ||||||||
Net income from financial instruments (NIFFI) at fair value through profit or loss | 349,962 | 20,960,966 | 9,707,395 | 5,454,354 | ||||||||
Exchange rate difference on gold and foreign currency | (5,411 | ) | (324,070 | ) | 1,733,237 | 604,734 | ||||||
NIFFI and Exchange Rate Differences | 344,551 | 20,636,896 | 11,440,632 | 6,059,088 | ||||||||
Net Financial Income | 509,525 | 30,518,040 | 31,443,278 | 27,526,655 | ||||||||
Service fee income | 143,578 | 8,599,607 | 9,118,706 | 9,327,965 | ||||||||
Service fee expenses | (37,465 | ) | (2,243,970 | ) | (2,181,620 | ) | (1,877,412 | ) | ||||
Income from insurance activities | 23,263 | 1,393,356 | 1,305,522 | 1,383,709 | ||||||||
Net Service Fee Income | 129,376 | 7,748,993 | 8,242,608 | 8,834,262 | ||||||||
Subtotal | 638,901 | 38,267,033 | 39,685,886 | 36,360,917 | ||||||||
Result from exposure to changes in the purchasing power of money | (89,483 | ) | (5,359,565 | ) | (9,253,021 | ) | (3,986,190 | ) | ||||
Other operating income | 46,002 | 2,755,267 | 3,805,134 | 2,827,476 | ||||||||
Loan loss provisions | (129,174 | ) | (7,736,868 | ) | (7,967,031 | ) | (6,204,348 | ) | ||||
Net Operating Income | 466,246 | 27,925,867 | 26,270,968 | 28,997,855 | ||||||||
Personnel expenses | 236,485 | 14,164,289 | 13,504,300 | 13,439,165 | ||||||||
Administration expenses | 126,447 | 7,573,543 | 8,615,396 | 7,566,294 | ||||||||
Depreciations and impairment of non-financial assets | 30,298 | 1,814,671 | 665,154 | 956,819 | ||||||||
Other operating expenses | 106,157 | 6,358,291 | 6,633,161 | 6,394,542 | ||||||||
Income / (loss) before taxes | (33,141 | ) | (1,984,927 | ) | (3,147,043 | ) | 641,035 | |||||
Income tax | (2,817 | ) | (168,695 | ) | (1,555,074 | ) | (1,802,869 | ) | ||||
Net loss for the year | (35,958 | ) | (2,153,622 | ) | (4,702,117 | ) | (1,161,834 | ) | ||||
Net loss for the year attributable to owners of the parent company | (35,924 | ) | (2,151,600 | ) | (4,658,050 | ) | (1,160,465 | ) | ||||
Net loss for the year attributable to non-controlling interest | (34 | ) | (2,022 | ) | (44,067 | ) | (1,369 | ) | ||||
Other Comprehensive Income | (798 | ) | (47,833 | ) | 371,617 | 72,120 | ||||||
Other comprehensive income attributable to parent company | (796 | ) | (47,701 | ) | 371,231 | 72,100 | ||||||
Other comprehensive income attributable to non-controlling interest | (2 | ) | (132 | ) | 386 | 20 | ||||||
Comprehensive Loss | (36,756 | ) | (2,201,455 | ) | (4,330,500 | ) | (1,089,714 | ) | ||||
Comprehensive loss for the year attributable to owners of the parent company | (36,720 | ) | (2,199,301 | ) | (4,286,819 | ) | (1,088,365 | ) | ||||
Comprehensive loss for the year attributable to non-controlling interest | (36 | ) | (2,154 | ) | (43,681 | ) | (1,349 | ) |
Grupo Supervielle S.A. | ||||||||||||
As of December 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
U.S.$. | Ps. | Ps. | Ps. | |||||||||
(in thousands of Pesos or U.S. dollars, as indicated) | ||||||||||||
ASSETS | ||||||||||||
Cash and due from banks | 440,823 | 26,403,099 | 51,822,372 | 25,205,322 | ||||||||
Cash | 146,107 | 8,751,111 | 7,368,112 | 6,902,384 | ||||||||
Financial institutions and correspondents | 294,716 | 17,651,988 | 44,454,260 | 18,302,938 | ||||||||
Argentine Central Bank | 265,922 | 15,927,336 | 42,132,824 | 16,011,978 | ||||||||
Other local financial institutions | 28,295 | 1,694,742 | 2,305,439 | 2,177,115 | ||||||||
Others | 499 | 29,910 | 15,997 | 113,845 | ||||||||
Debt Securities at fair value through profit or loss | 9,492 | 568,501 | 23,247,329 | 25,902,184 |
Derivatives | 4,301 | 257,587 | 24,496 | 61,133 | ||||||||
Repo transactions | — | — | — | 7,608,341 | ||||||||
Other financial assets | 35,009 | 2,096,866 | 2,612,157 | 3,674,743 | ||||||||
Loans and other financing | 1,469,405 | 88,010,011 | 118,771,635 | 134,001,359 | ||||||||
To the non-financial public sector | 482 | 28,872 | 50,460 | 74,060 | ||||||||
To the financial sector | 1,077 | 64,522 | 613,101 | 902,009 | ||||||||
To the non-financial private sector and foreign residents | 1,467,846 | 87,916,617 | 118,108,074 | 133,025,290 | ||||||||
Other debt securities | 174,615 | 10,458,556 | 6,631,861 | 815,144 | ||||||||
Financial assets in guarantee | 89,051 | 5,333,704 | 3,087,750 | 2,955,457 | ||||||||
Current income tax assets | 1,711 | 102,458 | 910,777 | 277,603 | ||||||||
Inventories | 742 | 44,455 | 107,557 | 240,449 | ||||||||
Investments in equity instruments | 243 | 14,579 | 16,005 | 105,961 | ||||||||
Property, plant and equipment | 66,818 | 4,002,078 | 3,359,290 | 3,169,795 | ||||||||
Investment property | 67,697 | 4,054,737 | 635,877 | 441,610 | ||||||||
Intangible assets | 73,003 | 4,372,514 | 4,170,146 | 706,737 | ||||||||
Deferred income tax assets | 27,902 | 1,671,195 | 1,264,222 | 1,779,810 | ||||||||
Non-current assets held for sale | — | — | 4,307 | — | ||||||||
Other non-financial assets | 21,610 | 1,294,351 | 1,367,029 | 1,082,140 | ||||||||
TOTAL ASSETS | 2,482,422 | 148,684,691 | 218,032,810 | 208,027,788 | ||||||||
LIABILITIES | ||||||||||||
Deposits | 1,486,070 | 89,008,177 | 145,996,201 | 128,119,290 | ||||||||
Non-financial public sector | 91,329 | 5,470,177 | 17,083,822 | 14,017,493 | ||||||||
Financial sector | 469 | 28,098 | 38,821 | 35,663 | ||||||||
Non-financial private sector and foreign residents | 1,394,272 | 83,509,902 | 128,873,558 | 114,066,134 | ||||||||
Liabilities at fair value through profit or loss | 3,165 | 189,554 | 412,403 | — | ||||||||
Derivatives | — | — | 144,944 | — | ||||||||
Repo transactions | 5,340 | 319,817 | — | — | ||||||||
Other financial liabilities | 152,192 | 9,115,565 | 6,564,396 | 8,883,137 | ||||||||
Financing received from the Argentine Central Bank and other financial institutions | 150,557 | 9,017,597 | 12,357,106 | 8,008,155 | ||||||||
Unsubordinated negotiable Obligations | 101,619 | 6,086,475 | 14,317,445 | 19,507,851 | ||||||||
Current income tax liabilities | — | — | 1,217,233 | 1,873,619 | ||||||||
Subordinated negotiable obligations | 35,393 | 2,119,888 | 2,128,759 | 1,557,801 | ||||||||
Provisions | 11,303 | 677,018 | 133,703 | 182,071 | ||||||||
Deferred income tax liabilities | 8,453 | 506,291 | 343,586 | 45,854 | ||||||||
Other non-financial liabilities | 137,055 | 8,208,914 | 8,314,639 | 8,634,696 | ||||||||
TOTAL LIABILITIES | 2,091,147 | 125,249,296 | 191,930,415 | 176,812,474 | ||||||||
SHAREHOLDERS’ EQUITY | 391,275 | 23,435,395 | 26,102,395 | 31,215,314 | ||||||||
Shareholders’ equity attributable to owners of the parent company | 390,947 | 23,415,797 | 26,080,725 | 30,873,343 | ||||||||
Shareholders’ equity attributable to non-controlling interests | 328 | 19,598 | 21,670 | 341,971 | ||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 2,482,422 | 148,684,691 | 218,032,810 | 208,027,788 |
Grupo Supervielle S.A. | |||||||||
As of and for the year ended December 31, | |||||||||
2019 | 2018 | 2017 | |||||||
SELECTED RATIOS | |||||||||
Return on average equity(1) | (9.2% | ) | (16.2% | ) | (4.7% | ) | |||
Return on average assets(2) | (1.1% | ) | (1.9% | ) | (0.6% | ) | |||
Net Interest Margin(3) | 21.0% | 17.0% | 18.4% | ||||||
Net Fee Income Ratio(4) | 28.6% | 28.6% | 31.4% | ||||||
Efficiency Ratio(5) | 62.7% | 61.8% | 66.3% | ||||||
Cost/assets(6) | 10.9% | 9.5% | 11.2% | ||||||
Basic earnings per share (in Pesos)(7) | (4.7 | ) | (10.2 | ) | (2.5 | ) | |||
Diluted earnings per share (in Pesos) | n/a | n/a | n/a | ||||||
Basic earnings per share (in U.S.$.)(8) | (0.1 | ) | (4.7 | ) | (0.0 | ) | |||
Diluted earnings per share (in U.S.$.)(8) | n/a | n/a | n/a | ||||||
Liquidity and Capital | |||||||||
Loans to Total Deposits(9) | 106.5% | 86.6% | 110.1% | ||||||
Total Equity / Total Assets | 15.7% | 12.0% | 14.8% | ||||||
Pro forma Consolidated Capital / Risk weighted assets(10) | 12.1% | 14.0% | 19.6% | ||||||
Pro forma Consolidated Tier1 Capital / Risk weighted assets(10) | 11.3% | 12.9% | 17.2% | ||||||
LCR Pro forma(10) | 150.3% | 173.4% | 113.9% | ||||||
Risk Weighted Assets/Assets(10) | 87.2% | 73.0% | 81.7% | ||||||
Asset Quality | |||||||||
Non-performing loans as a percentage of Total Loans | 7.4% | 4.1% | 3.1% | ||||||
Allowances as apercentageof Total Loans | 7.1% | 6.0% | 5.0% | ||||||
Cost of risk(11) | 7.5% | 5.4% | 5.0% | ||||||
Cost of risk, net(12) | 7.1% | 5.1% | 4.7% | ||||||
Coverage Ratio(13) | 96.0% | 147.2% | 162.3% | ||||||
Other Data | |||||||||
Dividends paid to ordinary shares (Ps.million) | 426.0 | 466.1 | 505.1 | ||||||
Dividends per ordinary share (Ps.) | 0.9 | 0.7 | 1.1 | ||||||
Employees | 5,019 | 5,253 | 5,236 | ||||||
Branch and sales points | 316 | 317 | 326 | ||||||
ATMs, self service terminals and cash dispensers with biometric identification | 955 | 920 | 704 |
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● | If financial intermediation activity volumes relative to GDP continues at low levels, the |
Changes in market conditions and any associated risks, including | ||
Not applicable.
Not applicable.
● | The Bank’s revenues from its business with senior citizens could decrease or cease to grow if the agreement with ANSES is terminated or not renewed. |
● | Our controlling shareholder has the ability to direct our business, and potential conflicts of interest could arise. |
You should carefully consider the risks described below, as well as the other information in this annual report. Our business, results of operations, financial condition or prospects could be materially and adversely affected if any of these risks occurs. In general, investors take more risk when they invest in the securities of issuers in emerging markets such as Argentina than when they invest in the securities of issuers in the United States and other more developed markets. The risks described below are those known to us and that as of the date of this annual report believe may materially affect us.
Risks Relating to Argentina
Our business is largely dependent upon macroeconomic, political, regulatory and social conditions in Argentina.
Substantially all of our operations, property and customers are located in Argentina. As a result, the quality of our assets, our financial condition and the results of our operations are dependent upon the macroeconomic, regulatory, social and political conditions prevailing in Argentina from time to time. These conditions include growth rates, inflation rates, exchange rates, taxes, foreign exchange controls, changes to interest rates, changes to government policies, social instability, and other political, economic or international developments either taking place in, or otherwise affecting, Argentina.
The ongoing COVID-19 pandemicDevelopments in economic, political, regulatory and government measures to contain the virus are adversely affecting our business and results of operations, and, associal conditions are evolving rapidly, we cannot accurately predict the ultimate impact on the Group.
In December 2019, a novel strain of coronavirus (SARS-COV-2) causing a severe acute respiratory syndrome (“COVID-19”) was reported to have surfaced in Wuhan, China. COVID-19 has since spread across the world, including Argentina, and on March 11, 2020, the World Health Organization declared COVID-19 a pandemic. By late April, around 4,000 cases had been confirmed in Argentina. In response, countries have adopted extraordinary measures to contain the spread of the virus, including imposing travel restrictions and closing borders, requiring closures of non-essential businesses, instructing residents to practice social distancing, issuing stay at home orders, implementing quarantines and similar actions. The ongoing pandemic and these extraordinary government measures are disrupting global economic activity and resulting in significant volatility in global financial markets. According to the IMF, the global economy has recently entered into a recession.
The Argentine government has adopted multiple measures in response to the COVID-19 pandemic, including a nationwide mandatory lockdown that began on March 19, 2020 and has been extended several times, most recently through May 10, 2020. The government has also required the mandatory shutdown of businesses not considered essential, including initially the closure of bank branches.
At the same time, in order to mitigate the economic impact of the COVID-19 pandemic and mandatory lockdown and shutdown of non-essential businesses, the Argentine government has adopted social aid, monetary and fiscal measures. We cannot assure you whether these measures will be sufficient to prevent a severe economic downturn in Argentina, particularly if current conditions are prolonged and if Argentina’s main trading partners are concurrently facing an economic recession. However, the Argentine government may have more limited resources at this time to support the country’s economy; the pandemic has struck at a time when Argentina is struggling to pull out of a two year recession and the government is seeking to restructure the country’s large sovereign debt.
Some of the measures adoptedtaken by the Argentine government, may adversely affect financial institutions, such as our Group. These temporary measures include (i) postponement of loan payments without punitive interests, (ii) prohibiting bankshave had and are expected to charge fees for ATM transactions, (iii) freezing mortgage payments and suspending foreclosures, (iv) the automatic refinancing of credit card payments and reduction of the maximum interest rates that can be charged on credit cards, (v) imposing a minimum interest ratecontinue to be paid on time deposits under Ps.1 million made by individuals, and (vi) forbidding bank account closures. Additionally, some of the government measures are aimed at encouraging bank lending, such as (i) limitations on banks’ holdings of notes from the Central Bank (LELIQ), in order to make liquidity available and encourage the provision of credit lines to SMEs, (ii) lowering of reserve requirements on loans to households and SMEs, and (iii) the easing of bank loan classification rules (providing an additional 60 days of non-payment before a loan is required to be classified as non-performing). Moreover, banks may not distribute dividends until at least June 30, 2020 or carry out employees’ layoffs until at least May 30, 2020. For more information on regulations in connection with the COVID-19 pandemic and their impact on our Group, see “Item 4.B.—Business Overview—Argentine Banking Regulations – Government Measures in Response to the Ongoing COVID-19 Pandemic” and “Item 5.A Operating Results – The Ongoing COVID-19 Pandemic.” Although these measures may help attenuate the economic impact on the Argentine economy overall, they may have a negativesignificant impact on our business and results of operations.
The ongoing COVID-19 pandemic and government measures taken to contain the spread of the virus are adversely affecting our business and results of operations. Our branches were required to remain closed during the second half of March 2020, and were subsequently only gradually allowed to open with limited operations. As of the date of this annual report, banks are permitted to open to provide limited services to clients, in each case with prior appointment, provided that certain health and safety requirements set forth by the Central Bank are complied with. Additionally, we have transitioned a significant part of our workforce to work remotely, which may exacerbate certain risks to our business, including an increased reliance on information technology resources, increased risk of phishing and other cybersecurity attacks, and increased risk of unauthorized dissemination of sensitive personal information. Moreover, we face various risks arising from the economic impact of the pandemic and government measures which are difficult to predict accurately at this time, such as (i) a higher risk of impairment of our assets, (ii) lower revenues as a consequence of the temporary restrictions on charging certain fees to customers, and as a result of lower interest rates on loans promoted by the Central Bank, (iii) a possible significant increase in loan defaults and credit losses, with a consequent increase in loan loss provisions, and (iv) a decrease in credit demand and in our business activity in general, particularly new retail lending.
We are continuing to monitor the impact of the ongoing COVID-19 pandemic on the Group. The ultimate impact of the pandemic on our business, results of operations and financial condition remains highly uncertaincondition. Argentina is an emerging market and will depend on future developments outside of our control, including the intensity and duration of the pandemic and the government measures takeninvesting in order to contain the virus or mitigate the economic impact. To the extent the COVID-19 pandemic adversely affects our business, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.such markets generally carries additional risks.
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Economic and political instability in Argentina may adversely and materially affect our business, results of operations and financial condition.
The Argentine economy has experienced significant volatility in recentthe past decades, characterized byincluding multiple periods of low or negative growth and high levels of inflation and currency devaluation. As a consequence, our businessdepreciation, and operations have been, and couldmay experience further volatility in the future be, affected from timefuture. According to timedata published by the INDEC, Argentina’s real GDP decreased by 2.2% in 2019 and by 9.9% in 2020. In 2021, according to varying degreesdata published by economic and political developments and other material events affectingthe INDEC, Argentina’s GDP increased by 10.3%, mainly due to the mitigation of the impact of the COVID-19 pandemic on the Argentine economy such as: inflation; price controls; foreign exchange controls; fluctuationsas a result of the implementation of vaccination programs, which enabled the lifting of certain restrictions that had been enforced in foreign currency exchange rates and interest rates; governmental policies regarding spending and investment, national, provincial or municipal tax increases and other initiatives increasing government involvement with economic activity; civil unrest and local security concerns. You should make your own investigation into Argentina’s economy and its prevailing conditions before making an investmentArgentina until the end of 2020, as well as due to the increase in us.
During 2001 and 2002, Argentina went through a period of severe political, economic and social crisis. Among other consequences, the crisiscommodity prices, which resulted in Argentina defaultingan increase in U.S. dollar exports.
Argentine economic conditions are dependent on its foreign debt obligations, introducing emergency measures and numerous changes in economic policies that affected utilities, financial institutions, and many other sectorsa variety of factors, including the economy. Argentina also suffered a significant real devaluation of the Peso, which in turn caused numerous Argentine private sector debtors with foreign currency exposure to default on their outstanding debt. In the past three years, GDP grew 2.7% in 2017, but it contracted 2.5% in 2018 and 2.2% in 2019.
A decline infollowing: (i) domestic production, international demand and prices for Argentine products, a lackArgentina’s principal commodity exports; (ii) the competitiveness and efficiency of domestic industries and services; (iii) the stability and competitiveness of the PesoArgentine peso against other currencies, a decline in confidence among consumers andforeign currencies; (iv) the rate of inflation; (v) the government’s fiscal deficits; (vi) the government’s public debt levels; (vii) foreign and domestic investors,investment and financing; and
2
(viii) governmental policies and the legal and regulatory environment. Government policies and regulation –which at times have been implemented through informal or de facto measures and have been subject to radical shifts– that have had a high rate of inflation and future political uncertainties, among other factors, may affect the development ofsignificant impact on the Argentine economy in the past, have included, among others: (i) monetary policy, including exchange controls, capital controls, high interest rates and a variety of measures to curb inflation; (ii) restrictions on exports and imports; (iii) price controls; (iv) mandatory wage increases or prohibition of dismissals; (v) taxation; and (vi) government intervention in the private sector.
The IMF and the Argentine authorities have reached an understanding on key policies as part of their ongoing discussions of an IMF-supported program in order to renegotiate the principal maturities of the U.S.$44.1 billion under a stand-by arrangement. On March 25, 2022, the IMF approved the execution of the financing agreement (the “IMF Agreement”) with Argentina for a total amount of U.S.$44 billion, which includes a disbursement of U.S.$9.6 billion. We cannot assure that the conditions of the IMF Agreement will not affect Argentina’s ability to implement reforms and public policies and boost economic growth, nor the impact that the IMF Agreement may have in Argentina’s ability to access international capital markets (and indirectly in our ability to access those markets). Moreover, the long-term impact of these measures and any future measures taken by the government on the Argentine economy, as a whole and in the banking sector in particular, remains uncertain. It is possible that reforms could leadbe disruptive to reduced demand for our servicesthe economy and adversely affect the Argentine economy and the banking industry, and, consequently, our business, financial condition and results of operations.
The primary elections (Elecciones Primarias, Abiertas y Simultáneas y Obligatorias - “PASO”, per its acronym in Spanish), which define which political partiesoperations and which candidates of the different political parties may run in the general elections, took place in August 11, 2019. In these elections, theFrente de Todos coalition (a political coalition composed of, among others, the Justicialist Party and the Renovating Front, which was at the time part of the opposition and included former president Fernandez de Kirchner as a candidatefinancial condition. We are also unable to the vice-presidency) obtained 47.78% of the votes, whileJuntos por el Cambio coalition (then president Mr. Mauricio Marcri’s coalition), obtained 31.79% of the votes.
After the results of the primary elections, the Peso devalued almost 30% and the share price of Argentine listed companies dropped approximately 38% on average. In turn, the emerging market bond index (EMBI) peaked to one of the highest levels in Argentine history, above 2000 points on August 28, 2019. As of April 28, 2020 the EMBI was 3,995 points. As a consequence of the aforementioned effects, in order to control the currency outflow and restrict exchange rate fluctuations, the Central Bank re-implemented exchange controls, in hopes of strengthening the normal functioning of the economy, fostering a prudent administration of the exchange market, reducing the volatility of financial variables and containing the impact of the variations of financial flows on the real economy.
Presidential and Congressional elections in Argentina took place on October 27, 2019, which resulted in Mr. Alberto Fernández being elected President of Argentina, having earned 48.1% of the votes. The Fernández administration assumed office on December 10, 2019. As of such date, the Argentine Congress was composed as follows:Frente de Todoscommanded a majority in the Senate with 41 seats, with the first minority beingJuntos por el Cambio with 28 seats; while in the House of RepresentativesJuntos por el Cambio commanded the first minority with 119 seats and the second minority belongs to the Frente de Todos with 116 seats.
The political uncertainty in Argentina aboutpredict the measures that the newArgentine government may adopt in the future, and how they will impact on the Argentine economy and our results of operations and financial condition.
Legislative elections took place on November 14, 2021, in the context of which one third of the seats in the senate and half of the seats in the house of representatives, were up for election. “Juntos por el Cambio” (the political party of the former administration) obtained 41.7% of the votes and “Frente de Todos” (the political party of the current administration) obtained 33.6% of the votes. As a result, the “Frente de Todos” coalition lost its majority of votes in the house of representatives, but maintained a majority of the seats in the senate. As a result, the administration of President Fernández administration could take with respectmay not be able to the economy, including with respect to the crisis resulting from the ongoing COVID-19 pandemic, could generate volatility in the price of the Argentine companies’ securities or even a decrease in their prices, in particular companies in the financial sector like us.
7
enact new legislation.
We can offer no assurances as to the policiescannot assure you that may be implemented by the new Fernández Argentine administration, or that political developments in Argentina will not adversely affect macroeconomic, political, regulatory or social conditions in the Argentine economycountry and, our financial condition and results of operations. In addition, we cannot assure you that future economic, regulatory, social and political developments in Argentina will not impairconsequently, our business, financial condition or resultsresult of operations or cause the market value of our shares to decline.and financial condition.
If the current levels of inflation continue or increase, the Argentine economy and our business and financial position and businesscondition could be adversely affected.
In the past, inflation has materially undermined the Argentine economy and Argentina’s ability to create conditions that would permit growth. High inflation may also undermine Argentina’s competitiveness abroad and lead to a decline in private consumption which, in turn, could also affect employment levels, salaries and interest rates. Moreover, a high inflation rate could undermine confidence in the Argentine financial system, reducing the Peso deposit base and negatively affecting long-term credit markets.
TheIn recent years, Argentina has confronted high inflationary pressures, evidenced by significantly higher fuel, energy and food prices, among other factors, and continues to do so. In 2019, the INDEC reported a cumulative variation of theregistered an increase in CPI of 24.8%53.8% and an increase in WPI of 58.5%. In 2020, the INDEC registered an increase in CPI of 36.1% and in increase in WPI of 35.4%. In 2021, the INDEC registered an increase in CPI of 50.9% and an increase in WPI of 51.3%.In March 2022, the INDEC registered a CPI of 6.7%, which represents the highest monthly inflation in the last 20 years.
In June 2018, the International Practices Task Force categorized Argentina as a country with a projected three-year cumulative inflation rate greater than 100%. Pursuant to IAS 29 (Financial Reporting in Hyperinflationary Economies), the financial statements of entities whose functional currency is that of a hyperinflationary economy must be restated in a suitable general price index to control the effects of changes. Argentine companies applying IFRS are required to apply IAS 29 to their financial statements for 2017, 47.6%periods ending on and after July 1, 2018. In addition, certain regulatory authorities, such as the CNV, have required that financial statements submitted to the CNV for the periods ended on and after December 31, 2018 be restated for inflation in accordance with IAS 29.
Monetary policies carried out by the Central Bank to provide financial assistance to the Argentine government in order to fund measures adopted in relation to the ongoing COVID-19 pandemic could trigger further inflationary pressures in 2022. On April 8, 2022, the Argentine Central Bank announced that the new inflation estimates for years 2022, 2023 and 53.8% for 2019.2024 are 59.2%, 47.5% and 40.9%, respectively, pursuant to its survey of consumer expectations (Relevamiento de Expectativas de Mercado) carried out between March 29 and March 31, 2021.
There can be no assurances that inflation rates will not continue to escalate in the future or that the measures adopted or that may be adopted by the new Fernández administration to control inflation will be effective or successful. Inflation remains a challenge for Argentina. SignificantIf inflation levels remain high or continue to
3
rise in the future, the development of the Argentine economy could have a material adverse effect on Argentina’s economybe negatively impacted and, in turn could increaseparticular, our costs of operation in particular labor costs, andcould increase, which may negatively affect our business, financial condition and results of operations.
A high levelThe ongoing COVID-19 pandemic and government measures to limit the spread of uncertaintythe virus have disrupted the global and Argentine economies, andaffected, and could continue to affect, our business and results of operations.
In December 2019, COVID-19, a novel strain of coronavirus (SARS-COV-2) causing a severe acute respiratory syndrome, was reported to have surfaced in Wuhan, China. COVID-19 has since spread across the world, including Argentina, and on March 11, 2020, the World Health Organization declared COVID-19 a pandemic. In response, governments across the world, including Argentina, have adopted extraordinary measures to contain the spread of the virus. Since March 2020, the Argentine government has adopted a series of extraordinary measures, including, among others, mandatory quarantine, closure of external borders and internal travel restrictions, the closing of public and private institutions, restrictions on certain economic activity, aimed at preventing the spread of COVID-19.
The Argentine government also adopted multiple measures to mitigate the effects of the pandemic on the Argentine economy. These measures have included, in addition to price controls, and the prohibition of dismissals without cause, the postponement of loan payments without punitive interests, the deferral of unpaid loan installments and the prohibition to banks on charging fees for ATM transactions, which have adversely affected, and could continue to affect, financial institutions, such as our Group. In addition, with regardthe outbreak of the COVID-19, we had to close a significant number of our branches temporarily, reduce the opening hours of working with the public, and transitioned a significant part of our workforce to work remotely, which continues as of the date of this annual report and which may exacerbate certain risks to our business, including an increased reliance on information technology (“IT”) resources, increased risk of phishing and other cybersecurity attacks, and increased risk of unauthorized dissemination of sensitive personal information. While some of these measures have been lifted and others softened, additional restrictions could be adopted that affect the Group’s operations. Although these measures may have helped attenuate the economic variables,impact on the Argentine economy overall, they had and a general lack of stability in terms of inflation, couldmay continue to have a negative impact on economic activityour business and adversely affect our financial condition.
The Argentine government’s ability to obtain financing from international markets is limited, which may impair its ability to implement reforms and foster economic growth, which may negatively impact our financial condition or cash flows.results of operations.
In 2005addition, the Group has been and 2010, Argentina conducted exchange offersmay continue to restructure partbe affected by other measures or recommendations adopted by regulatory authorities in the banking sector such as variations in reference interest rates, the modification of its sovereign debt that had beenprudential requirements, the temporary suspension of dividend payments, deferrals of loan payments and the granting of lending to companies and self-employed persons backed by public guarantees.
Moreover, we faced and could continue to face various risks arising from the economic impact of the COVID-19 pandemic and government measures, such as (i) a higher risk of impairment of our assets or a significant increase in default sinceloan defaults and credit losses, with a consequent increase in loan loss provisions, (ii) lower revenues as a consequence of the end of 2001. Astemporary restrictions on charging certain fees to customers, and as a result of these exchange offers, Argentina restructured over 92% of its eligible defaulted debt. However,litigation initiatedlower interest rates on loans promoted by bondholders thatdid not accept Argentina’s settlement offers continuedthe Central Bank and minimum interest rates imposed on deposits, , and (iii) a decrease in several jurisdictionscredit demand and limitedin our business activity in general, particularly new retail lending. For more information on regulations in connection with the country’s accessCOVID-19 pandemic and their impact on our Group, see “Item 4.B. Business Overview—Government Measures in Response to international capital markets.the Ongoing COVID-19 Pandemic” and “Item 5.A Operating Results—The Ongoing COVID-19 Pandemic.”
In April 2016,December 2020, the Argentine government settled U.S.$4.2 billion outstanding principal amount of untendered debt.
In 2018, due to Argentina’s limitation of access to international markets, the Argentine government and the IMF entered intostarted a “stand-by” credit facility agreement for an amount of U.S.$57.1 billion with a 36-month maturity.national vaccination program. As of the date of this annual report, 80% of the total population in Argentina has been administered at least two doses of a vaccine against the COVID-19, and 37% of the population has received disbursements undera third dose. Despite the agreementavailability of vaccines, the COVID-19 pandemic may not be fully contained for U.S.$46.1 billion. Notwithstanding the foregoing,foreseeable future and certain regions may be subject to an increase in the number of people infected and deaths. New waves of contagion or the emergence of new Fernández administration has publicly announced that they will refrain from requesting additional disbursements understrains prolonguing the agreement, and instead vowedhealth crisis due to renegotiate its terms and conditions in good faith.
Thenew Fernández administration has initiated negotiations with creditors in orderthe COVID-19 pandemic could continue to restructurethe country’s current Peso and U.S. dollar-denominated public debt. In this context,have an adverse impact on February 5, 2020, the Argentine Congress passed Law N° 27,544, by virtue of which the sustainability ofthe sovereign debt is declared a national priority, authorizing the Ministry of Economy to renegotiate new terms and conditions with Argentina’s creditors within certain parameters.
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Additionally, in the midst of debt restructuring negotiations, on April 5, 2020 the Argentine government issued Decree No. 346/2020, through which the repayment of Argentine law-governed dollar-denominated notes was postponed.
On April 21, 2020, the Argentine government launched an exchange offer with the aim of refinancing its external indebtednesseconomy, resulting in a manner which does not compromisefurther decline in employment, as well as in confidence among businesses and consumers.
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We are continuing to monitor the development and potential growth of Argentina in the next years. For more information on this offer, see “Item 5.A—Operating Results—The Argentine Economy and Financial System—Argentina’s Sovereign Debt Restructuring”. Asimpact of the dateongoing COVID-19 pandemic across our businesses. The ultimate impact of this annual report,the exchange offer is still open and there is uncertainty as to whether the Argentine government will be able to successfully carry out theexchangeofferand restructure its foreign financial indebtedness, under the proposed terms or at all.
If the Argentine government is not able to successfully renegotiate the terms ofthe sovereign debt, or if the negotiations with creditors are prolonged beyond May 22, 2020, or if significant litigation with holdout bondholders results from such negotiations,the country’s ability to access international credit markets may be adversely affected.Additionally, the pressure from creditors may result in restructured terms that are not sustainable for Argentina, or the IMF may impose strict austerity measures as a condition to restructuring its debt. As a result, the Argentine government may not have theability or the financial resources necessary to foster economic growth, which, in turn, could have a material adverse effect on the country’s economy and, consequently, our business and results of operations. Furthermore, Argentina’s inability to obtain credit in international markets could have a direct impactpandemic on our own ability to access international credit markets to finance our operations and growth, which could adversely affect ourbusiness, results of operations and financial condition remains uncertain and will depend on future developments outside of our control, including whether new variants of the COVID-19 arise and the government measures in response of the COVID-19 pandemic, including the vaccination program. To the extent the COVID-19 pandemic adversely affects our business, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section.
A decrease in international prices for the main commodities exported by Argentina could negatively affect Argentina’s economic condition.
Argentina’s reliance on the export of certain commodities, particularly soybeans and its by products, corn and wheat, has made the country more vulnerable to fluctuations in their prices. A decrease in commodity prices may adversely affect the Argentine government’s fiscal revenues and the Argentine economy as a whole. Given its reliance on such agricultural commodities, the country is also vulnerable to weather events —such as 2018’s drought— that may negatively affect the production of such commodities, reducing fiscal revenues and the inflow of U.S. dollars.
If the international prices for agricultural commodities decrease, Argentina’s economy could be adversely affected. In addition, a decline in international prices for agricultural commodities could have a negative impact on the government’s tax revenues, including its ability to repay its debt, and on the availability of foreign currency. Moreover, agriculture production— which represent an important source of Argentina’s export income— could be negatively affected due to adverse climate conditions. Any such developments may adversely affect Argentina’s economy and, as a result, our business, results of operations and financial condition.
The geopolitical conflict between Russia and Ukraine has had and may continue to have an impact on commodities prices, especially international crude oil and gas prices, which have increased significantly between February and April 2022. Furthermore, the conflict has resulted in sanctions to to Russia, which may result in a shortage of raw materials and commodities, which could in turn generate greater levels of inflation in economies and interruptions in the supply chain in general, and particularly in the energy sector, which may consequently result in difficulties to supply the local market.
A long-term decrease in the international price of oil would negatively impact the country’s oil and gas prospects and result in a decrease in foreign investment in these sectors.
High fiscal deficit could result in long lasting adverse consequences for the Argentine economy, which in turn could adversely affect our business, financial condition and results of operations.
During the last years, the Argentine government has sustained high levels of fiscal deficit, and has resorted regularly to the Central Bank to source part of its funding requirements. In 2019, 2020, and 2021, public sector expenditure increased approximately 37.2%, 63.5% and 49.6%, respectively, and the government achieved a primary fiscal deficit of 0.4%, 6.5% and 2.2% of Argentina’s GDP, respectively, according to the Argentine Ministry of Treasury. The decrease in the fiscal deficit in 2021 was mainly due to certain extraordinary revenues. If the Argentine government would not have generated such extraordinary revenues, the fiscal deficit would have represented 3.8% of the Argentina’s GDP in 2021.
Following the agreement with the IMF, Argentina is committed to gradually reduce its primary fiscal deficit to 2.5% of GDP in 2022, 1.9% of GDP in 2023 and 0.9% of GDP in 2024, together with a gradual reduction of the monetary assistance to the Argentine government of 1% of GDP in 2022, 0.6% of GDP in 2023 and 0% in 2024.
We cannot assure you that the Argentine government will not seek to finance its deficit by gaining access to the liquidity available in the local financial institutions. In that case, government initiatives that increase the exposure of local financial institutions to the public sector could affect our liquidity and assets quality and have a negative effect on clients’ confidence in the financial system.
Fluctuations in the value of the Argentine Peso could adversely affect the Argentine economy.
Fluctuations in the value of the Peso could adverselycontinue to affect the Argentine economy,economy. Since January 2002, the Peso has fluctuated significantly in value. Persistent high inflation, together with formal and consequently our results of operations or financial condition.
Fluctuationsde facto exchange controls, have resulted in the valuepast in an overvalued official exchange rate. Compounded by the effects of exchange controls and restrictions on foreign trade, highly distorted relative prices have resulted in the loss of competitiveness of Argentine production, impeded investment and caused economic stagnation. In 2019, 2020 and 2021, the Peso depreciated 36.6%, 29% and 22%, respectively, with respect to the U.S. dollar. As of April 26, 2022, the exchange rate was Ps.114.84 per U.S. dollar.
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The depreciation of the Peso may also adversely affect the Argentine economy, our financial condition and results of operations. In 2017, 2018 and 2019, the Peso lost approximately 18.4%, 101% and 58% of its value against the U.S. dollar, respectively.The devaluation of the Peso in real terms can have a negative impact on the ability of certain Argentine businesses to honorservice their foreign currency denominated debt, and also lead to very high inflation, significantly reduce real wages and significant reduced real wages. The devaluation can also negatively impactjeopardize the stability of businesses whose success is dependentdepends on domestic market demand, and also adversely affect the Argentine government’s ability to honor its foreign debt obligations. A substantial increase in the valueobligations. In turn, a significant appreciation of the Peso against the U.S. dollar also representspresents risks for the Argentine economy, since it may lead toincluding the possibility of a deteriorationreduction in exports as a consequence of the country’s current account balance and the balanceloss of payments which mayexternal competitiveness. Any such appreciation could also have a negative effect on GDPeconomic growth and employment and reduce the revenues of the Argentine public sector by reducing tax revenues in real terms, due to its current heavy dependence on export taxes.
As of April 28, 2020, the exchange rate was Ps.66.635 per dollar.
As a result of the greater volatility of the Peso, the former administration announced several measures to restore market’s confidence and stabilize the value of the Argentine Peso. Among them, during 2018, the Argentine government negotiated two agreements with the IMF, increased the interest rates and the Central Bank decided to intervene in the exchange market in order to stabilize the value of the Peso. During 2019, based on a new agreement with the IMF, the government established a new regime for a stricter control of the local monetary base, which would remain in place until December 2019, in an attempt to reduce the amount of Pesos available in the market and reduce the demand for foreign currency. Complementing these measures,in September 2019, foreign currency controls were reinstated in Argentina. As a consequence of the reimposition of exchange controls, the spread between the official exchange rate and other exchange rates resulting implicitly from certain common capital market operations (“dolar MEP” or “contado con liquidación”) has broadened significantly, reaching a value of approximately 50% above the official exchange rate. The success of any measures taken by the Argentine government to restore market’s confidence and stabilize the value of the Argentine Peso is uncertain and the continued depreciation of the Peso could have a significant adverse effect on our financial condition and results of operations.
terms.
The maintenance or implementation in the future of newadditional exchange controls regulations, restrictions on transfers abroad and capital inflow restrictions could limit the availability of international credit and could threaten the financial system, which may adversely affect the Argentine economy and, as a result, our business.economy.
In 2001 and 2002, following a run on the financial system triggered by the public’s lack of confidence in the continuity of the convertibility regime that resulted in massive capital outflows,past, the Argentine government imposed exchange controls and transfer restrictions, substantially limiting the ability of companies to retain foreign currency or make payments abroad. Although several of such exchange controls and transfer restrictions were subsequently suspended or terminated, in June 2005 the federal government issued a decree that established new controls on capital inflows, which resulted in a decrease in the availability of international credit for Argentine companies. From 2011 until 2015, the Argentine governmenthas increased controls on the sale of foreign currency, and the acquisitionlimiting transfers of foreign assets by local residents, limiting the possibility of transferring funds abroad.
After Measures taken by the Argentine government significantly curtailed access to the official foreign exchange market and, as a result, an unofficial U.S. dollar trading market developed in which the Peso-U.S. dollar exchange rate differed substantially from the official Peso-U.S. dollar exchange rate. While the former Macri’s administration had initially eliminated a significant portion of the foreign exchange restrictions in 2016, in September 2019, in response to significant capital flight from the country, the Argentine Central Bank imposed restrictions on September 1,foreign exchange transactions, which were effective until December 31, 2019. Following the change in government in December 2019, it temporarily reinstatedthe Fernández administration has extended the measures indefinitely, and established further restrictions, including a new tax (impuestosolidario) on certain transactions involving the purchase of foreign currency by Argentine residents.
The current exchange restrictions, followed by new exchange restrictions imposed by the new Fernandez’s administration. The new controls apply with respect to access to the foreign exchange market by residents for savings and investment purposes abroad, the payment of external financial debtdebts abroad, the payment of dividends in foreign currency abroad, payments of imports and exports of goods and services, and the obligation to repatriate and settle for Pesos the proceeds from exports of goods and services for Pesos, among others. For morefurther information, onsee “Item 10.D. Exchange Controls”.
In September 2020,the Central Bank issued Communication “A” 7106 restricting the access to the foreign exchange market for the repayment of principal payments under certain external financial indebtedness maturing between October 15, 2020 and March 31, 2021. These restrictions see “Item 10.D—Exchange Controls.”were further amended and currently the restrictions apply to external financial indebtedness maturing between October 15, 2020 and December 31, 2022. We cannot assure you whether the Central Bank will extend these restrictions or adopt similar restrictions in the future.
Exchange
We cannot anticipate for how long these measures will be in force or if additional restrictions will be imposed. The Argentine government could maintain or impose new exchange controls, restrictions and take other measures in response to capital flight or a significant depreciation of the Peso, which could in turn limit access to the international capital markets and affect the Argentine economy. In addition, such evolving exchange control restrictions and measures may negativelyresult in Argentine Central Banks’s information requests, enforcement actions and penalties due to diverging interpretations of foreign exchange regulatoins.
As a related matter, the international reserves deposited with the Argentine Central Bank have fluctuated significantly. The international reserves of the Argentine government amounted to U.S.$39.7 billion as of December 31, 2021. Future measures taken by the Argentine government could further reduce the level of international reserves deposited with the Argentine Central Bank in the future.
In addition, since the imposition of exchange controls, the difference between the official exchange rate, which is currently used for both commercial and financial operations, and other informal exchange rates that arise implicitly as a result of certain operations commonly carried out in the capital market (dollar “MEP” or “contado con liquidación”), have broadened deeply during 2021 creating a gap of approximately 86% with the official exchange rate as of April 26, 2022.
The Argentine government could maintain a single official exchange rate or create multiple exchange rates for different types of transactions, substantially modifying the applicable exchange rate at which we acquire currency for different purposes. Furthermore, existing or future measures could undermine the Argentine government’s public finances, which could adversely affect Argentina’s international competitiveness, discouraging foreign investments and lending by foreign investors or increasing foreign capital outflow which could have an adverse effect on economic activity in Argentina, andeconomy, which, in turn, could adversely affect our business, and results of operations.operations and financial condition.
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The Argentine economygovernment’s ability to obtain financing from the international loan and capital markets may be adversely affected bylimited or costly, which may impair its ability to implement reforms and foster economic developmentsgrowth.
During recent years the Argentine government has faced difficulties in otherthe payment of its sovereign debt. As a result, the Argentine government may not have access to international financing, or its access may be costly, which would limit its ability to make investments and foster economic growth. Additionally, Argentine companies may also have difficulty accessing international financing, at reasonable costs or at all.
During March 2020, the Argentine government initiated discussions with various groups of creditors to discuss a path for Argentina’s debt sustainability. With respect to Argentina’s international bonds, the Argentine executive branch approved the restructuring of certain eligible global bonds issued under foreign laws for up to U.S.$65 billion. In August 2020, the Argentine government announced that it had obtained the consents required to exchange 99% of the aggregate principal amount outstanding of all series of eligible bonds.
On March 13, 2020, the Minister of Economy addressed a letter to the Paris Club members expressing Argentina’s decision to postpone until May 5, 2021 the U.S.$2.1 billion payment originally due on May 5, 2020, in accordance with the terms of the settlement agreement Argentina had reached with the Paris Club members on May 29, 2014 (the “Paris Club 2014 Settlement Agreement”). In addition, on April 7, 2020, the Minister of Economy sent the Paris Club members a proposal to modify the existing terms of the Paris Club 2014 Settlement Agreement, seeking mainly an extension of the maturity dates and a significant reduction in the interest rate. In June 2021, the parties agreed that Argentina would pay U.S.$430 million to the group before the end of July and the rest during the following year to avert default in July 2021. On March 22, 2022, the Argentine government reached an agreement with the Paris Club for a new extension of the agreement reached in June 2021.
In June 2018, the Argentine government and the IMF signed a three-year, U.S.$50 billion loan agreement, as further amended to U.S.$57.1 billion through 2021 (the “IMF 2018 Agreement”). Following an IMF report in February 2020 stating that Argentina’s debt may not be sustainable, the Argentine government requested to begin discussions with the IMF in order to renegotiate the principal maturities of the U.S.$44.1 billion disbursed between 2018 and 2019 under a stand-by arrangement. The IMF and the Argentine authorities reached an understanding on key policies as part of their ongoing discussions on an IMF-supported program. On March 25, 2022, the IMF approved the execution of the IMF Agreement with Argentina for a total amount of U.S.$44 billion, which includes a disbursement of U.S.$9.6 billion. The IMF will monitor Argentina’s compliance with such agreement at the end of each quarter. By means of the IMF Agreement, the Argentine government seeks to decrease the high inflation in Argentina improving public finances and strengthening Argentina’s balance of payments. We cannot assure that the conditions of the IMF Agreement will not affect Argentina’s ability to implement reforms and public policies and boost economic growth, nor the impact that the IMF Agreement may have in Argentina’s ability to access international capital markets (and indirectly in our ability to access those markets).
In June 2021, Morgan Stanley Capital Index (“MSCI”), in its market classification report, reclassified the Argentine market from the “Emerging Markets” category to the “Standalone” or “Independent Markets” category, classification that is reserved for those countries that have accessibility barriers to foreign investors, political tensions, small capital markets and by more general “contagion” effects,poor economies or that lack adequate regulations. In the case of Argentina, the classification as a “Standalone” market was due to the prolonged severity of capital controls in the Argentine stock market which couldis not in line with the accessibility criteria of the MSCI Emerging Markets index. As a result of the reclassification, several Argentine companies suffered a negative impact on the price of their shares, and may face greater difficulties in obtaining financing in the future.
Due to past or future defaults on its indebtedness, we cannot assure you that Argentina will have a material adverse effectaccess to international financing in the future, on Argentina’sfavorable terms or at all. If Argentina is not able to access financing, it may not be able to foster economic growth and consequently,invest in the country. As a result, we cannot assure you that private companies in Argentina will have access to financing on favorable terms or at all, which could adversely affect our business, financial condition and results of operations.
The Argentine economy could be adversely affected by economic events in other global markets.
Argentina’s economy isremains vulnerable to external shocks that could be caused by adverse developments affecting its principal trading partners.regional or global developments. A significant decline in the economic growth of any of Argentina’s major trading partners (including Brazil, the European Union, China and the United States), including as a result of the ongoing COVID-19 pandemic, could have a material adverse impact on Argentina’s balance of trade and adversely affect Argentina’s economic growth.economy. In addition, Argentina may be affected by economic and market conditions in other markets worldwide, as was the case in 2008,/2009, when the globalfinancial economic crisis led to asignificant sudden economiccontraction decline in Argentina in 2009.
Since 2015, The ongoing COVID-19 pandemic has disrupted global and Argentine economies, the Brazilian economy, Argentina’s largest exportfull impact of which cannot be accurately predicted at this time.
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In the past, emerging market and the principal source of imports, has experienced heightened negative pressure due to the uncertainties stemming from the ongoing political crisis, including the impeachment of Brazil’s president, which resultedeconomies have been affected by changes in U.S. monetary policy, at times resulting in the Senateunwinding of Brazil removing Ms. Dilma Rousseff from office for the rest of her term on August 31, 2016. Mr. Michel Temer, who previously held office as vice president of Brazil, subsequently took office until the end of the presidential periodinvestments and in October 2018, Mr. Jair Bolsonaro was elected president. Mr. Bolsonaro has liberal, conservative and nationalist tendencies and assumed office on January 1, 2019. Given that Brazil is the largest economy in Latin America, the measures taken to clean up its economy can have a great impactincreased volatility in the region. A further deteriorationvalue of their currencies. During 2018, the interest rate curve in economic conditions in Brazil may reduce the demand for Argentine exports to the neighboring country and, if this occurs, it could have a negative effect on the Argentine economy and potentially on our operations.
In addition, financial and securities markets in Argentina have been influenced by economic and market conditions in other markets worldwide. Although economic conditions vary from country to country, investors’ perceptions of events occurring in other countries have in the past substantially affected, and may continue to substantially affect, capital flows into, and investments in securities from issuers in, other countries, including Argentina. International investors’ reactions to events occurring in one market sometimes demonstrate a “contagion” effect in which an entire region or class of investment is disfavored by international investors.
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The Argentine financial system and securities markets could be also adversely affected by events in developed countries’ economies, such as the United States shifted upward, generating a generalized devaluation in emerging markets, with the Turkish Lira and Europe.the Peso being the most affected currencies against the U.S. dollar. However, in July 2019, the U.S. Federal Reserve cut rates for the first time since 2008, indicating an expectation of lower growth in the future, with long-term rates remaining low during 2020 and 2021. On June 23, 2016,March 16, 2022, the United Kingdom votedU.S. Federal Reserve approved an increase of 0.25% in favor of interest rates,the United Kingdom exiting the European Union (“Brexit”). The United Kingdom formally left the European Union on January 31, 2020. Even when the United Kingdom agreed its departure from the European Union, negotiations on the termsfirst increase since December 2018, and conditionsinterest rates are expected to continue to rise during the transition period, which is dueto expire on December 31, 2020. The effects of the Brexit vote and the perceptions as to the impact of the withdrawal of2022. If interest rates rise significantly in developed economies, including the United Kingdom from the European Union may adversely affect business activity and economic and market conditions in the United Kingdom, the Eurozone and globally, and could contribute to instability in global financial and foreign exchange markets. In addition, Brexit could lead to additional political, legal and economic instability in the European Union and have a negative impact on the commercial exchange of Argentina with that region.
On November 8, 2016, Mr. Donald Trump was elected president of the United States. His presidency has created significant uncertainty about the future relationships between the United States, and other countries, including with respect to the trade policies, treaties, government regulations and tariffs that could apply to trade between the United States and other nations. We cannot predict how Mr. Trump’s protectionist measures will evolve or how they may affect Argentina, nor will the effect that the same or any other measure taken by the Trump administration could cause on global economic conditions and the stability of global financial markets. Moreover, the next presidential elections in the United States are expected to take place in November 2020, and we cannot predict the outcome of such elections.
In July 2019, the Common Market of the South (“MERCOSUR”) signed a strategic partnership agreement with the European Union (the “EU”), which is expected to enter into force in 2021, once approved by the relevant legislatures of each member country. The objective of this agreement is to promote investments, regional integration, increase the competitiveness of the economy and achieve an increase in GDP. However, the effect that this agreement could have on the Argentine economy and the policies implemented by the Argentine government is uncertain.
Changes in social, political, regulatory and economic conditions in other countries or regions, or in the laws and policies governing foreign trade, could create uncertainty in the international markets and could have a negative impact on emerging market economies, including the Argentine economy. Also, if these countries fall intoArgentina, could find it more difficult and expensive to borrow capital and refinance existing debt, which would negatively affect their economic growth.
We are currently operating in a recession, the Argentine economy would beperiod of economic uncertainty and capital markets disruption, which has been significantly impacted by a declinegeopolitical instability due to the ongoing military conflict between Russia and Ukraine.
Global markets are experiencing volatility and disruption following the start of the military conflict between Russia and Ukraine in its exports, particularlyFebruary 2022. Although the length and impact of its main agricultural commodities. All of these factorsthe ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility in commodity prices (in particular oil and gas), credit and capital markets. Additionally, Russia’s military interventions in Ukraine have a negative impact on Argentina’s economyled to sanctions and in turn, our business,other penalties being levied by the United States, European Union and other countries against Russia and certain other regions, including agreement to remove certain Russian financial conditioninstitutions from the Society for Worldwide Interbank Financial Telecommunication payment system. Additional potential sanctions and results of operations.
Furthermore, the financial marketspenalties have also been proposed and/or threatened. Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets.
Argentina could be adversely affected by the oil production crisisnegative economic or financial developments in March 2020 arising from the OPEC’s failureother countries. We cannot assure you that developments in other markets will not affect macroeconomic, political or social conditions in Argentina and, consequently, our business, results of operations and financial condition.
Government or labor pressure to reduce production. For more information, see in this section “Sustained declinesgrant salary increases and/or additional benefits may affect business conditions in the international prices for oil could have an adverse material effect on the Argentine and the global economy.” Any of these factors could depress economic activity and restrict our access to suppliers and could have a material adverse effect on our business, financial condition and results of operations.
Government measures, as well as pressure from labor unions, could require salary increases or added benefits, all of which could increase the company’s operating costs.country.
In the past, the Argentine government has passed laws and regulations forcing privately owned companies to maintain certain wage levels and provide added benefits forto their employees. Additionally, both public and private sector employers have been subject to strongsignificant pressure from the workforce and trade unions to grant salary increases and certain workerother benefits. The Argentine government has increased the minimum monthly salaries on numerous opportunities. In addition, the Argentine government has arranged other measures to mitigate the impact of inflation and exchange rate fluctuation in wages, or the consequences of the ongoing COVID-19 pandemic.
Labor relations in Argentina are governed by specific legislation, such as laborLabor Law No. 20,744 and Collective Bargaining Law No. 14,250, which, among other things, dictate how salary and other labor negotiations are to be conducted. EveryMost industrial or commercial activity isactivities are regulated by a specific collective bargaining agreement that groups together companies together according toby industry sectors and by trade unions. While the process of negotiation is standardized, each chamber of industrial or commercial activity separately negotiates the increases of salaries and labor benefits with the relevant trade union of such commercial or industrial activity. In the banking activity, salaries are established on an annual basis through negotiations between the chambers that represent the banks and the banking employees’ trade union. The National Labor Ministry mediates between the parties and ultimately approves the annual salary increase to be applied in the banking activity. Parties are bound by the final decision once it is approved by the labor authority and must observe the established salary increases for all employees that are represented by the bankingrespective union and to whom the collective bargaining agreement applies.
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In addition, each company is entitled, regardless of union-negotiated mandatory salary increases, to give its employees additional merit increase or variable compensation scheme.
Argentine employers, both in the public and private sectors, have experienced significant pressure from their employees and labor organizations to increase wages and to provide additional employee benefits. Due to the high levels of inflation, employees and labor organizations are demanding significant wage increases. In August 2018, the National Labor Ministry resolved to increase the minimum salary to Ps.12,500 in four stages: an increase (i) to Ps.10,700 in September 2018, (ii) to Ps.11,300 inOn December 2018, (iii) to Ps.11,900 in March 2019, and to 12,500 in June 2019.
Due to high levels of inflation, employers in both the public and private sectors are experiencing significant pressure from unions and their employees to further increase salaries. Through Decree No. 610/2019, a staggered increase of the minimum salary was approved as follows: (i) Ps.14,125 as of August 1, 2019; (ii) Ps.15,625 as of September 1, 2019; and (iii) Ps.16,875 as of October 1, 2019. In addition,24, 2021, the Argentine government has arranged various measures to mitigate the impact of inflation and exchange rate fluctuation in wages. Moreover due to high levels of inflation, both public and private sector employers continue to experience significant pressure to further increase salaries. In December 2019, the Argentine government issuedenacted Decree No. 34/2019,886/2021, which establishedsets forth that, in case of dismissals without cause, during six (6) months after the publicationemployees shall be entitled to receive an increase in the official gazettetheir compensation equivalent to (i) 75% of such Decree, employees have the rightcompensation, from January 1, 2022 to collect double indemnification. This Decree was enacted dueFebruary 28, 2022; (ii) 50% of such compensation, from March 1, 2022 to the economical emergencyApril 30, 2022; and the increase(iii) 25% of the unemployment, and its aim wassuch compensation, from May 1, 2022 to dissuade employers to dismiss personnel. This measure was further reinforced through Decree No. 329/2020, issued amid the COVID-19 pandemic crisis, by virtue of which dismissals without cause or with cause under the argument of force majeure or lack of/reduction of work not imputable to the employer for 60 business days (this last cause also applies for temporary suspensions). Also, in January 2020,June 30, 2022.
We cannot assure you that the Argentine government issued Decree No. 14/2020 which established a general increase for all employees of Ps.3,000 in January 2020, and an additional amount of Ps.1,000 in February 2020 (total Ps.4,000 as from February 2020).
In thewill not adopt future the Argentine government could take new measures requiring salary increases that employers increase salaries and/or additionalemployee benefits, for workers, and the labor force andprohibition of dismissals, duplication of severance payments or that our employees and/or labor unions may applywill not pressure for such measures.measures themselves. Any such increase in wage or worker benefit could result in added costsan increase in our operating expenses and, reduced results of operations for Argentine companies, including us. Such added costs couldtherefore, adversely affect our business, financial condition, results of operations and our ability to make payments under the notes.operations.
Government intervention in the Argentine economy could adversely affect our results of operations or financial condition.undermine business and investor confidence.
The Argentine government exercises substantial control over the economy and may increase its level of intervention in certain areas of the economy, including through the regulation of market conditions and prices.
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In the past, the Argentine government has increased state intervention in the economy, including through expropriation and nationalization measures, price controls and exchange controls and restrictions on capital flows. For example, in 2008, the Fernández de Kirchner administration absorbed and replaced the former private pension system for a public “pay as you go”“pay-as-you-go” pension system. As a result, all resources administered by the private pension funds, including significant equity interests in a wide range of listed companies, were transferred to a separate fund (Fondo de Garantía de Sustentabilidad, or “FGS”) to behave since been administered by the NationalArgentine Social Security Administration (Administración Nacional de la Seguridad Social, or “ANSES”, per its acronym in Spanish)). The dissolution of the private pension funds and the transfer of their financial assets to the FGS have had important repercussions on the financing of private sector companies. Debt and equity instruments which previously could be placed with pension fund administrators are now entirely subject to the discretion of the ANSES. Since it acquired equity interests in privately owned companies through the process of replacing the pension system, the ANSES is entitled to designate government representatives to the boards of directors of those entities. Pursuant to Decree No. 1,278/12, issued by the Executive Branch on July 25, 2012, the ANSES’s representatives must report directly to the Ministry of Public Finance are subject to a mandatory information-sharing regime, under which, among other obligations, they must immediately inform the Ministry of Public Finance of the agenda for each Board of Directors’ meetings and provide related documentation.
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Also, in April 2012, the Fernández de Kirchner administration decreed the removal of directors and senior officers of YPF S.A. (“YPF”), the country’s largest oil and gas company, which was controlled by the Spanish group Repsol, and submitted a bill toIn 2014, the Argentine Congress to expropriate shares held by Repsol representing 51% of the shares of YPF. The Argentine Congress approved the bill in May 2012 through the passage of Lawgovernment enacted law No. 26,741,26,991, which declared the production, industrialization, transportation and marketing of hydrocarbons to be activities of public interest and fundamental policies of Argentina, and empoweredenables the Argentine government to adoptintervene in certain markets when it considers that any measures necessaryparty to achieve self-sufficiencythe market is trying to impose prices or supply restrictions in hydrocarbon supply.the market. This law applies to all economic processes linked to goods, facilities and services which, either directly or indirectly, satisfy basic needs of the population (so-called “basic needs goods”), and grants broad powers to the relevant enforcing agency (Secretariat of Commerce) to become involved in such processes. In February 2014,June 2020, the Argentine government and Repsol announced that they had reached an agreement onordered the terms60-day temporary intervention of the compensation payablecereal producer group Vicentín S.A.I.C. to Repsol forensure the expropriationcontinuance of the YPF shares. Such compensation totaled U.S.$5 billion payable by deliverycompany’s operations and to preserve jobs and assets. In addition, as a result of Argentine sovereign bonds with various maturities. The agreement, which was ratified by Law No. 26,932, settled the claim filed by Repsol before the International Centre for Settlement of Investment Disputes (“ICSID”).
Historically, actions carried outpublic health emergency declared by the Argentine government concerningdue to the ongoing COVID-19 pandemic, several measures have been adopted to limit the impact on the Argentine economy, including decisions regarding interest rates, taxes, price controls, wage increases, increased benefits for workers, exchange controlsfreezing rent prices and potential changespublic services tariffs, and the prohibition of work dismissals, among others.
In the future, the level of intervention in the market of foreign currency, have had a substantial adverse effect on Argentina’s economic growth.
It is widely reported by private economists that expropriations, price controls, exchange controls and other direct involvementeconomy by the Argentine government may continue or increase, including in the economy have had an adverse impact on the levelresponse to social unrest, through expropriation, nationalization, intervention, forced renegotiation or modification of investmentexisting contracts, new taxation policies, establishment of price controls, changes in Argentina, the access of Argentine companies to international capital marketslaws, regulations and Argentina’s commercialpolicies affecting foreign trade and diplomatic relations with other countries. If the level of government intervention in the economy continues or increases, the Argentineinvestment. These measures may adversely affect Argentina’s economy and, in turn, our business, results of operations and financial condition could be adversely affected.
We cannot assurethatmeasures implementedin connection with the Law of Solidarity and Productive Reactivation No. 27,541 willnot adversely impact our operations, financial condition and results of operations.
On December 20, 2019, the Argentine Congress enacted Law of Solidarity and Productive Reactivation No. 27,541 , declaring public emergency in economic, financial, fiscal, administrative, social and energetic matters, among others, thus delegating in the Executive Branch the ability to ensure the sustainability of public indebtedness, regulate the energetic tariffs through an integral review of the current tariff regime and the intervention of supervisory entities, among others.
From a tax standpoint, the main measures are the following:
There is uncertainty as to the impact that Law N° 27,541 and/or any of its regulatory orders issued or that may be issued might have on our business, financial condition and results of operations. We can offer no assurances as to the measures that may be implemented by the current Argentine administration in relation to the public emergency and the general conditions of Argentine economy will not adversely affect our financial condition and results of operations.
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High public expenditure could result in long lasting adverse consequences for the Argentine economy, which in turn could adversely affect our business, financial condition and results of operations.
The Argentine government has high public expenditures, and has in the past resorted to the Central Bank and to the ANSES to source part of its funding requirements. For 2017, the government pursued a fiscal deficit target of 4.2% of GDP, while achieving a primary fiscal deficit of 3.9% of GDP, below such target. In 2018, the Argentine government updated the fiscal targets in order to achieve fiscal balance. The government’s goal for 2018 regarding the primary fiscal deficit was 2.7% of GDP. The fiscal result for 2018 showed a primary fiscal deficit of 2.4% of GDP, which represented a decrease of 1.4% with respect to 2017 and an over-compliance of 0.3% of GDP target with respect to the target tax rate of 1.1%. Although the objective of the former Macri administration was to achieve a primary fiscal deficit equivalent to 1.3% of GDP in 2019, in the context of the negotiations with the IMF, the fiscal deficit target was adjusted to 0% of GDP for 2019 and a surplus of 1% for 2020. The fiscal result for 2019 showed a primary fiscal deficit of 0.4%.However, the new Fernández administrationhas indicated that will seek to foster economic growth, which may require additional public spending.Additionally, the economicimpact of the COVID-19 pandemicand the nationwide lockdown may also require the Argentine government to increase public spending.
If the newFernández administration were to seek to finance its deficit by increasing the exposure of local financial institutions to the public sector, our liquidity and assets quality could be affected, and as a consequence, impact negatively on clients’ confidence.
A continuous decline in international prices for Argentina’s main commodity exports could have an adverse effect on Argentina’s economic growth, which could adversely affect our business, financial condition and results of operations.
Argentina’s financial recovery from the 2001-2002 crisis occurred in a context of price increases for Argentina’s commodity exports. High commodity prices contributed to the increase in Argentine exports since the third quarter of 2002 and to high government tax revenues from export withholdings. Consequently, the Argentine economy has remained relatively dependent on the price of its main agricultural products, primarily soy. This dependence has rendered the Argentine economy more vulnerable to commodity prices fluctuations.
A continuous decline in the international prices of Argentina’s main commodity exports could have a negative impact on the levels of government revenues and the government’s ability to service its sovereign debt, and could either generate recessionary or inflationary pressures, depending on the government’s reaction. Either of these results would adversely impact Argentina’s economy and, therefore, our business, results of operations and financial condition.
Failure to adequately address actual and perceived risks of institutional deterioration and corruption may adversely affect Argentina’s economy, and financial condition, which in turn could adversely affect our business, financial condition and results of operations.
A lack of a solid institutional framework and corruption have been identified as, and continue to be a significant problem for Argentina. In Transparency International’s 20192020 Corruption Perceptions Index survey of 180 countries, Argentina was ranked 66, improving from the previous survey in 2018. In the World Bank’s Doing Business 2020 report, Argentina ranked 126 out of 190 countries,78, down from 11966 in the index for 2019. In Transparency International’s 2021 Corruption Perceptions Index survey of 180 countries, Argentina was ranked 96, down from 78 in the index for 2020.
Recognizing that the failure to address these issues could increase the risk of political instability, distort decision-making processes and adversely affect Argentina’s international reputation and ability to attract foreign investment, the former Macri administration announced several measures aimed at strengthening Argentina’s institutions and reducing corruption. These measures includeincluded the reduction of criminal sentences in exchange for cooperation with the government in corruption investigations, increased access to public information, the seizing of assets from corrupt officials, increasing the powers of the Anticorruption Office (Oficina Anticorrupción) and the passing of a new public ethics law, among others. The current Argentine administration’s ability and determination to implement these initiatives taken by the former administration is still uncertain, as it would require, among other things, the involvement of the judicial branch, which is independent, as well as legislative support.support from opposing parties. We cannot assure whether the implementation of these measures will be successful.
In addition, certain senior executive officersThe Argentine government’s inability to accurately address actual and directorsperceived risks of companies operating ininstitutional deterioration and corruption might adversely affect the Argentine energy, infrastructure, oil and gas and other sectors, are currently facing judicial investigationseconomy which, in Argentina relating to payments allegedly made to government officials.
These investigations may have an adverse impact on the ability of the companies involved and their affiliates to access financing, on their ability to participate in significant projects and ultimately on theirturn, could adverselyaffect our business, financial condition,and results of operations.
However, we do not consider potential losses that could arise from our exposure to the individuals and the companies involved in the investigations to be material.
We cannot predict for how long the corruption investigations will continue, or the effects on the different sectors in the Argentine economy.
Sustained declines in the international prices for oil could have an adverse material effect on the Argentine and the global economy.
Between March 5 and March 30, 2020, the price of Brent crude oil dropped by 50%, falling to the lowest price since the beginning of the century. On April 20, 2020, U.S. oil futures with expiration in May 2020 even reached negative values. Similarly, the price of U.S. West Texas Intermediate crude dropped below U.S.$20 a barrel, almost a two-decade low. Mainly, this sharp decline in price was explained by the failure to agree to cut production between the members of the Organization of the Petroleum Exporting Countries and Russia, and the drop in oil demand caused by the COVID-19 pandemic.
A decline in oil prices could harmthe Argentine government’srevenues, availability of foreign currency and the government’s ability to service its sovereign debt, and affect Argentina’s growth prospects and, therefore, our business, financial condition and results of operations.
Moreover, the recent crude price crash couldalso affect the economic and financial sustainability of companies exploring and drilling oil and gas at the Vaca Muerta formation, the fourth biggest resource of non-conventional oil in the world.
We cannot anticipatefor how long thecurrent volatility in oil prices will continue, nor the consequences it might havefor the Argentine and the global economies.
Risks Relating to the Argentine Financial System
The stability of the Argentine financial system depends upon the ability of financial institutions, including Banco Supervielle, the Bank,main subsidiary of Grupo Supervielle, to retain the confidence of depositors.
The measures implemented by the Argentine government in late 2001 and early 2002, in particular the restrictions imposed on depositors to withdraw money freely from banks and thepesification and restructuring of their deposits, resulted in losses for many depositors and undermined their confidence in the Argentine financial system.
Although the financial system had seen a recovery in the amount of deposits since then, this trend ended after the PASO results of August 2019 which affected the U.S. dollar-denominated deposit base of the Argentine financial system, including the U.S. dollar-denominated deposit base of our main subsidiary, the Bank. This U.S. dollar-denominated deposit base drop has affected the Argentine financial system since its growth strongly depends on deposit levels, due to the small size of its capital markets and the absence of foreign investments during the previous years.
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Although liquidity levels are currently reasonable, no assurances can be given that these levels will not be reduced in the future due to adverse economic conditions that could negatively affect the Bank’s business.
If, in the future, depositor confidence further weakens and the deposit base continues to contract,contracts, such loss of confidence and contraction of deposits will have a substantial negative impact on the ability of financial institutions, including the Bank, to operate as financial
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intermediaries. If the Bank is not able to act as a financial intermediary and otherwise conduct its business as usual, the results of its operations could be adversely affected or limited, affecting its ability to distribute dividends to us, which in turn could affect our results of operations and financial condition.
The growth and profitability of Argentina’s financial system partially depend on the development of medium and long-term funding.funding sources.
Since most term deposits (more than 95%) are short-term deposits with a termmaturity of less than three months, a substantial portion of the loans have very short maturity, and there is a small portion of medium- and/or long-term credit lines.
The uncertainty about the ability to reduce inflation in the future is a principal obstacle preventing a faster recovery of Argentina’s private sector long-term lending and thus the financial system size. This uncertainty has had, and may continue to have, a significant impact on both the supply of, and demand for, long-term loans as borrowers try to hedge against inflation risk by borrowing at fixed rates while lenders hedge against inflation risk by offering loans at floating rates.
If longer-term financial intermediation activity does not grow, the ability of financial institutions, including us, to generate profits will be negatively affected.
OurThe asset quality and that of other financial institutions, including ourselves, may deteriorate if the Argentine private sector does not fully recover.continues to be affected by adverse macroecononic conditions in Argentina.
As a result ofArgentina’s current macroeconomic environment,, including the economic recession since 2018, high interest rates,high inflation and depreciation of the Peso, the capacity of many Argentine private sector debtors to repay their loans has deteriorated significantly, materially affecting the asset quality of financial institutions, including the Bankand CCF. Additionally,IUDÚ. According to data published by the INDEC, while Argentina’s GDP decreased by 9.9% in 2020 due to the ongoingimpact of the COVID-19 pandemic and thegovernment measures taken by the Argentine government to contain the spread of the virus, since mid-March 2020 economy activity has been disrupted. The new Fernández administration has recently taken fiscal, monetary and social measuresArgentina’s GDP grew by 10.3% in 2021, mainly due to address the effectsmitigation of the current macroeconomic environment;however, these measures may notbe sufficient to offset thesignificantimpacts of Argentina’s economicrecession and the COVID-19 pandemic. Consequently,as a result of the implementation of vaccination programs, as well as to the increase in commodity prices, which resulted in an increase in U.S. dollar exports.However, although Argentina’s GDP has surpassed pre-pandemic levels, the country’s economy remains fragile and volatile.
If customers are not able to repay their loans the quality of the Bank’sand CCF’sIUDÚ’s assets may further deteriorate if customersare not able to repay their loans,thereby also increasingand loan loss provisions.In such eventprovisions may increase, which could, in turn, adversely affect our results of operations and financial conditionwould be adversely affected.
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condition.
Increased competition and consolidation in the banking and financial industry could adversely affect our operations.
We expect competition in the banking and financial sector to continue to increase. Such increased competition in the banking and financial sector could reduce prices and margins and the volume of operations and our market share. Therefore, our results of operations could be adversely affected.
Enforcement of creditors’ rights in Argentina may be limited, costly and lengthy.
In the past, in order to protect debtors affected by the economic crisis in 2001-2002,2001 and 2002, the Argentine government adopted measures in the beginning of 2002 that suspended proceedings to enforce creditors’ rights upon debtor default, including mortgage foreclosures and bankruptcy petitions.Recently, More recently, in order to mitigate theeconomic impact resulting fromconnection with the ongoing COVID-19 pandemic, and government measures taken to contain the spread of the virus, the new FernándezArgentine administrationhas, among other things, suspended mortgage foreclosures until September 30, 2020.March 31, 2021. For more information on regulations in connection with the COVID-19pandemic, see “Item 4.B.—Business Overview—Argentine Banking Regulations – Government Measures in Response to the Ongoing COVID-19 Pandemic.”
Any such measures, and any other measures which may limit the ability of creditors, including us, to bring legal actions to recover unpaid loans or restricting creditors’ rights generally could have a material adverse effect on the financial system and on our business.
The Consumer Protection Law and the Credit Card Law may limit some of the rights afforded to us and our subsidiaries.
The application of the Argentine Consumer Protection Law No. 24,240 as supplemented or amended (the “Consumer Protection Law”), which establishes a number of rules and principles for the protection of consumers. Althoughconsumers, and the Consumer Protection Law does not contain specific provisions for its enforcement in relation to financial activities, it contains general provisions that might be used as grounds to uphold such enforcement, as it has been previously interpreted in various legal precedents. Moreover, the Argentine Civil and Commercial Code has captured the principles of the Consumer Protection Law and established their application to banking agreements. Additionally, Law No. 25,065 (as amended by Law No. 26,010 and Law No. 26,361, the “Credit Card Law”) also, which sets forth several mandatory regulations designed to protect credit card holders.
The application of both the Consumer Protection Law and the Credit Card Lawholders, by administrative authorities and courts at the federal, provincial and municipal levels has increased. Moreover, administrative and judicial authorities have issued various rules and regulations aimed at strengthening consumer protection. In this context, the Central Bank issued Communication “A” 5460, as supplemented and amended, grantingregulations with respect to the protection of financial services customers, which grants broad protection to financial services customers, limitingand limits fees and charges that financial institutions may validly collect from their clients. In addition, the Argentine Supreme Court issued theAcordada 32/2014, creating
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created the Public Registry of Collective Proceedings for the purpose of registeringto register collective proceedings (such as class actions) filed with national and federal courts. In the event that we or our subsidiaries are found to be liable for violations of any of the provisions of the Consumer Protection Law or the Credit Card Law, the potential penalties could limit some of our rights or our subsidiaries’ rights. Forrights, for example, reducing our orwith respect to their ability to collect payments due from services and financing provided us andby the Bank or its subsidiaries, which could adversely affect our or their financial results of operations.
On September 18, 2014, a new pre-judicial service of dispute resolution was created by Law No. 26,993, in order for consumers and providers to resolve any dispute within the course of 30 days, including fines for companies that do not attend to the hearings.
Furthermore, the rules that govern the credit card business provide for variable caps on the interest rates and fees that financial entities may charge to clients and the fees that they may charge merchants. Moreover, general legal provisions exist pursuantmerchants, and enable courts to which courts could decrease the interest rates and fees agreed upon by the parties on the grounds thatif they are deemed excessively high. A change in the applicable law or the existence of court decisions that lowerlowering the cap on interest rates and fees that clients and merchants may be charged would reduce the Bank’s and CCF’sIUDÚ’s revenues, and thereforewhich could negatively affect our consolidated results.
Class actions against financial institutions for an indeterminateundetermined amount may adversely affect the profitability of the financial system and of some of our subsidiaries such as the Bank, specifically.IUDÚ and InvertirOnline S.A.U.
Certain public and private organizations have initiated class actions against financial institutions in Argentina, including the Bank.Bank, IUDÚ and InvertirOnline S.A.U. See “Item 8.A“Item 8.A. Consolidated Statements and Other Financial Information.Information.” The Argentine National Constitutionnational constitution and the Consumer Protection Law contain certain provisions regarding class actions. However,actions, although their guidance with respect to procedural rules for instituting and trying class action cases is limited. Nonetheless, Argentine courts have admitted class actions in certain cases, including various lawsuits against financial entities related to “collective interests” such as alleged overcharging on products, interest rates and advice in the sale of public securities. Recently, someSome of these lawsuits have been settled by the parties out of court. These settlements have typically involved an undertaking by the financial institution to adjust the fees and charges. If class action plaintiffs were to prevail against financial institutions, their success could have an adverse effect on the financial industry and on our business.
In the future, court and administrative decisions may increase the degree of protection afforded to our debtors and other customers or be favorable to the claims brought by consumer groups or associations. This could affect the ability of financial institutions, including us, to freely determine charges, fees or expenses for their services and products, therefore affecting their business and results of operations.
We operate in a highly regulated environment, and our operations are subject to regulations adopted, and measures taken, by several regulatory agencies.
Financial institutions are subject to significant regulation relating to functions that historically have been determined by the Central Bank, the Financial Information Unit (Unidad de Información Financiera or “UIF”) and the CNV. The number of these regulations have increased in connection with the ongoing COVID-19 pandemic. See “Item 4.B. Business Overview—Government Measures in Response to the Ongoing COVID-19 Pandemic.” These regulations include: (i) minimum capital requirements; (ii) mandatory reserve requirements; (iii) requirements for investments in fixed rate assets; (iv) lending limits and other regulatory authorities.credit restrictions, including mandatory allocations; (v) limits and other restrictions on fees; (vi) reduction of the period for the financial institutions to deposit the amount of sales made with credit cards in the corresponding accounts of the sellers; (vii) limits on the amount of interest banks can charge or pay, or on the period for capitalizing interest; (viii) accounting and statistical requirements; (ix) limits on dividends; (x) limits on market share; (xi) reporting or controlling regimes as agents or legally bound reporting parties; and (xii) changes in the deposit insurance regime.
We have no control over governmental regulations or the rules governing all aspects of our operations. The Central Bank may penalize our main subsidiary, the Bank, as well as our subsidiary CCF,IUDÚ, in case of any breach of applicable regulations. Similarly, the CNV, which authorizes our securities offerings and regulates the public markets in Argentina, has the authority to impose sanctions on us and our Board of Directors for breaches of corporate governance.
The Financial Information Unit (Unidad de Información Financiera or “UIF”) regulates matters relating to anti-money laundering and has the ability to monitor compliance with any such regulations by financial institutions and, eventually, impose sanctions. Any such regulatory agencies could initiate proceedings against us, our shareholders or directors and, accordingly, impose sanctions on us or any of our subsidiaries.
Our industry is the subject of a tight regulatory framework, including measures that have affected the profitability of financial institutions and limit the possibility of covering their positions against currency fluctuations. See “Item 4.B Business overview—Argentine Banking Regulation.”
The absence of a stable regulatory framework in Argentina for financial institutions and the imposition of measures that may affectsaffect the profitability of financial institutions and limit the possibility of covering their positions against currency fluctuations results in important limitations with respect toresult may limit the decisions ofthat financial institutions, as isincluding the case of us, in relation to theBank and IUDÚ, can make on asset allocation, of the asset. In turn, this situation could cause uncertainty andwhich may adversely affect future financial activities and our result of operations. On the other hand, current or future laws and regulations may require substantial expenses or otherwise have an adverse effect on our consolidated operations.
There can be no assurances that new and tighter regulations will not be implemented in the future, which could cause uncertainty and could negatively affect our future financial activities and results of operations. Also, the imposition of measures that may affect the profitability of financial institutions and limit the capacity to hedge against currency fluctuations could result in significant limits to financial institutions’ decisions, such as the Bank and CCF, regarding asset allocation. In addition, existing or future legislation and regulation couldmay require us to make material expenditures to avoid any material adverse effect on our consolidated operations.
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We are exposed to compliance risks.
Due to the nature of our activities, we are exposed to certain compliance risks. We must comply with regulations regarding customer conduct, market conduct, the prevention of money laundering and the financing of terrorist activities, the protection of personal data, the restrictions established by national or otherwiseinternational sanctions programs and anti-corruption laws (including the U.S. Foreign Corrupt Practices Act of 1977 and the UK Bribery Act of 2010), the violations of which could lead to very significant penalties. As part of our business, we directly or indirectly, through third parties deal with entities whose employees are considered to be government officials. Our activities are also subject to complex customer protection and market integrity regulations.
Although we have adopted multiple policies, procedures, internal control systems and other measures to manage compliance risk, it is dependent on its employees and external suppliers for the implementation of these policies, procedures, systems and other measures, and it cannot guarantee that these are sufficient or that our employees or other persons related to us or our business partners, agents and/or other third parties with a business or professional relationship do not circumvent or violate current regulations or our ethics and compliance regulations, acts for which such persons could be held ultimately responsible and/or that could damage our reputation. In particular, acts of misconduct by any employee, and particularly by senior management, could erode trust and confidence and damage our reputation among existing and potential clients and other stakeholders. Actual or alleged misconduct by the us in any number of activities or circumstances, including operations, employment-related offenses such as sexual harassment and discrimination, regulatory compliance, the use and protection of data and systems, and the satisfaction of client expectations, and actions taken by regulators or others in response to such misconduct, could lead to, among other things, sanctions, fines and reputational damage, any of which could have a material adverse effect on our consolidatedbusiness, financial condition and results of operations.
18 We may not be able to prevent third parties from using the banking network in order to launder money or carry out illegal or inappropriate activities. Moreover, financial crimes continually evolve and emerging technologies, such as cryptocurrencies and blockchain, could limit our ability to track the movement of funds. Additionally, in adverse economic conditions, it is possible that financial crime attempts will increase significantly.
If there is a breach of the applicable regulations or the Group’s ethics and compliance regulations or if the competent authorities consider that the Bank does not perform the necessary due diligence inherent to its activities, such authorities could impose limitations on our activities, the revocation of our authorizations and licenses, and economic penalties, in addition to having significant consequences for our reputation, which could have a significant adverse impact on our business, financial condition and results of operations. Furthermore, we from time to time conduct investigations related to alleged violations of such regulations and ethics and compliance regulations, and any such investigation or any related procedure could be time consuming and costly, and its results difficult to predict.
In 2020 and 2021, the COVID-19 outbreak has led in many countries to new specific regulations, mainly focused on consumer protection measures. The difficulties associated with the need to adapt our subsidiaries’ systems to these new regulations quickly along with the fact that the majority of our employees have been working remotely could pose new compliance risks. Likewise, despite the existing controls in place, the increase in remote account opening driven by the pandemic could increase money laundering risks. Additionally, criminals are continuing to exploit the opportunities created by the pandemic across the globe and increased money laundering risks associated with counterfeiting of medical goods, investment fraud, cyber-crime scams and exploitation of economic stimulus measures put in place by governments. Increased strain on our communications surveillance frameworks could in turn raise our market conduct risk.
Exposure to multiple federal, provincial andand/or municipal legislation and regulations could adversely affect our business or results of operations.
The Argentine government has historically exercised significant influence over the economy and financial institutions. In the past, several different bills to amend the Argentine Financial Institutions Law No. 21,526 (the “FIL”) have been put forth for review by the Argentine Congress, seeking to amend different aspects of the FIL, including the qualification of financial services as a public service, an increase in governmental regulations affecting the activities of financial entities and initiatives to make financial services more widely available.
Laws and regulations currently governing the economy and the banking sector may continue to change in the future, and any changes may adversely affect our business, financial condition and results of operations. In particular, a thorough amendment of the FIL would have a substantial effect on the banking system as a whole. If such a bill were passed, or any other amendment to the FIL be
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made, the subsequent changes in banking regulations may have adverse effects on financial institutions in general, and on our business, financial conditions and results of operations.
In addition, Argentina has a federal system of government with 23 provinces and the Autonomous City of Buenos Aires, each of which, under the Argentine national constitution, has full power to enact legislation concerning taxes and other matters. Likewise, within each province, municipal governments have broad powers to regulate such matters. Due to the fact that our branches are located in multiple provinces, we are also subject to multiple provincial and municipal legislation and regulations. Future developments in provincial and municipal legislation concerning taxes, provincial regulations or other matters may adversely affect our business or results of operations.
Future governmental measures or regulations may adversely affectAs an example of the economyaforementioned, in the second half of 2020 and after the suspension of the 2017 fiscal consensus in late 2019, certain Argentine provinces (Córdoba, San Luis, Buenos Aires and the operationsCity of financial institutions.Buenos Aires) raised the tax rate on gross income tax for banks. Additionally, in October 2020, the City of Buenos Aires also eliminated a tax exemption on interest income received from LELIQs (short-term debt instruments issued by the Central Bank as part of its monetary policy).
The Argentine government has historically exercised significant influence overIn January 2021, a legal action was filed against the economy,Autonomous City of Buenos Aires in order to declare Laws No. 6,382 and financial institutions, in particular, have operated in a highly regulated environment. LawsNo. 6,383 unconstitutional, which seek to burden the returns derived from securities, bonds, bills, certificates of participation (equity) and regulations currently governing the economyother instruments issued or the banking sector may continue to changebe issued in the future and any changes may adversely affect our business, financial condition and results of operations.
In the past, several different bills to amend the Argentine Financial Institutions Law No. 21,526 (the “FIL”) have been put forth for review by the Argentine Congress, seekingCentral Bank with turnover tax. Such legal action was filed under File No. CAF 18156/2020 (“ADEBA Asociación Civil de Bancos Argentinos y otros c/GCBA y otro s/Proceso de Conocimiento”) by the Association of Banks and most of its members. The Argentine Central Bank has filed a legal action for the same purpose.
If financial intermediation activity volumes relative to amend different aspects ofGDP continues at low levels, the FIL, including the qualification of financial services as a public service, an increase in governmental regulations affecting the activities of financial entities and initiatives to make financial services more widely available. A thorough amendment of the FIL would have a substantial effect on the banking system as a whole. If such a bill were passed, or any other amendment to the FIL be made, the subsequent changes in banking regulations may have adverse effects on financial institutions in general, and on our business, financial conditions and results of operations.
The asset qualitycapacity of financial institutions, including the Bank, our main subsidiary, to generate profits may be affected bynegatively affected.
As a result of the 1999-2002 financial crisis, as a result of which the Argentine economy fell 18.4%, the volume of financial intermediation activity dropped dramatically: private sector credit plummeted from 24% of GDP in December 2000 to 7.7% in June 2004 and total deposits as a percentage of GDP fell from 31% to 23.2% during the same period. The depth of that crisis and the effect it had on depositors’ confidence in the financial system created uncertainty regarding its ability to act as an intermediary between savings and credit. Although private credit relative to GDP grew after the 1999-2002 financial crisis, since 2018 credit contracted in real terms as a result of the negative economic growth. Furthermore, the ratio of the total financial system’s private-sector deposits and loans to GDP remains low when compared to international levels and continues to be lower than the periods prior to the 1999-2002 crisis and also from prior years, especially in the case of private-sector deposits and loans, which amounted to 14.8% and 8.3% of GDP, respectively, as of December 31, 2021.
There is no assurance that financial intermediation activities will continue in a manner sufficient to reach the necessary volumes and businesses to provide financial institutions, including the Bank and IUDÚ, with sufficient capacity to generate income, which may, in turn, impact our results of operations.
Argentine financial institutions, including us, continue to have exposure to public sector debt, and short termincluding securities issued by the Central Bank.
Argentine financial institutions usually hold public sector debt issued by the national, provincial and municipal governments and securities – generally short term – issued by the Central Bank, as partand its repayment capacity, which in periods of economic recession may negatively affect their portfolios. Asresults of December 31, 2019, the financial institutions’ exposure to the public sector represented 8.4% of total assets and their holdings of short term securities issued by the Central Bank represented 5.6% of total assets. As of December 31, 2019, our exposure to the public sector amounted to Ps.4.0 billion, representing 2.7% of our total assets as of that date and our exposure to short term securities issued by the Central Bank amounted to Ps.7.2 billion or 4.9% of our total assets as of such date.
By virtue of Executive Decrees 596/2019 and 609/2019, the Executive Branch resolved to restructure the maturity schedule ofshort-term public sector debt securities(“Letes”, “Lecaps”, “Lelink” and “Lecer”), extending the maturity date to February 2020. Afterwards, through Decree No. 49/2019, the Argentine government further extended the maturity date of certain “Letes” to August 31, 2020. In addition, on February, 2020, the Secretary of the Treasury and the Secretary of Finance issued Joint Resolution 6/2020, by which certain “Lecaps” and “Letes” which had already been reprofiled pursuant to Executive Decrees No. 596/2019 and 609/2019 were subsequently exchanged by peso-denominated treasury bills (“Lebads”) maturing on September 18, 2020. On April 5, 2020 the Argentine government also issued Decree No. 346/2020, by which the repayment of Argentine law-governed U.S. dollar-denominated notes was postponed. Our holdings of “Letes” and “Lecaps” were affected as a result of theaforementioned restructuring measures of Argentine law-governed sector public debt adopted by the Argentine goverment.
In addition to the public sector debt restructuring process described in the aforementioned paragraph, the Argentine government has alsolaunched an exchange offer with the aim of refinancing its foreign law-denominated external indebtedness. For more information on this offer, see “Item 5.A—Operating Results—The Argentine Economy and Financial System—Argentina’s Sovereign Debt Restructuring”.operations.
To some extent, the value of the assets held by Argentine financial institutions, as well as their income generation capacity, is dependent on the public sector’s creditworthiness, which is in turn dependent on the Argentine and the provincial government’s ability to promote sustainable long-term economic growth, generate tax revenues and control public spending.
Argentine financial institutions usually hold public sector debt issued by the national, provincial and municipal governments and securities – generally short term – issued by the Central Bank as part of their portfolios. As of December 31, 2021, the exposure of the financial institutions to the public sector represented 13.2% of total assets and their holdings of short-term securities issued by the Central Bank represented 29% of total assets. As of December 31, 2021, our exposure to the public sector amounted to Ps.40.8 billion, representing 10.4% of our total assets as of that date and our exposure to short term securities issued by the Central Bank and Repo transactions with Central Bank amounted to Ps.100.3 billion or 25.6% of our total assets as of such date.
By virtue of Executive Decrees No. 596/2019 and No. 609/2019, the maturity date of short-term public sector debt securities (“Letes,” “Lecaps,” “Lelink” and “Lecer”) was extended to February 2020. Afterwards, through Decree No. 346/2020, the Argentine government further extended the maturity date of certain “Letes” to December 31, 2020. In February 2020, through Joint Resolution
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6/2020, certain “Lecaps” and “Letes” which had already been reprofiled pursuant to the aforementioned Executive Decrees No. 596/2019 and 609/2019 were subsequently exchanged by peso-denominated treasury bills (“Lebads”) maturing on September 18, 2020. On April 5, 2020, the Argentine government issued the Decree No. 346/2020, by which the repayment of Argentine law-governed U.S. dollar-denominated notes was postponed to December 31, 2020, including the abovementioned “Letes.”
Should the public sector fail to fulfill its commitments in due time and proper form, this could have a negative adverse effect on our business, financial situation and results of operations. Moreover, failure by the Argentine government to successfully carry out the restructuring of its foreign financial indebtedness may further affect the public sector’s creditworthiness and negatively affect the Bank’s exposure to public sector debt and therefore its asset quality.
Risks Relating to Our Business
Due to our exposure to middle and lower-middle-income individuals and SMEs, the quality of our consolidated loan portfolio is more susceptible to economic downturns and recessions.
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Our consolidated loan portfolio is exposed to the segments of SMEs and middle and lower-middle-income individuals, which are more vulnerable to economic recessions than large corporations and higher income individuals. The quality of our portfolio of loans to SMEs and to individuals is therefore dependent to a large extent on domestic and international economic conditions. Consequently, we may experience higher levels of past due amounts, which could result in higher provisions for loan losses. See “Item 4.D Property, plants and equipment.”
The loan portfolio of the retail segment, which includes individuals and companies with annual sales of up to Ps.100 million, depending on commercial activity, represented approximately 43% of the consolidated loan portfolio (net of provisions) as of December 31, 2019. If the economy in Argentina experiences a significant downturn, this could materially and adversely affect the liquidity, businesses and financial condition of our customers, which may in turn cause us to experience higher levels of past due loans, thereby resulting in higher provisions for loan losses and subsequent write-offs. This may materially and adversely affect the credit quality of our loan portfolio, our asset quality, our results of operations and our financial condition.
We may continue to seek potential acquisitions, but we may not be able to complete such acquisitions or successfully integrate businesses that we acquire.
In the past, in addition to organic growth, we have significantly expanded our business through acquisitions. We expect to continue considering acquisition opportunities that we believe may add value and are compatible with our business strategy.
In this respect, we may not be able to continue to identify opportunities or consummate acquisitions leading to economically favorable results or that any future acquisition will, if required, be authorized by the Central Bank, which would limit our ability to implement an important component of our growth strategy. In addition, in the event that an acquisition opportunity is identified and authorized, successful integration of the acquired business entails significant risks, including compatibility of operations and systems, unexpected contingencies, employee retention, compliance, customer retention, and delays in the integration process.
Changes in market conditions and any associated risks, including interest rate and currency exchange volatility, could materially and adversely affect our consolidated financial condition and results of operations.
We are directly and indirectly affected by changes in market conditions. Market risk, or the risk that values of assets and liabilities or revenues will be adversely affected by variations in market conditions, including interest rate and currency exchange volatility, is inherent in the products and instruments associated with our operations, including loans, deposits, long-term debt and short-term borrowings.
In particular, our results of operations depend to a great extent on our net financial income. Net financial income represented 87.5%87.8% of our net operating revenue in 20192021 and 85.2%85.8% in 2018.2020. Changes in market interest rates could affect the interest rates earned on our interest-earning assets differently from the interest rates paid on our interest-bearing liabilities, leading to a reduction in our net financial income or a decrease in customer demand for our loan or deposit products. In addition, increases in interest rates could result in higher debt service obligations for our customers, which could, in turn, result in higher levels of delinquent loans or discourage customers from borrowing. Interest rates are highly sensitive to many factors beyond our control, including the minimum reserve policies of the Central Bank, regulation of the financial sector in Argentina, domestic and international economic and political conditions and other factors.
Any changes in interest rates and currency exchange rates could adversely affect our business, our future financial performance and the price of our securities.
Reduced spreads between interest rates on loans and those on deposits without corresponding increases in lending volumes, could adversely affect the Bank’s and CCF’sIUDÚ’s profitability.
Historically, the Argentine financial system witnessed a decrease in spreads between the interest rates on loans and deposits as a result of increased competition in the banking sector and the Argentine government’s tightening of monetary policy in response to inflation concerns. TheFrequent regulatory changes, high inflation and frequent currency devaluations have also led to fluctuations in interest rates which could also impact spreads. Moreover, amid the COVID-19 outbreak, the Central Bank imposed minimum interest rates paid on time deposits, imposed maximum interest rates on credit cards financing, and established some credit lines to be granted to SMEs at preferential interest rates, pressuring margins downwards.
In addition, a change in the composition of the source of funding, which is currently heavily weighted by non-interest-bearing deposits, could also put downward pressure on margins. A change in the composition of the source of funding could result from lower interest rates, higher demand of credit and therefore a need to increase the amount of time deposits or other types of bearing interest liabilities. Further reduction in spreads could have a material adverse effect on our business, results of operation and financial condition. We cannot guarantee that interest rate spreads will remain attractive.
Due to our exposure to middle and lower-middle-income individuals and SMEs, the quality of our consolidated loan portfolio is more susceptible to economic downturns and recessions.
Our consolidated loan portfolio is exposed to the segments of SMEs and middle and lower-middle-income individuals, which are more vulnerable to economic recessions than large corporations and higher income individuals. The quality of our portfolio of loans to SMEs and to individuals is therefore dependent to a large extent on domestic and international economic conditions. Consequently, we may experience higher levels of past due amounts, which could result in higher provisions for loan losses.
The loan portfolio of the BankPersonal & Business Banking segment, which includes individuals and CCF followsmall business with annual sales of up to Ps.300 million and SMEs with annual sales over Ps.300 million and below Ps.1.5 billion, represented approximately 50% of the same trend.consolidated loan portfolio (net of provisions) as of December 31, 2021, while the loan portfolio of the Consumer Finance Segment
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represented approximately 9% of the consolidated loan portfolio. Within the 50% share of the Personal & Business Banking Segment, 43% corresponds to individuals, while 7% corresponds to Small Businesses & SMEs. Morover, loans to lower-risk payroll and pension clients accounted for 67% of our total loans to individuals at the bank level. If inflation reduces, competition continues or increasesthe economy in Argentina experiences a significant downturn, this could materially and interest rate spreads decrease, without corresponding increases in the volume of loans such decrease could adversely affect the liquidity, businesses and financial condition of our consolidatedcustomers, which may in turn cause us to experience higher levels of past due loans, thereby resulting in higher provisions for loan losses and subsequent write-offs. This may materially and adversely affect the credit quality of our loan portfolio, our asset quality, our results of operations and our financial condition.
20 Our estimates and established reserves for credit risk and potential credit losses may prove to be insufficient, which may materially and adversely affect our asset quality and our financial condition and results of operations.
Pursuant to the implementation of IFRS 9, our subsidiaries, particularly the Bank, establish reserves for potential credit risk and losses related to changes in the levels of income of debtors/borrowers, increased rates of inflation, increased levels of non-performing loans or an increase in interest rates. In this process, our subsidiaries rely on several models that estimate the distribution of possible losses arising out of the loan portfolio to calculate expected losses. The Bank’s models estimate distribution of possible loan portfolio losses, which depend on counterparties’ probability of default (“PD”), as well as the exposure at the time of default (“EAD”) and the proportion of each unfulfilled loan that the entity is able to recover (i.e., loss in the event of default or “LGD”). Based on these parameters, we estimate our expected loss (“PE”) and economic capital. At the same time, we assess expected credit losses on a forward-looking basis, incorporating the impact of updated macroeconomic scenarios in the variables which we consider affect credit risk.
During 2020, the Central Bank established several measures in favor of debtors, including an automatic rescheduling program on unpaid loans installments maturing between the months of April 2020 and March 2021. Although these measures are no longer in force, they had a negative impact our consumer finance business.
If we are unable to effectively control the level of non-performing or poor credit quality loans in the future, or if our loan loss reserves are insufficient to cover future loan losses, our asset quality and our financial condition and results of operations may be materially and adversely affected.
We are a holding company and, as a result, we conduct our business through our subsidiaries. Our ability to invest in our business developments will depend on our subsidiaries’ ability to pay dividends to us.
As a holding company, we conduct our operations through our subsidiaries, the largest of which is the Bank. Consequently, we do not operate or hold substantial assets, except for equity investments in our subsidiaries and temporary liquidity. Except for such assets, our ability to invest in our business developments and to repay obligations is subject to the funds generated by our subsidiaries and their ability to pay cash dividends. In the absence of such funds, we may have to resort to financing options at unappealing prices, rates and conditions. Additionally, such financing could be unavailable when we may need it.
Each of our subsidiaries is a separate legal entity and due to legal or contractual restrictions, as well as to their financial condition and operating requirements, they may not be able to distribute dividends to us. Our ability to develop our business, meet our payment obligations and pay dividends to our shareholders could be limited by restrictions preventing our subsidiaries from paying us dividends. Investors should take such restrictions into account when analyzing our investment developments and our ability to cancel our obligations.
Our estimatesWe may continue to seek potential acquisitions or expand our business, but we may not be able to complete such acquisitions or expansion, or successfully integrate businesses that we acquire.
In the past, in addition to organic growth, we havesignificantly expanded our business through acquisitions. We expect to continue considering acquisition opportunities that we believe may add value and established reserves for credit risk and potential credit lossesare compatible with our business strategy. In addition, we may provecontinue to implement business strategies in order to expand our business.
In this respect, we may not be insufficient,able to continue to identify opportunities or consummate acquisitions, or implement business strategies, leading to economically favorable results. We cannot assure you that any future acquisition or other actions taken to expand our business will, if required, be authorized by the Central Bank, which may materially and adversely affectwould limit our asset quality andability to implement our financial condition and results of operations.
A number of our products expose us to credit risk, including consumer loans, commercial loans and other receivables. Changesgrowth strategy. In addition, in the income levelsevent that an acquisition opportunity or business strategy is identified and authorized, successful integration of our borrowers, increasesthe acquired business or strategy entails significant risks, including compatibility of operations and systems, unexpected contingencies, employee retention, compliance, customer retention, and delays in the inflation rate or an increase in interest rates could have a negative effect on the quality of our loan portfolio, causing us to increase provisions for loan losses and resulting in reduced profits or in losses.integration process.
We estimate and establish reserves for credit risk and potential credit losses. This process involves subjective and complex judgments, including projections of economic conditions and assumptions on the ability of our borrowers to repay their loans.15
Overall, if we are unable to effectively control the level of non-performing or poor credit quality loans in the future, or if our loan loss reserves are insufficient to cover future loan losses, our asset quality and our financial condition and results of operations may be materially and adversely affected.
The Bank’s revenues from its business with senior citizens could decrease or cease to grow if the Bank’s agreement with ANSES is terminated or not renewed.
Since 1996, the Bank has acted as one of the paying agents of social security payments to senior citizens on behalf of the government pursuant to an agreement with ANSES. In December 2014, pursuant to Resolution No. 648/14, ANSES renewed its agreement with the paying agents for a six-year period. In December 2019,2021, the Bank made payments on behalf of ANSES to approximately 988,000978,000 senior citizens and beneficiaries. Offering this service to senior citizens allows the Bank ready access to a pool of potential consumers of financial services. The Bank derives an important part of its revenues (26%(19% as of December 31, 2019)2021) from the sale of financial services to senior citizens in our service branches.citizens. The Bank’s agreement with ANSES providesis an agreement that it will continue in effect as long asmust be signed by any bank that intends to pay pensions or benefits on behalf of ANSES. The current agreement with ANSES expires on June 30, 2022 and negotiations between the parties continue performing their obligations for a six-year term.banks and ANSES to renew the agreement have already started. In addition, ANSES has the right to terminate the agreement with a 90 daysday prior notice.
The termination of the agreement with ANSES a decision by ANSES not to renew the agreement in December 2020, or ANSES’s failure to add new senior citizens to the payment service could have a negative effect on our business and results of operations.
Since deposits are one of our main sources of funds, a sudden shortage of the term of our deposits could cause an increase in costs of funding, affect our liquidity ratios and have an adverse effect on our revenues.
Deposits are one of our primary sources of funding, representing 71.3% of our total liabilities as of December 31, 2019. A significant portion of our assets has longer maturities, resulting in a mismatch between the maturities of liabilities and the maturities of assets. If a substantial number of our depositors withdraw their sight deposits or do not roll over their time deposits upon maturity, our liquidity position, results of operations and financial condition may be materially and adversely affected.In the event of a sudden or unexpected shortage of funds in the banking system, money markets in which we operate may not be able to maintain levels of funding without incurring high funding costs or the liquidation of certain assets. If this were to happen, we may be unable to fund our liquidity needs at competitive costs and our results of operations and financial condition may be materially adversely affected.
Because our main subsidiary, the Bank, as well as CCF, are financial institutions, any insolvency proceeding against them would be subject to the intervention of the Central Bank, which may limit the remedies otherwise available and extend the duration of any insolvency proceeding.
Under Argentine law, the commencement of bankruptcy or liquidation proceedings against financial institutions, until the revocation by the Central Bank of their banking license, may only be commenced by the Central Bank. If the Bank and/or CCF are unable to pay their debts as they come due, the Central Bank would intervene and revoke their respective banking and “compañía financiera” licenses, and file a bankruptcy petition before a commercial court. If the Central Bank intervenes, the reorganization proceeding could take longer and it is likely that the shareholders’ remedies would be restricted. During any such process, the Central Bank would have to consider its interests as a regulator and, as a result, could prioritize the claims of other creditors and third parties against the Bank and/or CCF. As a result of any such intervention, shareholders may realize substantially less on the claims than they would in a regular bankruptcy proceeding in Argentina, the United States or any other country.
Our controlling shareholder has the ability to direct our business, and potential conflicts of interest could arise.
Our controlling shareholder, Julio Patricio Supervielle, directly or beneficially owned as of April 28, 2020,2022, 61,738,188 Class A shares and 98,684,713 Class B shares. Virtually all decisions made by shareholders will continue to be directed by our controlling shareholder. He may, without the concurrence of the remaining shareholders, elect a majority of our directors, effect or prevent a merger, sale of assets or other business acquisition or disposition, cause us to issue additional equity securities, effect a redemption of shares, effect a related party transaction and determine the timing and amounts of dividends, if any. According to our bylaws, a two-thirds vote by our Class A shares is required, regardless of the percentage of our total capital they represent, in order for us to duly resolve a merger with another company, a voluntary dissolution, our relocation abroad, and the fundamental change in our corporate purpose. Mr. Supervielle’s interests may conflict with your interests as a holder of Class B shares or ADSs, and he may take actions that might be desirable to him but not to other shareholders.
Early termination of CCF’s businessIUDÚ’s commercial agreement with Grupo De Narváez, the current owners of Chango Más (formerly, Walmart Argentina) could have an adverse effect on our revenue.
In April 2000, CCF (formerlyGE Compañía Financiera)IUDÚ and Walmart entered into a commercial agreement pursuant to which CCFIUDÚ became the soleexclusive provider of financial and credit products and services for Walmart’s customers at Chango Más (formerly, Walmart Argentina) stores in Argentina. The agreement was renewed on several occassions and most recently in 2005, in 2010 and in December 2014. Such agreement is key to CCF’s overall performance. ThisAugust 2021. As a result, the commercial agreement expires on August 24, 2026.
On November 6, 2020, Walmart Inc. agreed to sell its business in August 2020 and, whileArgentina to Dorinka S.R.L. (“Grupo de Narváez”), a renewalwell-known name in Argentina conducting several retail businesses in the country. Although Grupo De Narváez has not participated in the retail business in Argentina in recent years, they have built retail capabilities in other countries in Latin America.
If the commercial agreement with Grupo de Narváez is currently being negotiated, it may not be renewed on the same terms or at all. In addition, the agreement is subject under certain conditions to voluntary termination by Walmart Argentina. The decision by Walmart Argentina not to renew or to terminate the agreement could negatively affectearly terminated, our expected benefit from this alliance andpartnership could resultbe adversely affected which, in turn, could have a material adverse effectmaterially negative impact on CCF’sour business, financial condition and results of operations.
Cybersecurity events could negatively affect our reputation, our financial condition and our results of operations.
We depend on the efficient and uninterrupted operation of internet-based and on-premise data processing, communication and information exchange platforms and networks, including those systems related to the operation of our ATM network. We have access to large amounts of confidential financial information and control substantial financial assets belonging to our customers as well asand to us. In addition, we provide our customers with continuous remote access to their accounts and with the possibility of transferring substantial financial assets byusing electronic means. Accordingly, cybersecurity is a material risk for us. Cybersecurity incidents, such as computer break-ins, viruses, ransomware, denial-of-service attacks, phishing, identity theft and other disruptions, could negatively affect the security of information stored in and transmitted through our computer systems and network infrastructure and may cause existing and potential customers to refrain from doing business with us.
During the COVID-19 pandemic, the number of cybersecurity attacks performed through email, short message service, instant messaging systems and other social networks increased. As cyberattacks evolve and become more sophisticated, companies strengthen
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their prevention and monitoring efforts and adopt new measures to mitigate cybersecurity risks, such as those related to remote work security. Our system monitoring capabilities have been reinforced, with special attention to critical assets that support business processes to prevent the materialization of threats and, where appropriate, to identify and respond immediately to any security incident that may occur. Our prevention, detection, and response capabilities have also been strengthened through the use of integrated information sources, enhanced analytical capabilities, and automated platforms. For example, our cybersecurity security operations center (“SOC”) allows us to detect and respond to cyberattacks performed on our users and our infrastructure by combining information on cyberthreats. In addition, our threat intelligence service proactively detects cyberattacks against our key executives and our infrastructure, as well as data leaks, among others. The main objective of these measures is to ensure an immediate and effective response to any security incident that occurs through the coordination of the different business and support areas involved to reduce the possible negative impact and, where appropriate, report said incident in a timely manner to the corresponding supervisory or regulatory authorities.
Although we have an insurance coverage, contingency plans in place may not be sufficient to cover liabilities associated with any such events, and we do not have insurance to coverall cyber risks and breaches. Our operational systems and networks have been, and will continue to be, subject to an increasing risk of continually evolving cybersecurity or other technological risks.
Although we intend to continue to implementimplementing and updating our security technology devices and establish operational procedures to prevent such damage, it is possible that not all ofcybersecurity damages, our systems are entirelymay not be free from vulnerability and these security measures will notcountermeasures may be successful.defeated. If any of these events occur, it could damage our reputation entailcould be damaged, entailing serious costs and affectaffecting our transactions,business, as well as our results of operations and financial condition.
Our business is highly dependent on properly functioning information technologyIT systems and improvements to such systems.
Our business is highly dependent on the ability of our informationteams to develop solutions according to what our customers need, having technology systems that allow an effective management and the third party managers of such systems to effectively manage and processenable processing a large number of transactions across numerous and diverse markets, products and productsregulations in a timely manner. In addition, we provide our customers with continuous remotehave the possibility to access to their accountsfinances remotely, whenever they want or wherever they are, and the possibility of transferringto transfer substantial financial assets by electronic means. The proper functioning of our financial control, risk and fraud management, accounting, cybersecurity, customer service and other data processing systems is critical to our business and to our ability to compete effectively. Oureffectively, as we are a customer centric company. Also, as our business activities may be materially disrupted if there were a partial or complete failure of any of our information technologyIT systems or our communication networks. Such failures couldnetworks, we have implemented a business continuity program and an IT risk program, and we created a Cybersecurity Center of Excellence within our operating model implemented in the third quarter of 2020. Although from time to time we may face events that might be caused by, among other things, software bugs, computer virus attacks or intrusions, phishing, identity theft or conversion errors due to system upgrading.upgrading, we have implemented remediate plans to reduce their frequency. In addition, any security breach caused by unauthorized access to information or systems, or intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment, could have a material adverse effect on our customers experience, as well as on our business, financial condition and results of operations and financial condition.operations.
Our ability to remain competitive and achieve further growth will depend in parton the loyalty of our customers and on our ability to upgradekeep our information technologyIT systems andupgraded with all the features that our customers need. In addition, our IT systems must be available without interruptions in order to increase our capacity on a timely and cost effectivecost-effective basis. Any disruption or substantial failure to improve or upgrade information technologyIT systems effectively or on a timely basis could materially affect us.
We are susceptible to fraud, unauthorized transactions and operational errors.
As with other financial institutions, we are susceptible to, among other things, fraud by employees or outsiders, unauthorized transactions by employees and other operational errors (including clerical or record keeping errors and errors resulting from faulty computer or telecommunications systems). Given the high volume of transactions that may occur at a financial institution, errors could be repeated or compounded before they are discovered and remedied. In addition, some of our transactions are not fully automated, which may further increase the risk that human error or employee tampering will result in losses that may be difficult to detect quickly or at all. Losses from fraud by employees or outsiders, unauthorized transactions by employees and other operational errors could have a material adverse effect on us.
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Our policies and procedures may not be able to detect money laundering and other illegal or improper activities fully or on a timely basis, which could expose us to fines and other liabilities.
We are required to comply with applicable anti-money laundering laws, anti-terrorism financing laws and other regulations. These laws and regulations require us, among other things, to adopt and enforce “know your customer” policies and procedures and to report suspicious or large transactions to the applicable regulatory authorities. While we have adopted policies and procedures aimed at detecting and preventing the use of banking networks for money laundering activities and by terrorists and terrorist-related organizations and individuals generally, such policies and procedures may not completely eliminate instances where they may be used by other parties to engage in money laundering and other illegal or improper activities. If we fail to fully comply with applicable laws and regulations, the relevant government authorities to which they report have the power and authority to impose fines and other penalties. In addition, our businesses and reputation could suffer if customers use our financial institutions for money laundering or illegal or improper purposes. As of the date of this annual report, we have not been subject to material fines or other penalties, and we have not suffered business or reputational harm, as a result of any money laundering activities in the past.
Risks Relating to Our Class B Shares and the ADSs
Holders of our Class B shares and the ADSs may not receive any dividends.
We are a holding company and our ability to pay dividends depends on the cash flow and distributable income of our operating subsidiaries, particularly the Bank.subsidiaries. We and our subsidiaries are subject to contractual, legal and regulatory requirements affecting our ability to pay dividends. In particular, dividend distribution by the Bank isand IUDÚ are subject to the requirements established by the rules of the Central Bank, as amended from time to time. Pursuant to such regulations, dividend distributions shall be admitted as long as none of the following circumstances applyapply: (i) the financial institution is subject to a liquidation procedure or the mandatory transfer of assets ordered by the Central Bank in accordance with section 34 or 35 bis of the FIL; (ii) the financial institution is receiving financial assistance from the Central Bank; (iii) the financial institution is not in compliance with its reporting obligations to the Central Bank; (iv) the financial institution is not in compliance with minimum capital requirements (both on an individual and consolidated basis and excluding any individual franchise granted by the Superintendency) and with minimum cash reserves (on average), whether in Pesos, foreign currency or securities issued by the public sector; (v) if the average minimum cash reserve is lower than the amount of cash required by the latest reported position or the pro forma position after making the dividend payment; and/or (vi) if the financial institution did not comply with the applicable Additional Capital Margins (as defined below). Financial institutions that comply with all of the above mentioned conditions may distribute dividends up to an amount equal to: (i) the positive balance of the account “unappropriated earnings” (resultados no asignados) at the end of the fiscal year, plus (ii) voluntary reserves for future payments of dividends, minus (iii) voluntary reserves and mandatory statutory reserves registered as of that date and other items, such as (a) 100% of the debit balance of each of the items recorded under “Other accumulated comprehensive income”,income,” (b) the result from the revaluation of property, plant, equipment and intangible assets and investment properties, (c) the net positive balance of the book-value and the market-value of certain public debt securities and Central Bank notes that the financial institution owns that are not marked to market, (d) unrecorded adjustments of asset value informed by the Superintendency of Financial and Exchange Entities (Superintendencia de Entidades Financieras y Cambiarias, or “Superintendency”) or mentioned by external auditors on their report, and (e) individual exemptions for asset valuation granted by the Superintendency.
In addition, financial entities may not distribute profits with the profit arising from the application of IFRS for the first time, and must set up a special reserve that can only be canceled for capitalization or to absorb any negative balances from the item “Unassigned Results.” See “Item 4.B“Item 4.B. Business overview—Argentine Banking Regulation—Overview—Liquidity and Solvency Requirements—Requirements Applicable to Dividend Distribution.Distribution.”
Although distribution of dividends to us by the Bank has been authorized by the Central Bank in the past, it is possible that in the future the Central Bank may limit the Bank’s ability to distribute dividends approved by its shareholders at the annual ordinary shareholders’ meeting without its prior consent, or such authorization may not be for the full amount of distributable dividends.
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Furthermore, on March 19, 2020, in the midst By virtue of the coronavirus’ outbreak crisis,Communication “A” 7312 of the Central Bank, issued Communication “A” 6939, by virtue of which the distribution of dividendsdividend distributions by financial entities was temporarily suspended until June 30, 2020. We cannot assure this measure will not be extended after this period nor the extentDecember 31, 2021. The Central Bank authorized financial entities to which the measure may affect the Bank’s abilitydistribute dividends up to pay dividends to us.20% of their accumulated earnings through December 31, 2021 in twelve equal monthly and consecutive installments.
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Restrictions on transfers of foreign exchange and the repatriation of capital from Argentina may impair your ability to receive dividends and distributions on, and the proceeds for any sale of, the Class B shares underlying the ADSs.
Exchange controls currently in place could impair or prevent the conversion of anticipated dividends, distributions, or the proceeds from any sale of Class B shares, as the case may be, from Pesos into U.S. dollars and the remittance of the U.S. dollars abroad. In particular, with respect to the dividends and distributions on any sale of Class B shares underlying the ADSs, as of the date of this annual report, the conversion from Pesos into U.S. dollars and the remittance of such U.S. dollars abroad is subject to prior Central Bank approval, which may not be granted. Access to the free foreign exchange market (“MLC,” as per its Spanish acronym) to pay dividends to non-resident shareholders is granted subject to the following conditions:
Maximum amounts: the total amount of transfers made through the MLC for payment of dividends to non-resident shareholders may not exceed the 30% of the total value of the capital contributions made in the relevant local company that entered and settled through the MLC as of January 17, 2020. The total amount paid to non-resident shareholders shall not exceed the corresponding amount denominated in Argentine Pesos determined by the shareholders’ meeting to be distributed as dividends. |
Minimum Period: access to the MLC will only be granted after a period of not less than thirty (30) calendar days has elapsed as from the date of the settlement of the last capital contribution that is taken into account for determining the aforementioned 30% cap. |
Documentation requirements: dividends must be the result of closed and audited balance sheets. When requesting access to the MLC for this purpose, evidence of the definitive capitalization of capital contributions must be provided or, in lack thereof, evidence of filing of the process of registration of the capital contribution before the Public Registry shall be provided. In this case, evidence of the definitive capitalization shall be provided within 365 calendar days from the date of the initial filing with the Public Registry. If applicable, the external assets and liabilities reporting regime set forth by Communication “A” 6401 of the Central Bank (the “External Assets and Liabilities Reporting Regime”) shall have been complied with. |
If the exchange rate fluctuates significantly during a time when the depositaryDepositary (as defined in “Item 12.D. American Depositary Shares”) cannot convert or reinvest the foreign currency, you may lose some or all of the value of the dividend distribution. Also, if payments cannot be made in U.S. dollars abroad, the repatriation of any funds collected by foreign investors in Pesos in Argentina may also be subject to restriction. Moreover, available mechanisms to receive dividends in U.S. dollars may involve a significantly higher implicit exchange rate. See “Item 10.D“Item 10.D. Exchange Controls—Other Regulations—Sale of Foreign Currency to Non-residents.Controls.”
We are traded on more than one market and this may result in price variations; in addition, investors may not be able to easily move shares for trading between such markets.
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In addition to the trading of our ADSs in the United States and countries other than Argentina, our Class B shares are traded in Argentina. Trading in the ADSs or our Class B shares on these markets will take place in different currencies (U.S. dollars on the New York Stock Exchange (“NYSE”) and Pesos on BYMA)ByMA), and at different times (resulting from different time zones, different trading days and different public holidays in the United States and Argentina). The trading prices of these securities on these two markets may differ due to these and other factors. Any decrease in the price of our Class B shares on the ByMA could cause a decrease in the trading price of the ADSs on the NYSE. Investors could seek to sell or buy our shares to take advantage of any price differences between the markets through a practice referred to as arbitrage. Any arbitrage activity could create unexpected volatility in both our share prices on one exchange, and the ADSs available for trading on the other exchange. In addition, holders of ADSs will not be immediately able to surrender their ADSs and withdraw the underlying Class B shares for trading on the other market without effecting necessary procedures with the depositary.Depositary. This could result in time delays and additional cost for holders of ADSs.
Under Argentine Corporate Law, shareholder rights may be fewer or less well defined than in other jurisdictions.
Our corporate affairs are governed by our bylaws and by the AGCL,Argentine General Corporations Law, which differ from the legal principles that would apply if we were incorporated in a jurisdiction in the United States (such as Delaware or New York), or in other jurisdictions outside Argentina. Thus, your rights or the rights of holders of our Class B shares under the AGCL toArgentine General Corporations Lawto protect your or their interests relative to actions by our Board of Directors may be fewer and less well defined than under the laws of those other jurisdictions. Although insider trading and price manipulation are illegal under Argentine law, the Argentine securities markets may not be as highly regulated or supervised as the U.S. securities markets or markets in some of the other
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jurisdictions. In addition, rules and policies against self-dealing and regarding the preservation of shareholder interests may be less well defined and enforced in Argentina than in the United States, or other jurisdictions outside Argentina, putting holders of our Class B shares and the ADSs at a potential disadvantage.
Holders of our Class B shares and the ADSs located in the United States may not be able to exercise preemptive rights.
Under the AGCL,Argentine General Corporations Law, if we issue new shares as part of a capital increase, our shareholders may have the right to subscribe to a proportional number of shares to maintain their existing ownership percentage. Rights to subscribe for shares in these circumstances are known as preemptive rights, pursuant to the AGCL.Argentine General Corporations Law. In addition, shareholders are entitled to the right to subscribe for the unsubscribed shares remaining at the end of a preemptive rights offering on apro rata basis, which are known as accretion rights. Upon the occurrence of any future increase in our capital stock, United States holders of Class B shares or ADSs will not be able to exercise the preemptive and related accretion rights for such Class B shares or ADSs unless a registration statement under the Securities Act is effective with respect to such Class B shares or ADSs or an exemption from the registration requirements of the Securities Act is available. We are not obligated to file a registration statement with respect to those Class B shares or ADSs. We may not file such a registration statement, or an exemption from registration may not be available. Unless those Class B shares or ADSs are registered or an exemption from registration applies, a U.S. holder of our Class B shares or ADSs may receive only the net proceeds from those preemptive rights and accretion rights if those rights can be sold by the depositary;Depositary; if they cannot be sold, they will be allowed to lapse. Furthermore, the equity interest of holders of Class B shares or ADSs located in the United States may be diluted proportionately upon future capital increases.
Your voting rights with respect to the ADSs are limited by the terms of the deposit agreement.
Holders may exercise voting rights with respect to the Class B shares underlying ADSs only in accordance with the provisions of the deposit agreement. There are no provisions under Argentine law or under our bylaws that limit ADS holders’ ability to exercise their voting rights through the depositary with respect to the underlying Class B shares, except if the depositary is a foreign entity and it is not registered with the IGJ,Inspección General de Justicia (“IGJ”), and in this case, the depositary is registered with the IGJ. However, there are practical limitations upon the ability of ADS holders to exercise their voting rights due to the additional procedural steps involved in communicating with such holders. For example, Argentine Capital Markets Law requires us to notify our shareholders by publications in certain official and private newspapers of at least 20 and no more than 45 days in advance of any shareholders’ meeting. ADS holders will not receive any notice of a shareholders’ meeting directly from us. In accordance with the deposit agreement, we will provide the notice to the depositary,Depositary, which will in turn, if we so request, as soon as practicable thereafter provide to each ADS holder:
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the notice of such meeting; |
voting instruction forms; and |
a statement as to the manner in which instructions may be given by holders. |
To exercise their voting rights, ADS holders must then provide instructions to the depositaryDepositary on how to vote the shares underlying ADSs. Because of the additional procedural step involvinginvolves the depositary,Depositary, the process for exercising voting rights will take longer for ADS holders than for holders of Class B shares.
Except as described in this annual report, holders will not be able to exercise voting rights attaching to the ADSs.
The relative volatility and illiquidity of the Argentine securities markets may substantially limit your ability to sell Class B shares underlying the ADSs at the price and time you desire.
Investing in securities that trade in emerging markets, such as Argentina, often involves greater risk than investing in securities of issuers in the United States. The Argentine securities market is substantially smaller, less liquid, more concentrated and can be more volatile than major securities markets in the United States, and is not as highly regulated or supervised as some of these other markets. There is also significantly greater concentration in the Argentine securities market than in major securities markets in the United States. As of December 31, 2019,2021, the ten largest companies in terms of market capitalization represented approximately 66%63% of the aggregate market capitalization of ByMA. Accordingly, although you are entitled to withdraw the Class B shares underlying the ADSs from the depositaryDepositary at any time, your ability to sell such shares at a price and time at which you wish to do so may be substantially limited. Furthermore, exchange controls imposed by the Central Bank could have the effect of further impairing the liquidity of the ByMA by making it unattractive for non-Argentines to buy shares in the secondary market in Argentina. See “Item 10.D“Item 10.D. Exchange Controls.Controls.”
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Substantial sales of our Class B shares or the ADSs could cause the price of the Class B shares or of the ADSs to decrease.
We have shareholders that own a substantial amount of our Class B shares or ADSs. If such shareholders decide to sell a substantial amount of our Class B shares or the ADSs, or if the market perceives they intend to sell a substantial amount of our Class B shares or the ADSs, the market price of our Class B shares or the ADSs could drop significantly.
Our shareholders may be subject to liability for certain votes of their securities.
Our shareholders are not liable for our obligations. Instead, shareholders are generally liable only for the payment of the shares they subscribe. However, shareholders who have a conflict of interest with us and who do not abstain from voting may be held liable for damages to us, but only if the transaction would not have been approved without such shareholders’ votes. Furthermore, shareholders who willfully or negligently vote in favor of a resolution that is subsequently declared void by a court as contrary to the AGCL orArgentine General Corporations Lawor our bylaws may be held jointly and severally liable for damages to us or to other third parties, including other shareholders.
Item 4.Information of the Company Item 4.AHistory and development of the Company |
We are a financial group with a long-standing presence in the Argentine financial system and a leading competitive position in certain attractive market segments. We are controlled by Julio Patricio Supervielle. We trace our history back more than 130 years, when the Supervielle family, predecessors of our controlling shareholder, first entered the Argentine financial services industry in 1887. Below is a brief history of our company, including the participation of the Supervielle family.
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Supervielle y Cía. Banqueros
The predecessors of our controlling shareholder emigrated from France in the second half of the 19th century and established L.B. Supervielle y Cía. Banque Francaise (later Banco de Montevideo S.A.) in Montevideo, Uruguay. In 1887, they established Supervielle y Cía. Banqueros (a subsidiary of L.B. Supervielle y Cía. Banque Francaise) in Buenos Aires. Supervielle y Cía. Banqueros offered demand deposits, time deposits, savings accounts, securities trading orders, purchases and sales of foreign currency and drafts and letters of credit payable in European financial centers. Luis Bernardo Supervielle managed the bank until his death in 1901, whereupon the bank’s management transferred to his son, Luis Supervielle, and subsequently to Esteban Barón, son-in-law of Luis Bernardo Supervielle, who in 1905 became president of Supervielle y Cía. Banqueros. Mr. Barón managed the bank from 1905 until 1930, and subsequently served on the board of the bank as an honorary president until 1964. Mr. Barón’s son, Andrés Barón, joined the bank in 1925 and took over its general management in 1930, also becoming chairman of the board of the bank in 1940. He carried out these functions until 1964, and then served on the board of the bank as an honorary president.
On December 30, 1940, Banco Supervielle de Buenos Aires S.A., a bank controlled by the Barón and Supervielle families, acquired the assets and liabilities of Supervielle y Cía. Banqueros and listed its shares on the Buenos Aires Stock Exchange. Esteban Barón and his son, Andrés Barón Supervielle, continued to manage the operations of this bank until 1964.
In 1964, Société Générale (Paris) acquired a majority of the capital stock of Banco Supervielle de Buenos Aires S.A. from the BaronBarón and Supervielle families, transforming it into a universal bank with 60 branches and a significant presence in the corporate market. Following the acquisition of control by Société Générale, the Supervielle family had no role in the management of Banco Supervielle. In 1997, Banco Supervielle de Buenos Aires S.A. created Société Générale Asset Management Sociedad Gerente de FCI S.A. In March 2000, the name Banco Supervielle de Buenos Aires S.A. was changed to Banco Société Générale S.A.
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Banco Banex S.A.
In 1969, Jules Henri Supervielle, the father of Julio Patricio Supervielle, our controlling shareholder, and cousin of the Supervielle family members who had owned and managed Banco Supervielle de Buenos Aires S.A. until 1964, founded Exprinter de Finanzas S.A., which became Exprinter Banco S.A. in 1991. On July 15, 1996, Exprinter Banco S.A. acquired 100% of the capital stock of Banco San Luis S.A. in 1996 pursuant to a public bidding process organized by its owner, the Province of San Luis. On July 25, 1996, the Province of San Luis entered into a financial agency agreement with Banco San Luis S.A. (the “Contrato de Vinculación”), pursuant to which the Province designated Banco San Luis as its financial agent. The acquisition of Banco San Luis S.A. by Exprinter Banco S.A. was part of a strategic plan aimed at growing in the interior of the countryAgentina and penetrating the middle and lower-middle-income individual consumerretail and the SMEs segments. In 1998, Exprinter Banco S.A. and Banco San Luis S.A. merged to create Banco San Luis S.A. Banco Comercial Minorista, and was later renamed Banco Banex S.A. In December 2006, the government2001, Banco Banex S.A. acquired several branches of the Province of San Luis extended the term of this financial agency agreement until 2021. On January 17, 2017, the Province of San Luis notified us of its decision to exercise its right to terminate the agreement, as of February 28, 2017. Since February 2017, the Bank has continued to provide financial services to the government of the Province of San Luis and its employees despite the termination of the financial agency agreement. In January 2019, the government of the Province of San Luis released the terms and conditions of the auction to be held by the Province for the new financial agency agreement. On December 6, 2019, the provincial government issued the Decree No. 8,589 that resolved to close the auction process without awarding the financial agency agreement to any financial institution. Supervielle is continuing to render services as financial agent until the Province of San Luis names a new financial agent.Banco Balcarce S.A.
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Creation of Holding Company
Grupo Supervielle was incorporated in the City of Buenos Aires on in 1979, under the name Inversiones y Participaciones S.A., changing the name to Grupo Supervielle S.A. in November 2008.
Acquisition of Banco Société Générale S.A. by Banco Banex S.A.
In March 2005, the Central Bank approved the purchase by Banco Banex S.A. of a majority stake in Banco Société Générale S.A., Supervielle Asset Management Sociedad Gerente de FCI S.A. and Sofital S.A.F.e I.I.Sofital. Upon consummation of this acquisition, Banco Société Générale S.A.’s corporate name was changed to Banco Supervielle S.A. At the time of the purchase, the total assets of Banco Banex S.A. were 61.3% of the total assets of Banco Societé Générale S.A.
Merger of Banco Banex S.A. and Banco Supervielle S.A.
In July 2007, with the prior approval of the Central Bank, Banco Banex S.A. merged into the Bank.
Acquisition of Banco Regional de Cuyo S.A.
In September 2008, the Bank finalized the acquisition of 99.94% of the capital stock of Banco Regional de Cuyo S.A. The Banco Regional de Cuyo S.A. merged with and into the Bank in November 2010.
Acquisition of Tarjeta Automática S.A.
In December 2007, we acquired 51% of Tarjeta’s capital stock. The remaining 49% was held by Acalar S.A., an Argentinesociedad anónima wholly owned by the Coqueugniot family (Gabriel A. Coqueugniot, Cecilia B. Coqueugniot, Mónica I. Coqueugniot, and Diana I. Coqueugniot), in equal parts. Following several stock transfers that took place in 2009 and 2010, as of December 31, 2021 Tarjeta’s capital stock is as of the date of this annual report, held 87.5% by Grupo Supervielle, 10.0% by the Bank, and 2.5% by CCF.
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IUDÚ. On February 25, 2022 and March 31, 2022, IUDÚ made contributions to Tarjeta’s equity in the amounts of Ps.150 million and Ps.150 million, respectively. Following these capital contributions, which were capitalized by the shareholders’ meeting of Tarjeta held on April 19, 2022, as of the date of this annual report, Grupo Supervielle, IUDÚ and the Bank hold 67.6%, 24.7% and 7.7% of Tarjeta’s equity, respectively.
Acquisition of Cordial Compañía Financiera S.A. (formerly known as “GE Compañía Financiera S.A.”)IUDÚ
In July 2010, Grupo Supervielle and the Bank agreed to acquired 100% of CordialGE Compañía Financiera S.A. (“Cordial Compañía Financiera”),S.A, a financial services company that specialized in credit cards, personal loans and the distribution of certain third-party insurance products. In August 2011, the purchase was completed through a stock transfer in which 5% and 95% of the total shares were transferred to Grupo Supervielle and the Bank, respectively.
Through In August 2011, the shareholders of IUDÚ approved the change of its corporate name from GE Compañía strategic alliance with Walmart Argentina,Financiera S.A. to Cordial Compañía Financiera S.A. On November 2, 2020, the change of its corporate name to IUDÚ Compañía Financiera S.A. was approved, in line with the commercial and brand strategy of the company.
Since 2000, IUDÚ has exclusive rights to promote and sell financial and credit products in Walmart Argentina stores nationwide through Augusta strategic partnership originally entered into with Walmart Argentina. In November 2020, (withWalmart Argentina sold the entire operation to Grupo De Narváez, a renewal currently being negotiated).
We acquired Cordial Compañía Financiera to further our strategy of increasing our market sharelong-standing company in the Argentine banking and financial services industry through the strategic purchase of financial services companies and financial institutions.
Argentina operating several retail businesses. In August 2011,2021, IUDÚ extended the partnership with Grupo De Narváez until August 24, 2026.
On November 2, 2020, the shareholders of Cordial Compañía FinancieraIUDÚ approved the change of its corporate name change from GE Cordial Compañía Financiera S.A. to CordialIUDÚ Compañía Financiera S.A. This change was approved by the Argentine Central Bank and was registered on April 19, 2021.
Creation of Espacio Cordial de Servicios S.A.
In October 2012, theour Board of Directors createdapproved the creation a new entity called ECM S.A., which was later renamed Espacio Cordial de Servicios S.A. Espacio Cordial wasServicios is an entity created to sell non-financial products and services, such as insurance plans and coverage,
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tourism packages, health insurance and health services, tourism packages, electric appliances and furniture, insurance mechanisms and plans and alarm systems. Espacio Cordial deals with insurance services that can be delegated or assigned to third party insurance companies, such as Supervielle Seguros.
Acquisition of Supervielle Seguros S.A. (formerly known as Aseguradores de Créditos del Mercosur S.A.)
In February 2013, we and Sofital accepted an offer for the acquisition of 100% of the shares of an insurance company named Aseguradores de Créditos del Mercosur S.A., which in October 2013 was renamed Supervielle Seguros S.A. In June 2013, 95% of the shares of Aseguradores de Créditos del Mercosur S.A. were transferred to us and the remaining 5% of the shares were transferred to Sofital.
Sale of Adval In October 2013, Aseguradores de Créditos del Mercosur S.A.
In May 2014, Grupo was renamed Supervielle Seguros S.A. and Sofital entered into an agreement for the sale of 100% of the shares of Adval S.A. to CAT Technologies S.A. The purchase price was paid in installments between July 2014 and July 2019.
Successful IPO in May 2016
Since May 19, 2016, the ordinary Class B shares of Grupo Supervielle S.A. are listed on ByMA, and its American Depositary Shares (“ADSs”), representingADSs, each of which represents five ordinary Class B shares, are listed inon the NYSE under the ticker “SUPV”.“SUPV.” At the time, Grupo Supervielle made an initial public offer of its Class B shares in Argentina and of its ADSs in the international markets for an aggregate amount of U.S.$323 million. Through the offering, Grupo Supervielle placed 146,625,087 ordinary Class B shares, of which 137,095,955 were placed internationally in the form of ADSsADSs. In the offering, 114,807,087 were newly issued ordinary Class B shares while 31,818,000 were sold pursuant to a secondary offering.
Sale of Cordial Microfinanzas S.A.
On March 20, 2017, Grupo Supervielle and the Bank accepted an offer from Ciudad Microempresas S.A. to purchase Grupo Supervielle’s and the Bank’s shares of Cordial Microfinanzas S.A. Ciudad Microempresas S.A. is a company owned by Corporación Buenos Aires Sur and Banco de la Ciudad de Buenos Aires. Grupo Supervielle and the Bank transferred on March 31, 2017 all their shares of Cordial Microfinanzas S.A. to Ciudad Microempresas
The decision to sell Cordial Microfinanzas S.A. was based on our need to focus our resources in designated strategic segments. As of December 31, 2016, Cordial Microfinanzas S.A. operated through five branches, had a total loan portfolio of Ps.192 million, and held assets representing 0.4% of the total assets of Grupo Supervielle. Its contribution to the net income of Grupo Supervielle in 2016 was 0.8%. Cordial Microfinanzas S.A. was created in 2007 by Grupo Supervielle to service the microfinance market in Argentina and with the objective of providing technical and financial assistance to micro-entrepreneurs to meet the needs related to their productive, commercial and service activities, thereby contributing to the development of their entrepreneurial capacity.
Capitalization of an in-kind contribution and resulting capital stock increase
At the ordinary and extraordinary shareholders’ meeting of Grupo Supervielle held on April 27, 2017, the shareholders of Grupo Supervielle approved the capitalization of an in-kind contribution of 7,672,412 shares of common stock of Sofital S.A.F. e I.I. made by Mr. Julio Patricio Supervielle and an increase of the capital stock of Grupo Supervielle through the issuance of up to 8,032,032 new Class B shares. In connection with the capital increase, on July 18, 2017, a total of 7,494,710 new Class B shares were subscribed as follows: on July 18, 2017,(i) 4,321,208 were issued to Mr. Julio Patricio Supervielle in return for the in-kind contribution, representing 57.7% of the total capital increase, and (ii) 3,173,502 Class B shares were issued to existing shareholders of Grupo Supervielle who exercised their preemptive and accretion rights with respect to the capital increase, representing 42.3% of the total capital increase.
Sale of shares of Viñas del Monte S.A.
On May 26, 2017, Grupo Supervielle, Sofital S.A.F. e I.I. and Mr. Julio Patricio Supervielle completed the transfer of their shareholdings in Viñas del Monte S.A., which were sold for an aggregate amount of U.S.$1,500,000 to Ramón Francisco Federico and Guillermo Héctor Federico.
Successful completion of follow-on and capital increase
In September 2017, Grupo Supervielle made an increase of capital stock through an offer of Class B shares. Simultaneously with the offer, Grupo Supervielle made an offer of preemptive and accretive rights of Class B shares to existing shareholders. As a result of the offer, Grupo Supervielle issued a total of 85,449,997 new Class B shares for a total of U.S.$344.0 million.
Creation of Adquisición y Desarrollo S.A.
On December 18, 2017, our Board of Directors approved the creation of Adquisición y Desarrollo S.A. to sell credit and non-credit product and services through new indirect channels. As of the date of this annual report, Adquisición y Desarrollo S.A. registration process with the IGJ is dormant.
Creation of Fideicomiso Financiero Fintech Supervielle I
On February 16, 2018, theour Board of Directors approved the creation of Fideicomiso Financiero Fintech Supervielle I to invest in financial technology (fintech) and insurance technology (insurtech) start up projects forin an amount up to U.S.$3 million. The Fideicomiso Financiero Fintech Supervielle I has made investments with minor participations in the following start up projects since its creation: 123Seguro, Increase, Avancargo, Blended, SixClovers and Lemon Cash. The Fideicomiso Financiero Fintech Supervielle I is funded by Grupo Supervielle and Banco Supervielle.
Acquisition of Micro Lending S.A.U.
On April 6, 2018, Grupo Supervielle approved an offer to acquire 100% of the share capital of Micro Lending S.A.U. (“MILA”).MILA. MILA specializes in car financing, particularly forin used cars. On May 2, 2018, Grupo Supervielle closed the acquisition of MILA for a total price of U.S.$20 million, subject to final adjustments.
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MILA.
Acquisition of the capital stock of InvertirOnline S.A.U. and InvertirOnline.com Argentina S.A.U. (renamed as Portal Integral de Inversiones S.A.U., with registration pending)
On May 24, 2018, we acquired the capital stock of the online trading platform InvertirOnline (“InvertirOnline”),IOL invertironline through the purchase of both InvertirOnline S.A.U. and InvertirOnline.com Argentina S.A.U. In July 2021, the platform was renamed IOL invertironline. On April 19, 2022, InvertirOnline.com Argentina S.A.U. was renamed as Portal Integral de Inversiones S.A.U. As of the date of this annual report, the registration of this name change is pending.
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Conversion of Class A shares
On April 24, 2019, and as per the request ofrequested by Mr. Julio Patricio Supervielle, theour Board of Directors of Grupo Supervielle authorized the conversion of 65,000,000 Class A shares, with a par value of Ps.1.00eachPs.1.00 each and entitled to five votes per share, held by Mr. Supervielle, into Class B shares, with a par value of Ps.1.00 each and entitled to one vote per share, in the the terms of article 6 (b)pursuant to Section 6(b) our bylaws. On May 9, 2019, the aforementioned conversion was approved by the CNV.
Creation of Bolsillo Digital S.A.U.
On June 12, 2019, we created Bolsillo Digital S.A.U.Digital. This company is a fintech which was created withintroduced in the exclusive purposefast-growing industry of providing design, programmingmeans of payment, which designs and developing services for software, mobile phone applications, web pages and/or any other digital medium, commercializingdevelops products and services relatedfor payment processing, thereby offering solutions to businesses and individuals and facilitating their integration into the managementdigital payment systems by using mobile points of sale (“MPOS”) and processing of payments made by and in favor of third parties and developing and operating platforms and tools of payment methods of any type and in any ofmobile wallet products. On August 5, 2021, Grupo Supervielle transferred its forms. We are the sole shareholdershares of Bolsillo Digital S.A.U.to its subsidiary Banco Supervielle S.A. as part of its strategy within the industry of means of payment.
Bolsillo Digital’s main activity is providing payment services. It actively participates in the growth of Grupo Supervielle’s business and seeks to promote digitization, reduce the use of cash and promote financial inclusion by providing more opportunities to merchants, professionals, SMEs and entrepreneurs.
Acquisition of deautos.com by Espacio Cordial de Servicios S.A.
On June 18, 2019, Espacio Cordial de Servicios S.A. acquired deautos.com, a platform of new and pre-owned cars and one of the leading siteswebsites in its category with more than 10 years of presence in the market.
Through this acquisition, the Consumer Division of Grupo Supervielle seeks to continue enhancing the customer experience through digital transformation, widening the offering of consumer products and increasing cross selling to drive higher efficiency and profitability.
The acquisition of deautos.com platform will allowallowed us to create an innovative and disruptive business model in the online car market powered by Mila’sMILA’s relationship with agencies and dealers, provide a new car digital platform experience for users, integrating and simplifying the financial offer, insurance and services of the Company.segment.
Creation of Supervielle Productores Asesores de Seguros S.A. (formerly known as Supervielle Broker de Seguros S.A.)
On December 21, 2018, we created Supervielle BrokerProductores Asesores de Seguros, S.A. was created, which has the exclusive purpose of carrying out the insurance intermediation activity, promoting the contracts of life insurance, wealth and pension insurance premiums, and advising customers and potential customers. Grupo Supervielle owns allmore than 99% of its share capital, directly andor indirectly. Supervielle Productores Asesores de Seguros S.A began operating in the second half of 2019.
Acquisition of Futuros del Sur S.A. (in the process of being renamed(renamed as Supervielle Agente de NegociacionNegociación S.A.U.)
On December 18, 2019, Supervielle acquired 100% of the share ownership of brokerage firm Futuros del Sur S.A., a brokerage firm seeking to broaden the investment and financial services it provides to institutional and corporate customers and also drive efficient and profitable cross selling. Futuros del Sur S.A. is in the process of being renamedchanged its corporate name to Supervielle Agente de Negociación S.A.U., which change was registered on January 24, 2022.
Acquisition of Easy Cambio S.A.
In October 2020, Grupo Supervielle acquired Easy Cambio S.A., a foreign exchange broker authorized by the Central Bank.
Acquisition of the capital stock of IOL Holding S.A. and IOL Agente de Valores S.A.
On August 6, 2021, Grupo Supervielle acquired 95% of the shares of IOL Holding S.A., a company incorporated in Uruguay which hold shares in companies which provide brokerage services in the Latin American region. Sofital acquired the remaining 5% of the shares of IOL Holding S.A.
On August 23, 2021, IOL Holding S.A. acquired 100% of the shares of IOL Agente de Valores S.A., a company incorporated in Uruguay which will provide security dealer services subject to the authorization of the Central Bank of Uruguay, which is pending as of the date of this annual report. IOL Agente de Valores S.A. provides its services through an online platform to non-residents of Uruguay who are based in Latin America and seek to participate in the U.S. capital markets.
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Executive Offices
Our principal executive offices are located at Bartolomé Mitre 434, 5th floor, Buenos Aires, Argentina. Our general telephone number is +54-11-4340-3100. Our website is http://www.gruposupervielle.com. Information contained or accessible through our website is not incorporated by reference in, and should not be considered part of, this annual report.
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We file reports, including our annual reports on Form 20-F, and other information with the SEC pursuant to the rules and regulations of the SEC that apply to foreign private issuers. The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. Any filings we make electronically with the SEC are available to the public over the Internet at the SEC’s web site at http://www.sec.gov.
Our agent for service of process in the United States is CT Corporation System, located at 111 Eighth Avenue, New York, New York, 10011.
Item 4.BBusiness Overview |
Overview
We own the eighth largest Argentine private bank in terms of loans. We maintain a strong geographic presence in the City of Buenos Aires and the Greater Buenos Aires metropolitan area, which is Argentina’s most commercially significant and highly populated area, and we are leaders in terms of our banking network in some of Argentina’s most dynamic regions, including Mendoza and San Luis. The Bank, which consolidated with CCF, is our main asset, comprising 96.4% of our total assets, and has a history of strong growth. As of December 31, 2019, we served 1.8 million active customers, and our assets totaled Ps.146.5 billion (approximately U.$.S.2.4 billion), in addition to Ps.16.8 billion (approximately U.$.S. 281 million) of assets managed by SAM and Ps.12.5 billion (U.$.S.209 million) of assets managed by InvertirOnline. As of December 31, 2019, the Bank and CCF accounted for 91.1% and 5.3% of our total assets, respectively.
As of December 31, 2019 and 2018, according to calculations performed based on Central Bank and other third-party information, our share for the following products or segments was as follows:
Based on the latest information published by ANSES, we made 13.7% of all social security payments to senior citizens in Argentina in June 2019, compared to 14.0% in December 2018.
We have a leading position in both the Provinces of Mendoza and San Luis, in which we have 198,000 and 192,000 active customers, respectively. According to calculations based on Central Bank information, as of December 31, 2019 in these Provinces we had a market share of loans among private banks of 21.2% and 49.6%, respectively, and a market share of deposits among private banks of 7.1% and 62.8% respectively.
We offer diverse financial products and services that are specifically tailored to cover the different needs of our customers through a multi-brand and multi-channel platform. We have developed a multi-brand business model to differentiate the financial products and services we offer to a wide spectrum of individuals, small businesses, SMEs, middle-market companies and large corporates in Argentina. Our infrastructure supports our multi-channel distribution strategy with a strategic national footprint through 316 access points which include 185 bank branches, 13 banking payment and collection centers, 79 CCF sales points located in Walmart supermarkets, Tarjeta’s 34 consumer finance sales points, 5 Mila customer support offices, a network of 393 car dealers, 536 ATMs, 217 self-service terminals and 202 cash dispensers with biometric identification.
We complement our existing physical network by offering solutions through our different digital channels such as our Online Banking platforms for Business and for Individuals, the Supervielle Mobile and the specific apps and solutions developed for different business segments such as the app for retirees, the Walmart app, and chatbots. We also offer products and services through InvertirOnline.com, our online broker with more than 51,800 active customers located countrywide.
As of December 31, 2019, the Bank’s loan portfolio to branches ratio, which we calculate by dividing the total amount of loans outstanding at the end of the period by the number of branches at the end of such period, was Ps.443.4 million, compared to Ps.393.0 million as of December 31, 2018. Based on the Peso amounts of the loan portfolios reported by the following Argentine private banks in their respective financial statements as of December 31, 2019, the loan portfolio to branches ratio of (i) Banco Macro S.A. was Ps.476.1 million, (ii) Banco de Galicia y Buenos Aires S.A. was Ps.934.5 million and (iii) BBVA Banco Francés S.A. was Ps.740.5 million. The loan portfolio to branches ratio as of December 31, 2018 of (i) Banco Macro S.A. was Ps.379.2 million, (ii) Banco de Galicia y Buenos Aires S.A. was Ps.739.4 million and (iii) BBVA Banco Francés S.A. was Ps.711.1 million.
Building on our banking sector expertise, we identify cross-selling opportunities and offer targeted products to our customers at each point of contact.
As of December 31, 2019 and 2018 on a consolidated basis, we had:
In our cross-selling segments we had as of December 31, 2019:
We have developed a segmentation strategy of our customer base to target the specific needs of each category of customers.
The following charts set forth the breakdown of our loan portfolio by segment, and of the specific customer categories in our corporate banking and retail segments as of December 31, 2019.
The following charts set forth the breakdown of our deposits by type of account and customer category as of December 31, 2019.
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Between 2017 and 2019, according to financial information made publicly available by the Central Bank and expressed following the Argentine Banking GAAP -nominal historic Peso amounts (i.e.,not adjusted for inflation)- and not including expected loss provisioning, our loan portfolio grew at a CAGR of 33.6%, as compared to 31.7% for the Argentine private financial system (excluding public banks). Our ROAE was 19.1%, 16.5% and 22.6% for the years ended December 31, 2017, 2018 and 2019, compared to an average ROAE of 25.0%, 33.5% and 53.4% for the Argentine private financial system over the same periods. We achieved net interest margins of 20.1%, 19.4% and 21.6% for the fiscal years ended December 31, 2017, 2018 and 2019, which compares favorably to averages for Argentine private financial system of 13.4%, 15.3% and 21.2% for the years ended December 31, 2017, 2018 and 2019, respectively. As of December 31, 2019, we accounted for 5.0% of all loans and leasing held by Argentine private financial sector (excluding public banks) and 3.2% of all deposits maintained with the Argentine private financial sector.
The Bank has made significant investments in its ATMs, self-service terminals, and cash dispensers with biometric identification network, multiplying by three the network from 2010 to 2019. We were the first bank in Argentina to use biometrics technology as part of our distribution channels. We also have technology scoring systems that allow for an efficient credit-related decision-making process.
Changes in Management
In late 2018, we started to implement changes intended to continue integrating the management of our operations, looking for more agility and flexibility. In February 2019, the CEO of Grupo Supervielle was also appointed CEO of Banco Supervielle, and subsequently, in April 2019, Mr. Alejandro Stengel (already member of our Board of Directors) was appointed as CCO in Banco Supervielle, reporting to the CEO. In addition, certain business areas of Banco Supervielle were redefined, such as the Personal and Business Banking area, Corporate Banking and Products and Communication area, reporting to the COO. Since May 2019, the new area of Personal and Business Banking started to implement a strategic view, focused on individual customers and SMEs, which demand and value close and digital service models. This focus was a transition to January 1, 2020, when the new Personal and Business Banking Division received our SMEs portfolio from the Corporate Banking Division.
The following areas also report to the COO: Technology, Operations and Central Services, Customer Experience and Business Intelligence, and Processes.
The COO also leads the Bank’s digital transformation, ensuring its adequate implementation organization-wide. Digital transformation involves the use of new working methodologies, new technologies and a strong cultural change within the organization. Agile methodologies are implemented in response to current needs, where the willingness to change and the prompt delivery of value are a competitive advantage. Under this methodology, independent and highly efficient work teams are formed with short turnaround times.
Business Segments
We conduct our operations through the following business segments:
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Until December 31, 2019, we offered services to SMEs through our Corporate Banking segment. On January 1, 2020, our Retail Banking segment was named Personal and Business Banking and our SMEs portfolio was transferred to the Personal and Business Banking segment.
Retail Banking: The Bank offers wide range of financial products and services designed to meet the needs of individuals and entrepreneurs and small businesses: personal loans, mortgage loans, unsecured loans, loans with special facilities for project and work capital financing, leasing, bank guarantee for tenants, salary advances, car loans, domestic and international factoring, international guarantees and letters of credit, payroll payment plan (planes sueldo), credit cards, debit cards, savings accounts, time deposits, checking accounts, and financial services and investments such as mutual funds, insurance and guarantees, and senior citizens benefit payments. As part of the organizational changes, since January 1, 2020, SMEs portfolio has been included under the Personal and Business Banking segment.
Corporate Banking: The Bank, through its Corporate Banking segment, works with middle-market companies and large corporates. The customer service model is formed in turn by three commercial managements: AMBA Corporate Banking Management, Interior Corporate Banking Management and Mutual Guarantee Societies Division. The Bank believes that its proximity to its corporate banking customers gives it a competitive advantage. Until December 31, 2019, SMEs portfolio was included under the Corporate Banking segment.
Treasury: It is primarily responsible for the allocation of the Bank’s liquidity according to the needs of the Retail Banking segment, the Corporate Banking segment and its own needs. The Treasury segment implements the Bank’s financial risk management policies, manages the Bank’s trading desks, distributes treasury products such as debt securities, and develops businesses with wholesale financial and non-financial clients. Below is a description of the services offered under this segment:
Consumer Finance: Through CCF and Tarjeta Automática, Supervielle offers credit card services and loans to the middle and lower-middle-income sectors. Product offerings also include consumer loans, credit cards and insurance products through an exclusive agreement with Walmart Argentina, as well as with other agreements with retailers such as Hiper Tehuelche and through Tarjeta Automática branch network. Moreover, through Espacio Cordial, which is reported in the Consumer Finance segment since 2018, Supervielle offers non-financial products and services. Since the MILA acquisition, the new portfolio of used car loans and its respective results are also recorded under Consumer Finance segment.
Insurance: Through Supervielle Seguros, Grupo Supervielle offers insurance products, primarily personal accidents insurance, protected bag insurance, life insurance and integral insurance policies for entreprenuers and SMEs. In 2018 the company incorporated the marketing of special multiple peril policies focused on the entrepreneurs and SMEs segment. Supervielle Seguros is continuously offering new products to the different customer segments of Grupo Supervielle companies: high net worth individuals (Identité), senior citizens, entrepreneurs and SMEs, customers of the Consumer Financing and Corporate Banking segments.
Asset Management and Other Services: Grupo Supervielle offers a variety of other services to its customers, including mutual fund products through Supervielle Asset Management. Since its acquisition in May 2018, Supervielle also offers products and services through InvertirOnline S.A.U. Also since the MILA acquisition, the MILA portfolio outstanding at the moment of the acquisition and its respective results are recorded under Asset Management and Others segment, while the new portfolio of used car loans and its respective results are recorded under Consumer Finance segment.
For more information on our operating segments, see Note 3 to our consolidated financial statements included in this annual report.
Products and Services
We offer our products and services in Argentina’s main regions and cities through our main operating subsidiaries, which include:
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Organizational structure
The following diagram illustrates our organizational structure as of the date of this annual report. Percentages indicate the ownership interest held.
The following information is related to our subsidiaries as of the date of this annual report:
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Competitive Strengths
We have achieved a strong competitive position in our core products (personal loans, factoring, leasing and social security payments to senior citizens), as well as a strong presence in certain geographical regions in Argentina.
We have developed a leading position in the Argentine market in a number of attractive products to different customer segments.
We are leaders in the Argentine market in the following areas:
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Leading position in certain geographical regions in Argentina. being one of the most active players in the Cuyo region and with a leading position in terms of our banking network
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Solid sources of funding
We have traditionally had access to diversified, competitive and stable sources of funding. Our low cost demand deposit base comprises 49% of our funding base as of December 31, 2019 (33% savings accounts, and 16% checking accounts) while our franchise allowed us also to capture interest bearing deposits according to our treasury management liquidity needs.
We occasionally use medium-term debt securities and securitization operations of consumer loans among our funding strategies. Additionally, our consolidated pro forma Tier I ratio was 11.4% as of December 31, 2019 and we have maintained at the holding company level, excess liquidity for future capital injections to our subsidiaries in order to fund our growth strategy.
Creation of value for shareholders through the implementation of prudent financial risk management policies and the primary focus on the intermediation activities.
Along the years, we have generated value and strong growth, while managing financial risks under policies designed to protect our capital and liquidity. In the past, in addition to our organic growth, we have successfully acquired and integrated strategic businesses. We have consistently limited our exposure to the non-financial public sector and limited term, currency and other mismatches in our assets and liabilities. We strategically decide to have high proportion of loans over total assets to derive our net income primarily from financial intermediation activities rather than from trading or financial investments, which has resulted in more stable sources of income and reduced the exposure of our earnings to market volatility. Since mid 2018, following the sudden changes in the macroeconomic conditions, and the consequent decline in credit demand, cash minimum reserve requirements were extraordinarily increased (some of such reserves being allowed to be set up in Central Bank short term securities). Therefore,, we opportunistically increased our holdings in Central Bank short term securities applying our excess liquidity, decreasing our proportion of loans over total assets.
Access to multiple customer segments through differentiated brands and channels positions us to capture future growth in the Argentine financial system.
We target a broad spectrum of socioeconomic segments and companies of varying sizes using a multi-brand model to offerprovide a wide range of financial services. The Bank offers customized financial products and non-financial services to corporateour clients and have 130 years of experience operating in SMEsArgentina. We are focused on offering fast solutions to our clients and middle-market companies, as well aseffectively adapting to high net worthevolving changes within the industries in which we operate. Grupo Supervielle operates multiple platforms and middle-income individualsbrands and has developed a diverse ecosystem to middlerespond to our clients’ needs and lower-middle-income senior citizens. CCF and Tarjeta focus their products and servicesdigital transformation. Since May 2016, the shares of Grupo Supervielle are listed on the middleByMA and lower-middle-income segments of the urban population. Our multi-brand model allows us to access segments of the population that are underserved and we believe offer growth opportunities once the macroeconomic conditions in Argentina stabilize.
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NYSE.
We consistently seek to leverage the strong cross-selling potential of our multi-brand and multi-channelOur business model and our stable pool of almost two million customers.
Through our multi-brand and multi-channel approach, we are able to cross-sell and create synergies across our segments. Bancassurance specifically allows us to cross-sell value added insurance products in compliance withis defined by the regulations of the National Superintendency of Insurance (Superintendencia de Seguros de la Nación) and of the Central Bank, as applicable. We offer an attractive platform for cross-selling certain credit cards and loans through 113 consumer finance points of sale as of December 31, 2019 (compared to 114 consumer finance points of sale as of December 31, 2018). We cross-sell non-financial services and products such as insurance products and plans, tourism packages, health insurance and health services, electric appliances and furniture, and alarm systems through Espacio Cordial and our senior citizens branches.following characteristics:
● | We are the oldest private franchise in Argentina and own the eighth largest Argentine private bank in terms of loans, and have a recognized presence within the Argentine financial industry; |
● | We have a strong liquidity and a solid capital base which support our growth initiatives. In addition to organic growth, we have significantly increased our business through acquisitions which have allowed us to expand our private loan market share among private financial institutions from 0.2% to 4.8% between 2002 and 2021. |
● | We operate in an underpenetrated financial system. The Argentine financial system is one of the least penetrated financial systems in Latin America, with a fragmented and competitive landscape. As a result, the Argentine financial system presents a number of growth opportunities, as Argentina resumes its stabilization process. We are well positioned and constantly evolving to capture these growth opportunities given our focus on a differentiated customer experience. |
● | We are going through a process of cultural and digital transformation. Placing the customer at the center of our business, we are advancing on the implementation of a deep cultural and digital transformation across our company, scaling the adoption of agile working methodologies, leveraging digital marketing and artificial intelligence capabilities, as well as cloud services. |
● | We are evolving our customer service model. We are accelerating our transformation initiatives across channels deepening our omnichannel model. This includes developing a modern technological system, evolving our branch model and adding application program interface (“API”) capabilities to connect to third parties and prepare for open banking, while improving the customer journey and driving efficiency. Our goal is to offer our customers a Human Banking Experience that combines the use of technology with our staff assistance to provide our customers the best of both worlds. |
● | We are building a service ecosystem. We continue to build our ecosystem integrating our service offerings and adding partnerships, improving customer experience, while driving synergies among our different verticals, increasing customer loyalty and pursuing cross selling initiatives. We are starting to embark on selective regionalization initiatives leveraging our proven capabilities with the aim of expanding our market presence. |
We believe our investment in developing a strategic national footprint positions us to capture profitable growth and benefit from economies of scale, once credit demand resumes.
Through the Bank, we have a focused presence in Argentina’s major regions and cities. Through our consumer finance business, we have presence in all the provinces of Argentina. Through our current infrastructure, we serve our customers through 316 access points including branches, 13 banking payment and sales and collection centers, 79 consumer finance, branches and access points within Walmart stores, Tarjeta’s 34 consumer finance sales points through other retailers, 5 MILA customer support offices, a network of 393 car dealers and 536 ATMs, 217 self service terminals and 202 cash dispensers with biometric identification, our call center and home banking and mobile services. The Bank has an important presence in the City of Buenos Aires and the Greater Buenos Aires metropolitan area (where approximately 20.3 million or 46% of Argentina’s population resides), through 113 branches and 1 collection center, and CCF has 27 sales points within Walmart locations in the City of Buenos Aires and Greater Buenos Aires. The Bank is also one of the most active players in the Cuyo region, which includes the Province of Mendoza, San Juan and San Luis where it operates through 52 branches, 1 mobile branch and 13 collection centers. The Bank has approximately 198,000 active customers in Mendoza and approximately 192,000 in San Luis. CCF has eight sales points in the Cuyo region. We offer consumer finance services through our Tarjeta distribution platform mainly in the Patagonia region, where we rely on 20 branches and 14 sales and collection centers.
We complement our existing physical network by offering solutions through our different digital channels such as our Online Banking platforms for Business and for Individuals, the Supervielle Mobile and the specific apps and solutions developed for different business segments such as the app for retirees, the Walmart app, and chatbots. We also offer products and services through InvertirOnline.com, our online broker with more than 51,800 active customers located countrywide.
Given the strength of our network in commercially significant and high income regions in Argentina, we believe we are well positioned to benefit from economies of scale by leveraging our existing network and growing our revenues without significant investments in additional expansion of our platform.
Long-standing presence in Argentina’s financial sector, committed controlling shareholder and experienced Board of Directors and management team.
Through our main subsidiary, the Bank, we trace our origins to the banking house Supervielle y Cía. Banqueros, established in 1887. Our long-standing presence in Argentina’s financial sector has allowed us to establish strong long-term relationships with our customer base, build a reputation for personalized customer service and establish the Supervielle brand as a recognized household name in the Argentine banking industry for both individuals and corporations, as well as in the securitization and corporate bond segments of the local capital markets. Our controlling shareholder has a strong commitment to the Argentine financial system. Julio Patricio Supervielle is the Chairman of the Board of Directors and the CEO of Grupo Supervielle and has led Grupo Supervielle for over 1820 years. During his tenure, we have experienced growth in terms of net worth, assets, deposits, and our network and customer base, and we have successfully
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completed some of our most significant acquisitions. We rely on aour Board of Directors whose members collectively have extensive experience in retail and commercial banking, a deep understanding of local business sectors and strong capabilities in risk management, finance, capital markets, M&A and corporate governance. In addition, our senior management team is comprised of seasoned officials and experts in their fields that foster a business culture of high performance. Our subsidiaries are: (i) Banco Supervielle, which is the eighth largest private bank in Argentina in terms of loans; (ii) IUDÚ, a financial service company with a growing digital offer; (iii) Tarjeta, a distribution network for consumer finance operating mainly in the Southern region of Argentina; (iv) MILA, a company specialized in the financing of car loans; (v) Espacio Cordial, an entity offering retail non-financial products, assistance, services and tourism; (vi) Supervielle Seguros, an insurance company; (vii) Supervielle Productores Asesores de Seguros, an insurance broker; (viii) Supervielle Asset Management, a mutual fund management company; (ix) IOL invertironline, a broker specialized in online trading; (x) Supervielle Agente de Negociación, a brokerage firm offering services to institutional and corporate customers, and (xi) Bolsillo Digital, a company that provides payment solutions to retailers with MPOS and mobile wallet products through its BOLDI brand. In addition, Sofital, a holding company that owns shares of the same companies owned by Grupo Supervielle, is part of our Group.
On a consolidated basis, we had:
● | Ps.390.4 billion in total assets as of December 31, 2021, compared to Ps.376.2 billion in total assets as of December 31, 2020; |
● | Ps.165.5 billion in loans as of December 31, 2021, compared to Ps.171.8 billion in loans as of December 31, 2020; |
● | Ps.288.5 billion in deposits as of December 31, 2021, including Ps.277.0 billion from the private sector, and Ps.11.5 billion from the non-financial public sector, compared to Ps.269.6 billion in deposits as of December 31, 2020, including Ps.257.7 billion from the private sector and Ps.11.9 billion from the non-financial public sector; |
● | Ps.51.5 billion in attributable shareholders’ equity as of December 31, 2021, compared to Ps.53.8 billion in attributable shareholders’ equity as of December 31, 2020; and |
● | 4,811 employees as of December 31, 2021, compared to 5,021 employees as of December 31, 2020. |
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During 2021, we continued to expand our ecosystem, and served more than 2 million active customers. The following chart illustrates our business ecosystem as of December 31, 2021:
Notes: (1) Loans and Deposits Market share: Banco Supervielle Market Share among Argentine Private banks; and (2) Insurance Market share among the insurance lines we underwrite as of the last twelve months as of September 2021, which is the latest information available as of the date of this annual report.
Financial Services
We own the eighth largest Argentine private bank in terms of loans. Through the Bank, we serve 1.4 million individual customers, around 22,000 small businesses, 1,800 SMEs and 2,500 corporates, and we maintain a competitive leading position in certain strategic segments.
According to calculations based on Central Bank and other third-party information, our share for the following products is as follows:
● | personal loans (advanced by the Argentine financial system): our market share as of December 31, 2021 was 4.3%, compared to a 4.5% market share as of December 31, 2020; |
● | leasing (made by the Argentine private banks): a 14.2% market share as of December 31, 2021, compared to a market share of 11.4% as of December 31, 2020; and |
● | Our factoring market share of the Argentine private financial system as of December 31, 2021 was 8.7%, compared to a 10.8% market share as of December 31, 2020. |
Additionally, based on the latest information published by ANSES, we made 9.8% of all social security payments to senior citizens in Argentina as of December 2021, compared to 10.4% as of December 31, 2020.
Through the Bank, we maintain a strong geographic presence in the City of Buenos Aires and the Greater Buenos Aires metropolitan area, which is Argentina’s most commercially significant and highly populated area, and we are leaders in terms of our banking network in some of Argentina’s most dynamic regions, including Mendoza and San Luis.
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We have a leading position in both the Provinces of Mendoza and San Luis, in which we had 202,000 and 196,000 active customers as of December 31, 2021, respectively. According to calculations based on Central Bank information, as of December 31, 2021 in these provinces we had a market share of loans to private sector of 21.0% and 49.4%, respectively, and a market share of deposits from private sector of 9.4% and 45.8% respectively.
Moreover, we are advancing on our omnichannel strategy and starting with a hybrid model including virtual hubs to expand our footprint and offer banking services anywhere and anytime. This model combines the efficiencies of a virtual hub with the strength of face-to-face interactions. As of the date of this annual report, we have implemented three virtual hubs offering an improved customer experience, and we are working towards implementing this model into other regions and segments.
We also made significant progress on our branch transformation, implementing a new service model and updating our network. In 2021, we udpated and expanded our services to SMEs and multi-segment businesses in 16 branches which offered services only to senior citizens. In addition, we increased the availability of our services to 24 hours in 40% of our total branches enabling extended banking hours. In 2021, the total number of our currency in-person transactions declined from 9% to 4% of total transations in 2020. We expect to continue working towards expanding our digital footprint and increasing customer acquisition through virtual hubs and transformed branches.
As of December 31, 2021, the Bank’s retail digitized customers increased 32% to 542,000 customers, from 377,000 customers as of December 31, 2020. During 2021, the Bank added 53,000 new retail customers, of which more than 80% are digital customers.
As of December 31, 2021, the Bank inreased the share of personal loans granted through digital and automatic channels to 40% of the total personal loans, from 35% as of December 31, 2020. As of December 31, 2021, asset management retail customers increased by 81% to 7,852 from 4,347 asset management retail customers in 2020, and assets under our management increased by 121% to Ps.2.3 billion from Ps. 1.0 billion assets in 2020.
During 2021, we also expanded the SMEs and middle market customers by nearly 4% compared to 2020. Moreover, over 20% of our sales to SMEs were digital as a result of the implementation of a digital onboarding process in 2021. As of December 31, 2021, we also increased our share of total system customers by over 17 basis points to 5.03% of total customers in 2021 from 4.86% in 2020, regaining our leading market position in leasing and posted share increases across payroll services, sight deposits and assets. As of December 31, 2021, the share of online and automatic monetary transactions increased to almost 90% of total transactions from 82% in 2020. During 2021, we also increased our share of wallet of corporate customers, as we more than doubled the number of monthly collections and payment transactions and experienced sustained growth in e-check volumes, which enabled us to rank 6th in this segment among all the financial institutions in Argentina.
In 2021, we continued making new partnerships. The Bank and SIDOM, a digital platform for foreign trade management, jointly launched SIDOM Pay, a digital platform which serves to automate the administrative and financial processes of import and export companies when generating customs duty payments and reduce costs. We expect that this platform will make management systems more dynamic, improve cash flows and provide greater digitization.
We also made significant progress transforming IUDÚ’s business from a model that offered personal loans and credit cards on-site in Chango Más (formerly, Walmart Argentina) stores to a completely digital financial services model that is starting to take retail deposits to lower cost of funds and offering a growing range of financial services to a broader lower-risk customer base, leveraging its position as a regulated financial entity. During 2021 we continued to launch new products. In the fourth quarter of 2021, we launched the retail digital savings account with the aim of increasing customer engagement and attracting lower cost of funding for this business.
Our Consumer Finance business segment has been renamed since January 2022 as IUDÚ Digital Financial Services segment.
Insurance
The insurance business is continuously adapting its products to the needs of our customers. We have access to customers through our distribution networks and aim to further develop our bancassurance distribution model by expanding the variety of insurance products offered.
In 2021, through a commercial partnership with the insurtech company 123 Seguros we integrated the insurance platform of 123 Seguros into our online banking, which allows us to offer digital car insurance products through the Bank’s online banking, and our
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insurance business segment completed the building of its datawarehouse which was integrated into the Bank’s data system in order to create predictive models.
As of December 31, 2021, we have issued Ps.3.3 billion in gross written premiums reaching as of December 31, 2021, 1.8% market share among the insurance lines we underwrite.
Investments & Savings solutions
We offer investments and savings solutions to our customers through a wide range of products. Through Supervielle Asset Management, we have 15 mutual funds designed to meet customers’ particular investment objectives and risk profiles. As of December 31, 2021, monthly average assets under management accounted for Ps.73.7 billion, which represents a real increase of 25.7% compared to monthly average assets under management as of December 31, 2020.
IOL invertironline ranked fifth in the ByMA exchange ranking on Equity, CEDEARs (Certificado de Depósito Argentinos) with a 5.8% market share and fourth in options trading. As of December 31, 2021, we had 109,161 customers through IOL invertironline, which represents an increase of 36% compared to 2020. Additionally, we contribute to improve financial education with around 23,000 participants attending financial courses education offered by IOL invertironline in 2021.
Payments
In June 2020, we launched IUDÚ Pago, a payment facilitator app through which companies and individuals with commercial activity are offered the possibility of charging with debit and credit cards, through MPOS and payment link. The value proposition is currently integrated with virtual wallet products, such as “Sube” charging, Prepaid Card (to make subscriptions, extraction and purchases) and cell phone recharge. In 2021, IUDÚ Pago was renamed as Boldi.
In 2020, we joined Play Digital S.A. (“Modo”), the systemic payment solution for banks in Argentina, as shareholder, with the aim of expanding the offer of financial services to our clients throughout the country, integrating technologies that facilitate the use of our applications on mobile devices, allowing them to operate in the digital market for payments and transfers through a systemic solution of the highest quality standard. In 2021, we integrated Modo into our Supervielle App, an online banking platform, our Supervielle Jubilados App, which serves to provide services to senior citizens, such as information on check payments and payment receipts, and cash withdrawals, and the IUDÚ digital app.
Mobility-Cars
The acquisition of deautos.com platform in 2019 allowed us to create an innovative and disruptive business model in the online car market powered by our existing MILA’s relationship with agencies and dealers, providing a new car digital platform experience for users, integrating and simplifying the financial offer, insurance and services. As of December 31, 2021 we have granted 14,000 auto loans.
In December 2021, we signed an agreement to finance the operation of KAVAK, a digital platform for the sale of used cars, in order to promote its growth in Argentina. As a result of this financing, KAVAK will provide a wide range of financial and non-financial services to its customers and its customers will receive exclusive benefits.
Housing
We offered housing solutions to our customers, through different value propositions, such as rent guarantees. As of December 31, 2021, we ranked the fifth largest private bank in terms of mortgages. These UVA (as defined below) mortgages were granted between 2016 and 2018.
Non financial services and products: Retail and Leisure, and Medical plans
Building on our banking sector expertise, we identify cross-selling opportunities and offer targeted products to our customers at each point of contact though our brands Cordial and Tienda Supervielle marketplace which was used to sell home appliances, technology, home and furniture, sport products, wellness and beauty, and tourism among others. During 2021, we sold more than 14,000 retail and leisure products, and as of December 31, 2021, we had 125,000 active medical plans.
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Our Vision and Strategy
The Argentine market is one of the least penetrated financial systems in Latin America, with a fragmented and competitive landscape. We believe the Argentine market has significant underused financial infrastructure in the form of checking and savings accounts but also goodand adequate mobile and internet penetration levels. This situation presents a number oflevels, which helps create growth opportunities. We believe we are well positioned to capture these growth opportunities givendue to our digital transformation, our focus on a differentiated customer experience, our evolving branch model and online platforms and our product offerings, extensive distribution network and leading technology.
Even though we ran into external headwinds during 2019, we remained focused on executing our strategy to strengthen our brand and improve operating performance. The following items are the key components of our strategy:
1. Digital transformation
2. Enhance value proposition for our target segments
3. Increase customer acquisition and cross selling
4. Streamline operations
5. Develop new products and businesses to expand our franchiseofferings.
The key componentsindustries in which we operate have been affected by the economic conditions in Argentina over the last several years, which was negatively impacted by the COVID-19 pandemic. Argentina’s GDP grew by 10.3% in 2021, mainly due to the mitigation of the impact of the COVID-19 pandemic on the Argentine economy as a result of the implementation of vaccination programs, which enabled the lifting of certain restrictions that had been enforced in Argentina until the end of 2020, as well as due to the increase in commodity prices, which resulted in an increase in U.S. dollar exports. As of December 31, 2021 Loan to GDP penetration decreased to 8.3% from 9.9% in 2020 and industry loan demand decreased to historical records. While the government is working to stabilize the Argentine economy, the financial sector in Argentina will continue to face considerable macroeconomic and regulatory challenges that we expect will go beyond 2022. Concurrently, the COVID-19 pandemic has changed how people conduct their personal and business relations through digital means and remote working. In order to adapt to these changes and the evolving environment in which we operate, we have accelerated our strategytransformation to anticipate our clients’ new needs by offering them banking services that combines the use of technology with our in-person and digital staff assistance.
In this context, we reaffirm our focus on long-term value creation and are described below:
Transformadvancing on our company into a modern, leading edge, cost efficient player and positionsix strategic pillars to drive our business to serve consumer’s evolving needs and aspirations
We have made significant progressreturn on digital transformation. Increasingly, customers want and expect to engage with us anytime from anywhere. equity, which are:
● | Enhance the Customer Experience |
● | Accelerate Client Acquisition |
● | Expand Digital Adoption |
● | Continue to Capture Operating Efficiencies |
● | Lower Cost of Funding |
● | Maintain Healthy Asset Quality |
Our digital strategy is aimed at respondingdesigned to that demand. We have a three-pronged approach:respond to our clients’ demand and is based on the following five principles:
The Bank is implementing our IT strategy by adding APIs to accelerate digital development and time to market, and transitioning to a data driven enterprise and to a hybrid multi cloud. In addition, our branch network is transforming using best in class technologies to facilitate self-service banking, expand our services to SMEs and increase the availability of our banking services. Moreover, we are moving towards a hybrid workplace model by optimizing our real estate infrastructure and providing work flexibility to our employees.
In relation to IUDÚ, we are converting its traditional consumer finance model into a full digital financial services offering.
2. | Develop Digital Attackers. We are also developing digital |
The launch of the IUDÚ platform was the first step to transform our consumer finance subsidiary from a business model that offered personal loans and credit cards on-site in Chango Más (formerly, Walmart Argentina) stores to a completely
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digital financial services model that is taking retail deposits to lower cost of funds and offering a growing range of financial services to a broader lower-risk customer base, leveraging its position as a regulated financial entity.
Through IOL invertironline, during the last years we have consolidated our leading position as an online retail broker. We seek to enable our customers to increase their savings by investing in a wide range of financial products through this simple and intuitive platform. We expect to continue to develop this business and to improve the services we provide to our customers through this platform. We also expect to offer U.S. investment products in selected countries in Latin America, except for Brazil, through mobile apps and online platforms. In addition, IOL Agente de Valores S.A., our subsidiary in Uruguay, has submitted a request for approval from the Central Bank of Uruguay to operate as a securities broker, which approval is pending to be authorized as of the date of this annual report.
We also expect to offer wellbeing and health services in B2C or B2B2C formats in certain countries in Lating America, except for Brazil.
3. | Develop Digital Businesses Based on Artifitial Intelligence. We are developing our digital businesses by using artificial intelligence in order to respond to our customers’ needs. |
|
IncreaseSustainability
At Grupo Supervielle we are committed to our market presenceemployees, customers and communities to achieve a sustainable growth while protecting the environment and acting with social responsibility. We integrate the sustainability strategy to our business model and promote a responsible culture among attractive customers through an effective segmentation strategyour employees. We report on our non-financial performance in a clear and strengthened value propositiontransparent way, in connection with environmental, social and corporate governance (ESG) factors.
WeIn 2021, we continued to work on reducing our green house emissions and we offset 20% of our carbon footprint in 2020 by restoring native forests. With respect to our social initiatives, we launched a comprehensive program to promote a diverse and inclusive work environment. With respect to our corporate governance policies, we continue to strengthenbe part of the ByMA Sustainability Index for the fourth consecutive year as a leading organization in environmental, social, sustainable development and improve the customer experience. We are working hard to give customers new ways to connect with us.corporate governance matters. Additionally, we will start disclosing additional metrics in our 2021 Sustainability Report in order to strengthen our commitment to ESG, in accordance with the criteria defined by the Sustainability Accounting Standards Board (SASB). This disclosure will expand our current reporting under Global Reporting Initiative to integrate our ESG objectives in our strategies.
The following are consistently adding newadditional commitments of the Group in terms of sustainability:
● | Customers |
We extended the use of financial products and services which increase our value proposition(financial inclusion) to customers. A few to mention include: insurance products for entrepreneursthose who already have an account with Grupo Supervielle, facilitating the adoption of new digital tools and small businesses, online FX purchases within InvertirOnline which has enabled us to almost triple our customer base for this subsidiary, and the refocusing and re-profiling of the car sales platform deautos.com. These are just a few examples of the initiatives that we believe will enable us to grow our customer base as well as drive cross-selling opportunities.promoting financial education.
● | Employees |
We seek to increase revenues through cross-selling enabled by customer relationship management:
High net worth customers: We successfully launched the Identité brand in 2014 with an attractive value proposition designed to capture and monetize the high net worth customer segment. That value proposition includes a wide range of components like premium credit cards, loyalty programs and exclusive events for customers. To reach high net worth individuals, the bank leverages three key assets: a premium, differentiated brand, a highly trained workforce and an excellent branch network in high income neighborhoods.
Senior citizens: We intend to maintain our leadership position in the senior citizen segment, providing unique services and benefits catered to its specific needs. Leveraging our network of branches we seek to expand our credit card and personal loan business, finance travel packages and consumer goods and services, and distribute insurance products, including life, burial, health, personal accident insurance and home insurance. This segment is adopting technology rapidly, which we anticipate will increase efficiency of service delivery.
Middle and lower-middle-income population: This segment has one of the lowest banking penetration rates in Latin America and represents an important opportunity to attract new customers. CCF’s exclusivity agreements with Walmart Argentina and Hipertehuelche Supermarkets position us to reach this segment with a powerful value proposition, particularly consumer finance loans and credit cards. This customer base also offers opportunities for cross-selling of other banking products. Additionally, we continuously analyze opportunities for new product launches to serve this segment, as well ascreate opportunities to forge new alliances with other retailers.
Entrepreneurspromote employees’ growth and Small Businesses: We aim at continuing expanding our market share within our customer base of entrepreneurspotential, and small businesses. We intend to leverage our branch network asfoster a primary means of attracting businessdiverse and focus on building our customized cash management services.
SMEs: Our aim is to become the premier bankinclusive work culture that values individuals for SMEs by deploying outstanding transactionalwho they are and cash management services. We intend to continue developing strategic partnerships with key industry players to provide financial services through direct lending or factoring transactions to their critical providers and suppliers along their value chains. We intend to target specific opportunities and customers in the agroindustry sector, energy, infrastructure and other specific sectors. With respect to the agri-industrial sector, we strive to deepen our existing relationships with leading industry players, providing financing to their customer base. In San Luis, Mendoza, and Tucumán, where we have a well-established distribution base, we intend to continue targeting clients and value chains related to their main regional economies. With respect to the wine industry, we seek to continue developing partnerships with premium wine producers and key industry suppliers. With respect to the energy and infrastructure sectors, we target SMEs and middle-market companies along the supply chains of oil and gas (exploration and production)and renewable energy projects.what they contribute.
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Middle markets and large corporate customers: We intend to offer a full range of products and services, including financial advisory, transactional services, treasury management, short, medium and long term financing to the middle market and large corporate customers that we have historically targeted. We aim to achieve this goal through quick decision-making with respect to our credit evaluation process, personal attention, increasing transactional services (such as check maintenance, payroll management, payments to suppliers and tax payment services) and building upon our cash management products, payroll management and other products that translate into higher balances of immediately available deposits. As we follow a customized approach across the value chain, suppliers and clients of our large corporate customers will be another source of SMEs client origination for the bank.
Leverage our proximity to customers through our extensive distribution network of branches and sales points to provide a superior customer experience
● | Diversity |
We haveare designing our diversity strategy by creating a direct presence in Argentina’s major regionsdiversity, equity and cities. The Bank has a particularly important presence in the Greater Buenos Aires metropolitan areainclusion forum and the Cuyo region, which includes the provinces of Mendoza, San Juan and San Luis. Given the geographical concentration of our network in commercially significant and high-income regions in Argentina, we believe we are well positioned to benefit from economies of scale by growing our revenues without significant investments in additional platform expansion.
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We may selectively expand the Bank’s network of branches, emphasizing services for high net worth and upper-middle income individuals, small businesses and SMEs, with a focus on the City of Buenos Aires and the Greater Buenos Aires metropolitan area.
We intend to build upon our leadership position in retail and corporate banking services in the Provinces of Mendoza and San Luis. Wedeveloping an action plan to continue promoting diversity within our partnershipsorganizations.
● | Community |
We promote social investment with premium retail storesimpact on projects related to education, minors, the elderly and shopping outletsinstitutional strengthening, and actions that promote culture and the arts.
· | Corporate Governance |
We do business pursuant to obtain differentiated discountsthe highest corporate governance standards, promoting transparence, ethical behavior, respect of the principle of legality and benefits forsustainability of our retail customers, relying onactivities and those of our existing network, which isvalue chain.
· | Respect of the Principle of Legality |
We regularly review the largest indegree of compliance with applicable laws and regulations and we take the Cuyo region.actions required to correct deviations.
Business Segments
We plan to continue to expandconduct our dedicated sales force with a focus on new entrepreneurs, small businesses and payroll services, to drive revenues and cross-selling.
We intend to seek new strategic partnerships in the agribusiness sector to provide financial services to leading national and international players catered to their customer base. We plan to broaden our offering of commodity warrants and livestock leasing, leveraging our strong market leadership in San Luis and Córdoba.
Continue capitalizing on synergies by developing new businesses to increase our share of wallet
Our nearly two million customers provide a base from which to expand our share of wallet and increase customer loyalty. The Bancassurance business allows us to cross-sell historically profitable and low-claims products to our existing customer base. We have accessoperations through our distribution networks and aim to further develop our bancassurance distribution model by expanding the variety of insurance products offered by Supervielle Seguros. Espacio Cordial allows us to reach our clients with a wide variety of non-financial products and services, including travel and home appliance financing and health services. Moreover, as mentioned above, we are developing digital attackers to broaden access to financial services. This includes Invertir Online, our online broker, and a new digital brand to be launched in the coming months which will refocus our strategy in the consumer finance business and allow acquisition of multisegment clients with full digital financial services. We are also developing a new system by building traffic from financial services into new platforms enhancing and deepening customer engagement.
Grow our statement of financial position while maintaining our conservative risk management policies
Over the past 15 years we have differentiated ourselves from our competition by systematically securitizing assets, becoming the leader in Argentine capital markets in this segment. Since our IPO and after the expansion of our capital base, we have reduced securitization of our originated assets relative to our total assets, and we grew systematically above industry growth levels until the loan demand slowdown and the sudden macroeconomic backdrop.
Our conservative financial policies based on a diversified deposit base, low portfolio concentration, short term high liquidity and low interest rate, term and currency mismatches have allowed us along the years to build a strong franchise in retail and corporate banking.
Continue to improve our efficiency by focusing on innovation and technology
We will seek to increase commercial productivity by redesigning processes with two goals: (i) making life simpler for our clients and enhancing customer experience and satisfaction, and (ii) extending processes automation to achieve greater efficiency.
Our strong culture of innovation supports our constantly keeping abreast of customer needs and global trends, creating and efficiently implementing solutions focused on local customer preferences.
We intend to expand our digital channels. Our goal is to offer an outstanding digital experience to our clients. We intend to continue increasing the number of active online users and migrating our services to digital channels, which we expect will allow us to increase low-cost distribution and convert service centers into full bank branches. We also intend to continue launching mobile banking applications, which will enable “one click” payment and “one click” loan functionalities, with anytime and everywhere financial services and provide alerts and messages to customers in order to achieve cost efficiencies through low-cost social network advertising. We have significantly improved the digital experience of our factoring product line, cash management and payroll services.
We expect the future of financial services to be marked by a transformation towards a digital business model. The challenge for organizations is to optimize the technological innovation of traditional banking to attract new consumers of financial services, with the aim of creating the bank of tomorrow, today.
As a further step towards the acceleration of Supervielle’s digital transformation, during 2018 we hired a top management consulting firm to boost our approach. The core idea relies on simple and modular propositions for selected customer episodes. Those value propositions will seek to design in the following years an agile operating model and methodology (“Agile”) for each relevant customer profile as a way of working for customer-centric change based on digital adaptable and radically lower cost IT and Operations environment. As a counterpart, our funding, growth and efficiency targets will be benefited. Therefore, during 2019, the Agile methodology began to be implemented as a work tool, which generated significant benefits in the business development, leading to better results. Interaction and communication gave members a comprehensive view of the needs and restrictions so as to establish clear targets, design the best actions and favor the speed of implementation of required changes. The service model continued changing, striking a balance between maximum contact efficiency (through autonomous management channels and personalized services) and service levels required by each customer profile and each strategic segment of Banco Supervielle. Agile teams developed projects for our different segments and products.segments:
Segment Reporting during 2019
● | Personal & Business Banking; |
● | Corporate Banking; |
● | Bank Treasury; |
● | Consumer Finance; |
● | Insurance; and |
● | Asset Management and Other Services. |
The following table sets forth the breakdown of our net revenue and net income by segment for the periods indicated.
As of December 31, 2019 | ||||||||||||
Segment | Net Revenue | Percentage | Net (Loss) / Income | Percentage | ||||||||
(in thousands of Pesos) | ||||||||||||
Retail Banking | 14,258,024 | 41.6% | (1,463,278 | ) | 60.3% | |||||||
Corporate Banking | 13,749,864 | 40.1% | (1,157,277 | ) | 47.7% | |||||||
Treasury | 771,834 | 2.3% | 1,359,906 | (56.0% | ) | |||||||
Consumer Financing | 3,047,064 | 8.9% | (1,088,408 | ) | 44.8% | |||||||
Insurance | 1,589,658 | 4.6% | 22,377 | (0.9% | ) | |||||||
Asset Management and Other Services | 872,600 | 2.5% | (101,689 | ) | (4.2% | ) | ||||||
Total Allocated to Segments | 34,289,044 | 100.00% | (2,428,369 | ) | 100.00% | |||||||
Adjustments(1) | 374,965 | 274,747 | ||||||||||
Total Consolidated | 34,664,009 | (2,153,622 | ) |
| | | | | | |
|
| As of December 31, 2021 | ||||
| | | | | | Net (Loss) / |
Segment | | Net Revenue |
| Percentage |
| Income |
| | (in thousands of Pesos) | ||||
Personal & Business Banking |
| 23,101.1 |
| 38.3 | % | (6,959.7) |
Corporate Banking |
| 7,229.0 |
| 12.0 | % | 1,005.3 |
Bank Treasury |
| 18,840.9 |
| 31.2 | % | 6,951.3 |
Consumer Finance |
| 5,728.6 |
| 9.5 | % | (3,136.5) |
Insurance |
| 2,551.3 |
| 4.2 | % | 539.9 |
Asset Management and Other Services |
| 2,935.2 |
| 4.9 | % | 428.4 |
Total Allocated to Segments |
| 60,386.1 |
| 100.0 | % | (1,171.3) |
Adjustments(1) |
| 67.2 |
| |
| (563.2) |
Total Consolidated |
| 60,453.3 |
| 100.0 | % | (1,734.5) |
(1) | Includes financial expenses incurred by Grupo Supervielle at the holding level in connection with its funding arrangements, the net interest income received from the investment of liquidity at the holding company, as well as transactions between segments. |
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The following table sets forth the breakdown of our assets by segment as of December 31, 2019.2021.
As of December 31, 2019 | ||||||||||||||||||||||||
Retail Banking | Corporate Banking | Bank Treasury | Consumer Finance | Insurance | Asset Management and Other Services | Adjustments | Consolidated Total | |||||||||||||||||
(in thousands of Pesos) | ||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||
Cash and due from banks | 7,691,602 | 1,022,915 | 16,870,526 | 321,145 | 3,385 | 2,420,972 | (1,927,446 | ) | 26,403,099 | |||||||||||||||
Debt Securities at fair value through profit or loss | — | — | 312,306 | 92,762 | — | 163,433 | — | 568,501 | ||||||||||||||||
Loans and other financings | 36,757,453 | 43,426,550 | 3,720,408 | 5,036,973 | 453,978 | 30,746 | (1,416,097 | ) | 88,010,011 | |||||||||||||||
Other assets | 2,525,566 | 1,335,130 | 17,533,288 | 2,975,202 | 1,091,343 | 538,602 | 7,703,949 | 33,703,080 | ||||||||||||||||
Total Assets | 46,974,621 | 45,784,595 | 38,436,528 | 8,426,082 | 1,548,706 | 3,153,753 | 4,360,406 | 148,684,691 |
| | | | | | | | | | | | | | | | |
| | As of December 31, 2021 | ||||||||||||||
| | Personal | | | | | | | | | | Asset | | | | |
| | and | | | | | | | | | | Management | | | | |
| | Business | | Corporate | | Bank | | Consumer | | | | and Other | | | | Consolidated |
|
| Banking |
| Banking |
| Treasury |
| Finance |
| Insurance |
| Services |
| Adjustments(1) |
| Total |
| | (in thousands of Pesos) | ||||||||||||||
Assets | |
| |
| |
| |
| |
| |
| |
| |
|
Cash and due from banks |
| 12,111,141 |
| 552,152 |
| 18,723,092 |
| 732,108 |
| 4,220 |
| 262,026 |
| 189,378 |
| 32,574,118 |
Debt Securities at fair value through profit or loss |
| — |
| — |
| 18,941,469 |
| 813,930 |
| — |
| 2,286 |
| — |
| 19,757,685 |
Loans and other financings |
| 76,316,258 |
| 62,161,494 |
| 10,363,027 |
| 11,202,166 |
| 864,345 |
| 101,688 |
| (5,534,649) |
| 155,474,329 |
Other assets (2) |
| 6,609,578 |
| 3,447,294 |
| 139,986,345 |
| 5,140,206 |
| 2,329,922 |
| 1,459,417 |
| 23,624,149 |
| 182,596,910 |
Total Assets |
| 95,036,977 |
| 66,160,940 |
| 188,013,933 |
| 17,888,410 |
| 3,198,487 |
| 1,825,418 |
| 18,278,878 |
| 390,403,042 |
(1) | Includes elimination of inter-segment loans and assets not directly allocated to a single segment, such as unlisted equity investments, miscellaneous receivables, premises and equipment, miscellaneous assets and intangible assets. |
(2) | Other Assets at the Bank Treasury segment includes Ps.57.4 billion of securities issued by the Central Bank, Ps.42.8 billion of Repo Transactions with the Central Bank and Ps.21.8 billion of Government Securities. |
The following table sets forth the breakdown of our active customers in 2019as of December 31, 2021 and 2018.
Active Customers | ||||||
As of December 31, | ||||||
2019 | 2018 | |||||
Retail Banking | 1,402,562 | 1,403,460 | ||||
Corporate Banking | 4,981 | 4,934 | ||||
Consumer Financing | 357,900 | 397,440 | ||||
InvertirOnline | 51,829 | 16,994 | ||||
MILA | 14,268 | 18,988 | ||||
Total | 1,831,540 | 1,841,816 |
2020.
Retail
| | | | |
|
| Customers | ||
| | As of December 31, | ||
| | 2021 | | 2020 |
Personal & Business Banking | | 1,446,671 | | 1,393,971 |
Individuals |
| 1,422,995 |
| 1,371,106 |
Entrepreneurs |
| 21,856 |
| 20,854 |
SMEs |
| 1,820 |
| 2,011 |
Corporate Banking |
| 2,502 |
| 2,304 |
Consumer Finance (IUDÚ+ MILA) |
| 403,571 |
| 410,580 |
IOL invertironline |
| 109,161 |
| 80,024 |
Total |
| 1,961,905 |
| 1,886,879 |
Personal & Business Banking segment. The Bank’s RetailSegment
Our Personal and Business Banking segment offers a wide range of financial products and services designed to meet the needs of individuals, and entrepreneurs and small businesses: personal loans, mortgage loans, unsecured loans, loans with special facilities for project and work capital financing, leasing, bank guarantee for tenants, salary advances, pledgecar loans, domestic and international factoring, international guarantees and letters of credit, payroll payment planplans (planes sueldo), credit cards, debit cards, savings accounts, time deposits, checking accounts, and financial services and investments such as mutual funds, insurance and guarantees, and benefit payments for senior citizens benefit payments. Until December 31, 2019,citizens. In 2021, we offeredcontinued to offer these financial products and services to SMEs throughsatisfy our Corporate Banking segment. On January 1, 2020 our SMEs portfolio was effectively transferredcustomers’ needs.
During 2021, we focused on developing and strengthening automatic self-service channels to the Retail Banking segment, which has been renamed as our Personal and Business Banking segment.
To promote digital transformation focus was placed on development and strengthening of autonomous management channels,by operating cash dispensers with special emphasis on digital contact channels. Facebiometric identification systems which require no card or password, among other means. As a result, during 2021 more than 300,000 customers had used our dispensers to face automatic platforms continued expanding, supported by biometric assistance, marking the beginning of a radical change in the daily operations of customers. Digital platforms were strongly boosted thanks to developments focused on increasingwithdraw their capabilities, both in assistance and in credit supply and product marketing, seeking a greater agility in operations and an improvement in the customer’s perception in respect of the Bank.
With the aim of accelerating digital transformation, during 2019, we started implementing the Agile methodology as a work tool, which generated significant benefits in the business development, leading to better results. Interaction and communication gave members a comprehensive view of the needs and restrictions so as to establish clear targets, design the best actions and favor the speed of implementation of required changes.
The service model continued changing, striking a balance between maximum contact efficiency (through autonomous management channels and personalized services) and service levels required by each customer profile and each strategic segment of Banco Supervielle.pension payments
Based on the assessment of their distinctive features, their needs and specific requirements, the Bank’sour customers are grouped in four strategic groups which are further described below: (i) SMEs customers, composed of natural personswhich comprise individuals engaged in commercial activities, small one-person ventures and small and medium sized companies with a billingrevenues lower than Ps.700 millionPs.3 billion per year, (ii) Identité customers, which gathers natural personascomprise high networth individuals belonging to serial ACB1ABC1 segments, (iii) personal customers,mass affluent, which includescomprise individual customers with nowho do not perform
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any commercial activities (notand are not included in the Identité segment), segment, and (iv) senior citizens customers, which includescomprise senior citizens who are paid their pension benefits through accounts held in the Bank.
Personal & Business Banking Segment – Retail Customers
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Identité customers (High Net Worth Customers). We offer exclusive services to our high net worth customers. During 2021, we created alliances with ABC1 schools, synergies with SMEs and a referral program focused on digital self-service. We also increased our Identité customer base by 35% compared to 2020, with 57% of total new customers |
In 2019, this segment established three strategic pillars for business development: funding, customer base growth and profitability.
As part of the profitability strategy, tools were used to strengthem the idea that we are the first-choice bank in new customers, so that they are offered benefits and bonuses taking into account the use they make of bank products, such as transactional accounts or fixed term deposits.
As regards the service model of the segment, focus was on digitalization, increasing its penetration by 3% and exceeding 75% of the high net worth customer base. In addition, work was done on automatization within the first 60 days with a view to leading customers to use digital channels and achieve an early activation of their products.
Senior |
In 2019, the Bank continued offering products and services addressing the2021, we carried out actions to respond to our retail customers’ needs of senior citizens, while further improving its value proposition and service model. Based on the knowledgeas a result of the customers’ life cycleCOVID-19 pandemic. We continued to provide training to our customers in relation to the use of debit cards through our website, brochures and digital communications. In addition, we offered new services through our Supervielle Jubilados App in order to provide access to digital tools by our senior customers and reduce the volume of their distinctive characteristics, we promoted the redesignface-to-face transactions. As of the commercial management model with focus on the penetration in high net worth customers and the implementation of specific policies to obtain the greatest risk/benefit ratio in low income segments.
The service model continued moving forward throughCaja Rápida (Cash dispenser with biometric identification) in its Service Centers, reaching a 100% coverage of the network and focusing on communicationdate of this systemannual report, our Supervielle Jubilados App allows customers to and adoption by senior citizens, with clear benefits in terms of waiting times and agility.
In line with the efforts to improve our service level, a new queue management system was implemented. This system allows a better experience, management and control of transactions and of the customer segment.
The innovation milestone for the segment was the launching of “Supervielle Jubilados", an app offering our customers a newprovide proof of life method required to receive their monthly payment, adapted to new technologies. The platform includesthrough facial recognition which identifies the customer and certifies that they are alive through a photograph. The idea is to make it easier for senior citizens who are Bank customers to provide their proof of life on a monthly basis, without the needhaving to go to the banka branch, check their pension collection date, download their payment slip, check their account movements, transfer money to other accounts, pay with a quick response (“QR”) code, and to do sosolve any time anywhere. This is an advantage too for those customers’ agents or relatives as they may download such app in their cell phones.
Digital Banking – Business: In 2019, the Digital Banking - Business sector continued focusing on improving existing capabilities and developing and incorporating new capabilities within the new digital asset, Online Banking Business, and also within the Mobile Banking - Business module.
The creation ofissue through a newcheque applive chat which is simple and quick and is intended to radically improve the digital experience and to align the user experience to the remaining digital assets of the Group is worthy of mention. In addition, the new technology used for its creation enables scalability and improves efficiency by creating new capabilities.
During 2019, these milestones allowed the net promoter score (“NPS”) of digital channels of companies to go from 12.9 to 29.2, a significant 16.3 point growth.
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All business digital assets incorporated tools which allow the online transaction monitoring and the verification of the adequate functioning of tools in real time.
Digital Banking – Individuals: The Digital Banking – Individuals sector continued working strongly on digital adoption focused on the evolution of platforms in terms of utility, particularly in the generation and improvement of capabilities both in the Online Banking platform and in Supervielle Mobile; and in the access of customers to digital operations, promoting specific actions and implementing highly attractive campaigns.
E-channels: In 2019 the self-management model continued being enhanced with deployment and strengthening of theCaja Rápida channel (cash dispenser with biometric identification), with at least two terminals per branch dedicated to payment of pensions. Likewise, improvements were made to increasing usability, adoption and speed in customers’ operations
Customers’ attention centers:The Contact Center manages queries and complaints by and sales to customers by phone, e-mail and social media. Work continued on the improvement of the automatic banking sector so as to make customer online time and experience more agile, to improve answer quality and to increase sales. The Investment Center that operates since September 2017 within the telephone banking management is formed by a team of experts on capital markets who provide advice on and manage the transactions of customers in all Bank segments. In line with the Bank’s strategy, the area favors the unification of management platforms, achieving agility, a larger number of products and better investment alternatives, securing a greater penetration in terms of managed funds and an increase in high net worth customer generation.
Total deposits from the Retail Banking segment (now, Personal and Banking segment) asavailable 24 hours. As of December 31, 2019 amounted to Ps.59.6 billion (approximately U.S.$994.6 million). Retail branch deposits in Pesos2021, approximately 170,000 customers had download our Supervielle Jubilados App.
Personal & Business Banking Segment – Entrepreneurs and senior citizens deposits continued to represent a high portion of total deposits. In 2019, retail branch deposits in Pesos plus senior citizen deposits represented 55% of total deposits.SMEs
● | SMEs customers. During 2021, we offered comprehensive value proposals and created policies and tools for early customer rating. We also improved our digital channels by implementing end-to-end digital onboarding for individual customers. In addition, for digital onboarding we leveraged on value propositions and exclusive credit lines, in synergy with sub-segments and partnership with B2B companies. Additionally, we placed credit lines to support SMEs in accordance with the principles set forth by the Central Bank. We continued to focus on generation of customers with a high cross-sell rate, in an attempt to become their strategic partner and principal bank for their payments, including payroll payments and collections. |
● | Strategic subsegments. During 2021, we continued to work on the value proposition for our Education subsegment, focused on private schools, with a specific offer together with the partners of the digital ecosystem, Franchise, Transportation, and Health |
◾ | Education: During 2021, we re-launched our education sub-segment, resulting in an increased number of customers in this sub-segment. |
◾ | Franchise: With the support of the Argentine Brand and Franchise Association (Asociación de Marcas y Franquicias), we offered financings with minimum requirements to more than 40 brands. |
◾ | Transportation: Transportation was the subsegment with the highest number of new customers generated during 2021. This subsegment reduced its response times to customers to a maximum of 72 hours. |
◾ | Health: We improved the business proposition of this subsegment by partnering with Bionexo, the main health marketplace. |
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Products offered:
● | Loans. The bank offers personal, car loans, mortgage loans, overdrafts, salary advances and guarantees for tenants. In 2021, we strengthened sales tools and channels and launched new financing lines in order to increase our loan origination. In addition, we continued improving the offer of self-service personal loans through ATMs and cash dispensers with biometrical identification. |
● | Deposits. In 2021, the Argentine Central Bank established minimum interest rates for time deposits made by individuals and companies. As of December 31, 2021, the number of our transactions made through digital channels increased by 18% and 90% of our time deposits were made through digital channels. As of December 31, 2021, total deposits from the Personal and Banking segment amounted to Ps.138.7 billion and retail customers deposits denominated in Pesos represented 33% of total deposits denominated in Pesos. |
● | Plan Sueldo. We continued with the process of transformation in product operations, aiming at achieving high efficiency standards in onboarding, cross-sell and customer profitability. During 2021, employees who received their salaries through accounts in the Bank were able to manage such salaries through our online banking systems without having to go to a branch. |
● | Insurance. We launched new products that provide better opportunities for customers, for example, our bicycle insurance products. In 2021, 30% of our total insurance sales was made digitally. As of December 31, 2021, we continued to offer guarantees for tenants, where 56% of sales were made through the digital channel. We improved the processes for the filing of forms on our website, which increased the agility in operations. In 2021, 1,000 auto insurance policies were sold, 68% of which transpired through the digital channel. |
Corporate Banking Segment
TheDuring 2021, the Bank offered a full range of products, services and financing options, including factoring, leasing, foreign trade finance and cash management, to companies and large corporations with annual revenues exceeding Ps.3.0 billion, through its corporate banking segment, works with middle-marketsegment.
Our customer service model includes providing specialized services relating to leasing, cash management, foreign trade, Plan Sueldo, insurance and investments, and is aimed at meeting the daily operational and transactional needs of the companies through customized instruments and large corporates with annual billing exceeding Ps. 700 million in 2019. Until December 31, 2019, SMEs customers were included under the Corporate Banking segment. services.
The customer service model is formed in turn by three commercial managements:
(1) | AMBA Corporate Banking which deals with companies operating in the city of Buenos Aires and the Greater Buenos Aires |
(2) |
(3) | Mutual Guarantee Companies “MGC” Division which operates at the headquarters in the City of Buenos Aires. |
The Bank believes that its proximity to its corporate banking customers gives it a competitive advantage.
(4) | Products and Services, which operates from the headquarters in the City of Buenos Aires and provides services to companies located both in the Greater Buenos Aires area and in the interior of the country. |
As of December 31, 2019,2021, the corporate bankingCorporate Banking segment had Ps.36.8Ps.62.2 billion of outstanding loans and other financings, and contributed almost 40%12% of our net operating revenues before adjustments.
TheWe strongly believe that providing high quality customer service modelservices is based on regionalization. Services to large companies in the city of Buenos Aires and its vicinities are provided through regional branches located in the most densely populated industrial and commercial areas. Communication, assistance, negotiation and operational management are centralized in banking nodes.
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In 2019, the synergy strengthened among the teamsone of the different areas, focusing on improvement of existing processes and the acquisitionmain drivers for generation of new technologies intendedbusinesses and support of our business relations. In 2021, the focus was also placed on risk management, using Risk Adjusted Return (“RAROC”) tools in order to significantly improve customer service quality.strike a balance between profitability and portfolio quality ratios.
The main guidelines on which the management focused were:36
Wines DivisionWine Division: . During 2019, the Wine Division continues consolidating2021, Banco Supervielle’s wine division maintained its position as a leaderbenchmark in the wine industry by remaining the only Argentine bank among the top 20 to have an expertwith a specialized team to dealserve the wine sector. The wine division provides customized products and services to customers across the industry.
Mutual Guarantee Societies (MGS): The guarantee system is composed of 55 entities, including mutual guarantee societies and official guarantee funds. The strategy of our MGS division is to continue operating with the sector.
The Bank’s target market consistsmain entities with which it has operated during the past years and to start operating with new entities. As of wine estatesDecember 31, 2021, the number of entities with high added value products, that focus mainly onwhich the export market. However, Banco Supervielle continued supporting all industry playersBank operated was approximately 60% of the total entities in the entire value chain of wine production, fromArgentine banking system, compared to 53% in 2020. The Bank also maintained its leading grape producers to major wine estates as well as suppliers of wine manufacturing and bottling supplies.
This broad based strategy also allows us to develop our Retail Banking products with these customers
Sociedad de Garantía Recíproca (Mutual Guarantee Agents or “SGRs”, per its Spanish acronym). In 2019, the Bank maintained a sector leadership, operating with approximately 78% of the SGRs authorizedposition in the country (33 out of 47 authorized SGRssector and, Guarantee Funds). The Bank isas a result, was recognized as the bank“MGS’s Bank” by the Argentine Chamber of the SGRs by theGuarantee Societies and Funds (Cámara Argentina de Sociedades y Fondos de Garantías) and the Ministry of Production/Sepyme,by the authority that supervises SGRs.the Argentine banking system.
The Bank also remained a leader in terms of development and innovation for being the first private BankProducts offered to offer a Business Credit Card with guaranteed purchase limit backed by a MGC and for operating withcheque discounts in the Securities Market directly and through Invertir Online, a subsidiary of Grupo Supervielle.
Also during 2019, by decision of the Ministry of Production, the Bank renewed the agreement entered into for receipt of guarantees issued by theFondo de Garantía Argentina, being the first private bank in the country to develop these operations basically oriented to loans for SMEs.
Together with some MGCs, financing facilities were developed for SMEs, members of the value chain, entrepreneurs and franchises.
Oil & Gas Project
The Bank considers that the oil and gas sector has a high growth potential. Therefore, in 2018, the Bank decided to lay the bases for the development of a project in this sector. Subsequently, in April 2018, a new branch was opened in the city of Neuquén in addition to the existing customer service model. This allows for a close contact with the value chain of large operators and an improved competitiveness through the incorporation of new wage payment plans of individuals with high purchasing power residing in the area.
During 2019 the Bank’s Oil & Gas Division organized strategic events with sector companies seeking to position the brand.
In addition, several financing agreements were entered into with operators’ suppliers, such as YPF, whereby the Bank could develop a commercial relationship with SMEs that are suppliers of the oil industry.
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However, 2019 has been a complex year for the sector due to macroeconomic conditions: it was hard for sector companies to access markets to obtain financing for their projects in an industry highly dependent on intensive capital investments.
As long as the sector activity stabilizes, the Bank expects to strengthen the actions on value chains of large operators, taking advantage of the experience gained with the new customers obtained due to the focus placed during 2018 and 2019.
Products and Communication
The Products and Communication department is formed by five teams focused on products and by the Marketing and Communications team.
All of them are based in the City of Buenos Aires and provide cross-functional services to all of the Bank’s commercial channels and make available their products to all customers, whether they are individuals or legal entities.
Teams focused on products include the Assets Management, Liabilities and Insurance, International Commerce (Comercio Exterior, or “Comex”), Leasing and Transactional Banking areas.
The Assets Management area offers personal, corporate, secured and unsecured loans, checking account agreements, factoring and/or guarantees issued, among other products, at fixed, variable or UVA adjusted rate.
The Liabilities and Insurance area is responsible for products such as fixed time deposits, accounts, safe deposit boxes and insurances and other marketed in the commercial network.
The Comex area not only manages customer financing through export prefinancing, import financing and international collections and payments which include import letters of credit (“ILC”), export letters of credit (“ELC”), international factoring, collections and transfers, but is also responsible, together with the Finance area, for the negotiation of commercial and financial facilities with correspondent banks.
The Leasing area structures and markets Leasing, Sale & Lease Back products, pledge loans to companies denominated in U.S. dollars, Pesos and at fixed or variable rate, on property in general, mainly oriented to transportation (trucks, cars, etc.) as well as industrial equipment and hardware in general.
Transactional Banking team deals with collection and payment services to human and legal persons, cash management,e-cheques, among others.
The Comex, Leasing and Transactional Banking areas have highly skilled officers providing advice and generating new businesses with Finance, Corporate Banking and Individuals and Business customers.
In addition, the Transactional Banking area comprises thePlan SueldoCustomers: area and its sales force, as well as the Means of Payment Management, mainly through the Debit and Credit Card products oriented to individuals or companies.
The following sets forth additional information on the main products and services offered by the different banking segments:
The Bank decided to provide dynamic personal loans supported by efficient processes and an agile management which have allowed improvements in the delivery times of credit ratings to enhance the tools and sales channels and expand placement, in addition to the launching of new financing facilities and the developments carried out to increase supply through digital platforms, which led to a better user experience and a more assertive segmentation of our customers.
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Regarding commercial loans-, special facilities were developed to suit the needs of the different corporate segments together with sales in digital and face-to-face channels, enhancing the placement of factoring, checking account and loan agreements.
The Bank participates in the check discounting market by offering three categories of products: (i) with recourse, where the customer who discounts the check with the Bank assumes the insolvency risk, (ii) first loss, where the customer assumes part of the insolvency risk, and (iii) non-recourse, where the Bank assumes all insolvency risk. The share of the factoring market of Argentine financial system as of December 31, 2019 was approximately 9.5%, according to the most recent publicly available information published by the Central Bank.
During 2019 a communication and management strategy was designed to align the Bank with the highest standards in order to obtain a greater market share in the different regions where it does business, which resulted in the Bank’s participation in different credit and financing programs as well as in supply of subsidized credit facilities for development and investment. To such end, the Bank participated in development programs and entered into agreements with financial institutions intended to foster production activities.
With the aim of generating a better customer experience, the Bank fully reviewed the management process of credit products. As a result, it launched an agile cell focused on factoring, to analyze current processes, detect points of improvement in internal and external processes and obtain significant benefits both for the Bank and for the customers.
As regards customers, a more fluid communication was achieved with the real time viewing of the status, agility in credit product management and a significant reduction in times from the first contact to loan disbursement.
These improvements had a positive impact on the performance of financial loans during the year but could not avoid the effect of the fall in the demand of loans derived from recession and high real interest rates in Argentina in 2019.
● | Foreign Trade: In 2021,we increased the volume of transactions as a result of our commercial actions related to |
● | Payments: During 2021, our Modo app had |
As of December 31, 2019, the Bank maintained approximately 740,000 Visa and MasterCard accounts.
In connection with the digital transformation proposal, focus was maintained on the use of contactless technology for all debit cards of the Individuals and Identité segments and in the credit cards for Mastercard International and Gold products and for all Visa products, such as International and Signature. The main goal is to offer an innovative product to make payments in a quick, comfortable and safe way, enhancing customer experience. In addition, migration continued from physical to digital credit card account statements, through email delivery. In the same line, Telephone Banking was created as a new channel for password resetting, in addition to Online Banking and Supervielle Mobile.
In 2019, a smart platform was implemented, through a multi-collection project, for collection of fees intended to improve the collection percentage of product packages in all of the Bank’s segments
DuringOmnichannel Service Model
Another major milestone of the first three quarters of 2019 simplification of exchange transactionsdigital transformation we are undergoing is related to foreign trade continued, following the trendnew capabilities of the last two years. However, due to the market uncertainty following the PASO elections, the Executive passed Decree 609/2019 authorizing the Central Bank to issue new temporary and urgent exchange provisions to further regulate the exchange scheme and thus strengthen the normal operation of economy, contribute to a prudent administration of the exchange market, reduce volatility of financial variables and soften the impact of financial flow fluctuation on the real economy.
The set of exchange regulations then issued by the Central Bank restored documentary control and verification of terms for import payments and export collections, limited the purchase of foreign exchange for natural and legal persons as well as exchange transactions among related companies.
In March 2019, the Bank was once again invited by Banco de Inversión y Comercio Exterior to participate with a US$12 MM facility in the Argentina Exporta program, a project designed by the Ministry of Production and Labor together with FONDEAR, which allowed for the reduction of interest rates in the granting of export prefinancing facilities to SMEsacquiring customers for up to US$200 thousand per customer, at a maximum annual nominal rate of 4.5% and for a maximum term of 180 days.
As regards foreign exchange settlements and transaction processing, the Bank grew by 10.4% in terms of number of processed transactions and 27% in terms of settled volumes during 2019.
By mid-August 2019 the digital offer to legal persons for purchase and sale of U.S. dollars through the Bank’sOnboarding digital platform was completed.
In addition,channel. We closed the year with some 45,000 new registrations, of which 18,000 were credit customers who purchased a credit card package, and 7,000 of these were Identité segment customers. Onboarding now accounts for 45% of all new registrations in line withour Personal Banking and Identité segments. A significant fact that shows how we are facing the objectivechallenge of improvingtraditional (physical) customer acquisition channels is the additional capacity to acquire customers through digital channels in territories without physical branches. The last year's new customer comprehensive experience, the Bank was GPI certified. GPI (Global Payment Innovation) is an initiative developed by SWIFT which is an absolute innovation in the international collections and payments system at global level. Thus, the Bank become the first Argentine bank to be Application Programming Interface (APIS) certified and the fourth in the market to implement GPI. Payments are now forwarded immediately within the business banking hoursacquisitions showed that 10% of the receiving entity. On the other hand, thanks to itsour new system, users may track their transactions until they are received by the final beneficiary.
The Bank remains the only bank in the Argentine financial system to operate in the International Factoring market, through FCI (formerly called Factor Chain International).customers came from these territories.
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In line with digital transformation, new agile services were developed to support the admission processes of new agreements. Thus, agreement admissions were generated, with mass generation of online banking Business accounts, and packages and new bonus rules were offered, which were a significant incentive for customer early profitability.
In such regard, a specific application was developed for mass onboarding reaching a milestone in online payroll processing.
In addition to the actions based on the adopted digital path, new and better generation proposals were developed for target companies. With the use of opportunity maps, a greater efficiency was obtained in contact with companies, incorporating new tools for generation of quality agreements and lead generation and customer retention campaigns were launched.
All the actions taken inured in a greater efficiency in contact customer and lead generation and in a greater efficiency in customer relations and credit offer.
● | Branches: |
As members of the Red Interbanking (a network comprised of Argentina’s major financial institutions), the Bank offers an electronic communications system which enables our customers to optimize their banking transactions. The Bank’s corporate customers can connect to the service from their personal computers at any time and review their accounts at any member bank, send us messages, transfer funds, make electronic wage payments, supplier payments and tax payments, and display market data. The Bank offers different electronic products for each segment of its corporate clientele, for example, Datanet Plus, Datanet Manager and InterPYME. Datanet Plus and Manager target SMEs, middle-market companies and large corporates and InterPYME is a product designed for small businesses. The Bank processes online transfers, allowing debit and credit transactions to be settled automatically and to be reflected in the relevant accounts in real time.Treasury Segment
The Bank offers corporate electronic home banking services, which allows customers to access their bank accounts and information regarding our primary products and services online without having to leave their offices. People and businesses can access their account balance information and monitor account activity, factoring transactions, payments, deferred checks in custody and the status of checks written through the supplier payments service. Customers can also check the status of payments to leasing and foreign trade transactions, request checkbooks, carry out account transfers, pay paychecks, suppliers and corporate credit card bills, access electronic payment services for foreign trade services and discount checks remotely through the e-Factoring service with the electronic platform.
During 2019, the Bank focused on the strengthening of supply, especially on strategic products, collections, direct payment, payments to suppliers, remote cheque scanners ande-cheque. The primary objective was to provide agile and simple solutions to customer treasury management, seeking to generate high value positive experiences. To such end, the Bank focused on the increase of collection and payment capabilities and on the training and communication to increase the service level in internal operations.
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Treasury
The Treasury segment is primarily responsible for the allocation of the Bank’s liquidity according to the needs of the Personal and Business Banking segment, the Corporate banking segment and its own needs. The Bank Treasury segment implements the Bank’s financial risk management policies, manages the Bank’s trading desks, distributes treasury products such as debt securities, and develops businesses with wholesale financial and non-financial clients. Below is a description of the services offered under this segment:
Trading Desk and Institutional Sales
The Bank’s trading desks trade financial assets on a proprietary and third-party basis, sell financial products, and implement the Asset and Liability Management Committee (“ALCO”) decisions, within the board’s policies, regarding the Bank’s liquidity and financial risk management policies. The Bank’s trading operations include money market instruments, which include institutional investor deposits, public debt instruments, Central Bank debt notes, foreign exchange, stocks, futures, swaps and repos. Trades develop within the limits of a comprehensive risk map which sets limits on counterparty risk and on long and short positions for each asset class, depending on volatility, traders’ seniority level, and other factors. The risk map also determines stop-loss policies. Banco Supervielle managed to grow in volume in all products operated, including foreign currency, public and private securities, stocks and derivatives. The Bank managed to position itself as one of the benchmarks of the market among institutional investors in all types of operations.
Correspondent Banking
During 2019,2021, commercial relationshipsrelations were maintained with foreign banks both asrelated to the management of correspondent accounts, the financing of foreign trade transactions and tothe operation of guarantees and letters of credit.credit.
A syndicated loan was entered intoPublic Sector and Intermediaries
The Bank has maintained a presence in August 2019 and subsequently disbursed in September 2019 through the FMO,Province of San Luis for almost 25 years, acting as exclusive paying agent for the Dutch Development Bank, and Proparco, a subsidiarygovernment of the French Development Agency,Province of San Luis to provide financial agency and tax collection services to the Province of San Luis and for US$80 million,all the municipalities in the Province of San Luis and serving as payor bank for provincial and municipal government employees. On January 17, 2017, the Province of San Luis notified the Bank of its decision to exercise its right to terminate the financial agency agreement, effective as of February 28, 2017. Since February 2017, the Bank has continued to provide financial services to the Provincial government of the Province of San Luis and its employees despite the termination of the financial agency agreement. On June 7, 2018, the Province of San Luis ratified an agreement signed with the Bank for a term of 12 months formalizing its role as exclusive paying agent which the Bank has continued to provide since the termination of the financial agency agreement with the Province of San Luis in February 2017. This agreement is currently in place until May 3, 2022, or until the Province of San Luis names a new financial agent.
Also, on May 23, 2018, the Municipality of the city of San Luis appointed the Bank as financial agent for a term of 2 years, agreement which was renewed in May 2020 for 2 additional years.
The Bank has a private sector business franchise in the Province of San Luis and provides full banking services to individual consumers and SMEs and middle-market companies. Further, the Bank provides its corporate customers in the Province of San Luis with a 3-year term, intended to strengthenwide range of financial services.
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As of December 31, 2021, the Bank’s supportexposure in the Province of San Luis was as follows:
| | | |
As of December 31, 2021 | |||
(in million of Pesos, except for ratios and operating data) | | | |
Loans | | | |
Banco Supervielle Total Loan Portfolio | 145,657 | | |
Payroll loan to the Province of San Luis employees | 3,352 | | |
Payroll loans to the Province of San Luis employees / Banco Supervielle Total Loan Portfolio | 2.3 | % | |
Loans to the provincial government | — | | |
Deposits | | ||
Consolidated Total Deposits | 282,269 | | |
Deposits made by the Government of the Province of San Luis | 1,033 | | |
Deposits made by the Government of the Province of San Luis / Consolidated Total Deposits | 0.4 | % | |
Deposits made by the municipalities of San Luis and other public entities | | 4,985 | |
Net Revenue | | ||
Related Net Revenue / Banco Supervielle’s Consolidated Net Revenue | 3.1 | % | |
Operating Data | | ||
Employees | 226 | | |
Branches | 20 | | |
Senior Citizen Service Center | 3 | | |
ATM’s & Self Service Terminals | 149 | |
Of the Bank’s approximately 196,000 customers in San Luis, it offers payroll services to SMEs.about 30,800 employees that were covered by the services provided under the financial agency agreement.
The Bank expects to continue acting as financial agent for the Province of San Luis until May 3, 2022 or until the Province of San Luis appoints a new financial agent. If the Bank is replaced in such a role by another entity, it could have a negative impact on the Bank’s business in the Province of San Luis, including on the recovery rate of loans granted to employees of the provincial government, and may require us to negotiate the assignment of branches, employees and loans with the new financial agent.
In addition to the services rendered in San Luis, the Bank works with the public sector in municipalities in the provinces of Mendoza, San Juan, Cordoba, and Buenos Aires. It also works with some national universities.
Capital Markets and Structuring
The Bank’s Capital Markets and Structuring department objective is to originate and structure financing products for the Argentine corporate capital markets. The idea is to provide financial advice services which allow both its customers and Grupo Supervielle and its subsidiaries to optimize their financial resources and capital structure in order to maximize the profitability of their operations.
The sector is mainly focused on the structuring of financial trusts and syndicated credit facilities, in the organization and placement of negotiable obligations and in equity capital markets transactions and mergers and acquisitions, with a view to providing a comprehensive advice on each product, generating long term relationships with customers and investors.
In 2019, the economic conditions were volatile and characterized by high inflation, high interest rates, uncertainty and an increased country risk index which made it difficult for companies to issue financial instruments. However, the Bank continued participating in the debt market, specifically providing services to YPF EnergíDuring 2021, we placed a Eléctrica S.A. in the reopeningtotal of Class I17 negotiable obligations for US$25 million, YPF S.A. in the issuance of Class II, III and IV negotiable obligations for Ps.1,683 million, Ps.1,157 million6 financial trusts to SMEs and US$19 million, respectively, and the Bank itself in the issuance of its Class F negotiable obligations for Ps.3,000 million. As regards the financial trust market, the Bank acted as arranger and dealer of the trusts Unicred Cheques Series 6 and 7 and CCF Créditos Series 20, 21 and 22. Additionally, during 2019, the Capital Markets and Structuring area provided advice to different companies on valuations and mergers and acquisitions.
Public Sector and Intermediaries
The Bank has maintained a presence in the Province of San Luis for more than 20 years. In 1996 the Bank acquired Banco de San Luis and was appointed as exclusive paying agent for the government of the Province of San Luis to provide financial agency and tax collection services to the Province and serve as payor bank for provincial government employees. This financial agent contract was renewed twice and was due to expire on 2021.
On January 17, 2017, the Province of San Luis notified the Bank of its decision to terminate, effective as of February 28, 2017, the financial agency agreement. Since February 2017, the Bank has continued to provide financial services to the Provincial government of the Province of San Luis and its employees despite the termination of the financial agency agreement.
On June 7, 2018, the Province ratified an agreement signed with the Bank forconsolidate our position as a term of 12 months formalizing its role as exclusive paying agent which the Bank has continued to provide since the termination of the financial agency agreement with the Provincebenchmark in February 2017.
In January 2019, the government of the Province of San Luis released the terms and conditions of the auction to be held by the Province for the new financial agency agreement. Only two proposals were presented on March 15, 2019. On December 6, 2019, the provincial government issued the Decree No. 8,589 that resolved to close the auction process without awarding the financial agency agreement. The Bank is continuing to render services as financial agent until the Province of San Luis names a new financial agent.
Also, on May 23, 2018, the Municipality of the city of San Luis appointed the Bank as financial agent for a term of 2 years with automatic renewal for 2 additional years, commencing with the first payroll payment on June 29, 2018. With the appointment by the City of San Luis, the Bank became financial agent for all the municipalities in the Province.
As of the date of this annual report, the Bank continues to provide financial services to the government of the Province of San Luis and its employees.
The Bank has a private sector business franchise in the Province of San Luis as well and provides full banking services to individual consumers and SMEs and middle-market companies. Further, the Bank provides its corporate customers in the Province of San Luis with a wide range of financial services and has a primary focus on infrastructure and construction projects.
As of December 31, 2019, the Bank’s exposure in the Province of San Luis was as follows:
| |||
Of the Bank’s approximately 192,000 active customers in San Luis, it offers payroll services to about 30,000 employees that were covered by the services provided under the financial agency agreement.
In addition to the services rendered in San Luis, the Bank works with the public sector in municipalities in the provinces of Mendoza, San Juan, Cordoba, and Buenos Aires. It also works with some national universities.
Consumer Financing
The Consumer Financing business of Grupo Supervielle is developed through its subsidiaries CCF and Tarjeta Automática S.A, Mila and Espacio Cordial de Servicios. Mila and Espacio Cordial were annexed to this segment in 2018.
Through CCF and Tarjeta Automática, the Bank offers credit card services and loans to the middle and lower-middle-income sectors. Product offerings also include consumer loans, credit cards and insurance products through an exclusive agreement with Walmart Argentina, as well as with other agreements with retailers such as Hiper Tehuelche and through Tarjeta Automática branch network. Moreover, through Espacio Cordial, Supervielle offers non-financial products and services. Since the MILA acquisition, the new portfolio of used car loans and its respective results are recorded under Consumer Financing Segment.
Consumer Financing business model is based on providing financing solutions to specific target groups, mainlymiddle and lower-middle income population, with focus on two core pillars:
The Consumer Financing segment’s loan portfolio totaled approximately Ps.5.0 billion (approximately U.S.$84 million) as of December 31, 2019.
The multichannel concept allows the Bank to be present countrywide through 116 branches of its 3 main marketing channels:
During the second half of 2018 the Group’s strategy had to adapt to face the adverse scenario resulting from the challenging macroeconomic context and its negative impact on the business. Managers have a robust experience in the financial system which allowed for a strategic business reshaping for 2019 and the quick implementation of the following measures:
While the placement of secured and unsecured financial instruments for SMEs.
Consumer Finance Segment
The consumer financing business was renamed IUDÚ Digital Financial Services in January 2022 and is carried out mainly through IUDÚ. The shareholders of IUDÚ are Banco Supervielle S.A. and Grupo Supervielle. During 2021, IUDÚ launched new services and products deceleratedthrough the IUDÚ digital app, which is available at Google Play and App Store. This app enables its users to create a digital account using a uniform banking key (“CBU”) and have access to a virtual VISA debit card, apply for personal loans and credit cards, make financial transactions, open interest bearing savings accounts, and make payments using QR codes. We expect to continue to develop this app during 2019 as a result2022 to offer new products and promote financial education among its users. During 2021, we maintained IUDÚ’s strategic alliances in the retail sector, mainly through our agreement with Grupo de Narváez, pursuant to which
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IUDÚ holds exclusive rights to promote and sell financial and credit products in Chango Más (formerly, Walmart Argentina) stores, and we were among the largest private issuers of the macroeconomic context,Mastercard credit cards.
During 2021 we marketed the following products continued to be marketed:.
Open Credit Card: it is a financial tool thatthrough our consumer finance segment: (i) open credit cards, which may be used for purchases in the stores of merchants accepting MasterCardwhich accept Mastercards and for cash advances, within the limits determined by the entity, which may be obtained inonline through the Permanent Promotion Booths located inIUDÚ digital app, and at the Chango Más (formerly, Walmart Argentina) stores Hipertehuelche and Tarjeta Automática stores.
Personal Loans:any of the Tarjeta’s offices; (ii) personal loans at fixed rate cashinterest rates; (iii) consumer loans using the french amortization system
Consumer Loans: Credit lines for the purchase of certain products, the transaction is completed upon delivery of the purchased products.
Car Loans: In order to be positioned as the company with the largest financing products offer, CCF reached an agreement with MILA (a subsidiary of Grupo Supervielle specialized in the marketing of car loans) to offerspecific products; (iv) car loans, which are marketed through car dealers using MILA channels. Thus, CCF contributes to Grupo Supervielle’s strategy to become a player in the car financing market. As this new product is backed by a security interest, the impairment of non-performing loans is reduced.
Insurance: a wide array ofMILA; (v) insurance, including personal accidents, protected bag,bags, unemployment, total protection and pets insurance policies.policies; (vi) interest bearing digital accounts; and (vii) virtual VISA debit cards for online payments which may be linked to e-wallets.
New products under development: borrowing products: CVU, remunerated account, fixed term deposits, among others.
The agreement as exclusive providerCordial Servicios and MILA have been integrated into our consumer finance segment since August 2018. During 2021, Cordial Servicios continued to operate onsite through our branches located in Argentina selling home appliances, health care plans, security plans, prepaid services and tourism plans, and through our telephone channels selling prepaid health care services. As of financial servicesDecember 31, 2021, we sold 14,085 home appliances and approximately 125,000 service plans through Cordial Servicios. During 2021, MILA originated 5,540 car loans, representing an increase of 118% in number of car loans originated and an increase of 143% in principal amount of car loans originated compared to Walmart’s customers in its stores is in force until August 2020, pursuant2020. This increase was mainly attributable to the third consecutive renewal of this agreement executedincrease in December 2014. This is the fourth consecutive period in which this agreement has been in effect, and a renewal is currently being negotiated.
Due to the deterioration of the purchasing power of the consumer segment in 2019, CCF focused on improving and adapting the credit card’s value proposition to the new scheme.
and second hand car sales in Argentina. During 2021, a total of 381,777 new cars were sold in Argentina, a 18% increase compared to 2020.
Insurance Segment
ThroughOur insurance business is operated by our subsidiaries Supervielle Seguros Grupoand Supervielle Productores Asesores de Seguros. Supervielle Seguros offers insurance products, primarilyincluding personal accidents, protected bags, life, home, medical, pets, bicycles, multi-peril and protected technology insurance protected bagpolicies. These policies are offered through the online networks of Banco Supervielle S.A. and IUDÚ.
During 2021, our insurance lifesegment launched a digital car insurance product, which is offered to individuals through our online banking platforms. We expect that we will develope a bancassurance distribution model through our insurance segment using product reengineering and integral insurance policies for entrepreneurs and SMEs. In 2019expanding the products offered by Supervielle Seguros started marketing new products focused on the marketing of the special multiple peril insurance to the entrepreneurs and SMEs segment. Supervielle Seguros is continuously offering new products to the different customer segments of Grupo Supervielle such as: high net, worth individuals (Identité), senior citizens, entrepreneurs and SMEs, customers of the consumer financing and medium and large companies segments. Additionally, different marketing channels are being developed to reach more customers.
Supervielle Seguros began issuing its policies in October 2014 starting with a few non-credit related insurance products, such as protected bag insurance and personal accident insurance.
By the end of year 2015, Supervielle Seguros began issuing credit-related policies. Supervielle Seguros’s business substantially grew since then, partly because of the growth of the loans and credit card portfolio balances and partly because of the migration of some of the portfolio previously booked in a third party insurance company.
In March 2016, the Central Bank issued a new resolution, effective as of September 1, 2016, which prohibits financial institutions from charging individuals any fee and/or charge associated with credit related insurance policies. This resolution also specifies that financial institutions must purchase life insurance and total and permanent disability insurance for debit balances for their clients. As a result, since September 1, 2016 the Bank and CCF assume these risks by self-insuring and no longer contract new credit related insurances.
Productores Asesores de Seguros. During 2019, the company started a digital transformation process, which includes a customer focused end-to-end digital process. In addition, the digital innovation permits the exploration of new businesses, processes and technologies to establish the vision of an insurer of the future, focused on efficiency and customer experience. The transformation comprises the use of new work methodologies, new technologies and a cultural change within the Group.
In 2019,2021, Supervielle Seguros consolidated its offers in the following products:
Protected Bag Insurance. Protected bag insurance is insurance for personal property contained in a bag, backpack, wallet, fanny pack or other bag that is either lost or stolen. Protected bag insurance can cover items such as cellular phones, makeup, planners, lost documents, keys and locks. In addition, protected bag insurance may cover a certain amount of charges from fraudulent credit card use as a result of a lost or stolen bag.
Personal Accident Insurance. Personal accident insurance covers policy holders in the event that they suffer an accident, subject to certain exclusions.
Life Insurance.Supervielle Seguros markets its life insurance products to the Bank’s senior citizen customers and sells its products through its own sales force that works within the Bank’s service centerbranch network. The basic life insurance product includes coverage for death, and customers can add varying degrees of coverage for accidents, serious and terminal illnesses and transplants.
Life Insurance and Total and Permanent Disability Insurance for Debit Balances. In the third quarter of 2015, Supervielle Seguros began to offer an insurance product that covers debit balances in the event of death or total and permanent disability. However, as mentioned above, since September 1, 2016, Banco Supervielle and CCF assume these risks by self-insuring and no longer contract new credit related insurances.
Home Insurance. Home insurance coverage includes fire insurance (building and content), theft of content, theft and damage of appliances, glass breakage, civil liability, personal accident coverage for domestic staff and home assistance service in cases of emergencies.
Technology Insurance. Technology insurance covers theft or accidental damage as a result of theft of electronic equipment (includes notebooks, cell phones, tablets, smartphones, cameras and GPSs). In case of theft or accidental damage as a result of theft, the cost of the stolen property or the cost of repair will be compensated up to the maximum insured amount (once the repair invoice is provided).
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ATM Insurance. ATM insurance covers robbery at ATMs, death at the time of the assault and reimbursement of the costs of stolen documentation.
Protected Content. Protected content insurance covers theft and accidental damage of the personal effects that are inside a vehicle.
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Broken Bones. The broken bones insurance covers death as result of an accident up to the amount of the insured capital. A certain amount will be paid in the event of quadriplegia or paraplegia, according to the respective insurance plan and once such condition has been verified by a medical audit. This insurance also covers the simple breakage of bones produced as an immediate consequence of an accident.
Integral insurance product for entrepreneurs and SME:Integral insurance product for entrepreneurs and SMEs completes the offer of services for our priority segment entrepreneurs and SMEs, with the particularity that is fully processed by Supervielle Seguros.
Supervielle Seguros reported gross written premiums of Ps.404.9 million in the first quarter of 2019, Ps.407.6 million in the second quarter of 2019, Ps.530.0 million in the third quarter of 2019 and Ps.438.7 million in the fourth quarter of 2019.
The following table sets forth the breakdown of Supervielle Seguros’s gross written premiums per quarter as of December 31, 2019.2021.
Gross written premiums by product
(in millions of PesosPesos))
% Change | |||||||||||||||||||||
4th quarter 2019 | 3rd quarter 2019 | 2nd quarter 2019 | 1st quarter 2019 | 4th quarter 2018 | 4th quarter 2019 vs. 3rd quarter 2019 | 4th quarter 2019 vs. 4th quarter 2018 | |||||||||||||||
Life insurance and total permanent disability insurance for debit balances | 0.9 | 2.8 | 6.8 | 6.8 | 13.1 | 33.2% | 7.0% | ||||||||||||||
Personal Accident Insurance | 25.8 | 27.3 | 27.2 | 28.6 | 29.7 | 94.4% | 86.9% | ||||||||||||||
Protected Bag Insurance | 55.0 | 62.4 | 57.7 | 59.3 | 61.2 | 88.1% | 90.0% | ||||||||||||||
Broken Bones | 15.2 | 17.7 | 15.9 | 15.3 | 15.6 | 85.8% | 97.3% | ||||||||||||||
Others | 8.5 | 13.3 | 7.8 | 11.4 | 10.4 | 63.9% | 81.9% | ||||||||||||||
Home Insurance | 56.1 | 88.6 | 63.5 | 56.8 | 57.6 | 63.4% | 97.4% | ||||||||||||||
Technology Insurance | 20.2 | 34.0 | 19.6 | 19.0 | 17.4 | 59.5% | 116.0% | ||||||||||||||
ATM Insurance | 24.1 | 15.1 | 14.2 | 16.1 | 12.2 | 159.9% | 197.9% | ||||||||||||||
Mortgage Insurance | 27.4 | 28.2 | 36.5 | 30.4 | 41.0 | 97.3% | 66.8% | ||||||||||||||
Life Insurance | 205.4 | 240.7 | 158.5 | 161.1 | 172.8 | 85.3% | 118.9% | ||||||||||||||
Total | 438.7 | 530.0 | 407.6 | 404.9 | 430.9 | 82.8% | 101.8% |
| | | | | | | | | |
|
| 4th quarter |
| 3rd quarter |
| 2nd quarter |
| 1st quarter |
|
| | 2021 | | 2021 | | 2021 | | 2021 | |
Life insurance and total permanent disability insurance for debit balances | | 0.3 | | 1.0 | | 0.3 | | 0.1 | |
Mortgage Insurance |
| 50.9 |
| 56.7 |
| 33.8 |
| 50.6 |
|
Personal Accident Insurance |
| 34.5 |
| 36.5 |
| 37.5 |
| 38.5 |
|
Protected Bag Insurance |
| 79.1 |
| 102.3 |
| 125.9 |
| 101.4 |
|
Broken Bones |
| 20.8 |
| 22.4 |
| 24.8 |
| 23.5 |
|
Others |
| 8.7 |
| 20.4 |
| 18.6 |
| 17.1 |
|
Home Insurance |
| 105.5 |
| 125.3 |
| 109.9 |
| 118.5 |
|
Technology Insurance |
| 46.3 |
| 62.8 |
| 43.4 |
| 40.1 |
|
ATM Insurance |
| 27.2 |
| 32.1 |
| 34.1 |
| 27.8 |
|
Life Insurance |
| 413.5 |
| 421.2 |
| 415.5 |
| 410.5 |
|
Total |
| 786.8 |
| 880.7 |
| 843.8 |
| 828.1 |
|
Asset Management and Other Services segment
Grupo Supervielle offers a variety of other services to its customers, including mutual fund products through Supervielle Asset Management. Since May 2018, Supervielle also offers products and services through InvertirOnline S.A.U. Since the MILA acquisition, the new portfolio of used car loans and its respective results are recorded under Consumer FinancingFinance segment. MILA portfolio outstanding at the moment of the acquisition and its respective results are recorded under Asset Management and Others segment.
SAM
Mutual Funds. SAM offers mutual funds services designed to meet customers’ particular investment objectives and risk profiles through its Premier“Premier” funds family. As of December 31, 2019, SAM had Ps 16.8 billion of2021, assets under management.
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management reached Ps.73.7 billion increasing 25.7% in real terms from December 2020. As of December 31, 2019,2021, SAM had approximately 4,5909,614 customers.
The PREMIERPremier funds family of funds consists of 14 mutual funds:comprises a Money Market Fundmoney market fund (Premier Renta Corto Plazo en Pesos), three Argentina short-termtwo short term fixed income funds in Pesos (Premier Renta Plus andPremier Renta Fija Ahorro Premier Capital), five Argentinasix fixed income and mixed income funds in Pesos (Premier Renta Fija Crecimiento, Premier Capital, Premier Commodities, Premier Inversión, Premier Balanceado and Premier Renta Mixta), two Argentina fixed income funds in USU.S. dollars (Premier Renta Mixta en Dólares and Premier Performance), a variable income fund (Premier Renta Variable), an investment fund in SME securitiesassets (Premier FCI Abierto PyMEs) and, a fixed income LatAm fund (Premier Global Dólares) and a close fund (Adblick Ganadería).
The As of December 31, 2021, (i) the money market fund showed an increase of 143%,increased 87% compared to 202, mainly due to the investments of corporate and institutional customers, representing 79%73% of the managedassets under management in December 2021, and (ii) the short term fixed income funds in December 2019,Pesos increased 370%, and represented 12% at the close of 2021 as compared to 40%5% in 2020. As of December 2018.
The Argentina Short Term Fixed Income31, 2021, the money market fund and the short term fixed income funds in Pesos (t+1) fell byrepresented approximately 85%, and its share on of the total managedassets under our management.
These Premier funds fell to 3% in December 2019 as compared to 28% in December 2018. As from August, duefamily are offered to the devaluation and the risepublic online. As of interest rates, the return became significantly volatile and corporate and individual customers began to redeem their funds. As from the last quarter, funds managed stabilized as a resultDecember 31, 2021, 97% of the low volatility of interest ratesPremier funds family transactions that were carried out by individuals and exchange rates.
The Argentina fixed and mixed income funds in U.S. dollars recorded an 81% fall in terms of Pesos. However, in terms of its currency of origin the funds recorded a 90% fall. The share on the total managed funds fell from 21% in December 2018 to 3% in December 2019. In spite57% of the factPremier funds family transactions that during the last quarter of 2019 the downward trend ceased, investments in this segment have not yet recovered.were carried out by corporate customers were made online.
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IOL invertironline
The Bank places funds through the face-to-face channel of its branch network, through its call center (centro integral de inversiones) and mainly through the home bankingIOL invertironline (formerly, invertironline.com) is a digital online channel.
In June 2013, SAM was ISO 9001 certified for meeting the requirements of the quality management system on “design and development, marketing, management, administration and control of mutual funds.” In October 2018, IRAM’s review audit recertified SAM, updated to the IRAM ISO 9001:2015 standard.
In April 2019 the Premier Global in Dollars was launched to the market, with investments in LatAm fixed income assets. These assets represent 5% of the funds managed by SAM, as per the average balance of December 2019.
InvertirOnline is an online platformbroker that offers brokerage and savings and investment services based on an agile, simple, transparent and innovative platform, suitable for the profile of each client, with the objective of helping our clients increase their savings.
During 2021, we focused on offering consultancy services through digital platforms. We opened approximately 10,000 new accounts and generated approximately 420,000 transactions on monthly average, reaching a focus on improving the qualitytotal of life of persons, through the increase of their income.
As part of Grupo Supervielle,InvertirOnline can leverage its growth and take advantage of the synergy of the different businesses of Grupo Supervielle.
InvertirOnline’s assets under management amounted to Ps.12.5 billion324,000 accounts as of December 31, 2019.
As of December 31, 2019,InvertirOnline had approximately 51,829 active customers located country-wide.
Corporate Social Responsibility
Grupo Supervielle has become2021, which resulted in an important leader in the Argentine financial system with a high visibility potential in its community actions. Its social engagement has grown on a sustained basis and, at present, Corporate Social Responsibility has a significant place in Grupo Supervielle’s agenda. In 2019 we continued focusing on our social and community activities with 20 programs grouped in 4 main lines of action: Education, Childhood, Senior Citizens, and Institutional Strengthening. In addition, during the year we launched three new environmental programs related to efficient management of energy, plastic reduction and technological scrap recycling.
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Grupo Supervielle issues a Sustainability Report on a yearly basis, following the guidelines and standards established by the Global Reporting Initiative (GRI). The report surveys the achievements made and the challenges ahead in its ongoing commitment towards sustainability, describing the performance of the different companies controlled by Grupo Supervielle in the economic, social and environmental areas. In the process of drafting the 2019 report we conducted a new materiality assessment survey with our stakeholders to identify those issues that are relevant to the business.
We have four strategic objectives for all actions taken:
The CSR strategic plan is developed through 20 programs grouped in four core axis:
In 2019, we carried out 20 programs. Three of our main programs are aimed at senior citizens and reached 7,675 individuals. Four programs target childhood and fighting poverty and malnutrition, seven are related to education and four are part of our institutional strengthening programs. We also supported 24 volunteering actions that 164 volunteers carried out in the City of Buenos Aires and Greater Buenos Aires, Mendoza, Córdoba and San Luis.
This past year we also started working on two projects related to sustainability: one related to the disposal of technological scrap, which includes recycling, and the other focused on the substantial reduction of single-use plastic and correct recycling in our biggest buildings.
Our Subsidiaries
Banco Supervielle S.A.
We own 97.10% of the share capital of the Bank and Sofital owns the remaining 2.79%. The Bank is a universal commercial bank and our largest subsidiary. When consolidated with CCF, the Bank accounted for 96.4% of our total assets as of December 31, 2019. The Bank operates in Argentina, and substantially all of its customers, operations and assets are located in Argentina. It offers a wide variety of financial products and services to retail and corporate customers.
According to the Central Bank, as of December 31, 2019, the Bank ranked 10 in terms of deposits, 8 in terms of total loans and 10 in terms of total assets among private banks in Argentina. In 2019, the Bank continued to be a leader among private banks with respect to the payment of federal benefits to senior citizens in terms of the number of payments made. The Bank is also one of the leading providers of (i) factoring services in Argentina with a 9.5% share among private banks as of December 31, 2019 and (ii) leasing services, with a market share estimated to be above 19% as of December 31, 2019.
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As of December 31, 2019, the Bank on a consolidated basis had total assets for Ps.142.3 billion, a total loan portfolio of Ps.87.5 billion and total deposits for Ps.91.5 billion, and its shareholders’ equity totaled Ps.18.2 billion.
Cordial Compañía Financiera S.A.
In August 2011, we purchased CCF, a company formerly known as GE Compañía Financiera S.A., a financial services division of General Electric. GE Compañía Financiera had been operating for more than ten years in the Argentine market with financial products such as credit cards, personal loans, consumer loans and a wide range of insurance products.
The Bank owns 95% of CCF’s common shares and Grupo Supervielle owns the remaining 5%. As of December 31, 2019, CCF had total assets of Ps.8.1 billion, net shareholders’ equity of Ps.2.5 billion and a personal loan portfolio, credit card and car loan on balance of Ps.5.9 billion.
Since 2000, through an agreement with Walmart Argentina, CCF has had exclusive rights to promote and sell financial and credit products to Walmart Argentina customers nationwide, including Changomas stores. The Walmart Argentina agreement grants CCF access, on an exclusive basis, to a distribution channel that includes Walmart Argentina and Changomas stores located throughout Argentina and all future stores to be opened by Walmart Argentina during the term of the agreement. On July 6, 2010, CCF renewed the Walmart Argentina agreement through August 31, 2015 and in December 2014, CCF renewed the agreement again, through August 2020. A renewal of the agreement is currently being negotiated.
CCF specializes in specific credit products and financial consumer services. Its business model is based on offering financial products to mainly the middle and lower-middle-income sectors and is focused on two fundamental pillars:
The multichannel concept requires that CCF be present countrywide, and as of December 31, 2019 it was present in 22 provinces through 113 branches and three main channels of distribution:
Tarjeta Automática S.A.
In December 2012 CCF began to market loans and credit cards under “$YA” and “Carta Automática” brands through Tarjeta branch channel which supplements the consumer division network.
Tarjeta consists of a network of branches created in 1996 with a strong positioning in the Patagonia region. At present it has 20 own branches in 9 provinces. CCF’s commercial strategy in this channel is to offer a wide ranche of financial services and insurance.
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The channel’s objective is to reach the leadership in the Patagonia region through a differential proposal: services similar to those of a bank but with an approach similar to that of a regional financial entity. To meet the demand of our customers the network focuses on the marketing of loans as the gateway.
CCF is the leader in the consumer loan segment in the Carta Automática markets, with high satisfaction and brand awareness levels among its customers (source: 2018 Quantitative Survey).
Supervielle Seguros S.A.
In June 2013, Grupo Supervielle and Sofital purchased 100% of the shares of Supervielle Seguros (formerly known as Aseguradores de Créditos del Mercosur S.A.). Supervielle Seguros began operations in October 2014.
Supervielle Seguros began issuing its first policies in October 2014 starting with a few non-credit related insurance products, such as protected bag insurance and personal accident insurance. By the end of 2015, it began issuing credit-related policies substantially growing its business since then, partly through the growth of the loans and credit card portfolio balances and partly through the migration of some of the portfolios previously booked in a third party insurance company. A Central Bank resolution issued in March, 2016 and effective September 1, 2016, prohibits financial institutions from charging individuals any fee and/or charge associated with credit related insurance policies. This resolution also specifies that financial institutions must purchase life insurance on debit balances or alternatively, self-insure the risk of death and permanent total disability of their clients. As a result, since September 1, 2016, both Banco Supervielle and CCF are self-insured against these risks and only contract new credit related insurances for mortgages loans. We intend to continue to expand this business and launch new insurance products previously offered to our customers by other insurance companies.
The challenge for 2020 is to continue consolidating the current insurance business and to make the necessary developments for the issuance of health and unemployment insurance policies, among other, focusing on the entrepreneur and SMEs, medium and large companies, senior citizens and Consumer Financing segments. Additionally, work will be done to develop new sales channels and to assess all those products that contribute to the provision of financial services and insurance to customers.
Supervielle Asset Management S.A.
Through SAM, we have become a player in the mutual funds market with the “Premier” funds family.
As of December 31, 2019, SAM offered 14 mutual funds services designed to meet customers’ particular investment objectives and risk profiles through its Premier funds family. As of December 31, 2019, SAM had U.S.$281 million of assets under management. Based on data from the Argentine Association of Mutual Funds, we estimate that we have a market share of approximately 2,12% of the mutual fund industry in Argentina and that SAM is ranked 18 out of 52 managers in the market.
Espacio Cordial de Servicios S.A.
Espacio Cordial was created in October 2012 and began operating in December 2012. The business was created to sell various types of goods and services related to insurance, tourism, health care plans and/or services and other goods and services set forth in its corporate by-laws.
As a result of the restructuring conducted in August 2018, Cordial Servicios became part of the consumer financing sector of Grupo Supervielle.
During 2019 Espacio Cordial continued operating in the direct and indirect channels already developed. The direct channel continued developing through sales points located at the Bank’s branches throughout the country, trading mainly home appliances, health care and security plans, prepaid services and tourism services. It was also present in theCarta Automática branch of La Plata, where the first prototype of integrated branch and home appliances outlet was launched, increasing the traffic in the branch and a larger product turnover. The home appliances category strategy continued seeking for stocks optimization and product mix under the motto: “Primer precio, Primera marca” (“Best price for a leading brand”) during 2019. The services and assistance category developed a new channel in partnership with Walmart, obtaining 100 additional sales points.
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As regards indirect channels, the telephone channel continued to be used for the sale of prepaid health care services.
The digital channel, through Tienda Supervielle Marketplace, was used to sell home appliances, technology, home and furniture, sports, wellness and beauty, toys, perfumes, tires and accessories. As regards the tourism category, Tienda Supervielle continued growing as a sales channel, with the introduction of technological changes, a new “look & feel” and the integration to the Rewards program of Banco Supervielle, as the main vertical portal for flights and hotels. In March 2019 the corporate trip management platform was launched for Grupo Supervielle companies. New group packages were developed, fully managed by the area, offering domestic destinations under the Rewards Groups program for employees of the group’s companies.
The services and assistance category continued developing the digital channel with the sale of health care plans through a strong online strategy in the social media and developing digital self-management products for the companies of the consumer division and the launching of new digital products such as “Doctor en línea” (“Online doctor”).
In June 2019, the company purchased Deautos.com, a new and second-hand vehicle purchase and sale platform, one of the leading sites in its category with over 10 years in the market. The aim was to create a digital ecosystem, integrating and simplifying the offer of services and increasing the synergy with other Grupo Supervielle companies to deliver a higher customer experience through the best market offers.
During 2019, 41,500 home appliances were sold, which accounted for an income of over $186 million, and 137,000 service plans, which accounted for an income of over $501 million.
Micro Lending S.A.U.
MILA is a company devoted to originating car financing loans and was acquired by Grupo Supervielle on May 2, 2018.
In 2019, MILA originated car financing loans for a total of Ps.605 million from 3,316 transactions.
In 2019 a total of 440,452 new cars (76,990 of which were financed through car loans) and 1,592,965 used cars (61,603 of which were financed through car loans loans) were sold in Argentina.
Throughout 2019, MILA operated with six insurance companies, offering a wide array of products, and generated an income from these concepts that represents about 20% of the total income of MILA.
The goal for 2020 is to expand the placement of transactions. This goal will be pursued through three strategic pillars: (i) greater commercial efficiency, (ii) a greater capillarity to its network, and (iii) launch of new financial products while taking advantage from synergies within the group holding.
InvertirOnline.com
InvertirOnLine.com is a fintech Company which was established at the end of 2000 and was acquired by Grupo Supervielle from its founder in May 2018. At present InvertirOnline is an online platform that offers brokerage and savings and investment services, with a focus on improving the quality of life of persons, through the increase of their income.
In 2019 there was a 155% increase in the number of transactions made,our customers from approximately 80,000 customers as comparedof December 31, 2020 to 2018, totaling 1,123,000 transactions. In 2018approximately 110,000 customers as of December 31, 2021. Since IOL invertironline is integrated into the number of transactions through InvertirOnline hit a record, with over 724,000 transactions. Also,Bank’s online platform, the transacted amount in 2019 exceeded the Ps.76 billion, representing a 213% increase as comparedBank’s customers have access to the previous year, and over 59,000 accounts opened by new customers during that period, which represents an increase of more than 750%services we offer through IOL invertironline. IOL invertironline continues to rank as compared to the 7,800 accounts opened during the prior period.
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During 2019 the services offered through the Invertironline.com platform continued to improve and in order to enhance the customer experience work continued to be done in the automatic crediting of online deposits, which enables the immediate transfer of funds made by customers.
During 2019, InvertirOnline offered 24x7 services for the purchase and sale of U.S. dollars to all of its customers.
As from August the amount of the maximum fee charged was reduced, and account maintenance and withdrawal charges were eliminated, thus attracting more customers to capital markets at very affordable costs and favoring financial inclusion.
With the same objective of facilitating market access to people countrywide, during this period the 100% digital onboarding was launched, therefore the account opening process is automatic, immediate and is available 24x7.
Since the beginning of 2019 InvertirOnline also started to offer the possibility to make transactions in the US market through different investment instruments, so as to diversify the assets invested in one of the largest markets at global level. This business has to comply with the FATCA and the IRS QI agreements.
Supervielle Productores Asesores de Seguros S.A.
On December 21, 2018, Supervielle Broker de Seguros S.A. was created. The company has the exclusive corporate purpose of carrying out the insurance intermediation activity, promoting the contract of life insurance, wealth and pension insurance premiums, and advising customers and potential customers. Grupo Supervielle directly owns 95% of its share capital (and indirectly owns 100% of its share capital). The company was renamed Supervielle Productores Asesores de Seguros S.A and began operationtop companies in the second halfByMA in terms of 2019.trade volume.
The 2020 goal is to expand the offer to the group’s customers with a focus on the entrepreneursDuring 2021, we renamed this company as IOL invertironline, and SMEs, SMEs and Medium and Large companies. This will improve risk management through the advice to customers, adding value to Grupo Supervielle’s comprehensive proposal.
A team of insurance experts will be working in every region so as to advice customers and create synergies to detect new business opportunities.
Bolsillo Digital S.A.U.
On June 12, 2019 Bolsillo Digital S.A.U. was created with the purpose of providing design, programming and development services for software, mobile phone applications, web pages and/or any other digital medium, commercializing products and services related to the management and processing of payments made by and in favor of third parties and developing and operate platforms and tools of payment methods of any type and in any of its forms.
Futuros del Sur S.A. (in process of changingrenewed its corporate namelogo and its website. In 2021, we also launched the school of brokers, which enable students to Supervielle Agente de Negociación S.A.U.)
On December 18, 2019, Grupo Supervielle acquired 100% ofsit for an exam before the capital stock of Futuros del Sur S.A.,CNV and start a trading agent registered with the Argentine Securities Commission. Through this acquisition Grupo Supervielle seeks to expand the financial and investment services to institutional and corporate customers and increase cross selling in an efficient and profitable way.
Sofital S.A.F. e I.I.
Sofital S.A.F. e I.I. is a sociedad anónima whose main activity consists of holding participations in other companies.
As of the date of this annual report, Sofital holds 2.7944% of the capital stock of the Bank,career as a 5.0% of the capital stock of Cordial Servicios, 5.0% of the capital stock of Supervielle Seguros and 5.0% of the capital stock of SAM.broker.
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Market Area
We maintain a strong geographic presence in the City of Buenos Aires and the Greater Buenos Aires metropolitan area, which is Argentina’s most commercially significant and highly populated area, and we are leaders in terms of our banking network in some of Argentina’s most dynamic regions, including Mendoza and San Luis.
City of Buenos Aires. The City of Buenos Aires is the capital of Argentina and the center of commerce and seat of the national government in Argentina. Based on company estimates, theArgentine government. The City of Buenos Aires had a GDP per capita in 2019 of approximately U.S.$28,000 and the INDEC estimatedhas a population of approximately 2.9 million (approximately 7.2%7% of Argentina’s overall population) as of December 31, 2019.2021 and is the richest city of Argentina. As of December 31, 2019,2021, the unemployment rate in the City of Buenos Aires was 6.9%, same rate as of December 31, 2018.4.6%. In terms of the banking sector, there are 855813 bank branches (out of a total of 4,7734,584 bank branches in Argentina) in the City of Buenos Aires.
Province of Buenos Aires. The Province of Buenos Aires, which includes the Greater Buenos Aires metropolitan area, is an agricultural center focused primarily on the production of soy, wheat, corn and other agricultural products. Based Company estimates, theThe Province of Buenos Aires had a GDP per capita in 2019 of approximately U.S.$7,000 and the INDEC estimate a population of approximately 15.6 million (approximately 38.9%39% of Argentina’s overall population) as of December 31, 2019.2021 and concentrates a high portion of the agricultural activity. As of December 31, 2019,2021, the unemployment rate in the Province of Buenos Aires decreasedincreased to 10.0% from 11.4% as of December 31, 2018.8.2%. During the last decade, agricultural production has been strong as a result of high commodity prices which has contributed to Argentina’s economic growth. It is expected that agriculture production will continue to be a key driver of economic growth in Argentina in the coming years. In terms of the banking sector, there are 1,5041,488 bank branches (out of a total of 4,773)4,584) bank branches in Argentina) in the Province of Buenos Aires.
Mendoza. The Province of Mendoza is located in the Cuyo region and is the center of the wine industry in Argentina. Based on Company estimates, Mendoza had a GDP per capita in 2019 of approximately U.S.$7,000 and the INDEC estimatedhas a population of approximately 1.7 million (approximately 4.3% of Argentina’s overall population) as of December 31, 2019.September 30, 2021. As of December 31, 2019,2021, the unemployment rate in Mendoza increased to 7.3% from 5.9% as of December 31, 2018.6.8%. In terms of the banking sector, there are 179174 bank branches (out of a total of 4,7734,584 bank branches in Argentina) in Mendoza.
San LuisLuis.. The Province of San Luis is located in the Cuyo region. The primary industries in the Province of San Luis are agricultural production and tourism. As of December 31, 2019,2021, the unemployment rate in the Province of San Luis increased to 2.9% from 2.8% as of December 31, 2018.was 4.0%. In terms of the banking sector, there are 5047 bank branches (out of a total of 4,7734,584 bank branches in Argentina) in the Province of San Luis.
Distribution NetworkCustomer Service Model Evolution
We are accelerating our transformation initiatives across channels to develop our omnichannel model. This includes developing a modern technological architecture, evolving our bank branch model and adding API capabilities to connect with third parties and prepare our business for open banking.
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Our physical infrastructure supports our multi-channel distribution strategy with a strategic national footprint through 316288 access points, which include 185184 bank branches, 13 banking payment and collection centers, 79 CCFIUDÚ sales points located inat Chango Más (formerly, Walmart supermarkets, 34Argentina) stores, 20 consumer financingfinance branches of Tarjeta, and other points of sale, 5 Mila’sMILA’s customer support offices, network of 393588 car dealers and 536450 ATMs, 217230 self-service terminals and 202 Cash Dispensers298 Supervielle own-experience ATMs with biometric identification..
Asidentification and do not require the use of December 31, 2019, the Bank’s loan portfolio to branches ratio, which we calculate by dividing the total amount of loans outstanding at the end of the period by the number of branches at the end of such period, was Ps.443.4, compared to Ps.393.0 million as of December 31, 2018.
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a password or card.
The following table shows the detail of our distribution network:
| | | |
| Distribution Network | ||
| | As of December 31, | |
| | 2021 | |
Banco Supervielle S.A. Branches | | 184 | |
Tarjeta Automática S.A. Branches | 20 | ||
IUDÚ Sales | 79 | ||
Micro Lending S.A.U. | 5 | ||
ATMs | 450 | ||
Self-service Terminals | 230 | ||
Supervielle own-experience ATMs with biometric identification | |||
298 |
During 2021, we made significant progress on our branch transformation, implementing a new service model and modernizing our network. We modernized and expanded services to SMEs and multi-segment businesses in 16 branches that until then were exclusively dedicated to senior citizens.
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Deposits – General Overview
The following charts set forth the breakdown of our deposits by type of account and customer category as of December 31, 2021.
Our main source of funds is the Bank’s deposit base.
As of December 31, 2021, non- or low-cost demand total deposits (including private and public-sector deposits) represented 33.9% of the Group’s total deposits, 21.4% of which corresponded to savings accounts and 12.5% to checking accounts. As of December 31, 2020, non- or low-cost demand total deposits represented 35% of the Group’s total deposits. As of December 31, 2021, retail customer deposits in Pesos represented 33% of the Group’s total deposits compared to 37% as of December 31, 2020.
The following tables compare the composition of the Bank’s (on a consolidated basis) total funding with those of all Argentine private banks’ in each case as of December 31, 2019:
Year ended December 31, 2019 | ||||||||||||
Liabilities and Shareholders equity | Banco Supervielle | Private Banks | ||||||||||
(in millions of Pesos) | % | (in millions of Pesos) | % | |||||||||
Deposits | 91,477.5 | 64,6% | 2,763,956 | 67.2% | ||||||||
Other Liabilities | 50,121.5 | 35,4% | 1,347,676 | 32.8% | ||||||||
Total | 141,599.0 | 4,111,632 |
Year ended December 31, 2019 | ||||||||||||
Deposits Breakdown | Banco Supervielle | Private Banks | ||||||||||
(in millions of Pesos) | % | (in millions of Pesos) | % | |||||||||
Checking accounts | 12,127.0 | 13.3% | 550,907 | 19.9% | ||||||||
Saving Accounts | 40,774.2 | 44.6% | 1.189,573 | 43.0% | ||||||||
Time deposits | 28,350.9 | 31.0% | 802,404 | 29.0% | ||||||||
Other deposits | 10,225.4 | 11.2% | 221,072 | 8.0% | ||||||||
Total | 91,477.5 | 2,763,956 | ||||||||||
Due to the importance of the franchise of our deposit network, retail plus senior citizens deposits in Pesos continued to account for a significant portion of total deposits. As of December 31, 2019, retail plus senior citizens deposits in Pesos represented 55% of total deposits.2021:
| | | | | | | | | |
|
| Year ended December 31, 2021 |
| ||||||
Liabilities and Shareholders equity | | Banco Supervielle | | Private Banks | | ||||
| | (in millions | | | | (in millions | | | |
| | of Pesos) | | % | | of Pesos) | | % | |
Deposits | | 289,073.2 | | 76.2 | % | 7,071,745.0 | | 69.8 | % |
Other Liabilities | | 90,388.8 |
| 23.8 | % | 3,062,747.1 | | 30.2 | % |
Total | | 379,462.0 |
| | | 10,134,492.2 | | | |
| | | | | | | | | |
|
| Year ended December 31, 2021 |
| ||||||
Deposits Breakdown | | Banco Supervielle | | Private Banks |
| ||||
| | (in millions | | | | (in millions | | | |
| | of Pesos) | | % | | of Pesos) | | % | |
Checking accounts | | 31,626.1 | | 10.9 | % | 1,637,160.1 | | 23.2 | % |
Saving Accounts(1) |
| 156,965.2 |
| 54.3 | % | 2,552,478.5 |
| 36.1 | % |
Time deposits |
| 78,493.9 |
| 27.2 | % | 2,057,487.7 |
| 29.1 | % |
Other deposits |
| 21,988.0 |
| 7.6 | % | 824,618.8 |
| 11.7 | % |
Total |
| 289,073.2 |
| |
| 7,071,745.0 |
|
| |
(1) | Includes special checking accounts |
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Loan Portfolio – General Overview
Each loan category in our loan portfolio faces different risks. We have established underwriting policies, standards and pricing mechanisms designed to mitigate the risks posed by each loan category. As of December 31, 2019,2021, we had a loan portfolio of Ps.92.2Ps.161.2 billion (equivalent to U.S.$1.51.6 billion converted to U.S. dollars at the reference exchange rate as of December 31, 2019)2021).
The following charts set forth the breakdown of our loan portfolio by segment, and of the specific customer categories in our corporate banking and retail segments as of December 31, 2021.
(1) | For information from January 1, 2021 to December 31, 2021, the term “small businesses” refers to individuals and businesses with annual sales up to Ps.300 million, the term “SMEs” refers to individuals and businesses with annual sales over Ps.300 million and below Ps.1.5 billion, the term “middle-market companies” refers to companies with annual sales over Ps.1.5 billion and below Ps.3 billion and the term “large corporates” refers to companies with annual sales over Ps.3 billion. |
Underwriting Policies
Our policies require that most loans only be approved for borrowers that are able to provide proof of a source of repayment and demonstrate an ability to service existing and future debt. Our underwriting procedures for all loan types require consideration of the borrower, including with respect to the borrower’s financial condition, cash flow, the management skills and industry of our corporate customers, and the economic environment surrounding the issuance of any given loan.
We generally expect customers to repay loans with unencumbered cash available to them. A significant part of our loan portfolio is secured, and we assess the quality and liquidity of collateral before we grant any secured loan.
Interest Rate Terms
We price loans: (i) on both a fixed rate and floating rate basis; (ii) over different terms; and (iii) based upon different rate indices. Our pricing structures are consistent with our interest rate risk management policies and procedures. For more information on these policies and procedures, See “—Loan portfolio - Credit Risk Management.Management.”
Loans to individuals (personal loans, credit card loans, car loans and mortgages) are priced only on a fixed rate basis. UVA Mortgage loans and some UVA car loans principal is adjusted for inflation. Loans to small businesses and SMEs are priced on both a fixed rate and floating rate basis as follows:
Fixed rate: promissory notes (checking and invoice discounts, work certificates for government projects and warrants), overdrafts, foreign trade loans, automobile, personal loans and mortgages with adjustable principal, based on inflation. |
Floating rate: automobile and other secured loans, receivables from financial leases. |
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Both rates: corporate unsecured loans. |
Risks
Below we list our loan categories from lowest risk to highest risk in terms of repayment ability and historical default rates:
(1) | Promissory notes |
(2) |
(3) |
(4) |
(5) |
(6) |
(7) |
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(8) |
(9) | Overdrafts |
(10) | Personal loans and credit card loans (from the Personal and Business Banking segment) |
Personal loans and credit card loans (from the Consumer |
Summary of Loan Portfolio Categories
Promissory notesNotes (factoring and check discounting and warrants)
Factoring and check discounting.Check discounting is used to finance working capital needs for businesses that have a diversified accounts receivable portfolio and customers or parties that issue checks and have a favorable credit history. Most of our check discounting transactions are with recourse to the assignor (i.e., we secure repayment with a pledge over an assignment of the borrower’s cash flow). However, some of our check discounting transactions are without recourse to the assignor, in which case we only have recourse to the endorser of the check. With respect to our operations with recourse, we evaluate the creditworthiness of both the assignor and the endorser of the check, specifically assessing each party’s payment history, credit history and legal history by requiring a variety of documents to aidhelp us in our underwriting process. We accept checks that are issued in the ordinary course of business from the customer with a payment date generally no longer than 180 days.
Warrants.Warrants are granted to finance working capital needs for producers or sellers of commodities or non-commodities such as sugar, soy, wheat, corn, sunflower, peanuts, cotton and yerba mate. We take collateral in respect of the warrants for at least 20% to 35%50% in excess of the value of the products and its liquidity in the event of an execution, depending on the type of product. The most significant risk we face when extending warrant financing relates to the quality and preservation of the underlying assets. To mitigate this risk, we select third-party companies to assess and monitor the value and quality of the underlying products. These third-party companies have been approved by our credit committee.
Foreign Trade Loans
Foreign trade loans are granted to finance exports and imports through pre-financing and financing loans for exports, international factoring and letters of credit for imports.
In the case of pre-financing and financing loans for exports, we analyze the repayment ability of both the borrower and its foreign client. Specifically, we ensure that the credit line that we grant is tailored to the borrower’s historical export levels and projected export levels (based on contracts, purchase orders and other documentation). We establish maximum warranty amountsgenerally grant pre-financing and financing loans for exports with terms ranging from U.S.$5.0 million90 to U.S.$ 40.0 million180 days, depending on the type of product. We set interesttransaction and such loans are solely denominated in U.S. dollars. Interest rates for our warrants basedpre-financing and financing loans for exports depend on the term of the warrantloan and market conditions.
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In the case of letters of credit for imports, we face a risk that we will have to pay for the imports in the event that the borrower defaults. To mitigate this risk, we ensure that the loan is granted once the merchandise to be imported can be shipped and the qualityrelevant shipment documentation can be issued. Generally, the term of our letters of credit do not exceed one year. We receive a fee for the letters of credit we issue instead of charging interest.
Mortgage Loans
During the period between 2016 and 2018, when mortgage loans were originated, the Bank set a fixed interest rate but the remaining capital is adjusted on a monthly basis according to the UVA monthly evolution. Therefore, the loan has index-linked capital payments (the value of the underlying product.capital and the installment is updated by inflation).
Receivables from financial leasesFinancial Leases
Our financial leases are granted for financing acquisitions of capital assets, industrial equipment, road equipment and automobiles. The terms of these loans are typically between 18 and 60 months, varying based on the type of product or equipment and the useful life of such product or equipment.
The primary source of repayment for this product is cash flows from the borrower, and, therefore, we evaluate the borrower’s repayment ability before granting such loans. We also evaluate the type of asset for which the financial lease is granted in the event the borrower is unable to repay the loan. If the borrower is unable to repay the loan, we may sell the asset to recover all or part of the outstanding amount of the loan.
The primary risk associated with our financial leases is that the borrower may default on the loan and the collateral may be insufficient to recover the outstanding amount of the loan. We mitigate this risk by: (i) granting financial leases in respect of new assets that have historically shown adequate resale values, (ii) requiring a down payment of 10% to 30% (depending on the repayment ability of the customer); and (iii) for certain types of assets, requiring a commitment from the supplier of the asset to buy or find a buyer for the asset in the event of the borrower’s default. We set floating or fix interest rates for our financial leases based on prevailing market rates.
MortgageAutomobile and Other Secured Loans
We grant secured loans
to finance automobile purchases. The Bank grants inflation adjusted mortgage loans. The Bank setsmaximum amount of our automobile loans is Ps.5,000,000 with a fixed interest rate butmaximum term of 60 months. Before granting this automobile and other secured loans, we evaluate a customer’s ability to meet monthly payment obligations by taking into account the remaining capital is adjusted on a monthly basis according to the UVA monthly evolution. Therefore, the loan has index-linked capital payments (the value of the capitalprospective borrower’s earnings, minimum credit rating and the installment is updated by inflation). The Bank evaluates the creditworthiness of the client based on creditfinancial and legal track records, a minimum credit score and income level. The loan is granted based on a loan-to-value ratio up to 75% of the property value (with a unlimited maximum amount). The terms of the mortgage loans are from 12 months to 360 months.
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Foreign trade loans
Foreign trade loans are granted to finance exports and imports through pre-financing and financing loans for exports, international factoring and letters of credit for imports.
In the case of pre-financing and financing loans for exports, we analyze the repayment ability of both the borrower and its foreign client. Specifically, we ensurebackground. We also require that the credit line that we grant is tailored tovehicle serve as collateral in the borrower’s historical export levels and projected export levels (based on contracts, purchase orders and other documentation).event of a payment default by the borrower. We generally grant pre-financing and financing loans for exports with terms ranging from 90 to 180 days, depending on the transaction and such loans are solely denominated in U.S. dollars. Interestset interest rates for pre-financing and financing loans for exports dependbased on the term of the automobile loan and rangea loan-to-value ratio ranging from 2%50% to 7.5%.
In75% of the casevalue of lettersthe vehicle at the time of credit for imports, we face a risk that we will have to pay for the imports in the event that the borrower defaults. To mitigate this risk, we ensure that the loan is granted once the merchandise to be imported can be shipped and the relevant shipment documentation can be issued. Generally, the term of our letters of credit do not exceed one year. We receive a fee for the letters of credit we issue instead of charging interest.sale.
Corporate unsecured loansUnsecured Loans
Corporate financial loansFinancial Loans. Our corporate financial loans finance short term working capital needs of up to one year or medium termmedium-term working capital needs of up to three years for businesses that require monthly or periodic amortization. These loans are granted to customers with annual revenues in excess of Ps.150Ps.300 million. We evaluate the customer’s repayment ability using the general criteria and analysis for corporate customers. We also analyze the following factors: the shareholders and management of the borrower, the financial and economic environment, regulatory risk and projected cash flow for the entire period during which the loan will be outstanding to ensure that the borrower will be able to comply with the scheduled payments under the loan. We take into account the potential effects that economic variables such as exchange rate volatility and inflation could have on projected cash flow. We set either a floating or fixed interest rate for our corporate financial loans based on the creditworthiness of the borrower’s business and the term of the loan.
Loans to small businessesSmall Businesses. Our loans to small businesses are originated at the Bank’s branches based on a policy that requires adequate credit and legal history, a minimum credit score and a certain level of revenues. Our loans to small businesses finance the working capital needs of businesses with annual revenues of up to Ps.150Ps.300 million. The maximum loan assistance that we provide is Ps.12.5 million for unsecured loans and Ps.16.6 million for factoring services. Our general policy is that our small business loan portfolio be composed 50% of unsecured loans and 50% of secured loans and factoring transactions. The Bank’s branches may grant up to Ps.2.5Ps.9.3 million of unsecured loans and Ps.3.3Ps.18.7 million of factoring transactions, and any excess amount must be evaluated by the Bank’s specialized credit analysis unit. We set either a floating or fixed interest rate for our loans to small businesses based on the creditworthiness of the
47
borrower’s business and the term of the loan. The interest rates for our loans to small business are generally higher than the interest rates for our corporate financial loans reflecting the difference in size and revenues of the businesses.
Overdrafts
We grant overdrafts to businesses to finance working capital needs and ordinary course business activity. We assess whether the borrower has the ability to meet its payment obligations over a maximum 180-day period, placing an emphasis on the borrower’s line of business. Businesses with operations that do not produce short-term revenues or with cyclical operations generally must seek other types of financing. We are able to anticipate a customer’s ability to repay overdrafts by analyzing daily accounts payable, accounts receivable, credits and fluctuations. We set interest rates for our overdrafts on a monthly basis.
AutomobilePersonal Loans and other secured loans
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We grant secured loans to finance automobile purchases. The maximum amount of our automobile loans is Ps.1,500,000 with a maximum term of 60 months. Before granting this automobile and other secured loans, we evaluate a customer’s ability to meet monthly payment obligations by taking into account the prospective borrower’s earnings, minimum credit rating and financial and legal background. We also require that the vehicle serve as collateral in the event of a payment default by the borrower. We set interest rates based on the term of the automobile loan and a loan-to-value ratio ranging from 50% to 75% of the value of the vehicle at the time of sale.
Personal loans and credit card loans (fromCredit Card Loans (within the Personal and Business Banking segment)
Our Personal and Business Banking segment originates loans based on scoring systems and policies specifically tailored to ourPlan Sueldoservices, pension and retiree services and general clientele. For a detailed discussion of the Bank’s credit application process, credit monitoring and review process and the risks associated with personal loans and credit card loans,loans. See “—Credit Risk Management—Policy—Banco Supervielle S.A.”
Retail banking in Argentina is heavily regulated, including with respect to maximum interest rates and fees. See “Item 4.B“Item 4.B. Business overview—Argentine Banking Regulation—Overview—Liquidity and Solvency Requirements—Interest Rate and Fee Regulations.Regulations.” We tailor our policies related to issuing and granting loans and credit to comply with these regulations.
Personal loansLoans and credit card loans (fromCredit Card Loans (within the Consumer FinancingFinance segment)
The personal and consumer loans offered by CCFIUDÚ and Tarjeta are unsecured products for personal use and are offered to the middle and lower-middle-income sectors. Due to the nature of these products, our pricing structure is high compared to the Argentine financial system.
To mitigate the risks associated with personal and consumer loans, the initial term of any such loan is limited during the first loan, and performing borrowers may receive offers to extend the terms of the loans.
One of the principal sales channels for personal and consumer loans is through telemarketing typically targeting credit card customers or customers that took out a loan previously with CCF,IUDÚ, Tarjeta or another company and performed in accordance with the terms of such loan.
The maximum amount of our personal and consumer loans is Ps.0.2Ps.10 million, while the average loan as of December 31, 20192021 was Ps.32,500.Ps.91,880. The average term of our personal and consumer loans as of December 31, 20192021 was 1724 months, with a maximum of 6084 months. The loans are granted at a fixed rate and are paid back in monthly installments and amortized based on the French amortization system, which consists of equal monthly installments amortized in a manner in which (i) interest payments are higher at the beginning of the loan and decrease over the life of the loan, while (ii) principal payments are lower at the beginning of the loan and increase over the life of the loan.
Loan portfolio - Credit Risk Management
We define credit risk as the risk that arises from losses and/or a decline in the value of our assets as a result of our borrowers or counterparties defaulting on or not complying with their obligations. Credit risk includes any event that may cause a decline in the present value of our loans,a loan, but does not necessarily require the counterparty’s default. This risk also encompasses liquidity risk, which exists whenever a financial transaction cannot be completed or generate liquidity in accordance with an agreement. The magnitude of credit risk losses hinges upon two factors:
the amount of exposure at the time of the default; and |
the amounts recovered by the Bank based on the payments received from the borrower and the execution of risk mitigation policies, such as guarantees that may limit losses. |
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With regard to risk appetite, the Credit Risk Managementmanagement is the process that leads to the identification, measurement or evaluation, mitigation and monitoring or follow-up of the risk, as considered in the entire credit cycle, since its origin until collection, recovery or loss, and in case of non-compliance. Likewise, the definition of the Bank’s risk appetite is generated through the development and monitoring of indicators, with their respective thresholds and limits for Credit Risk.
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Our credit risk management policies also monitor concentration risk. This risk arises when the concentration of exposure has the capacity to generate enough losses (relating to results of operations, minimum capital requirements, assets or global risk levels) to impact the entity’s financial strength or capacity to maintain its operations and significantly change the entity’s risk profile. In 2020 we developed and implemented a portfolio limits policy to fix maximum portfolio concentration ratios based on economic sectors and customer credit rating. Economic sectors were classified as Very High, High, Mid and Low, according to their risk perception. These sectors are regularly monitored to confirm or change the classification according to their evolution.
TheOur Board of Directors approves credit risk policies and strategies presented by the Risk Management Committee, in consultation with the Credit team, the Legal Affairs team and the Corporate Banking team, and in accordance with Central Bank regulations. The Bank’s credit risk policies and strategies seek to develop commercial opportunities and business plans, while maintaining a prudent level of risk. The credit policy is tailored to corporations and individuals from every segment.
The pillars of the Bank’s credit policy are based on an analysis of the client’s cash flow and its repayment capacity.
The Bank focuses on supporting companies belonging to sectors with great potential which tend to be successful in their activity. Within the range of credit products offered for the corporate business segment, the Bank aims to develop and lead the factoring and leasing market, as well as being leader in foreign trade.
Within the corporate banking segment, we seek to have a solid proposal for the SMEs and middle-market companies seeking to maintain proximity with customers through customer service centers, agreements with customers throughout their value chain and providing agile responses through existing credit processes.
With regard to individuals, in addition to the payroll customers and senior citizens, the retail banking is specially focused on entrepreneurs and SMEs as well as the Identité customers
We believe that loan portfolio diversification is a staple of the Bank’s credit risk management objective of distributing risk appropriately by economic segment, client type and loan amount. The same importance is given to the risk mitigation mechanisms that ensure adequate risk coverage, such as the use of credit instruments in the corporate segment that cover substantial amounts of the loan. Finally, we continuously use early detection processes to monitor the performance of the loan portfolio.
Credit Risk Measuring Models
The Bank relies on several models that estimate the distribution of possible losses arising out of the loan portfolio to calculate expected losses and minimum capital requirements. These models include:
Credit risk measurement models.The Bank’s models estimate distribution of possible loan portfolio losses, which depend on counterparties’ default (probability of default (“PD”)), as well as the exposure assumed with them (EAD—Exposure at the time of default) and the proportion of each unfulfilled loan that the |
Expected Losses Calculation.This is calculated based on the results of the PD, EAD and LGD models. The expected loss calculation analyzes portfolio information to estimate the average value of loss distributions for a one year time horizon in the case of performing loans and for a lifetime horizon in the case of underperforming or non-performing loans. |
Minimum Capital Requirement Calculation.This is represented by the difference between the portfolio’s risk value and expected losses within a 99.9% confidence interval for individuals and 99.0% confidence interval for corporate customers. We have two minimum capital requirement models (one for corporate customers and one for individuals), which include the economic capital required for our concentration risk and securitization risk. |
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Allowance for Loan Losses
Grupo Supervielle recognizes an impairment inWe assess on a forward-looking basis the valueexpected credit losses associated to our financial assets measured at amortized cost, debt instruments measured at fair value through other comprehensive income, loan commitments and financial guarantee contracts that are not measured at fair value.
The impairment for expected credit losses is recorded with a charge to the consolidated income statement for the period in which the impairment arises. In the event of occurrence, the recoveries of previously recognized impairment losses are recorded in the consolidated income statement for the period in which the impairment no longer exists or is reduced.
In the case of assets measured at fair value with changes in other comprehensive income, the changes in the fair value due to expected credit losses are charged in the consolidated income statement of the year where the change happened, reflecting the rest of the valuation in other comprehensive income.
As a rule, the expected credit loss is estimated as the difference between the contractual cash flows to be recovered and the expected cash flows discounted using the original effective interest rate. In the case of purchased or originated credit-impaired assets, this difference is discounted using the effective interest rate adjusted by credit rating.
Depending on the classification of financial instruments, which is mentioned in the following sections, the expected credit losses may be over 12 months or during the life of the financial instrument:
With the purpose of estimating the expected life of the financial instrument all the contractual terms have been taken into account (e.g. prepayments, duration, purchase options, etc.), being the contractual period (including extension options) the maximum period considered to measure the expected credit losses. In the case of financial instruments with an uncertain maturity period and a component of undrawn commitment (e.g.: credit cards), the expected life is estimated through quantitative analyses to determine the period during which the entity is exposed to credit risk, also considering the effectiveness of management procedures that mitigate such exposure (e.g. the ability to unilaterally cancel such financial instruments, etc.).
For the purposes of estimating the impairment amount, and in accordance with its internal policies, Grupo Supervielle classifieswe classify its financial instruments (financial assets, commitments and guarantees) measured at amortized cost or fair value through other comprehensive income in one of the following categories:
Normal Risk (“Stage 1”): includes all instruments that |
Normal risk under watchlist (“Stage 2”): includes all instruments that, |
Doubtful Risk (“Stage 3”): includes financial instruments, overdue or not, |
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Significant increase in credit risk
We consider a financial instrument to have experienced a significant increase in credit risk when any of the following conditions exist:
Individuals and Businesses
1.Portfolios between 31 and 90 days past due;
2.The credit application score has deteriorated by more than 30% with respect to the current performance score;
3.Score of behavior less than accepted cut off; or
4.Overlays are incorporated for those groups of the portfolio that are considered to have a higher risk than their historical behavior.
Corporate Banking
1.Portfolios between 31 and 90 days past due
2.Maximum Argentine Central Bank a situation equal to 2
3.Credit Ratings C (Probability of default higher than 30%)
4.Its rating deteriorated by more than two notes from its credit approval rating.
Consumer Finance: 1. Portfolios between 31 and 90 days past due.
Sectoral Analysis – COVID-19 Risk
In virtue of the fact that the internal models are estimated with historical information and the impact of the COVID-19 on local and global economies is ongoing, a sectoral analysis is maintained as an additional definition of the significant risk increase.
In such analysis, companies’ default risk is evaluated according to the type of industry and the impact such companies have suffered in face of the current economic situation, while taking into account their features, seasonal nature, etc.
Finally, the different activities that make up the Bank’s portfolio are classified into four types of risk. They are:
The asset impairment model in IFRS 9 applies to financial assets measured at amortized cost, debt instruments at fair value with changes in other comprehensive income, lease receivables and commitments and guarantees granted that are not measured at fair value.
The impairment represents the best estimation of the financial assets expected credit losses at the balance sheet date, assessed both individually and collectively.
The individually assessed impairment estimate is equal to the difference between the gross carrying amount of the financial instrument and the estimated value of the expected cash flows receivable discounted using the original effective interest rate of the transaction. The estimate of these cash flows takes into account all available information on the financial asset and the effective guarantees associated with that asset.
For the purposes of the collective assessment of expected credit losses, Grupo Supervielle has consistent and reliable internal models. For the development of these models, instruments with similar credit risk characteristics that are indicative of the debtors’ capacity to pay are considered.
The credit risk characteristics used to group the instruments are, among others: type of instrument, debtor’s sector of activity, geographical area of activity, type of guarantee, aging of past due balances and any other factor relevant to estimating the future cash flows.
Grupo Supervielle performs retrospective and monitoring tests to evaluate the reasonableness of the collective estimate.
On the other hand, the methodology required to estimate the expected credit loss due to credit events is based on an unbiased and weighted consideration by the probability of occurrence of a series of scenarios, considering a range of three possible future scenarios which could have an impact on the collection of contractual cash flows, always taking into account the time value of money, as well as all available and relevant information on past events, current conditions and forecasts of the evolution of macroeconomic factors that are shown to be relevant for the estimation of this amount (for example: GDP (Gross Domestic Product), Interest Rate, unemployment rate, etc.).
For the estimation of the parameters used in the determination of the allowance for loan losses (EAD – Exposure at Default, PD – Probability of Default, LGD – Loss Given Default), Grupo Supervielle based its experience in developing internal models for the estimation of parameters both in the regulatory area and for management purposes, adapting the development of the impairment models under IFRS 9.
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4. | Very high risk |
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On this occasion, this additional definition of a significant increase in risk has been applied for the SME and E&P segments, for the very-high and high risk activities (only for the single firm portfolio):
| | |
Very high risk | High risk | |
Real estate | Sports | |
Entertainment | Textile | |
| Public Construction | |
|
The definitionevaluation of default implemented bysignificant credit increases and the calculation of ECL include prospective information. Grupo Supervielle for the purpose of calculating the impairment provision models is based on the requirements of IFRS 9, which considerscarried out a historical analysis and identified key economic variable that a “default” exists in relation to a specific customer/contract when at least one of the following circumstances exists: the entity considers that there are reasonable doubts about the payment of all its credit obligations or that the customer/contract is delinquent for more than 90 days with respect to any significant credit obligation.
Rebuttable presumption thataffect the credit risk has increased significantly when payments are more than 30 days past due for commercial loans is used as an additional, but not primary, indicator of significant risk increase due to the credit evaluation complexity and as a result of studies that show a low correlation of the significant risk increase with this past due threshold. In order to do so other information is taken into account as financial and economic analysis, repayment capacity, among others.
Assets with low credit risk at the reporting date: Grupo Supervielle assesses the existence of significant risk increase in all its financial instruments.
For the estimation of the expected credit losses for each portfolio. Forecasts of these economic variables (“base economic scenario”) are provided on a six-month basis by the prospective information is taken into account. Specifically, Grupo Supervielle considers three prospective macroeconomic scenarios, which are updated periodically,research team at the Bank and offer a better estimated outlook of the economy for a time horizon ofthe next 12 months. The impact of such economic variables on DP and LGD resulted from the statistic regression analysis to understand the impact the changes in these variables has had historically on default rates and LGD components. In addition to the base economic scenario, the research team also provides two potential scenarios together with scenario analysis. The number of other scenarios is defined in accordance with the analysis of the main products to ensure the lineal effect between the future economic scenario and related expected credit losses. The number of scenarios and its features are re-evaluated on a six-month basis, except a situation occurs in the macroeconomic framework that justifies a greater regularity.
Grupo Supervielle considers the following variables for estimating expected credit losses on the different scenarios:
| | | | |
Parameter | Segment | Macroeconomic Indicators | ||
Probability of Default | Personal and Business Banking | Inflation, Wage increase, Economic Activity Estimate, Real | ||
| Corporate Banking | Exchange Rate, Inflation, Wage increase, Real Badlar rate | ||
| Consumer Finance | Estimator | ||
Loss Given Default | All | Inflation, Wage increase |
Country Risk ManagementAtomization of the loan portfolio
CountryAs a result of our risk arises from lossesmanagement policies, we have a diversified loan portfolio. As of December 31, 2021, the top 10, 50 and 100 borrowers represented 14%, 25% and 32%, respectively, of our total loan portfolio, which shows an increase in investments orthe diversification of our loan portfolio, compared to previous quarters.
Atomization of the loan portfolio
| | | | | | | | | | | |
Loan portfolio atomization |
| 4Q21 |
| 3Q21 |
| 2Q21 |
| 1Q21 |
| 4Q20 |
|
%Top10 |
| 14 | % | 19 | % | 17 | % | 17 | % | 17 | % |
%Top50 |
| 25 | % | 32 | % | 29 | % | 31 | % | 30 | % |
%Top100 |
| 32 | % | 38 | % | 35 | % | 36 | % | 36 | % |
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Loan Portfolio breakdown by economic activity
| | | | | | | |
Ps. Change YoY | | | | | | |
|
(In millions) |
| Business Sector |
| Dec 31, 2021 Share |
| Dec 31, 2020 Share | |
28 |
| Families and individuals |
| 48.7 | % | 46.9 | % |
6 |
| Agribusiness |
| 13.5 | % | 14.3 | % |
3,472 |
| Food & Beverages |
| 8.3 | % | 9.3 | % |
-620 |
| Construction & Public works |
| 2.4 | % | 4.1 | % |
-1 |
| Retailer |
| 0.6 | % | 1.9 | % |
2 |
| Wine |
| 3.2 | % | 2.7 | % |
-107 |
| Utilities |
| 2.5 | % | 3.8 | % |
1 |
| Financial |
| 2.5 | % | 2.6 | % |
1 |
| Oil, Gas & Mining |
| 1.0 | % | 0.3 | % |
2 |
| Transport |
| 2.1 | % | 1.2 | % |
2 |
| Chemicals & plastics |
| 1.7 | % | 1.2 | % |
928 |
| Automobile |
| 1.2 | % | 1.0 | % |
775 |
| Machinery & Equipment |
| 1.1 | % | 1.0 | % |
2 |
| Others |
| 11.2 | % | 9.6 | % |
Collateralized Loan Portfolio
As of December 31, 2021, 32% of the total commercial loan portfolio was collateralized, while 78% of the commercial non-performing loans portfolio was collateralized (compared to 80% as of December 31, 2020).
| | | | | | | | | |
| | Entrepreneurs & | | SMEs & Middel | | | | | |
Loan portfolio collaterall |
| Small Businesse |
| Market |
| Large |
| Total |
|
Collateralized Portfolio | | 56 | % | 40 | % | 30 | % | 32 | % |
Unsecured Portfolio |
| 44 | % | 60 | % | 70 | % | 68 | % |
Regarding the Personal and Business Banking portfolio, loans to individuals, corporations or governments, due to adverse changes in a foreign country’s economic, political or social environment. The risk is present in loans granted to non-residents, loans in which the borrower’s or its guarantor’s solvency is significantly tied to another country’s circumstances, investments made abroadpayroll and contracts with foreign service providers.
We believe that the Bank has an adequate framework in place to manage this risk, given the complexitypension clients as of its operations and its exposure to country risk. The Bank has no significant exposure to country risk except for credit lines with correspondents and international factoring. Country risk is a special consideration when granting credit lines and is analyzed on a case by case basis.
We have a Credit House Limit committee which is composed of at least three members of our Board of Directors, one of whom is the ChairmanDecember 31, 2021, represented 67% of the Board. The CEO oftotal loan portfolio to individuals in the Bank, the Chief segment.
Credit Officer (“CCO”) and the Bank’s heads of Retail Banking and/or Corporate Banking and/or Global Markets, are also members. The CCRO acts as chairman of the committee.Policy
The Credit House Limit Committee is the highest authority in our and our subsidiaries’ credit risk decision-making structure with respect to assessing situations in which any credit approval limit is exceeded.
76
a)Banco Supervielle S.A.
The Bank’s Board of Directors sets its credit policy and risk limits, with information from its risk department and the various commercial banking units and in compliance with Central Bank regulations. The credit policy is aimed at taking advantage of business opportunities within the scope and terms of the Bank’s business action plan, while maintaining prudent levels of exposure to counterparty risk. The Bank’s credit policy focuses on companies and individuals of all segments, with a special focus on small businesses, entrepreneurs and SMEs.
The pillars of the Bank’s credit policy include:
Credit Application Process
The credit approval process is designed to facilitate an accurate risks analysis, expedient decisions and complete support information.
Potential customers are interviewed and asked to submit documentation to efficiently evaluate risk. The risk areaCredit department performs a risk evaluation using computer software and issues an opinion on the requested assistance. If credit assistance is deemed feasible, the customer’s application is submitted for approval at the appropriate level, pursuant to credit authority guidelines and depending on the facility amount requested, the term and security.
Applications by prospective retail customers and small businesses are analyzed using an electronic application. Prospective corporate customers are evaluated on a case-by-case basis. There are no pre-approved lines of credit, except for individuals who may obtain a pre-approved line of credit based on their maximum debt burden ratio.
Credit Monitoring and Review Process
It is the Bank’s policy to continually track and monitor risk in order to anticipate or foresee changes in the macroeconomic environment and anomalies that may affect the course of customers’ activities and the repayment of loans. The Management and Credit Administration DepartmentRisk department traces alert indicators for signals that may affect credit collection. Signals could be late payments of more than 30 days, alerts from
52
credit bureaus, lawsuits from third parties, customers or suppliers and bounced checks. Action plans are in place to anticipate or mitigate potential nonperformance situations. The Credit and Risk Departmentsdepartment tracks alert indicators by:
analyzing loan portfolio evolution; |
verifying compliance with credit regulatory requirements; |
reviewing the factoring portfolio on a daily basis by operation, maturity, concentration, direct and indirect risk; |
verifying and analyzing customer arrears; |
77
detecting market alerts, customer behavior in the market and the financial system, lawsuits, etc.; |
proposing action plans; |
involving the |
reporting customer alerts to officials and managers; and |
establishing allowances for estimated loan losses. |
Credit Approval Process
The following chart describes the levels of approval for the different types of loans:
Credit Approval Limit (in millions of Pesos) | ||||||||
Unsecured | Secured | |||||||
House Limit (Senior Committee + Board of Director’s Chairman) | Total Maximum Approval Limit | |||||||
Credit Approval | Senior Committee (Credit Manager + Commercial Coordinator Manager + CEO + Credit Coordinators + One Member of the Board of Directors) | 300 | 300 | |||||
Committee | Coordinating Officers Committee (Credit + Corporate Banking) | 80 | 140 | |||||
Corporate Banking | Regional Committee (Credit Manager or Credit Officers + Commercial Manager) | 40 | 70 | |||||
Retail Financing | Small Businesses (Retail Credit Manager + Commercial Manager) | 25 | 35 | |||||
Small Businesses (Retail Credit Manager or Credit Supervisors) | 25 | 35 | ||||||
Retail Automatic credit analysis process | 1.5 | — | ||||||
Retail Manual credit analysis process | — | 10 | ||||||
The Risk Management Committee has the following responsibilities regarding credit policies:
| | | | | | |
| | | | Credit Approval Limit | ||
| | | | (in millions of Pesos) | ||
| | | | Unsecured |
| Secured |
| | | | Total Maximum | ||
|
| |
| Approval Limit | ||
Senior Committee |
| COO, Chief Risk Officer (as Chairman of the Committee); |
| |
| |
|
| CEO (as Vice chairman of the Committee); | | Limitless | | Limitless |
|
| Deputy CEO | | | | |
|
| Credit Executive Manager middle-market & corporates; | | | | |
|
| Head of Corporate Banking; | | | | |
|
| Manager of SMEs business | | | | |
|
| Head of Treasury and Global Markets; | | | | |
Junior Committee |
|
|
|
|
|
|
|
| Chief Risk Officer (as Chairman of the Committee); |
| 650 |
| 650 |
|
| Deputy CEO | | | | |
|
| Manager of SMEs business; | | | | |
|
| Credit Executive Manager middle-market & corporates; | | | | |
|
| Executive Manager Corporate Banking Bs Aires and Interior; | | | | |
Manager | | |
| 350 |
| 350 |
Team Leaders | | |
| 180 |
| 180 |
| | | | | | |
Relationship officers | | |
| 90 |
| 45 |
Recovery Process
The Bank’s Recovery Area handles the collection of past due credits. Collections are handled by different units for individual and corporate customers.
With respect to individual customers, the Recovery Area begins a collection process when credits become past due by three days. The recovery team issues automatic notice actions from the 3rd3rd to the 8th8th past due days in order to warn the customers. After this period, the collection of the overdue credit is handled by a third-party collection agency. After 150 days, the Recovery Area determines whether the past due credit should be sent to a different collection agency or it made subject to legal proceedings.
78 53
In the case of corporate clients and SMEs, payment defaults are analyzed on a case-by-case basis, taking into consideration the loan amount and the number of days in arrears, among other factors. The Early Delinquency area of the Recovery Management once a week monitors clients overdue more than 15 days. As the delay progresses, the members of that team assist the commercial officers and join the direct management of the case for its solution: structuring, extension of terms, refinancing with the aim of improving the debt profile and obtaining better guarantees. If the SMEs and corporate clients’ obligatios have been due for more than 90 days, or if they request their Extrajudicial Preventive Agreement, Bankruptcy or reorganization process (Concurso Preventivo) or there are indications of insolvency, they enter under the orbit of the direct management of the Recovery team that determines whether to treat the case internally or refer ir to a law firm. The Recovery Department can participate in out-of-court and judicial settlement negotiations and approve debtor payment proposals in amounts for up to Ps. 10Ps.10 million. Likewise, the Recovery Department meets in forums
b) | IUDÚ and Tarjeta |
In 2020, IUDÚ and Tarjeta made progress with the commercial areas to review the totality of cases overdue for more than 30 days. In the case of SME the forums are biweekly and in the case of corporate clients they are monthly. In these forums, the commercial, credit, or recovery areas can present proposals to the Coordinating Committee on how to deal with loan defaults that are beyond their reach.
This process allows the Recovery Department to manage risk earlier and also take steps such as refinancing a loan, reducing interest, or improving a guarantee.
The Corporate Committee meets every month to review the past due credits after 35 days, while the Retail SME Committee meets biweekly to review the outstanding dues after 15 days. This process allows the Corporate Recovery department to manage risk earlier, and also to take actions such as refinancing a loan, reducing the interest or using a guarantee.
The Corporate and Retail SME Committee, jointly with the Corporate Recovery department, can submit proposals to the Coordinating Officers Committee on how to address loan defaults that are outside their scope.
CCF and Tarjeta
CCF and Tarjeta carried out a reengineering of the application assessment process to update its processes and assessment systems. This reengineering allowed CCFIUDÚ and Tarjeta a faster and more flexible implementation of its credit policy. The assessmentnew evaluation process continues to be centralizedsimplified the application load and seeks to automatize and streamline mostimproved controls using the information available fromin the credit bureaus (such as Equifax) or,Central de Deudores (“Debtors Central”).bureaus. It will seek to deepen the control automation strategy, minimizing risks while providing a more agile service to our clients.
In the same period, changes were implemented in origination policies to ensure the ability to repay loans in all segments and especially in those most exposed to the macroeconomic situation generated by the pandemic.
However, the management of credit policies was included in the Integral Risk Committee, securing a more encompassing view of the assessment of said policies.
Since late 2018 changes were implementedCollections management is carried out by a specialized team and is carried out with specific processes for each instance defined by us.
During 2021, IUDÚ and Tarjeta continued working from collections on the review of sweep strategies, optimization of collection tools and review of predictive models to achieve a better approach to clients with non-compliance with their obligations, achieving a more assertive and effective management.
Information Security
The information security department of Grupo Supervielle is responsible for guaranteeing adequate information security management by establishing policies, procedures, standards, and controls related to the originationsecurity of its infrastructures, digital channels, protection of company assets, information and cross selling policies intended to improve credit portfolio and guarantee loan repayment capacity in all segments, particularly those more exposed to the macroeconomic context’s uncertainty. In addition, the internal behavior scoring model used in cross selling activities was improved and updated, and an improved modelmeans of payment, applying a holistic approach based on threat intelligence.
Grupo Supervielle’s information security strategy is being developed for the evaluation of leads and customers without the required length of bank-customer relationship.
Income prediction models provided by credit bureaus were added to the existing processes, thus improving the repayment capacity assessment and limiting customer indebtedness.
Taking into account the increase of the nonperforming portfolio ratio during 2018, a thorough review was conducted and changes were implemented in strategies and collection teams so as to offer adequate assistance to nonperforming customers. Statistical tools were added to set collection management priorities, introducing data enrichment processes and improving collection agencies’ allocation and control tools.
As a result of all those changes and adjustments in credit and collection processes, indicators of early non-performing loans and non-performing portfolios stabilized during the second half of 2019.
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Information Technology and Operations
During 2019, the Corporate Technology and Operations Management of the Bank continued adapting its functional scheme to its strategy, in line with the business, and enhancing the existing capacity.
The area’s strategic planning was updated, with a three-year plan, incorporating digital capacities as a way to achieve an external differentiation and consolidate the Banks’s positioning in the domestic market. The guidelines of the Corporate Management of Technology and Operations result from the strategic lines defined by the business. Such guidelines include the evolution of technology and systems (through evolution of their technological architecture to ensure an efficient processing model with adequately managed and contained technological risks), acceleration of the digital transformation (implementing the capacities required to build a new digital business); excellence in operational processes (putting up a technological operational model based on the combination of different widely disseminated models, which allow us to select the best practices ensuring an efficient management of technological services and supporting the transformation of operational processes) and the searchsecurity practice for a high performance organization (setting up a result oriented organization with clear cut roles and responsibilities and service vision).
This update on the strategic planning was done on the basis of two pillars: execution of plans related to business strategic projects (initiatives executed in line with the Bank’s strategies) and the definition and execution of strategic IT plans that pave the way for the evolution in areas such as technological infrastructure, applications, service operation, quality and governance.
The business’ strategic projects were grouped in 5 programs: Cash Management, Digital Banking, Service Model, Senior Citizens, Commercial Platform and Efficiency. Within these programs the following projects are worthy of mention: a technological solution was developed fore-cheque management, implementation continued of a new queue management solution, advance was made on Plan Sueldo onboarding programs and on the new scoring and offer system and a new tool was implemented for campaign management.
The strategic IT projects are grouped in five chapters: Applications, Quality, Technological Infrastructure, Service Operation and Security. They include the new reengineering of the entity’s batch process, launching of API for cards, individuals, signatures and powers of attorney, reengineering of ESB services, improvements in credit card app, migration of all terminals to Windows 10, improvements in networkingeach situation, and in data architectureturn provide the best cost-benefit solution to mitigate the risk exposure of each of our subsidiaries. These models are: (i) Zero Trust Architecture/Least Privilege, (ii) Defense In Depth, and implementation of a new tool for application.
CCF
During 2019, the Information Technology area of CCF,(iii) Security by Design. These models have been aligned with the corporate general strategy, worked onbest industry practices, which are consolidated in the explorationCenter for Internet Security Controls, which are periodically reviewed to determine potential cybersecurity gaps that need to be remedied.
During 2021, we have reinforced some measures to protect the information used and implementationstored by Grupo Supervielle and the assets that support our business processes. These measures are aimed at (i) guaranteeing the inclusion of new technologies to offer a competitive, innovativeinformation security from the beginning of projects (security in APIs, DevSecOps role, Cybersecurity Center of Excellence and flexible value proposition, and started transitioning to digital transformation,Security Champions, among others), (ii) guaranteeing the continuity of security operations through the implementation of new platforms, appsstate-of-the-art antivirus, the renewal of insurance against cybersecurity events and processes.digital attacks on Grupo Supervielle, as well as the implementation of a 7x24 SOC monitoring service, (iii) improving customer authentication and access control services related to electronic channels from a security and user experience perspective, and (iv) using biometrics to carry out transactions.
The creation
Grupo Supervielle continues to carry out training and awareness initiatives on cybersecurity and privacy matters for its employees and customers, and the society, through electronic channels. Some of the Digital Strategy area, focused on onboardingtopics covered in these initiatives include personal information protection, secure password management, phishing, and other cyberattacks.
Cybersecurity
Ensuring effective protection of our assets and customer experience, was keydata is essential for our business. During the consumer segment.
Thus,COVID-19 pandemic, the “Mobile” app continued evolving, offeringnumber of cybersecurity attacks performed through email, short message service, instant messaging systems and other social networks increased. As cyberattacks evolve and become more sophisticated, companies strengthen their prevention and monitoring efforts and adopt new measures to mitigate cybersecurity risks, such as those related to remote work security. Our system monitoring capabilities have been reinforced, with special attention to critical assets that enhance experience, enabling new servicessupport business processes to prevent the materialization of threats and, customer service models (100% digital).
Digital Transformation
In 2019, we have made significant progress on Digital Transformation. Increasingly, customers wantwhere appropriate, to identify and expectrespond immediately to engage with us anytime from anywhere.any security incident that may occur. Our digital strategy is aimed at responding to that demand. We have a three-prongued approach:
80 prevention, detection,
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In April 2019, the COO of the Bank was appointed. The COO leads the Bank’s digital transformation, ensuring its adequate implementation organization-wide. Digital transformation involvesand response capabilities have also been strengthened through the use of new working methodologies, new technologiesintegrated information sources, enhanced analytical capabilities, and automated platforms. For example, our cybersecurity SOC allows us to detect and respond to cyberattacks performed on our users and our infrastructure by combining information on cyberthreats. In addition, our threat intelligence service proactively detects cyberattacks against our key executives and our infrastructure, as well as data leaks, among others.
The main objective of these measures is to ensure an immediate and effective response to any security incident that occurs through the coordination of the different business and support areas involved to reduce the possible negative impact and, where appropriate, report said incident in a strong cultural changetimely manner to the corresponding supervisory or regulatory authorities.
Data Protection
During 2021, we adopted certain measures within the organization. Agile methodologiesZero Trust model, which restricts our employees’ access only to such matters they are implementedworking on, related to data protection matters to ensure that our information assets are duly protected against cyberattacks, electronic threats or unauthorized use of data by limiting the use of such assets to their intended purposes and by controlling the access to such assets. These measures were adopted according to our established security guidelines.
Competition
Over the last decade, and increasingly over the past two years, fintech startup technology providers have disrupted financial businesses in response to current needs, where the willingness to changemost innovative ways and have fundamentally changed the prompt delivery of value are a competitive advantage. Under this methodology, independent and highly efficient work teams are formed with short turnaround times.
Digital Innovation Developments
The strong belief that Fintech capabilities have a direct impact on the “customer centric” culture boosted the creation of theFondo Corporativo de Capital Emprendedor (Fideicomiso Fintech Supervielle I),way in which allows the Bank to partner with Fintech companies (digital solutions applied to finance) and Insurtech companies (digital solutions applied to insurance) which are within the strategic verticals of Grupo Supervielle. The goal is double fold: to generate a financial profit from investments madeservices and to create commercial synergies to add mutual value.
With the vision to create incrementalproducts are created. Digitization offers new business opportunities forand new usage options, but it also intensifies competition, as fintech platforms are increasingly entering the companies ofmarket with innovative digital business models and are transforming the portfolio and of Grupo Supervielle, four investments were made: 123Seguro, an online car insurance broker; Increase, a financial solutions platform for stores and businesses; Avancargo, a Company that uses technology to facilitate cargo freight contracts to match demand and supply; and more recently, in January 2020, Blended, a comprehensive school management platform for kinder, primary and secondary levels.
The Bank continues participatingsector in the Arfintech fund together with another 7 local capital Bankslong term. Fintech platforms are characterized by their agility, customer friendliness and participates in investment rounds;innovative strength forcing the Arfintech fund portfolio already has 10 companies in the insurance, payment, security, SMEs and blockchain segments.traditional banking industry to adapt quickly.
Bolsillo Digital SAU
With the aim of broadening the portfolio of product and services offered by Grupo Supervielle, we have created Bolsillo Digital S.A.U. This company is a fintech that belongs to the collecting payment’s industry. It will design, program and develop products and services related to the management and processing of payments, offering payment solutions to retail businesses and individuals. Mobile POS and mobile wallet will be the first products to be launched during 2020. Commercial efforts will be directed, initially, to the Cuyo Region where the Bank is one of the main market players.
Bolsillo Digital will enrich Supervielle’s value proposition in those client segments, and will also seek to establish new sales alliances & partnerships with social, educational and public institutions based on possibilities and flexibility of mobile payments and wallet platforms.
Competition
RetailTraditional Banking Corporate Banking and Treasury
The Argentine financial system remains highly fragmented compared to the rest of Latin America.
As of December 31, 2019,June 30, 2021, the Argentine financial system had 7879 financial entities, of which 6364 were banks, of which 13 were public and 50 private).51 privates. In terms of ownership, as of December 31, 2019,June 30, 2021, while the participation of the public sector was 20.6%20%, the portion of banks controlled by Argentine private entities represented 54.0%64% and the portion of banks controlled by foreign entities represented 25.4%16%.
As of December 31, 2019,2021, the number of financial companies operating in this segment was 15, six of which were controlled by Argentine entities and nine of which were controlled by foreign entities, and only one credit union remained.15.
Digital Banking
In recent years, followingAccording to the main global trends, digital banking begins to develop in Argentina. As of December 31, 2019, the main digital banks were: Wilobank, Brubank, Rebanking, Openbank, Naranja, Wenance and Ualá. The main features of each are outlined below:
(1). Wilobank offers credit cards even to unbanked people. It operates with a virtual card that will replace Mastercard Contactless. (2). Brubank offers savings accounts in Pesos and U.S. dollars and loans and transfers from an app. It uses contactless technology and allows purchases made with debit card to be paid in installments, allowing the partition of the expenses. (3). Rebanking aims at the lowest economic sectors with a corresponding banking offer. (4) Openbank, ownedinformation published by the Santander Group, offers savings accounts, credit cards, loans and facilitates investments. In Spain it already has more than one million customers. (5). Naranja, owned by Banco Galicia, has more than 1 millionCentral Bank, as of digital users. This company developed an app that enables merchants and professionals billing by using a dongle. (6). Wenance has two platforms: one for people who are in remote areas (not near branches) and the other one is aimed at unbanked people, enabling them to operate through the mobile phone. (6). Ualá is associated with the prepaid MasterCard and allows people to pay for services and bill payment service by scanning a barcode from the mobile phone.
Competitive Framework
WeJune 30, 2021 we were one of the top 10 private banks in the Argentine financial system with respect toin terms of outstanding amount of loans and deposits. In terms of private deposits, assets and equitywe had an estimated market share of 4.1% as of December 31, 2019, as presented inJune 30, 2021, ranking ninth among the following tables (figures are expressed in original currency and not adjusted for inflation):
As of December 31, 2019 | ||||||||
Total Assets | ||||||||
(in millions of Pesos) | Share of Total (%) | |||||||
Banco Santander Río S.A. | 621,110.3 | 15.2 | % | |||||
Banco de Galicia y Buenos Aires S.A. | 596,094.4 | 14.6 | % | |||||
BBVA Banco Francés S.A. | 431,493.2 | 10.6 | % | |||||
Banco Macro S.A. | 425,324.1 | 10.4 | % | |||||
HSBC Bank Argentina S.A. | 298,800.6 | 7.3 | % | |||||
Credicoop Cooperativo Limitado | 232,241.3 | 5.7 | % | |||||
ICBC S.A. | 224,501.6 | 5.5 | % | |||||
Citibank N.A. | 189,245.0 | 4.6 | % | |||||
Banco Patagonia S.A. | 188,176.2 | 4.6 | % | |||||
Banco Supervielle S.A. | 138,034.4 | 3.4 | % | |||||
Nuevo Santa Fe | 93,537.2 | 2.3 | % | |||||
Banco Hipotecario S.A. | 83,065.1 | 2.0 | % | |||||
Itau Argentina | 80,362.2 | 2.0 | % | |||||
Others | 486,876.9 | 11.9 | % | |||||
Total Private Banks | 4,088,862.5 |
Source: Central Bank
84
As of December 31, 2019 | ||||||||
Total Loans | ||||||||
(in millions of Pesos) | Share of Total (%) | |||||||
Banco de Galicia y Buenos Aires S.A. | 302,307.5 | 18.3 | % | |||||
Banco Santander Río S.A. | 266,431.1 | 16.1 | % | |||||
Banco Macro S.A. | 218,772.0 | 13.3 | % | |||||
BBVA Banco Francés S.A. | 184,200.4 | 11.2 | % | |||||
HSBC Bank Argentina S.A. | 107,099.7 | 6.5 | % | |||||
ICBC S.A. | 94,123.4 | 5.7 | % | |||||
Banco Patagonia S.A. | 83,241.0 | 5.0 | % | |||||
Banco Supervielle S.A. | 78,851.4 | 4.8 | % | |||||
Itau Argentina S.A. | 40,261.6 | 2.4 | % | |||||
Banco Hipotecario S.A. | 39,013.4 | 2.4 | % | |||||
Credicoop Cooperativo Limitado | 37,665.6 | 2.3 | % | |||||
Citibank N.A. | 33,115.8 | 2.0 | % | |||||
Nuevo Santa Fe | 32,975.1 | 2.0 | % | |||||
Others | 132,849.7 | 8.0 | % | |||||
Total Private Banks | 1,650,907.7 |
Source: Central Bank
As of December 31, 2019 | ||||||||
Total Deposits | ||||||||
(in millions of Pesos) | Share of total (%) | |||||||
Banco Santander Río S.A. | 474,903.3 | 17.2 | % | |||||
Banco de Galicia y Buenos Aires S.A. | 397,839.6 | 14.4 | % | |||||
BBVA Banco Francés S.A. | 293,411.8 | 10.6 | % | |||||
Banco Macro S.A. | 262,383.5 | 9.5 | % | |||||
HSBC Bank Argentina S.A. | 219,362.3 | 7.9 | % | |||||
Credicoop Cooperativo Limitado | 184,876.4 | 6.7 | % | |||||
ICBC S.A. | 128,485.1 | 4.6 | % | |||||
Citibank N.A. | 119,830.1 | 4.3 | % | |||||
Banco Patagonia S.A. | 119,535.4 | 4.3 | % | |||||
Banco Supervielle S.A. | 89,737.1 | 3.2 | % | |||||
Nuevo Santa Fe | 69,869.9 | 2.5 | % | |||||
Itau Argentina | 48,359.3 | 1.7 | % | |||||
Banco Comafi S.A. | 44,226.1 | 1.6 | % | |||||
Others | 310,825.5 | 11.2 | % | |||||
Banco Santander Río S.A. | 474,903.3 | 17.2 | % | |||||
Total Private Banks | 2,763,645.4 |
Source: Central Bank.
When consolidated with CCF, we were one of the top fivetotal private banks in the Argentine financial system with respect tosystem. In terms of total loans, we had an estimated market share of 4.5% as of June 30, 2021, ranking eighth among the total private banks in the Argentine financial system. In terms of personal loans, as of December 31, 2019, as presented2021 we had an estimated market share of 4.3% among the total financial institutions. Additionally, in the following table (figures are expressed in original currency and not adjusted for inflation):
85
As of December 31, 2019 | ||||||||
Personal Loans | ||||||||
(in millions of Pesos) | Share of total (%) | |||||||
Banco Macro S.A | 55,586.5 | 23.2 | % | |||||
Banco Santander Río S.A. | 26,564.9 | 11.1 | % | |||||
Banco de Galicia y Buenos Aires S.A.U. | 22,281.1 | 9.3 | % | |||||
BBVA Banco Francés S.A. | 19,969.3 | 8.3 | % | |||||
Banco Supervielle S.A.(1) | 16,844.5 | 7.0 | % | |||||
Nuevo Banco de Santa Fe | 13,781.9 | 5.8 | % | |||||
Banco Patagonia S.A. | 8,388.8 | 3.5 | % | |||||
Nuevo Banco de Entre Rios | 7,259.4 | 3.0 | % | |||||
Banco Hipotecario S.A. | 6,305.4 | 2.6 | % | |||||
ICBC S.A. | 5,644.8 | 2.4 | % | |||||
HSBC Bank Argentina S.A. | 5,464.5 | 2.3 | % | |||||
Otros | 51,470.9 | 21.5 | % | |||||
Financial Private System | 239,562.0 |
Source: Central Bank.
We were oneterms of the top five private banks in the Argentine financial system with respect to leasing as presented in the following tabletransactions, we had a market share of approximately 14.2% as of December 31 2019 (figures are expressed in original currency and not adjusted for inflation):2021.
As of December 31, 2019 | ||||||||
Leasing | ||||||||
(in millions of Pesos) | Share of total (%) | |||||||
Banco Comafi S.A. | 3,972.4 | 24.7 | % | |||||
Banco Supervielle SA | 3,186.7 | 19.9 | % | |||||
Banco de Galicia y Buenos Aires S.A. | 2,332.2 | 14.5 | % | |||||
BBVA Banco Francés S.A. | 1,660.2 | 10.3 | % | |||||
HSBC Bank Argentina S.A. | 1,191.9 | 7.4 | % | |||||
ICBC S.A. | 610.7 | 3.8 | % | |||||
Credicoop Cooperativo Limitado | 521.4 | 3.2 | % | |||||
Banco Patagonia S.A. | 509.1 | 3.2 | % | |||||
Banco Santander Río S.A. | 479.9 | 3.0 | % | |||||
Citibank N.A. | 352.0 | 2.2 | % | |||||
Others | 5,209.2 | 32.4 | % | |||||
Total Private Banks | 16,053.3 |
Source: Central Bank
The Bank, when consolidated with CCF, ranked second among private banks in the Argentine financial system with respect to MasterCard active accounts as of December 31, 2019 as presented in the following table:
As of December 31, 2019 | ||||||||
MasterCard active accounts with billing statement | ||||||||
1 | Banco de Galicia y Buenos Aires S.A | 10.3 | % | |||||
2 | Banco Supervielle S.A.(1) | 9.3 | % | |||||
3 | BBVA Banco Francés S.A. | 8.2 | % | |||||
4 | Banco Macro S.A. | 6.0 | % | |||||
5 | Banco Patagonia S.A | 5.7 | % | |||||
6 | HSBC Bank Argentina S.A. | 4.8 | % | |||||
7 | Industrial and Commercial Bank of China (Argentina) S.A. | 3.6 | % | |||||
8 | Banco Itaú Argentina S.A | 1.9 | % | |||||
9 | Banco Columbia S.A. | 1.9 | % | |||||
10 | Banco Comafi S.A. | 1.2 | % |
Source: First Data Cono Sur S.R.L.
The Bank faces a high degree of competition in virtually all core financial products with respect to pricing (interest rate or fee) and term. The Bank’s strategy in theto face of this competition is to maintain aggressive business policies, to differentiate itself with respect toits product offering and customer service from other financial institutions, and to redesign its processes forin order to achieve greater sales productivity.
Notwithstanding this competitive challenge, our growth strategy, for growth, both organic and through acquisitions, has resulted in an increase in our financial system market share (excluding public banks) since 2005, according to the information published by the Central Bank. Throughout this period, we gained some of the market share lost by several of our larger competitors.
55
The following graph showschart sets forth the Bank’s loan market share on a consolidated basis since 2001.
Source:Source: Central Bank.
Taking into consideration total loan portfolio and receivables from financial leases portfolio, total loans and leasing market share was 5.0%4.8% as of December 31, 2019.2021.
The graph below shows a comparison of
Neobanks
In recent years, following the Bank’s loan portfolio CAGR asmain global trends, digital banking began to develop in Argentina. As of December 31, 2019 compared to2021, the average loan portfolio CAGRmain digital banks were: Wilobank, Brubank, Reba, Openbank, Naranja and Banco del Sol. The main features of Argentine private Banks and the private financial system (excluding public banks).each are outlined below:
● | Wilobank offers credit cards to unbanked people. It operates with a virtual card that will replace Mastercard Contactless and also operates with physical debit and credit cards. |
● | Brubank offers savings accounts in Pesos and U.S. dollars and loans and transfers from an app. It uses contactless technology and allows purchases made with debit card to be paid in installments, allowing the partition of the expenses. In 2022, Brubank launched an offer of mutual funds. |
● | Reba aims at the lowest economic sectors with a corresponding banking offer. |
● | Openbank, owned by the Santander Group, offers savings accounts, credit cards, loans and facilitates investments and was launched in January 2022 offering savings accounts and debit cards. |
● | Naranja, owned by Grupo Financiero Galicia, has more than 1 million digital users. This company developed an app that enables merchants and professionals to issue invoices by using a dongle. Naranja offers Ps. and U.S. dollars saving accounts, prepaid cards, personal loans and insurance products through its Naranja X app. |
● | Banco del Sol was launched in July 2020 and is owned by Sancor Seguros. |
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Source: Central Bank. Figures are expressed inPesos in original currency and not adjusted for inflation.
The graph below shows a comparison of the Bank’s loan portfolio growth compared to the average loan portfolio growth of the Argentine financial system.
Source: Central Bank. Figures are expressed inPesos in original currency and not adjusted for inflation.
Consumer FinancingFinance
CCF offersDuring 2021, IUDÚ offered its products primarily to the middle and lower middle income sectors. CCF’s main competitors can be divided into two groups: (1) those that are not subject to Central Bank oversight such as Tarjeta Naranja, Tarjetas Cuyanas and Credial and (2) those that are subject to Central Bank oversight such as Compañía Financiera Argentina and Banco Columbia.
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sectors mainly at Chango Más (formerly, Walmart Argentina) stores.
With respect to its Walmart Argentina private label credit card, CCF’sIUDÚ’s primary competitors in terms of the types of products offered are Tarjeta CENCOSUD (issued at Jumbo and Easy and used in Jumbo, Easy, Disco, Vea and Blaisten), Tarjeta Carrefour (issued and used exclusively at Carrefour) and Tarjeta Coto (issued and used exclusively at Coto). However, CCFIUDÚ was the first to also issue an open MasterCard credit card, therefore operating in the banking and retail sectors. Currently, Tarjeta CENCOSUD is the only other competitor with a similar strategy. In addition, CCFIUDÚ is the sole provider of in store personal cash loans and consumer loans that may be granted and used immediately at the retail stores.
Tarjeta’s competitors vary in terms of region and type of product. Competitors in the lending space include Compañía Financiera Argentina (Efectivo Si), Banco Comafi, Banco Columbia, Credifacil, Credil, Corefin and Empresur. In terms of the credit card space, Tarjeta’s main competitor iscompetitors are Banco Nacion Argentina and other provincial Banks in each of the provinces where it operates, Tarjeta Naranja, followed by smaller regional competitors.
MILA is a financial company focused on car financing solutions that had been providing products in the Argentine market for almost 1415 years. MILA’s main competitors can be dividedivided into two groups: (1) those that are banks or financial companies such as Santander, ICBC, BBVA, MG Group and HSBC, and (2) those that are financial institutions owned by car manufacturers such as Renault Credit, Fiat Credito and Peugeot Finance. MILA’s main product is car loan with pledge that helps to maintain a low risk level portfolio. Currently MILA is ranked as one of the top five players in the new car financing market with 3.0% market share and achieved the fifth position in the used car financing market with 4.9% market share (source ACARA, December 2019). Regarding its distribution channel, MILA sells its products through 393 active dealers that allow the company to have presence in the whole country.
Mutual Funds
With respect to the mutual fund market, based on the Chamber of Mutual Funds information we estimate our market share was 2.12%2.05% as of December 31, 2019,2021, and that SAM is ranked eightteenth20 out of 5250 managers in the industry. Our main competitors are Galicia Administradora de Fondos S.A.S.G.F.C.I., Macro Fondos S.G.F.C.I.S.A., ICBC Investments S.A.S.G.F.C.I., Francés Administradora de Inversiones S.A.G.F.C.I., Itaú Asset Management S.A.S.G.F.C.I., HSBC Administradora de Inversiones S.A.S.G.F.C.I., BNP Paribas Asset Management Arg S.A.S.G.F.C.I. and Santander Río Asset Management G.F.C.I.S.A.
Online trading broker
According to BYMA information,InvertirOnline ranked 3 out of 205 broker With respect to theInvertirOnline operations, according to BYMA, asIOL invertironline is our digital online broker. As of December 31, 2019, our equity2021, IOL invertironline ranked fifth in the ByMA exchange ranking on Equity and CEDEARs (Certificado de Depósito Argentinos) and fourth in options trading, volume market share was 3.3% andInvertirOnline was ranked 8 out of 235 brokers.according to the information published by ByMA. IOL invertironline’s main competitors are Allaria, Buenos Aires Valores, Balanz, SBS Trading, Bull Market, AR Partners and PPI (Portfolio Personal).
Argentine Banking Regulation
Overview
Founded in 1935, the Central Bank is the principal monetary and financial authority in Argentina. Its mission is to promote monetary and financial stability, employment and economic development with social equity. It operates pursuant to its charter, which was amended in 2012 by Law No. 26,739 and the provisions of the FIL. Under the terms of its charter, the Central Bank must operate independently from the Argentine government.
Since 1977, banking activities in Argentina have been regulated primarily by the FIL, which empowers the Central Bank to regulate the financial sector. The Central Bank regulates and supervises the Argentine banking system through the Superintendency. The Superintendency is responsible for enforcing Argentina’s banking laws, establishing accounting and financial reporting requirements for the banking sector, monitoring and regulating the lending practices of financial institutions and establishing rules for participation of financial institutions in the foreign exchange market and the issuance of bonds and other securities, among other functions.
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The powers of the Central Bank include the authority to fix the monetary base, set interest rates, establish minimum capital, liquidity and solvency requirements, regulate credit, approve bank mergers, approve certain capital increases and transfers of stock, grant and revoke banking licenses, and to authorize the establishment of branches of foreign financial institutions in Argentina and the extension of financial assistance to financial institutions in cases of temporary liquidity or solvency problems.
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The Central Bank establishes differentcertain technical ratios that must be observed by financial entities, with respectsuch as ration related to levels of solvency, liquidity, the maximum creditscredit that may be granted per customer and foreign exchange assetassets and liability positions.
In addition, financial entities need the authorization from the Central Bank for the disposition of their assets,forcertain actions, such as opening or changing branches or ATMs, acquiring share interests in other financial or non-financial corporations and establishing liens over their assets, among others.
As the supervisor of the financial system, the Central Bank requires financial institutions to submit information on a daily, monthly, quarterly, semiannual and annual basis. These reports, which include balance sheets and income statements, information related to reserve funds, use of deposits, classifications of portfolio quality (including details on principal debtors and any allowances for loan losses), compliance with capital requirements and any other relevant information, allow the Central Bank to monitor the business practices of financial entities. In order to confirm the accuracy of the information provided, the Central Bank is authorized to carry out inspections.
If the Central Bank’s rules are not complied with, various sanctions may be imposed by the Superintendency, depending on the level of infringement. These sanctions range from a notice of non-compliance to the imposition of fines or, in extreme cases, the revocation of the financial entity’s operating license. Additionally, non-compliance with certain rules may result in the compulsory filing of specific adequacy or restructuring plans with the Central Bank. These plans must be approved by the Central Bank in order forto permit the financial institution to continue to operate.remain in business.
Banking Regulation and Supervision
Central Bank Supervision
Since September 1994, the Central Bank has supervised the Argentine financial institutions on a consolidated basis. Such institutions must file periodic consolidated financial statements that reflect the operations of head offices or parent companies, as well as those of their branches in Argentina and abroad, and of their significant subsidiaries, whether domestic or foreign. Accordingly, requirements in relation to liquidity and solvency, minimum capital, risk concentration and loan loss provisions, among others, should be calculated on a consolidated basis.
Permitted Activities and Investments
The FIL governs any individuals and entities that perform habitual financial intermediation and, as such, are part of the financial system, including commercial banks, investment banks, mortgage banks, financial companies, savings and loan companies for residential purposes and credit unions. Except for commercial banks, which are authorized to conduct all financial activities and services that are specifically established by law or by regulations of the Central Bank, the activities that may be carried out by Argentine financial entities are set forth in the FIL and by related Central Bank regulations. Commercial banks are allowed to perform any and all financial activities inasmuch as such activities are not forbidden by law. Some of the activities permitted for commercial banks include the ability to (i) receive deposits from the public in both local and foreign currency; (ii) underwrite, acquire, place or negotiate debt securities, including government securities, in both exchange and over-the-counter (“OTC”) markets (subject to prior approval by the CNV, if applicable); (iii) grant and receive loans; (iv) guarantee customers’ debts; (v) conduct foreign currency exchange transactions; (vi) issue credit cards; (vii) act, subject to certain conditions, as brokers in real estate transactions; (viii) carry out commercial financing transactions; (ix) act as registrars of mortgage bonds; (x) participate in foreign exchange transactions; and (xi) act as fiduciary in financial trusts. In addition, pursuant to the FIL and Central Bank Communication “A” 3086, as amended, commercial banks are authorized to operate commercial, industrial, agricultural and other types of companies that do not provide supplemental services to the banking services (as defined by applicable Central Bank regulations) to the extent that the commercial bank’s interest in such companies does not exceed 12.5% of its voting stock or 12.5% of its capital stock. Nonetheless, if the aforementioned limits were to be exceeded, the bank should (i) request Central Bank’s authorization; or (ii) give notice of such situation to the Central Bank, as the case may be. However, even when commercial banks’ interests do not reach such percentages, they are not allowed to operate such companies if (i) such interest allows them to control a majority of votes at a shareholders’ or board of directors’ meeting, or (ii) the Central Bank does not authorize the acquisition.
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Furthermore, according to the rules regarding “Complementary Services of the Financial Entities and Allowed Activities,”, as amended, commercial banks are authorized to operate in local or foreign companies that have one or two of the exclusive corporate purposes listed in section 2.2 of Communication “A” 5700, as amended by Communication “A” 6342, in which the commercial bank’s interest either exceeds 12.5% of such companies’ voting stock or allows the commercial bank to control a majority of votes at a
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shareholders’ or board of directors’ meeting. The financial entities shall give notice to the Superintendency if the corporate purposes of such companies include any of the corporate purposes listed in section 2.2 of that rule.
Under Central Bank rules regarding to “Financial Entities Minimum Capital,” the holdings of a commercial bank in the capital stock of third parties, including participations in mutual funds, shall not exceed 60% of the Computable Equity Liability (“RPC,” as per its acronym in Spanish) of such commercial bank. In addition, the total amount of a commercial bank’s holdings, considered as a whole, in (i) unlisted shares, excluding holdings in companies that provide complementary services to the financial activity and holdings in state-owned companies that provide public services, (ii) listed shares and mutual fund shares that do not trigger minimum capital requirements on a market risk bases, and (iii) publicly traded shares that do not have a “market price available to the general public,” is limited to 15% of such commercial bank’s RPC. For this purpose, a given market price of the shares is considered to be “available to the general public” when market rates that measure the daily volume of significant transactions are available, and the sale of such shares held by such bank would not materially affect the share price.
Operations and Activities that Banks Are Not Permitted to Perform
Section 28 of the FIL prohibits commercial banks from: (a) creating liens on their own assets without prior approval from the Central Bank, (b) accepting their own shares as collateral, (c) conducting transactions with their own directors or managers and with companies or persons related thereto under terms that are more favorable than those regularly offered in transactions with other clients, and (d) carrying out commercial, industrial, agricultural or other activities without prior approval of the Central Bank, except those considered financialfinancially related activities under Central Bank regulations. Notwithstanding the foregoing, banks may own shares in other financial institutions with the prior approval of the Central Bank, and may own shares or debt of public services companies, if necessary to obtain those services.
Liquidity and Solvency Requirements
As ofSince 1994, the Central Bank supervision of financial institutions ishas been carried out on a consolidated basis. Therefore, all the documentation and information filed with the Central Bank, including financial statements, must show the operations of each entity’s headquartersparent company and all of its branches (in Argentina and abroad), the operations of significant subsidiaries and, as the case may be, of other companies in which such entity holds stock. Accordingly, all requirements relating to liquidity, minimum capital, risk concentration and bad debts’ reserves, among others, are calculated on a consolidated basis.
Legal Reserve
Pursuant to the FIL, we are required to maintain a legal reserve towhich must be funded with no more than 20% and no less than 10% of yearly income. Notwithstanding the aforementioned, pursuant to Central Bank rules, we are required to maintain a legal reserve which is funded with 20% of our yearly income determined in accordance with such rules. This reserve can only be used during periods in which a financial institution has incurred losses and has exhausted all other reserves. If a financial institution does not comply with the required legal reserve, it is not allowed to pay dividends to its shareholders. For further information, please see “Item 5. Operating and Financial Review and Prospects–Item 5.A 5.A.Operating Results.”
Non-liquid Assets
Since February 2004, non-liquid assets (computed on the basis of their closing balance at the end of each month, and net of those assets that are deducted to compute the regulatory capital) plus the financings granted to a financial institution’s related parties (computed on the basis of the highest balance during each month for each customer) cannot exceed 100% of the Argentine regulatory capital of the financial institution, except for certain particular cases in which it may exceed up to 150%.
Non-liquid assets consist of miscellaneous assets and receivables, bank property and equipment, assets securing obligations, except for swaps, futures and derivative transactions, certain intangible assets and equity investments in unlisted companies or listed shares, if the holding exceeds 2.5% of the issuing company’s equity. Non-compliance with the ratio produces an increase in the minimum capital requirements equal to 100% of the excess on the ratio.
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Unless otherwise indicated, the regulations described in this section should be applied to financial information of the banks calculated in accordance with Central Bank rules. IFRS differs in certain significant respects from Central Bank rules.
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Minimum Capital Requirements
The Central Bank requires financial institutions to maintain minimum capital amounts measured as of each month’s closing. The minimum capital is defined as the greater of (i) the basic minimum capital requirement, which is explained below, or (ii) the sum of the credit risk, operational risk and market risk. Financial institutions (including their domestic Argentine and international branches) must comply with the minimum capital requirements both on an individual and a consolidated basis.
The following table sets forth information regarding excess capital and selected capital and liquidity ratios of the Bank, consolidated with CCF:IUDÚ:
As stated above under “Presentation of Financial and Other Information”,Information,” we have prepared our audited consolidated financial statements for 2019, 20182021, 2020 and 20172019 under IFRS. Minimum capital requirement has been prepared in accordance with the rules of the Argentine Central Bank, which is not comparable to data prepared under IFRS.
Year ended December 31,(2) | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
(in thousands of Pesos except percentages and ratios) | ||||||||||||
Calculation of excess capital: | ||||||||||||
Allocated to assets at risk | 7,164,842 | 6,090,341 | 4,710,391 | |||||||||
Allocated to Bank premises and equipment, intangible assets and equity investment assets | 826,133 | 370,233 | 191,549 | |||||||||
Market risk | 251,739 | 301,724 | 121,155 | |||||||||
Interest rate risk | — | — | — | |||||||||
Public sector and securities in investment account | 11,472 | 96,882 | 131,109 | |||||||||
Operational risk | 2,349,952 | 1,486,516 | 1,016,501 | |||||||||
Required minimum capital under Central Bank rules | 10,604,138 | 8,345,696 | 6,170,705 | |||||||||
Basic net worth | 16,991,091 | 11,847,865 | 9,903,099 | |||||||||
Complementary net worth | 1,033,734 | 1,163,939 | 913,256 | |||||||||
Deductions | (2,999,716 | ) | (867,798 | ) | (386,192 | ) | ||||||
Total capital under Central Bank rules | 15,025,109 | 12,144,006 | 10,430,163 | |||||||||
Excess capital | 4,420,971 | 3,798,310 | 4,259,458 | |||||||||
Selected capital and liquidity ratios: | ||||||||||||
Regulatory capital/risk weighted assets(1) | 15.6 | % | 15.30 | % | 13.9 | % | ||||||
Average shareholders’ equity as a percentage of average total assets | 10.4 | % | 9.9 | % | 10.5 | % | ||||||
Total liabilities as a multiple of total shareholders’ equity | 7.1 | x | 9.4 | x | 8.2 | x | ||||||
Cash as a percentage of total deposits | 28.2 | % | 35.1 | % | 18.2 | % | ||||||
Tier 1 Capital / Risk weighted assets | 10.8 | % | 10.8 | % | 12.6 | % |
| | | | | | | |
| | Year ended December 31,(2) | | ||||
|
| 2021 |
| 2020 |
| 2019 | |
| | (in thousands of Pesos except percentages and | | ||||
| | ratios) | | ||||
Calculation of excess capital: |
|
|
|
|
|
|
|
Allocated to assets at risk |
| 12,957,481 |
| 9,047,140 |
| 7,164,842 |
|
Allocated to Bank premises and equipment, intangible assets and equity investment assets |
| 2,035,689 |
| 1,350,035 |
| 826,133 |
|
Market risk |
| 965,159 |
| 551,765 |
| 251,739 |
|
| | | | | | | |
Public sector and securities in investment account |
| 34,489 |
| 27,651 |
| 11,472 |
|
Operational risk |
| 4,805,957 |
| 3,233,793 |
| 2,349,952 |
|
Required minimum capital under Central Bank rules |
| 20,798,775 |
| 14,210,384 |
| 10,604,138 |
|
Basic net worth |
| 42,938,440 |
| 30,242,263 |
| 16,991,091 |
|
Complementary net worth |
| 1,564,272 |
| 1,090,865 |
| 1,033,734 |
|
Deductions |
| (11,770,286) |
| (7,028,227) |
| (2,999,716) |
|
Total capital under Central Bank rules |
| 32,732,426 |
| 24,304,901 |
| 15,025,109 |
|
Excess capital |
| 11,933,651 |
| 10,094,517 |
| 4,420,971 |
|
Selected capital and liquidity ratios: |
|
|
|
|
|
|
|
Average shareholders’ equity as a percentage of average total assets |
| 12.54 | % | 11.20 | % | 10.40 | % |
Total liabilities as a multiple of total shareholders’ equity |
| 7.5 x |
| 7.5 x |
| 7.1 x |
|
Cash as a percentage of total deposits |
| 11.1 | % | 20.3 | % | 28.7 | % |
Tier 1 Capital / Risk weighted assets |
| 12.25 | % | 14.00 | % | 11.60 | % |
(1) | Risk Weighted Assets includes operational risk weighted assets, market risk weighted assets, and credit risk weighted assets. Operational risk weighted assets and market risk weighted assets are calculated by multiplying their respective required minimum capital under Central Bank rules by 12.5. Credit Risk Weighted Assets is calculated by applying the respective credit risk weights to our assets, following Central Bank rules. |
(2) | Nominal values without inflation adjustment. |
As of December 31, 2019, Banco Supervielle’s Tier 1 Capital ratio on a consolidated basis with CCF was 10.8%, just as it was as of December 31, 2018. Including Ps. 645 million retained at the holding company which are available for future capital injections to our subsidiaries in order to fund our growth strategy, the consolidated pro-forma Tier 1 Capital ratio as of December 31, 2019 stood at 11.3%. Supervielle’s Tier 1 ratio coincides with CET1 ratio.
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As of December 31, 2019,2021, the Bank’s total capital ratio on a consolidated basis with CCFIUDÚ was 11.6%12.9%, compared to 11.9% at13.9% as of December 31, 2018.2020, and the Bank’s common equity Tier 1 ratio on a consolidated basis with IUDÚ was 12.2%, compared to 13.4% as of December 31, 2020. Including Ps.645 million retained at the holding companyfunds held by Grupo Supervielle, which are available for futurecapital injections to our subsidiaries in orderused to fund our growth strategy, the consolidated pro-forma total capital ratio as of December 31, 2019 stood at 12.1%2021 was 13.3%. Including the liquidity held by Grupo Supervielle, which is available for capital contributions into its subsidiaries or for investments in order to promote our business growth, the consolidated pro-forma Tier 1 capital ratio as of December 31, 2021 was 12.7%. The Bank’s Tier 1 ratio is the same as the CET 1 ratio. The Tier 1 capital ratio as of December 31, 2021 reflects: (i) higher deductions from Tier 1 capital on increased IT investments; (ii) impact on net results on accelerated headcount efficiencies in the quarter; (iii) write offs that reduced the expected loss regulatory easing on capital; and (iv) a 10% increase in risk weighted assets, which was offset by inflation adjustment of capital.
The capital composition to be considered in order to determine compliance with minimum capital requirements is the financial institution’s RPC (Central Bank rules regarding to “Financial Entities Minimum Capital”,Capital,” as amended).
Basic minimum capital60
Minimum capital requirements of commercial banks acting as custodians of securities representing investments of theFondo de Garantía de Sustentabilidad del Sistema Integrado Previsional Argentino and/or as registrar of mortgage securities must comply with an extra 0.25% of the value of securities in custody and/or mortgage securities and must be invested in Argentine public bonds or monetary regulation instruments.
Basic Minimum Capital
The basic minimum capital requirement varies depending on the type of financial institution and the jurisdiction in which the financial institution’s headquarter is registered, with Ps.26 million for banks under category I and II (Ps.12 million for other financial entities under this category), and Ps.15 million for banks under category III to VI (Ps.8 million for other financial entities under this category).
| | | | |
Category |
| Banks | Other Entities (*) | |
I and II | Ps.26 million | Ps.12 million | ||
III to VI |
| | Ps.15 million | Ps.8 million |
Description(*)Except credit entities.
As of ArgentineApril 1, 2022, the basic minimum capital requirement to be complied with by financial institutions is as follows:
| | | | |
| Banks | Other Entities (*) | ||
| Ps.500 million | Ps.230 million |
(*)Except credit entities.
Financial entities operating as of April 1, 2022 must comply with the basic capital requirement set forth in the table above from March 31, 2024. Until that date, such financial entities are required to comply with the basic capital requirement set forth in the table below for the periods indicated:
| | | | |
Period | Banks | Other Entities (*) | ||
From April 1, 2022 to March 31, 2023 | Ps.170 million | Ps.80 million | ||
From April 1, 2023 to March 30, 2024 | Ps.300 million | Ps.140 million |
(*)Except credit entities.
Regulatory Capital of Financial Institutions: Tier 1 and Tier 2 Capital Regulations
Argentine financial institutions must comply with guidelines similar to those adopted by the Basel Committee on Banking Regulations and Supervisory Practices, as amended in 1995 (the “Basel Rules”). In certain respects, however, Argentine banking regulations require higher ratios than those set forth under the Basel Rules.
The Central Bank takes into consideration a financial institution’s RPC in order to determine compliance with capital requirements. Pursuant to Communications “A” 5369 and “A” 5580, as amended and supplemented, RPC consists of Tier 1 capital (Basic Net Worth) and Tier 2 capital (Complementary Net Worth).
Tier 1 Capital
Tier 1 capital consists of (i) ordinary capital levelcommon equity tier 1 (“COn1”), (ii) deductible items from ordinary capital levelthe common equity tier 1 (CDCOn1), (iii) additional capital levelequity tier 1 (“CAn1”), and (iv) deductible itemsconcepts from additional capital level 1 (CDCAn1).
COn1 Capital
COn1 includes the following net worth items: (i) capital stock (excluding preferred stock), (ii) non-capitalized capital contributions (excluding share premium), (iii) adjustments to shareholders’ equity, (iv) earnings reserves (excluding the special reserve for debt instruments), (v) unappropriated earnings, (vi) other results either positive or negative, in the following terms:
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(ii) | non-capitalized capital contributions (excluding share premium), |
(iii) | adjustments to shareholders’ equity, |
(iv) | earnings reserves (excluding the special reserve for debt instruments), |
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(v) | unappropriated earnings, |
(vi) | other results |
● | 100% of net earnings or losses recorded until the last quarterly financial statements with limited review report, corresponding to the last full fiscal year and in respect of which the auditor has not issued the audit report; |
100% of net earnings or losses for the current year as of the date of the most recent audited quarterly financial statements; |
50% of profits or 100% of losses for the most recent audited quarterly or annual financial statements; and |
100% of losses not shown in the financial statements, arising from quantification of any facts and circumstances reported by the auditor; |
(vii) Other comprehensive results:
(vii) | other comprehensive income: |
(a) | 100% of the results |
Revaluation of property, plant, and equipment and |
intangibles; gains or losses on financial instruments at fair value with changes in other comprehensive income. |
(b) | 100% of the debit balance of each of the items recorded in other comprehensive income not mentioned in section (a). The recognition of these concepts, registered in accounts of other comprehensive income or other accumulated comprehensive income, as appropriate, will be made in accordance with the terms of points 8.2.1.5. or 8.2.1.6., as the case may be of Central Bank’s rules regarding “Financial Entities Minimum |
(viii) | share premiums of the instruments included in COn1, and |
(ix) | in the case of consolidated entities, |
minority shareholdings |
In order for the shares to fall under COn1, at the time of issuance, the financial entity must not generate any expectation that such shares will be reacquired, redeemed or amortized, and the contractual terms must not contain any clause that might generate such an expectation.
For the purpose of determining the RPC, financial institutions included in Group A must compute as COn1 the positive difference between the higher of the accounting allowance stipulated in point 5.5 of IFRS 9 and the regulatory allowance calculated in accordance with the rules on “Establishment of minimum provisions for loan losses” or the accounting provision corresponding to the balance as of November 30, 2019.
Deductible ItemsConcepts
The above-mentioned itemsconcepts will be considered without certain deductions pursuant to subsection 8.4.1 and 8.4.2 (as applicable) of Central Bank rules regarding “Financial Entities Minimum Capital”,Capital,” as amended.
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ItemsConcepts deductible from COn1 include, among other things: (a) positive balances resulting from the application of income tax withholdings above 10% of the previous months of basic net worth and balances in favor from deferred tax assets; (b) deposits maintained in a corresponding account with a foreign financial institutions that are not rated as “investment grade,” (c) debt securities not held by the relevant financial institutions, except in the case of securities registered by or in custody of the Central Bank (CRYL), Caja de Valores S.A., or Clearstream, Euroclear and the Depository Trust Company, (d) securities issued by foreign governments whose credit rating is at leastless than ‘investment grade’ according to Communication “A” 5671; (e) subordinated debt instruments issued by other financial institutions; (f) shareholders; (g) real property added to the assets of the financial entity and with respect to which the title deed is not duly recorded at the pertinent Argentine real property registry, except where such assets shall have been acquired in a court-orderedcourt-
62
ordered auction sale; (h) intangible assets; (i) items pending allocation, debtor balances and other; (j) certain assets, as required by the Superintendency resulting from differences between carry amount and the fair value of assets or actions taken to distort or disguise the true nature or scope of operations; (k) those required by the Superintendency; (l) any deficiency relating to the minimum loan loss provisions required by the Superintendency; (l)(m) equity interests in companies that have the following activities: (i) financial assistance through leasing or factoring agreements, (ii) transitory equity acquisitions in other companies in order to further their development to the extent the ultimate purpose is selling such interest after development is accomplished, and (iii) credit, debit and similar cards emissions; (m)(n) the excess to the limits set forth for secured assets on Section 3 of the rules on “Affectation of SecuredRestricted Assets” (n)(o) the highest balance of that month’s financial assistance granted during the month, where the advance payments set forth in Section 3.2.5 of the rules on “Lending to the non-financial public sector” surpass the authorized limit and/or are not settled within the terms established therein; (o)(p) income from sales relating to securitization transactions, as applicable, pursuant to the provisions of Sections 3.1.4., 3.1.5.1. and 3.1.5.2., and from portfolio sales or assignments with recourse. This deduction can be applied as long as the credit risk still persists and to the extent in which the capital requirement for the underlying exposures or the sold or assigned portfolio with recourse is maintained; (p)(q) in the case of liabilities from derivatives accounted for at fair value, unrealized gains or losses due to changes in the financial institution’s credit risk will be deductible. The deduction will be limited to the financial institution’s own credit risk adjustments only plus or minus, as the case may be); such adjustments may not be offset against adjustments for counterpart risk; (q)(r) equity interests in financial institutions subject to consolidated oversight, except where not permitted due to the existence of deductible amounts; or in the case of foreign financial institutions. In these cases, the deductions will be the net amount of the allowance for impairment and, when controlled financial institutions subject to the provisions of Section 8.2.1.6., item iii) are involved, the deductions will be 50% of the net amount of profits derived by these entities on a proportional basis to their respective interests.
CAn1 Capital
CAn1 includes certain debt instruments of financial entities not included under COn1 that meet the regulatory criteria established in section 8.3.2 of the rules regarding “Financial Entities Minimum Capital”,Capital,” as amended and supplemented, and share premiums resulting from instruments included in CAn1. Furthermore, in the case of consolidated entities, it includes instruments issued by subsidiaries subject to consolidated supervision and belonging to third parties, pursuant to applicable regulatory requirements.
The itemsconcepts mentioned in the previous points will be reduced, if applicable, by the deductible concepts provided in point 8.4.2 of the rules regarding “Financial Entities Minimum Capital”,Capital,” as amended and supplemented, which are described below.
Moreover, debt instruments included under Can1CAn1 must comply with the following requirements:
(1) | Must be totally subscribed and paid in full. |
(2) | Must be subordinated to depositors, unsecured creditors and to the subordinated debt of the financial entity. The instruments must contemplate that in the case of the entity’s bankruptcy and once all debts with all the other creditors are satisfied, its creditors shall have priority in the distributions of funds only and exclusively with respect to the shareholders (irrespective of their class), with the express waiver of any general or special privilege. |
(3) | Must not be insured or guaranteed by the issuer or a related entity, and with no agreement improving, either legally or economically, the payment priority in the case of the entity’s bankruptcy. |
(4) | They shall not contemplate any type of capital payment, except in the case of liquidation of the financial entity. Provisions gradually increasing remuneration or other incentives for anticipated amortization are not allowed. |
(5) | After five (5) years as from the issuance date, the financial entity can buy back the debt instruments if: (i) it has the prior authorization of the Superintendency, (ii) the entity does not create any expectations regarding the exercise of the purchase option, and (iii) the debt instrument is replaced by a RPC of equal or greater value sustained by its revenue capacity, or if it is demonstrated that once the purchase option is exercised its RPC significantly exceeds at least by 20% of the minimum capital requirements. |
(6) | Any capital repayment requires previous authorization from the Superintendency. In the case of a capital repayment, the financial entity must not create any market expectations regarding the granting of such authorization. |
(7) | The financial entity can pay dividends/interest coupons at any time, and at its sole discretion, which shall not be considered a default in itself and shall not grant bondholders the right to claim the conversion of their notes into |
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ordinary shares. Furthermore, there shall be no restrictions to the financial entity, except with respect to dividend distribution to the shareholders. |
(8) | The payment of dividends/interest coupons shall be carried out through the noting of distributable entries, in the terms of the regulations on “Results Distribution” (Section III of the Central Bank’s regulations). |
(9) | The included dividends/interest coupons shall not have periodic adjustments because of the financial entity’s credit risk. |
(10) | They should not have been bought by the financial entity or any other entity over which the financial entity has control or significant influence. |
(11) | They should not have been bought with direct or indirect financing from the financial entity. |
(12) | They shall not contain elements that make re-capitalization difficult. |
Instruments considered liabilities must absorb losses once a pre-established triggering event takes place. The instruments must do so through their conversion into commonordinary shares and a mechanism assigning final losses to the instrument with the following effects:
(a) | Reduction of debt represented by the instrument in the event of winding-up of the entity; |
(b) | Reduction of the amount to be repaid in case a call option is exercised; |
(c) | Total or partial reduction of the dividends/interest coupon payments of the instrument. |
Complementary Net Worth (PNc)(PNc): Tier 2
Tier 2 Capital includes
(i) certain debt instruments of financial entities which are not included in Tier 1 Capital and meet the regulatory criteria established in section 8.3.3 of the Central Bank rules regarding “Financial Entities Minimum Capital” as amended and supplemented, (ii) share premium from instruments included in Tier 2 Capital, and (iii) loan loss provisions on the loan portfolio of debtors classified as being in a “normal situation” pursuant to Central Bank rules on debtor classification and on financings with class “A” preferred securities not exceeding 1.25% of the assets measured for credit risk. Additionally, in the case of consolidated entities, it includes (iv) debt instruments issued by subsidiaries subject to a consolidated supervision and belonging to third parties, if they meet the criteria in order to be included under complementary net worth.
The above-mentioned itemsconcepts will be considered minus deductible itemsconcepts pursuant to section 8.4.2 of the Central Bank rules regarding “Financial Entities Minimum Capital”,Capital,” as amended and supplemented, which is described below.
Moreover, debt instruments included under complimentary net worth must comply with the following requirements:
Must be totally subscribed and paid in full. |
Must not be insured or guaranteed by the issuer or a related entity, and |
Maturity: (i) original maturity date within no less than |
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The investor shall not be entitled to accelerate the repayment of future projected payments, except in the case of bankruptcy or liquidation. |
They cannot incorporate dividends/coupons with periodic adjustments linked to the financial entity’s credit risk. |
They should not have been bought by the financial entity or any other entity over which the financial entity has control or significant influence. |
They should not have been bought with direct or indirect financing from the financial entity. |
● | They should not contain elements that affect re-capitalization. |
Additionally, instruments included in Tier 2 capital and Can1,CAn1, shall meet the following conditions in order to assure their loss-absorbency capacity:
(a) | Their terms and conditions must include a provision pursuant to which the instruments must absorb losses–either through a release from debt or its conversion into ordinary capital–once a triggering event has occurred, as described hereunder. |
(b) | If the holders receive compensation for the debt release performed, it should be carried out immediately and only in the form of |
(c) | The financial entity must have been granted the authorization required for the immediate issuance of the corresponding |
Triggering events of regulatory provisions described above are: (i) when the solvency or liquidity of the financial entity is threatened and the Central Bank rejects the amnesty plan submitted or revokes its authorization to function, or authorizes restructuring protecting depositors (whichever occurs first) or (ii) upon the decision to capitalize the financial entity with public funds.
The Bank has issued three series of subordinated notes, allonly one of which areis outstanding as of the date of this annual report. The series issued in 2013 and 2014 complycomplies with all the requirements described above. However, the series issued in November 2010 is not in compliance with the requirements because it was issued prior to the effectiveness of Communication “A” 5580. See “Item 5.B5.B. Liquidity and Capital Resources—Financings—Bank – Foreign currency-denominated Subordinated Notes.Banco Supervielle S.A.” On February 9, 2017, under the Bank’s global program of simple negotiable obligations, not convertible into shares, for a nominal value of up to U.S.$2,300 million (previously, U.S.$800 million) (or its equivalent in other currencies or units of value), the Bank issued Class A Negotiable Obligations, which constitute unsubordinated senior obligations, and therefore are not computable for the purpose of calculating the RPC.
Further criteria regarding the eligibility of items included in the RPC calculation must be followed pursuant to the regulatory requirements of minority and other computable instruments issued by subsidiaries, subject to consolidated supervision by third parties. A minority shareholding may be included in Con1COn1 of the financial entity if the original instrument complies with the requirements established for its qualification as commonordinary shares regarding the RPC.
Deductible itemsconcepts applied to the different capital levels
(i) | Investments in computable instruments under the financial entity’s RPC not subject to consolidated supervision when the entity owns up to 10% of the issuer’s ordinary capital according to the following criteria: (i) investments include direct, indirect or synthetic interests; (ii) investments include the acquired net position; (iii) securities issued are placed within five (5) business days; and (iv) the investments in capital instruments that do not satisfy the criteria to be classified as |
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are not deducted, are weighted based upon the risk or are taken into account in the calculation of the market risk requirement, as applicable. |
(ii) | Investments in instruments computed as regulatory capital of financial institutions and companies rendering services supplementary to the financial industry, not subject to consolidated supervision and insurance companies, when the institution holds more than 10% of the common equity of the issuer, or when the issuer is a subsidiary of a financial institution, shall be subject to the following criteria: i) The investments include direct, indirect and synthetic interests. For these purposes, indirect interest means an investment by a financial institution in another financial institution or company not subject to consolidated oversight, which in turn has an interest in another financial institution or company not consolidated with the first one. A synthetic interest means an investment made by a financial institution in an instrument the value of which is directly related with the equity value of another financial institution or company not subject to consolidated supervision; ii) The net acquired position is included, i.e., the gross acquired position less the position sold in the same underlying exposure, when this has the same duration than the acquired position or its residual life is at least one year; iii) The holding of securities underwritten to be sold within a five business day term may be excluded; iv) Investments in capital instruments that do not satisfy the criteria to be classified as |
(iii) | Own repurchased instruments that satisfy the criteria for being included in |
Limits
Central Bank Rulesrules regarding “Financial Entities Minimum Capital”,Capital,” as amended and supplemented, establishes minimum thresholds regarding capital integration: (i) for Con1,COn1, the amount resulting from multiplying the capital risk weighted assets (“RWA”) by 4.5%; (ii) for the basic net worth, the amount resulting from multiplying the RWA by 6% and (iii) for the RPC, the amount resulting from multiplying the RWA by 8%. It is important to note that the RWA calculation results from multiplying the required minimum capital under Central Bank rules by 12.5%. The failure to complylack of compliance with any of these limitations is considered an infringement of the minimum capital integration requirements.
Pursuant to Communication “A” 5889, as amended from time to time, RWA shall be calculated as follows:
RWA = RWAc + [(MR+OR) x 12.5]
Where:
RWA: risk weighted assets
RWAc: credit risk weighted assets
MR: minimum capital requirement for market risk
OR: minimum capital requirement for operational risk
Economic Capital
Central Bank rules regarding “Financial Entities Risk Management Guidelines,”, as amended and supplemented, requires financial institutions to have an integrated global internal process in place to assess the adequacy of their economic capital based on their risk profile (the “Internal Capital Adequacy Assessment Process” or “ICAAP”), as well as a strategy aimed at maintaining their regulatory capital. If, as a result of this internal process, it is found that the regulatory capital is insufficient, financial institutions must increase regulatory capital based on their own estimates to meet the regulatory requirement.
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The economic capital of financial institutions is the amount of capital required to pay not only unexpected losses arising from exposure to credit, operational and market risks, but also those arising from other risks to which the financial institution may be exposed.
Financial institutions must demonstrate that their internal capital targets are well-funded and adequate in terms of their general risk profile and operations. The ICAAP should take into consideration all material risks to which the institution is exposed. To this end,
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institutions must define an integral process for the management of credit, operational, market, interest rate, liquidity, securitization, graduation, reputational and strategic risks and use stress tests to assess potential adverse scenarios that may affect their regulatory capital.
The ICAAP must include stress tests supplementing and validating any other quantitative or qualitative approach employed by the institution in order to provide the Boardits board of Directorsdirectors and senior management with a deeper understanding of the interaction among the various types of risk under stress conditions. In addition, the ICAAP must consider the short- and long-term capital needs of the institution and ensure the prudent accumulation of excess capital during positive periods of the economic cycle.
The capital level of each entity must be determined in accordance with its risk profile, taking external factors such as the economic cycle effects and political scenario.
Pursuant to Communication “A” 5398, theThe main elements of a strict capital evaluation include:
(a) | Policies and procedures to guarantee that the entity identifies, quantifies and informs all the important risks. |
(b) | A process which relates economic capital with the current level of risk. |
(c) | A process which sets forth capital sufficiency objectives related to the risk, taking a strategic approach from the entity and its business plan into consideration. |
(d) | An internal process of controls, tests and audits, with the objective to guarantee that the general risk management process is exhaustive. |
The required amount of capital of each institution shall be determined based on its risk profile, taking into consideration other external factors such as the effects of the economic cycle and the economic scenario.
Communication “A” 6534 which replaced Communication “A” 6459,7143 provides guidelines for the calculation of economic capital, depending on the type of financial entity. Entities considered within Group A pursuant to Central Bank rules shall use their internal models to quantify the needs of economic capital with relation to its risk profile. Conversely, Group B or Group C entities may opt for a simplified calculation methodology. Such option must be approved by the board of directors of such entity.
Group B or Group C entities which have opted for the simplified methodology shall apply the following expression:
EC = (1.05 x MC) + max [0; ρU EVE – 15 % x bNW)]
Where:
EC: economic capital
MC: minimum capital requirements
EVE: measure of risk calculated according to a standardized framework forseen in section 5.4 of Communication “A” 6534
bNW: basic net worth (tier 1 capital)
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Requirements Applicable to Dividend Distribution
Dividends are calculated based on the statutory financial statements of the Bank, and prepared under Central Bank rules, which differ in certain aspects from IFRS. The Central Bank has imposed restrictions on the payment of dividends, substantially limiting the ability of financial institutions to distribute such dividends subject to compliance with the rules set forth in the “Rules“Restated Regulations on Dividend Distributions” of the Central Bank, under the criterion that the amount to be distributed cannot affect the institution’s liquidity and solvency, which shall be verified by the satisfaction of certain requirements, on a consolidated basis.
Such regulations provides that the payment of dividends (other than dividends on commonordinary shares), the acquisition of treasury shares, the payment on other tier 1 equity instruments (as determined in accordance with the provisions set forth in the rules on “Minimum capital of financial institutions”) and/or the payment of financial incentives (bonuses) to personnel – in this case, subject to the public order labor regulations (legal, statutory and contractual) governing the financial institutions’ relationships with their personnel– shall be subject to these rules.
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Institutions may distribute dividends up to the positive amount derived from the off-balance sheet calculation set forth herein, without exceeding the limits set forth in these rules.
To such effect, the registered balances, as of the end of the fiscal year to which they belong, in the account “Unassigned Results” (Resultados no asignados) and in the voluntary reserve for future distributions of dividends shall be computed, deducting the amounts – recorded on the same date – of the legal and statutory reserves – whose creation is mandatory – and the following items:concepts:
1. 100% of the negative balance of each of the items recorded under the line “Other comprehensive retained earnings.”
2. The result derived from the revaluation of property, plant and equipment and intangible assets and investment properties.
3. The net positive difference resulting from the calculation at amortized cost and the fair market value recorded by the financial institution in connection with sovereign bonds and/or currency regulation instruments issued by the Central Bank for such instruments valued at amortized cost.
4. The asset valuation adjustments notified by the Superintendency – whether accepted or not by the institution– that are pending registration and/or those indicated by the external audit that have not been accounted.
5. The individual deductibles – regarding asset valuation – established by the SEFyC, including the adjustments derived from the failure to consider agreed adjustment plans.
1. | 100% of the negative balance of each of the concepts recorded under the line “Other comprehensive retained earnings.” |
2. | The result derived from the revaluation of property, plant and equipment and intangible assets and investment properties. |
3. | The net positive difference resulting from the calculation at amortized cost and the fair market value recorded by the financial institution in connection with sovereign bonds and/or currency regulation instruments issued by the Central Bank for such instruments valued at amortized cost. |
4. | The asset valuation adjustments notified by the Superintendency – whether accepted or not by the institution– that are pending registration and/or those indicated by the external audit that have not been accounted. |
5. | The individual deductibles – regarding asset valuation – established by the SEFyC, including the adjustments derived from the failure to consider agreed adjustment plans. |
6. | The resulting lower provisions and higher RPC from the treatment established on point 2 of Central Bank’s Communication “A” 6946 (as amended) for financing MiPyMEs for the payment of salaries. |
In addition, financial entities may not distribute profits withearnings out of the profit arisingincokme derived from the first application of IFRS, for the first time, and must set up a special reserve thatwhich can only be canceled for capitalization or to absorb anypossible negative balances from the item “Unassigned results.”
The amount to be distributed, which shall not exceed the limits set forth by the Central Bank, shall not compromise the liquidity and solvency of the institution. This requirement shall be considered satisfied once it has been verified that there are no integration defects in the minimum capital position – whether individual and consolidated – as of the end of the fiscal year to which the unappropriated retained earnings pertain or in the last closed position, whichever has the lesser integration excess, recalculating them together (for such purpose only) with the following effects based on the data relevant as of each such date:
1. | Those arising after deducting the |
2. | The failure to consider the deductibles established by the SEFyC affecting the requirements, integrations and minimum capital position. |
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3. | The deduction of the amounts relating to the following |
the amount to be distributed and, if applicable, the amount allocated to the creation of the reserve to repay debt instruments, capable of integrating the regulatory capital; |
positive balances due to the application of the minimum presumed income tax – net of allowances for impairment – that have not been deducted from the basic shareholders’ equity, in accordance with the provisions set forth in rules on “Minimum capital of financial institutions”; and |
adjustments made in accordance with points 1 to 5 above. |
4. | The failure to consider the limit set forth in paragraph 7.2. of the rules on “Minimum capital of financial institutions.” |
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The distribution of earnings shall only be admitted if none of the following events occurs:
the institution is subject to the provisions of article 34 “Regularization and Recovery” and article 35 bis “Institution’s restructuring for the purpose of safeguarding loans and deposits” of the FIL; |
the institution has received financial assistance from the Central Bank under section 17 of its Charter, due to illiquidity; |
the institution is delayed or in breach of the reporting regime set forth by the Central Bank; |
the institution records minimum capital integration deficits – whether individually or consolidated – (without computing the effects of the individual deductibles established by the SEFyC); |
the integration of the average minimum cash – in Pesos, in foreign currency or in sovereign securities – is smaller than the requirement applicable to the last closed position or the projected position, taking into account the effect of the earnings distribution; |
the institution has failed to comply with the additional capital margins applicable in accordance with Section 4. |
As from January 2020, in order to recalculate the minimum capital position set under Section 3 of the rules on “Dividends Distribution”, financial institutions of the Company “B” shall enforce Section 5.5 about Impairment from the IFRS Financial Instrument No. 9.
The aforementioned regulation contemplated transitory provision, effective until March 31, 2020, pursuant to which those financial institutions which, in order to determine distributable earnings, have not increased the ranges of COn1 net of deductions (CDCOn1) set forth in 1 percentage point, must obtain the prior authorization of the SEFyC for the distribution of earnings. This requirement shall also be applicable to the payment of financial services applicable to the issue of debt securities.
Unless otherwise indicated, the regulations explained in this sectionareapplied to financial information of the banks calculated in accordance with Argentine Banking GAAP. IFRS differs in certain significant respects from Argentine Banking GAAP.
On March 19, 2020, in the midst of the coronavirus’ outbreak crisis, the Central Bank issued Communication “A” 6939,6945, as amended from time to time, by virtue of which the distribution of dividends by financial entities was temporarily suspended until June 30, 2020.suspended. On December 31, 2021, by means of Communication “A” 7421 of the Central Bank, as amended, the Central Bank authorized financial entities to distribute dividends for up to 20% of accumulated dividends by December 31, 2021 from January 1, 2022 to December 31, 2022. Such financial entities must make such distributions in twelve equal, monthly and consecutive installments.
99 Moreover, in accordance with the FX Regulations, the access to the MLC to pay dividends to non-resident shareholders is subject to certain requirements. For more information, see “Item 10.D. Exchange Controls.”
Unless otherwise indicated, the regulations explained in this section are applied to financial information of the banks calculated in accordance with Central Bank rules. IFRS differs in certain significant respects from Central Bank rules.
Capital Conservation Buffer
Communication “A” 5827 of the Central Bank establishesrules also establish that financial entities shall maintain a capital conservation margin in addition to the minimum capital requirements in order to ensure the accrual of owned resources to cope with eventual losses, reducing the non-compliance risk.
Financial entities considered D-SIBs or globally systemically important (“G-SIBs”), shallmust have a capital level that permits a greater capacity for loss absorption, by virtue of negative externalities that the effects of insolvency of such entities or their foreign holdings could create in the financial system and the economy.
The conservation capital margin shall be 2.5% of the amount of RWA. In cases of entities considered systemically important, the margin will be increased to 3.5% of the amount of capital risk weighted assets. These margins can be increased once again, according to the counter-cycle margin. The conservation capital margin, increased in the case of entities considered systemically important, must be integrated exclusively with Common Equity Tier 1 (COn1), net from deductible itemsconcepts (CDCOn1).
When such margin is used, the entities must raise capital with new capital contributions, or reduce future distributions.
The dividend distribution shall be limited whenever the level and composition of the computable asset liability, even when it complies with the minimum capital requirements, is within the range of the capital conservation margin. This limitation reaches solely the dividend distribution, but not the operation of the entity. Entities shall be able to operate normally when levels of Con1 are within the range of conservation margin. When the coefficient of Common Equity Tier 1 (Con1 as percentage of RWA) is within the range of margins conservation of capital, the restriction to the results distribution shall be increased whenever the coefficient of Con1 comes
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close to the minimum required in section 8.5.1 of regulations over “Minimum Capital for Financial Entities”.Entities.” The following table shows the maximum percentages of dividend distribution, according to the compliance with the conservation margin presented:
| | | | | |
Coefficient of Common Equity Tier 1 (COn1) net of deductions | | | |||
(CDcon1) – as percentage of RWA - | | | |||
Financial Entities – That | | D-SIBs and G-SIBs | | Minimum coefficient of capital | |
D-SIBs or G-SIBs- | Entities | percentage of | |||
4.5 – 5.13 | | 4.5 – 5.38 | | 100 | |
> 5.13 – 5.75 | > 5.38 – 6.25 | 80 | |||
> 5.75 – 6.38 | >6.25 – 7.13 | 60 | |||
> 6.38 – 7.0 | > 7.13 – 8 | 40 | |||
> 7 | > 8 | 0 | |||
Currently, the minimum limits required by the regulations are:
COn1/RWA: 4.5% |
NWb/RWA: 6.0% |
RPC/RWA: 8.0% |
COn1 must be used in the first place to satisfy the minimum capital requirement of 4.5% of RWA. Subsequently, and in the event the total does not have enough Additional Tier 1 (CAn1) or Tier 2 Capital (PNc), the COn1 shall also be applied to meet requirements of 6% and 8% of Tier 1 Capital and total capital. Only the remaining COn1, if any, can be computed to satisfy the applicable conservation margin, increased in function of the counter-cycle margin, if applicable.
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Any entity that desires to exceed the dividend distribution limits shall finance this distribution by new contributions of COn1 in the excess amount.
In order to determine the RPC Group “A” financial institutions shall compute as COn1 the positive difference between the accounting provision set forth by point 5.5 of IFRS 9, and the higher of the regulatory provision as calculated by the “Minimum Provision Requirement for Uncollectability Risk” Central Bank rules and the accounting provision corresponding to the balance as of November 30, 2019.
The Central Bank also establishes the counter-cycle margin in order to allow the financial entities’ capital levels to correspond to the accumulative systematic risk associated with an excessive credit expansion and the macro-financial context. When the Central Bank considers that the credit growth is excessive, creating an increase in systematic risk, it can establish, with a twelve-month advanced notice, the obligation to constitute a counter-cycle margin within a range of 0% to 2.5% of RWA. This margin can be reduced or cancelled by the Central Bank when it considers that the systematic risk has been diminished.
Financial entities with international activity shall consider the geographic location of their credit exposure with local and foreign residents of the private sector and calculate the counter-cycle margin as the mean between the required margins in foreign jurisdictions. This includes all credit exposure to private sectors subject to the requirement of credit risk capital.
In order to determine which jurisdiction corresponds to each exposure, the principle of ultimate risk shall be applied. Pursuant to this principle, one must identify the jurisdiction where the guarantor of the risk resides. The counter-cycle margin shall be observed by means of an increase in the conservation capital margin and shall be satisfied exclusively with Common Equity Tier 1, net of deductible concepts (CDCOn1).
Credit Risk
The minimum capital requirement in respect of counterparty risk (“CRC”) shall be calculated with the items included, which must be computed on the basis of the balances as of the last day of each month (capital, interests, premiums, restatements –by theBenchmark Stabilization Ratio (Coeficiente de Estabilización de Referencia or “CER”) published by the CER –Central Bank and price differences, as appropriate, net of the non-recoverability and devaluation risks provisions and of accumulated depreciation and amortization attributable to them and other regularizing accounts, without deducting 100% of the minimum amount required for the
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non-recoverability risk provision in the portfolio corresponding to debtors classified as in a “Normal Situation” – points 6.5.1 and 7.2.1 of the rules on “Classification of Debtors”- and financings secured by preferential guarantees “A”).
The minimum capital requirement in respect of counterparty risk must be calculated applying the following equation:
CRC = (k x 0.08 x RWAc) + INC
Variable “k” is determined by the rating (1 is the strongest, 5 is the weakest) assigned to the financial entity by the Superintendency, pursuant to the following scale:: Minimum capital requirements also depend on the CAMELBIG rating (1 is the strongest, 5 is the weakest) assigned by the Superintendency, which also determines the “k” value. This rating system complies with international standards and provides a broad definition of the performance, risks and perspectives of financial entities. Financial entities have to adjust their capital requirements according to the following “k” factors:
CAMELBIG Rating | K Factor | |||
1 | 1.00 | |||
2 | 1.03 | |||
3 | 1.08 | |||
4 | 1.13 | |||
5 | 1.19 | |||
| | |
CAMELBIG Rating |
| K Factor |
1 |
| 1.00 |
2 |
| 1.03 |
3 |
| 1.08 |
4 |
| 1.13 |
5 |
| 1.19 |
For the purposes of the calculation of the capital requirement, the rating will be that of the third month after the month of the most recent rating informed to the entity. For so long as no notice is given, the “k” factor will be equal to 1.03.
RWAc: These are creditstands for capital risk weighted assets, calculated by addingapplying the following:
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following formula:
A * p + PFB * CCF * p + no DVP “DvP”+DvP+ (DVP + RCD + INC significant holding in other companies) * 12,5012.50
Where:
Variable “A” refers to eligible assets/exposures; “PFB”
“PFB” are eligible items which are not registered on the balance sheet; “CCF”
“CCF” the conversion credit factor; and “p”
“p” refers to the weighting factor, expressed on a per unit basis.
In addition, “no DvP” refers to transactions that do not involve delivery against payment. The amount is determined by the addition of the amounts arrived at by applying the weighting factor (p) on the relevant transactions.
“DvP” refers to failed delivery against payment transactions (for purposes of these rules, failed payment against payment (PvP) transactions are also included). The amount is determined by the addition of the amounts arrived at by multiplying the current positive exposure by the applicable capital requirement.
In addition, “no DvP” refers to transactions that do not involve delivery against payment. The amount is determined by the addition of the amounts arrived at by applying the weighting factor (p) on the relevant transactions.
“RCD” refers to requirements for counterparty risk in OTC transactions.
“INC” incremental minimum capital requirements based on any excess in the fixed assets and other ratios, the limitations established under the “Major Exposure to Credit Risk Regulations”.Regulations.”
“INC(investments in companies)” means the incremental minimum capital requirements based on any excess over the following limits:
equity interest held in companies: 15% |
total equity interests held in companies: 60% |
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The established maximum limits will be applied on the financial entity’s computable regulatory capital for the last day before the relevant date, as prescribed in the rules on “Credit Risk Fractioning”.Fractioning.”
Each type of asset is weighted according to the level of risk assumed to be associated with it. In broad terms, the weights assigned to the different types of assets are:
| | | |
Type of Asset | Weighting (%) | ||
Cash and cash equivalents | |||
Cash held in treasury, in transit (when the financial institution assumes responsibility and risk for transportation), in ATMs, in checking accounts and in special accounts with the Central Bank, gold coins or bars | 0 | ||
Cash items in the process of collection, cash in armored cars and in custody at financial institutions | 20 | ||
Exposure to governments and central banks | |||
To the Central Bank denominated and funded in Pesos | 0 | ||
To the public non-financial sector denominated and funded in Pesos, including securitized exposures | 0 | ||
To the public non-financial sector arising from financing granted to social security beneficiaries or public employees (with discount code) | 0 | ||
To the public non-financial sector and the Central Bank. Other. To other sovereign states or their central banks. | |||
AAA to AA- | 0 | ||
A+ to A- | 20 | ||
BBB+ to BBB- | 50 | ||
BB+ to B- | 100 | ||
Below B- | 150 | ||
Unrated | 100 | ||
Entities of the non-financial public sector from other sovereigns, pursuant ot the credit rating assigned to the respective sovereign | 0 | ||
AAA to AA- | 20 | ||
A+ to A- | 50 | ||
BBB+ to BBB- | 100 | ||
BB+ to B- | 100 | ||
Below B- | 150 | ||
Unrated |
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100 | |||
To the Bank for International Settlements, the IMF, the European Central Bank and the European Community | 0 | ||
To the non-financial public sector of the provinces, municipalities and/or the Autonomous City of Buenos Aires arising from the acquisition of sovereign bonds issued in Pesos by the central administration, when they do not have any one of the guarantees described in the regulations on “Financing to Non-Financial Public | |||
AAA to AA- | 20 | ||
A+ to A- | 50 | ||
BBB+ to BBB- | 100 | ||
BB+ to B- | 150 | ||
Below B- | 200 | ||
Unrated | 200 | ||
Exposure to the Multilateral Development Banks (MDB) | |||
The International Bank for Reconstruction and Development (IBRD), the International Finance Corporation (IFC), the Inter-American Development Bank (IDB), the European Investment Bank (EIB), the Asian Development Bank (ADB), | 0 | ||
Other | |||
AAA to AA- | 20 | ||
A+ to A- | 50 | ||
BBB+ to BBB- | 50 | ||
BB+ to B- | 100 | ||
Below B- | 150 | ||
Unrated | 50 | ||
Exposure to local financial institutions | |||
Denominated and funded in Pesos arising from transactions with an initial contractual term of up to 3 months | 20 | ||
Other. The weighting percentage to be applied will be the one for one category less favorable than the one assigned to the exposures with the |
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the public non-financial sector and the Central Bank, with a maximum of 100%, except for the case in which the grade was less than B-, in which case the weighting percentage will be 150%. | |||
Exposure to foreign financial institutions, pursuant to the credit rating assigned to the sovereign of their jurisdiction of incorporation. | |||
AAA to AA- | 20 | ||
A+ to A- | 50 | ||
BBB+ to BBB- | 100 | ||
BB+ to B- | 100 | ||
Below B- | 150 | ||
Unrated | 100 | ||
Exposure to companies and other legal entities in the country and abroad, including exchange institutions, insurance companies and stock exchange entities | 100 | ||
Exposures included in the retail portfolio | |||
Loans to individuals (provided that installments of loans granted by the institution do not exceed, at the time of the agreements, 30% of borrower’s income) and to Micro, Small- and Medium-Sized Companies (“MiPyMEs”). | 75 | ||
Other | 100 | ||
Exposures guaranteed by reciprocal guaranty companies (sociedades de garantía recíproca) or public security funds registered with the registries authorized by the Central Bank | 50 | ||
First mortgageloans on residential homes property or mortgage loans with any order of preference provided that the institution remains the creditor, irrespective of the order of preference, to the extent that the | |||
If credit facility does not exceed 75% of the appraised value of such real property | |||
- Sole, permanently-occupied family home | 35 | ||
- Other |
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50 | |||
On the amount exceeding 75% of the appraised value of such real property | 100 | ||
First mortgageloans on other than | |||
Up to 50% of the lower of the real property market value or 60% of the mortgage loan. | 50 | ||
On the remaining portion of the loan. | 100 | ||
Past due loans over 90 days | |||
Weighting varies according to the loan and specific provisions Created | 50-150 | ||
Equity holdings | 150 | ||
Securitization exposures, failed DvP transactions, non-DvP transactions, exposures to central counterparty institutions (CCP) and derivative transactions not included in said | * | ||
Exposures to individuals or companies originated in credit card purchases made in installments of travel tickets to foreign destinations and other touristic services abroad | 1250 | ||
Other assets and off-balance categories | 100 | ||
*They receive a special treatment.
Excluded items include: (a) securities granted for the benefit of the Central Bank for direct obligations; (b) deductible assets pursuant to RPC regulations and (c) financings and securities granted by branches or local subsidiaries of foreign financial entities by order and on account of their headquarters of foreign branches or the foreign controlling entity, to the extent: (i) the foreign entity has an investment grade rating, (ii) the foreign entity is subject to regulations that entail consolidated fiscalization, (iii) in the case of finance operations, they shall be repaid by the local branch or subsidiary exclusively with funds received from the aforementioned foreign intermediaries; and (iv) in the case of guarantees granted locally, they are in turn guaranteed by their foreign branch headquarters or the foreign controlling entity and foreclosure on such guaranty may be carried out immediately and at the sole requirement of the local entity.
Credit Risk Regulation – Large Exposures
General Overview
Communication “A” 6599 of the Central Bank, as amended and restated by Communication “A” 6620, effective as of January 1, 2019, abrogated credit risk fractioning regulations (except for the provisions related to the non-financial public sector), and replaced the
73
former regime by regulating “large exposures to credit risk”.risk.” The system seeks to limit the maximum loss that a financial entity may suffer upon the occurrence of an unexpected default of a counterparty or group of connected counterparties who do not belong to the non-financial public sector, therefore affecting its solvency. The regulations regarding the exposures to credit risk must be applied at all times with every counterparty of the entity.
In this regard, the regulations have established the concept of group of connected counterparties, which applies to all cases in which one of the counterparties of a financial entity have direct or indirect control over the rest or in those cases in which financial difficulties experimented by one of the counterparties causes a strong likelihood that its subsidiaries may struggle financially as well. According to the regulation, upon the detection of the existence of a group of connected counterparties by the financial entity, such group shall be considered as a single counterparty and the sum of the exposures to credit risk that a financial entity possesses with all the individual counterparties comprehended in that group shall be subject to the information and disclosure requirements provided in section 2.
One of the main aspects of Communication “A” 6599 is the introduction of the concept of large exposure to credit risk in Argentine banking regulations, which is defined as the sum of all values of exposure of a financial entity with a counterparty or group of connected counterparties when it is equal or above 10% of the Tier 1 Capital registered by the financial entity the immediately preceding month of its calculation.
However, the determination of the values of exposure to risk recognize the following exceptions:
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Intraday interbank exposures; |
Exposures of financial entities with qualifying central counterparties, as defined by the Central Bank rules on minimum capital; |
Exposures with the Central Bank; and |
Exposures with the Argentine non-financial public sector. |
Regarding the information regime, the Central Bank has established that the financial entities shall inform the Superintendency of all the values of exposure to credit risk before and after the application of mitigation techniques, detailing:
Exposures to risk with a value equal or above 10% of Tier 1 Capital of the financial entity; |
Every other exposure to risk which value is equal or above 10% of the Tier 1 Capital of the financial entity, without applying credit risk mitigation techniques; |
Excluded exposures to risk which values are equal or above 10% of the financial entity’s Tier 1 Capital; and |
The financial entity’s 20 largest applicable exposures to risk, regardless of its value in relation with the financial entity’s Tier 1 Capital. |
Limits
On the one hand, Communication “A” 6620 sets at 15% the limit of exposure with a counterpartycounterpart of the non-financial private sector. Nevertheless, the limit will be increased by 10 percentage points for the part of the exposures that are covered by preferred collaterals. Additionally, it sets special limits for operating with financial institutions in the country and abroad (the general rule sets it at 25%). In the case of foreign financial institutions that do not have an international risk rating included in the “investment grade” category, the maximum limit is 5%.
Similarly,On the other hand, Communication “A” 6599 sets the global limit of exposure to risk with respect to affiliate counterparties at 20%. In the case of stock held in an investment portfolio, the sum of all the values of exposure to risk corresponding to the total stocks not related to the portfolio shall not exceed 15% (holdings in public services companies or companies dedicated to complementary services to financial activities are excluded). The total limit of stocks and holdings shall be the sum of all the values of exposure to risk
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corresponding to the total amount of stock in an investment or negotiation portfolio plus the credits for forward operations and sureties entered into in authorized Argentine markets shall not exceed 50%.
Minimum controls to exposures of affiliates
The regulations set forth three stages for the control of the financial entity’s affiliates exposure:
(1) | Reports for the entity’s management: |
● | Report by the CEO; |
Report by the supervisory committee; and |
Acknowledgment of the reports by the entity’s management. |
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(2) | Evidence of the affiliation to the financial entity: the personnel responsible for the analysis and resolution of the credit operations shall expressly register whether or not the client is affiliated with the financial entity. |
(3) | Affidavit evidencing affiliation: affiliated clients shall file an affidavit stating if they belong to the lending entity or if its relationship with such entity implies the existence of a controlling influence. |
Interest Rate Risk
Until January 1, 2013, financial entities had to comply with minimum capital requirements regarding interest rate risk. These requirements were intended to capture the sensitivity of assets and liabilities to changes in the interest rates. Communication “A” 5369 removed all rules and regulations regarding minimum capital requirements for interest rate risk. Notwithstanding this change, financial entities must continue to calculate the interest rate risk and remain subject to the Superintendency’s supervision. Communication “A” 6534, dated July 3, 2018 established that the interest rare risk shall be measured through the calculation of the Investment Portfolio Interest Rate (RTICI).
Market Risk
Minimum capital requirements for market risks are computed as a function of the market risk of financial entities’ portfolios, measured as their VaR. The regulation includes those assets traded on a regular basis in open markets and excludes those assets held in investment accounts, which must meet counterparty and interest rate risk minimum capital requirements.
There are five categories of assets. Domestic assets are divided into equity and public bonds/Central Bank debt instruments, the latter being classified in two categories based on whether their modified duration is less than or more than 2.5 years. Foreign equity and foreign bonds comprise two other categories and are also classified according to their duration, the latter of which is also broken up into two separate categories based on whether their modified duration is less than or more than 2.5 years. The fifth category is made up of foreign exchange positions, which are differentiated based on currency.
Overall capital requirements in relation to market risk are based on the sum of the five amounts of capital necessary to cover the risks arising from each category of assets.
Market risk minimum capital requirements must be met daily. Information must be reported to the Central Bank on a monthly basis. Since May 2003, the U.S. dollar has been included as a foreign currency risk component for the calculation of the market risk requirement and all assets and liabilities denominated in U.S. dollars are taken into account.
Pursuant to Communication “A” 5867, market risk will beis defined as the possibility of incurring losses in on- and off-balance sheet recorded positions as a result of adverse changes in market prices. The market risk minimum capital requirement is the arithmetic sum of the minimum capital requirement for interest rate (trading portfolio), stock (trading portfolio), exchange rate, commodities and options risks (trading portfolio). To meet this capital requirement, entities must apply a “Standard Measurement Method” based on an aggregate of components that separately capture the specific and general market risks for securities positions.
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General considerations. Risks subject to this minimum capital requirement include risks derived from positions in instruments – such as securities and derivatives – recorded as part of the trading portfolio, and risks from foreign currency and commodities positions recorded, indistinctly, as part of the investment or trading portfolio. For the purpose of the above accounting recording, the trading portfolio of financial entities comprises positions in financial instruments included among an entity’s assets for purposes of trading or of providing hedging to other items contained in the portfolio. Pursuant to Communication “A” 6690, as amended, a financial instrument may be accounted for as part of the trading portfolio – for purposes of meeting the minimum capital requirement for market risk – if such instrument may be traded free from any restriction or if the instrument may be hedged in full. Also, the portfolio must be actively managed, and its positions must be valued on a daily basis and with the required accuracy. Positions kept for trading purposes are those positions that the entity intends to sell in the short term or from which it intends to derive a profit as a result of changes, either actual or expected, in short-term prices, or by means of arbitrage activities. They include both positions that the entities keep for their own use and those they purchase in the course of services performed for customers or “market making’ activities”.activities.” Financial entities must calculate the minimum capital requirement for the counterparty credit risk involved in OTC transactions involving derivatives and securities financing transactions, such as repo transactions (repo agreements), recorded as part of the trading portfolio on a separate and additional basis to the calculation of capital requirements for general market risk and specific market risk of the underlying securities. For this purpose, entities will be required to apply the methods and weighting factors usually applicable when those transactions are recorded as part of the investment portfolio. Entities must have clearly defined policies and procedures in place, designed to determine the exposures that are to be included into or excluded from the trading portfolio in order to calculate their minimum
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capital requirement for market risk. On the other hand, the investment portfolio will include all securities held by the entity which are not included in the trading portfolio.
The minimum capital requirement for exchange rate risk will apply to the total position in each foreign currency. The minimum capital requirement for securities will be computed in respect of the instruments accounted for as part of the trading portfolio, which must be valued prudently (marked to market or marked to model). Instruments whose yield is determined in relation to CER must be considered fixed-rate securities. Whether recorded as part of the trading or of the investment portfolio, items to be deducted for purposes of calculating the RPC will be excluded from the calculation of the market risk minimum capital requirement.
Minimum capital requirement for interest rate risk. The minimum capital requirement for interest rate risk must be calculated in respect of any debt securities and other instruments accounted for as part of the trading portfolio, including any non-convertible preferred shares. This capital requirement is calculated by adding two separately calculated requirements: first, the specific risk involved in each instrument, either a short or a long position, and second, the general market risk related to the effect of interest rate changes on the portfolio. A set off of the long and short positions held in different instruments will be allowed.
Minimum capital requirement for positions in stock. The capital requirement for the risk of holding equity positions in the trading portfolio applies to both long and short positions in ordinary shares, convertible debt securities that function like shares and any call or put options for shares, as well as any other instrument with a market behavior similar to that of shares, excluding non-convertible preferred shares, which are subject to the minimum capital requirement for interest rate described in the preceding paragraph. Long and short positions in the same security may be computed on a net basis.
Minimum capital requirement for exchange rate risk. The capital requirement for exchange rate risk establishes the minimum capital required to hedge the risk involved in maintaining positions in foreign currency, including gold. To calculate the capital requirement for exchange rate risk, entities must first quantify its exposure in each currency, and then estimate the risks inherent in the combination of long and short positions in different currencies.
Minimum capital requirement for commodities risk. The capital requirement for commodities risk establishes the minimum capital required to hedge the risk involved in maintaining positions in commodities – but gold. The calculation of the capital requirement shall express every commodity position in terms of the standard measure unity, and following the rules set forth in Communication “A” 6690.6690, as amended.
Minimum capital requirement for positions in options. The calculation of the capital requirement for the risk involved in positions in options may be based on the “simplified method” set forth in Communication “A” 6690, as amended, if the entity only purchases options; provided that the market value of all the options in its portfolio does not exceed 5% of the entity’s RPC for the previous month, or if its positions in sold options are hedged by long positions in options pursuant to exactly the same contractual terms. In all other cases, the entity must use the alternative “delta plus” method, provided for in the regulation.
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Consequences of a Failure to Meet Minimum Capital Requirements
In the event of non-compliance with capital requirements by an existing financial institution, Central Bank Communication “A” 6091, as amended, provides the following:
(i) | non-compliance reported by the institutions: the institution must meet the required capital no later than the end of the second month after |
(ii) | Non-compliance detected by the Superintendency: the institution may challenge the non-compliance determination within thirty (30) calendar days after being served notice by the Superintendency. If no challenge is made, or if the defense is dismissed, the non-compliance determination will be deemed to be final and the procedure described in the previous item will apply. |
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Furthermore, pursuant to Communication “A” 5867,5889, as amended, by “A” 5889, among others, if a financial institution fails to meet market risk daily minimum capital requirements, except for any failure to meet the requirements on the last day of the month, calculated as a sum of VaR of included assets or derived from the calculation of capital requirements for interest rate, exchange rate and stock risks the financial institution must replace its capital or decrease its financial position until such requirement is met, and has up to ten (10) business days from the first day on which the requirement was not met to meet the requirement. If the financial institution fails to meet this requirement after ten (10) business days, it must submit a regularization and reorganization plan within the following five (5) business days and may become subject to an administrative proceeding initiated by the Superintendency.
Operational Risk
The regulation on Operational Risk (“OR”) recognizes the management of OR as a comprehensive practice separated from that of other risks, given its importance. OR is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. The definition includes legal risk but excludes strategic and reputational risk.
Financial institutions must establish a system for the management of OR that includes policies, processes, procedures and the structure for their adequate management. This framework must also allow the financial entity to evaluate capital sufficiency.
Seven OR event types are defined, according to internationally accepted criteria:
internal fraud; |
external fraud; |
employment practices and workplace safety; |
clients, products and business practices; |
damage to physical assets; |
business disruption and system failures; and |
execution, delivery and process management. |
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Financial entities are charged with implementing an efficient OR management system following the guidelines provided by the Central Bank. A solid system for risk management must have a clear assignment of responsibilities within the organization of financial entities. Thus, the regulation describes the roles prepared by each level of the organization in managing of OR (such as the roles of the Board of Directors, senior management and the business units of the financial institution).
A financial institution’s size and sophistication, and the nature and complexity of its products and processes, and the extent of the transaction determines the type of “OR Unit” required. For small institutions, this unit may even consist of a single person. This unit may functionally respond to the senior management (or similar) or a functional level with risk management decision capacity that reports to that senior management.
An effective risk management will contribute to prevent future losses derived from operational events. Consequently, financial entities must manage the OR inherent in their products, activities, processes and systems. The OR management process comprises:
(a) | Identification and assessment: the identification process should consider both internal and external factors that could adversely affect the development of the processes and projections created according to the business strategies defined by the financial institution. Financial entities should use internal data, establishing a process to register frequency, severity, categories and other relevant aspects of the OR loss events. This should be complemented with other tools, such as self-risk assessments, risk mapping and key risk indicators. |
(b) | Monitoring: an effective monitoring process is necessary for quickly detecting and correcting deficiencies in the policies, processes and procedures for managing OR. In addition to monitoring operational loss events, banks should identify forward-looking indicators that enable them to act upon these risks appropriately. |
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(c) | Control and mitigation: financial entities must have an appropriate control system for ensuring compliance with a documented set of internal policies, which involve periodic reviews (to occur at least annually) of control strategies and risk mitigation, and adjust these as necessary. |
Pursuant to Communication “A” 5282, as amended by Communications “A” 6091 and “A” 6638, among others, the minimum capital requirements regarding OR are equal to 15% of the annual average positive gross income of the last thirty-six (36) months.
The OR formula is as follow:
The variables in the OR formula are defined as follows:
Cro: the capital requirement for operational risk. |
α: 15%. |
n: the number of twelve-month consecutive terms with positive IB, based on the 36 months preceding the month of calculation. The maximum value of n is 3. |
IBt: gross income from twelve-month consecutive terms, provided that it is a positive figure, corresponding to the 36 months preceding the month of calculation. |
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Gross income (ingresos brutos) (“IB,” as per its acronym in Spanish) is defined as the sum of (a) financial and service income minusnet of financial and service expenses and (b) other income minus other expenses.sundry gains net of sundry losses.
The following items are excluded from items (a) and (b) above:
(i) | expenses derived from the creation or elimination of reserves during previous fiscal years and recovered credits during the fiscal year that were written off in previous fiscal years; |
(ii) | profits or losses from holding equity in other financial institutions or companies, if these were deductible from RPC; |
(iii) | extraordinary or unusual gains (i.e., those arising from unusual and exceptional events that resulted in gains) including income from insurance recovery; and |
(iv) | gains from the sale of classified species and measures at amortized cost of fair value with changes in other integral gains. |
New financial institutions must comply, in their first month, with an OR minimum capital requirement equivalent to 10% of the aggregate requirements determined for credit and market risks, in the latter case, for the positions on the last day of that month. As from the second and up to the thirty-sixth month, the monthly capital requirement will be equivalent to 10% of the average requirements determined for the months elapsed until, and including, the calculation period based on a consideration of the risks referred to in the preceding paragraph. paragraph, in accordance with the following formula:
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For every t-month:
● | CRCt: the capital requirement for credit risk. |
● | RMP,t: the capital requirement for market risk for the last day of such t-month. |
● | n: the number of months preceding the month of calculation, inclusive. 2≤ n ≤ 36. |
From the thirty-seventh month onwards, the monthly requirement is calculated based on the OR formula.
Minimum Cash Reserve Requirements
The minimum cash reserve requirement requires that a financial institution keeps a portion of its deposits or obligations readily available and not allocated to lending transactions and it is included in the Central Bank “Rules of Minimum Cash”,Cash,” as amended and supplemented.
Minimum cash requirements are applicable to demand and time deposits and other liabilities arising from financial intermediation denominated in Pesos, foreign currency, or government and corporate securities, and any unused balances of advances in checking accounts under formal agreements not containing any clauses that permit the bank to discretionally and unilaterally revoke the possibility of using such balances.
Minimum cash reserve obligations exclude (i) amounts owed to the Central Bank, (ii) amounts owed to domestic financial institutions (excluding special deposits related to inflows of funds – Decree No. 616/2005), (iii) amounts owed to foreign banks (including their head offices, entities controlling domestic institutions and their branches) in connection with foreign trade financing facilities and with multilateral development banks, (iv) cash purchases pending settlement and forward purchases, (v) cash sales pending settlement and forward sales (whether or not related to repurchase agreements), (vi) overseas correspondent banking operations, and (vii) demand obligations for money orders and transfers from abroad pending settlement to the extent that they do not exceed a seventy-two (72) business hour term as from their deposit, and (iii)(viii) demand obligations with business for the sales made by credit card and/or for the purchase.
The liabilities subject to these requirements are computed on the basis of the effective principal amount of the transactions, including differences in rates (either negative or positive), excluding interest accrued, past due, or to become due on the aforementioned liabilities, provided they were not credited to the account of, or made available to, third parties, and, in the case of fixed -term deposit of UVA and UVIs (as defined below), the accrued amount resulting from the increment of the value of such unit.
The basis on which the minimum cash reserve requirement is computed is the average of the daily balances of the liabilities:
registered at the end of each day during the period |
registered at the end of each day during the calendar month, in the case of liabilities denominated in foreign currency, or government and corporate securities. |
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The averages shall be obtained by dividing the aggregate of the daily balances into the total amount of the days of each period. Those days in which no movements are registered shall repeat the balance corresponding to the immediately preceding Business Day.
Such requirement shall be complied with on a separate basis for each currency and/or security and/or instrument under monetary regulation in which the liabilities are denominated.
The table below shows the percentage rates that should be applied to determine the required minimum cash reserve requirement for financial institutions, depending on whether: (i) the financial entities are included in Group “A”“A,” as provided by Section 4 of the regulations on “Authorities of financial entities” (Autoridades de entidades financieras), and/or branches or subsidiaries of foreign banks are classified as systemically important (G-SIB) not included in that group; or (ii) the remaining financial entities. Section 4 of the regulations on “Authorities of financial entities” (Autoridades de entidades financieras) of the Central Bank classifies the financial entities in: (a) Group “A” which includes those entities in which the amount of their assets is greater than or equal to 1% of the total of the assets of the financial system (for the purposes of calculating this indicator, the average of the assets corresponding to the months of July, August and September of the
79
previous year will be considered, according to the data that arise from the corresponding information regime); and (b) Group “B” composed of allwhich includes those entities that arein which the amount of their assets do not included inexceed 1% and greater than or equal to 0.25% of the total of the total of the assets of the financial system; and (c) Group “A”“C” which includes those institutions whose deposits do no exceed 0.25% of the total of the assets of the financial system and/or, being Group B institutions, the ratio between their deposits and their RPC is reless than 100%. The following fees arise from Communication “A” 6616,6991:
| | | | | | | | | | |
| | | | Rate % | ||||||
| | | | Group A and G-SIB | | Group B and Group C | ||||
| | | | | | Foreign | | | | |
Item | | |
| Pesos |
| Currency |
| Pesos |
| Foreign Currency |
1- |
| Checking account deposits and demand deposits opened at credit cooperatives |
| 45 |
| |
| 20 |
|
|
2- |
| Savings account, salary/social security accounts, special accounts (except for deposits included on items 7 and 11), and other demand deposits and liabilities, pension and social security benefits credited by ANSES pending collection and immobilized reserve funds for liabilities covered by these regulations |
| 45 |
| 25 |
| 20 |
| 25 |
3- |
| Unused balances of advances in checking accounts under executed overdraft agreements |
| 45 |
| |
| 20 |
|
|
4- |
| Deposits in checking accounts of non-bank financial institutions, computed for purposes of meeting their required minimum cash reserve |
| 100 |
| |
| 100 |
|
|
5- |
| Time deposits, liabilities under “acceptances,” (including responsibilities for sale or transfer of credits to agents different from financial institutions), stock-exchange repos (cautions and stock exchange passive repos), constant-term investments, with an option for early termination or for renewal for a specified term and variable income, and other fixed-term liabilities, except deposits included in the following items 7, 10 y 12 of this table, securities (including negotiable obligations), according to their outstanding term: |
|
|
|
|
|
|
|
|
|
| (i) Up to 29 days |
| 32 |
| 23 |
| 11 |
| 23 |
|
| (ii) From 30 days to 59 days |
| 22 |
| 17 |
| 7 |
| 17 |
|
| (iii) From 60 days to 89 days |
| 4 |
| 11 |
| 2 |
| 11 |
|
| (iv) From 90 days to 179 days |
| — |
| 5 |
| — |
| 5 |
|
| (v) From 180 days to 365 days |
| — |
| 2 |
| — |
| 2 |
|
| (vi) More than 365 days |
| — |
| — |
| — |
| — |
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| | | | | | | | | | |
| | |
| Rate % | ||||||
| | | | Group A and G-SIB | | Group B and Group C | ||||
| | | | | | Foreign | | | | |
Item |
| |
| Pesos |
| Currency |
| Pesos |
| Foreign Currency |
6- | | Liabilities owed due to foreign facilities (not including those instrumented by term deposits, unless they are made by residents abroad linked to the entity pursuant to Section 2 of the rules on “Large Exposures to Credit Risk,” nor the acquisition of debt securities, to which they must apply the requirements provided in the previous point) |
| |
|
|
|
|
|
|
| | (i) Up to 29 days |
| |
| 23 |
|
|
| 23 |
| | (ii) From 30 days to 59 days |
| |
| 17 |
|
|
| 17 |
| | (iii) From 60 days to 89 days |
| |
| 11 |
|
|
| 11 |
| | (iv) From 90 days to 179 days |
| |
| 5 |
|
|
| 5 |
| | (v) From 180 days to 365 days |
| |
| 2 |
|
|
| 2 |
| | (vi) More than 365 days |
| |
| — |
|
|
| — |
7- | | Demand and time deposits made upon a court order with funds arising from cases pending before the court, and the related immobilized balances |
| |
| |
|
|
| 15 |
| | (i) Up to 29 days |
| 29 |
| 15 |
| 10 |
| 15 |
| | (ii) From 30 days to 59 days |
| 22 |
| 15 |
| 7 |
| 15 |
| | (iii) From 60 days to 89 days |
| 4 |
| 15 |
| 2 |
| 15 |
| | (iv) More than 90 days |
| — |
| 15 |
| — |
| 15 |
8- | | Special deposits related to inflows of funds. Decree 616/2005 |
| |
| 100 |
| |
| 100 |
9- | | Time deposits in nominative, non-transferable Peso-denominated certificates, belonging to public sector holders, with the right to demand early withdrawal in less than 30 days from its setting up |
| 32 |
| |
| 11 |
|
|
10- | | Deposits and term investments —including savings accounts and securities (including Notes)— in UVIs and UVAs, according their outstanding term |
| |
|
|
|
|
|
|
| | (i) Up to 29 days |
| 7 |
| |
| 7 |
|
|
| | (ii) From 30 days to 59 days |
| 5 |
| |
| 5 |
|
|
| | (iii) From 60 days to 89 days |
| 3 |
| |
| 3 |
|
|
| | (iv) More than 90 days |
| — |
| |
| — |
|
|
11- | | Labor Work Fund for Construction Industry Workers, denominated in UVA |
| 7 |
| |
| 7 |
|
|
12- | | Deposits and fixed term investments created in the name of minors for funds they receive freely |
| — |
| — |
| — |
| — |
13- | | Deposits in Pesos in demand accounts that constitute the assets of mutual funds (money market) |
| — |
| |
| — |
|
|
In the case of transactions in Pesos, when the jurisdiction of the main office where the transaction takes place, according to what is established in Central Bank’s regulations regarding “Categorization of locations for financial entities”, belongs to the categories II to VI, the rates foreseen for demand deposits will be reduced by 2 percentage points and for term placements by 1 percentage point up to a minimum of zero. In both cases, it does not include the impositions in securities. The deferred impositions in Pesos arranged remotely (i.e. through home banking, web time deposits, etc.) will receive the same treatment as amended, dated December 20, 2018, its effectiveness will depend onthose captured in the groupcategories II to which the financial entity belongs, being February 2, 2019 forVI.
Financial entities included in Group “A” and G- SIBbranches or subsidiaries of G-SIB not included in that group may integrate the period and on January 1, 2019 for the remaining entities:daily requirement in Pesos with “National Treasury Bonds in Pesos at a fixed rate due November 2020” and “National Treasury Bonds in pesos at a fixed rate due May 2022” in up to:
Rate % | |||||||||||||||
Group A and G-SIB | Group B | ||||||||||||||
Item | Pesos | Foreign Currency | Pesos | Foreign Currency | |||||||||||
1- | Checking account deposits and demand deposits opened at credit cooperatives | 45 | 20 | ||||||||||||
2- | Savings account, salary/social security accounts, special accounts (except for deposits included on items 7 and 11), and other demand deposits and liabilities, pension and social security benefits credited by ANSES pending collection and immobilized reserve funds for liabilities covered by these regulations | 45 | 25 | 20 | 25 | ||||||||||
3- | Unused balances of advances in checking accounts under executed overdraft agreements | 45 | 20 | ||||||||||||
4- | Deposits in checking accounts of non-bank financial institutions, computed for purposes of meeting their required minimum cash reserve | 100 | 100 | ||||||||||||
5- | Time deposits, liabilities under “acceptances”, (including responsibilities for sale or transfer of credits to agents different from financial institutions), stock-exchange repos (cautions and stock exchange passive repos), constant-term investments, with an option for early termination or for renewal for a specified term and variable income, and other fixed-term liabilities, except rescheduled deposits included in the following items 7, 10 y 12 of this table, securities (including negotiable obligations), according to their outstanding term: | ||||||||||||||
(i) Up to 29 days | 32 | 23 | 11 | 23 | |||||||||||
(ii) From 30 days to 59 days | 22 | 17 | 7 | 17 | |||||||||||
(iii) From 60 days to 89 days | 4 | 11 | 2 | 11 | |||||||||||
(iv) From 90 days to 179 days | 0 | 5 | 0 | 5 | |||||||||||
(v) From 180 days to 365 days | — | 2 | — | 2 | |||||||||||
(vi) More than 365 days | — | 0 | — | 0 | |||||||||||
6- | Liabilities owed due to foreign facilities (not including those instrumented by term deposits, unless they are made by residents abroad linked to the entity pursuant to Section 2 of the rules on “Large Exposures to Credit Risk”, nor the acquisition of debt securities, to which they must apply the requirements provided in the previous point) | ||||||||||||||
(i) Up to 29 days | 23 | 23 | |||||||||||||
(ii) From 30 days to 59 days | 17 | 17 | |||||||||||||
(iii) From 60 days to 89 days | 11 | 11 | |||||||||||||
(iv) From 90 days to 179 days | 5 | 5 |
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Rate % | |||||||||||||||
Group A and G-SIB | Group B | ||||||||||||||
Item | Pesos | Foreign Currency | Pesos | Foreign Currency | |||||||||||
(v) From 180 days to 365 days | 2 | 2 | |||||||||||||
(vi) More than 365 days | 0 | 0 | |||||||||||||
7- | Demand and time deposits made upon a court order with funds arising from cases pending before the court, and the related immobilized balances | 15 | 15 | ||||||||||||
(i) Up to 29 days | 29 | 10 | |||||||||||||
(ii) From 30 days to 59 days | 22 | 7 | |||||||||||||
(iii) From 60 days to 89 days | 4 | 2 | |||||||||||||
(iv) More than 90 days | |||||||||||||||
8- | Special deposits related to inflows of funds. Decree 616/2005 | 100 | 100 | ||||||||||||
9- | Time deposits in nominative, non-transferable Peso-denominated certificates, belonging to public sector holders, with the right to demand early withdrawal in less than 30 days from its setting up | 32 | 11 | ||||||||||||
10- | Deposits and term investments —including savings accounts and securities (including Notes)— in UVIs and UVAs, according their outstanding term | ||||||||||||||
(i) Up to 29 days | 7 | 7 | |||||||||||||
(ii) From 30 days to 59 days | 5 | 5 | |||||||||||||
(iii) From 60 days to 89 days | 3 | 3 | |||||||||||||
(iv) More than 90 days | |||||||||||||||
11- | Labor Work Fund for Construction Industry Workers, denominated in UVA | 7 | 7 | ||||||||||||
12- | Deposits and fixed term investments created in the name of minors for funds they receive freely |
- | 5 percentage points of the rates provided in point 1, point 2 (in Pesos), point 3, point 9, and sections (i) and (ii) of points 5 and 7 (both in Pesos); and |
- | 2 percentage points of the rates provided in sections (iii) of points 5 and 7 (both in Pesos). |
Financial entities included in Group “A” and branches or subsidiaries of G-SIB not included in that group may integrate the period and daily requirement in Pesos with LELIQ and/or NOBAC up to 16 percentage points of the rate provided in section (i) of point 5 (in Pesos) and 9; in up to 13 percentage points of the rates provided by section (ii) of point 5 (in Pesos); in up to 3 percentage points of the rates provided by seciton (i) and (ii) of point 10 and 11; and in up to 2 percentage points of the rates provided by section (iii) of point 5.to:
- | 16 percentage points of the rates provided in section (i) of point 5 (in Pesos) and 9; |
- | 13 percentage points of the rates provided by section (ii) of point 5 (in Pesos); |
- | 3 percentage points of the rates provided by seciton (i) and (ii) of point 10 and 11; and |
- | 2 percentage points of the rates provided by section (iii) of point 5. |
Financial entities not included in the last paragraph up to 3 percentage points of the rates provided by sections (i) and (ii) of point 5, point 9, sections (i) and (iii) of point 10 and point 11; and in up to 2 percentage points of the rates provided in section (iii) of point 5.to:
- | 3 percentage points of the rates provided by sections (i) and (ii) of point 5, point 9, sections (i) and (iii) of point 10 and point 11; and |
- | 2 percentage points of the rates provided in section (iii) of point 5. |
In order to be admitted the integration with “National Treasury Bonds in Pesos at a fixed rate due November 2020”,2020,” “National Treasury Bonds in pesos at a fixed rate due May 2022,” LELIQ and/or NOBAC as described above, they must be valued at market prices and be deposited in Sub-account 60, minimum cash enabled in the “Central Registry and Settlement of Public Liabilities and Financial Trusts—CRyL” (Central de Registro y Liquidación de Pasivos Públicos y Fideicomisos Financieros).
The minimum cash requirement will be reduced:
in accordance with the participation in the total of financing operations to the non-financial private sector in Pesos in the entity of financing to MiPyMEs in the same currency; |
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| | | |
Participation, in the total of financing operations | | Reductions (over | |
to MiPyMES with | | the total of | |
operations to the non-financial private
| |
| |
the institution | in Pesos) % | ||
Less than 4 | 0 | ||
From 4 to less than 6 | 1.00 | ||
From 6 to less than 8 | 1.25 | ||
From 8 to less than 10 | 1.50 | ||
From 10 to less than 12 | 1.75 | ||
From 12 to less than 14 | 2.00 | ||
From 14 to less than 16 | 2.25 | ||
From 16 to less than 18 | 2.50 | ||
From 18 to less than 20 | 2.75 | ||
From 20 to less than 22 | 3.00 | ||
From 22 to less than 24 | 3.25 | ||
From 24 to less than 26 | 3.50 | ||
26 | |||
3.75 |
Calculations will consider the mobile average balance at the end of the last 12 months prior to the low report of the financings in Pesos (Loans and Credits for Financial Leases) granted to MiPyMEs in respect of the total of such financings to the non-financial private sector of the institution.
Depending on the granting of financing under the“Ahora 12” Program (the implementation of the Consumer Promotion Program and the Production of Goods and Services named“Ahora 12” was created by Joint Resolution |
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671/2014 and 267/2014 of the former Ministry of Economy and Public Finance and the Ministry of Industry), in an amount equivalent to |
(i) | whose destination is the acquisition of goods and services included in the aforementioned resolution and its complementary regulations; or |
(ii) | to non-financial companies issuing credit cards at an annual interest rate of up to 17%, insofar as these companies are part of the“Ahora 12” Program. |
Effective from March 1, 2020, Communication “A” 6916, as amended, increased the 20% decrease of the requirement for the granting of financing under the “Ahora 12” as set forth in Communication “A” 6857,Program from 20% to 35% of the aggregate financings in Pesos granted by the relevant institution.institution until September 30, 2020, to 50% of such aggregate financings in Pesos granted from October 1, 2020 to January 1, 2022, and to 40% of such aggregate financings in Pesos granted from February 1, 2022. Additionally, effective as of March 19, 2020, Communication “A” 6916“ A” 6937 set the limit of the deduction at 4% over6% of the items in Pesos subject to the Central Bank Rulesrules of Minimum Cash. Amended by Communication “A” 6937, effective from March 19, 2020,Effective as of July 29, 2021, this limit was increased to 8% of the latter percentage was raiseditems in Pesos subject to 6%.the Central Bank rules of Minimum Cash.
Depending on the cash withdrawals made through institution ATMs. The requirement will be reduced by the amount calculated on the basis of the monthly average of total daily cash withdrawals from ATMs, corresponding to the prior month, located in the institution’s operational houses, according to the jurisdiction in which is located, in accordance with the provisions of the “Locations for Financial Institutions Categorization |
For this purpose, the included ATMs are those that – at least – allow users to make cash withdrawals regardless of the institution in which they are customers and the network managing such equipment and that –on a monthly average, computing business and non-business days – have remained accessible to the public for at least ten hours a day.
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In the case of financial entities included in Group “A,” the requirement will be reduced by an amount equivalent to the 30% of the aggregate of all financing in Pesos to MiPyMEs – in accordance with the definition contained in the “Determination of the Status of Micro, Small or Medium-Sized Enterprises Rules”- agreed at a maximum interest of: |
40% fixed nominal per annum until and including February 16, 2020 (which may continue to be counted until its termination). |
35% fixed nominal per annum from February 17, 2020. |
For this purpose, the average monthly balance of the financings granted the period before the requirement was calculated that meets the above conditions shall be included. This deduction may not exceed 2% of the items in Pesos subject to the requirement, on average, of the month prior to the calculation.
The financings calculated for this item 4 deduction cannot be included for the determination of the item 1 above deduction.
In accordance with the special treatment provided for |
(a) | MiPyMEs if at least 50% of such financings are allocated to working capital. |
(b) | Providers of human health services if they provide hospitalization in the framework of the health emergency as provided by Decree No. 260/2020. |
(c) | Non-MiPyMEs clients that agree such financings for the acquisition of machines and |
ForThis deduction may not exceed 4% of the period from February 2020 until January 2021 inclusive, the minimum cash requirementconcepts in Pesos willsubject to demand on average of the month immediately previous of the month of computation, and can be reduced by 0.8% overextended up to 6% in the contractual balance – atcase of the endfollowing financings agreed as from July 1, 2020:
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- | Clients that received the assistance provided for in point (5) a. above, up to the total amount equivalent to the monthly wage bill (without the supplementary annual salary) to be paid by the applicant; |
- | Clients that did not received such special assistance. |
(7) | In accordance with the special treatment provided for under Decree No. 332/2020. The requirement will be reduced by an amount equivalent to: |
(a) | 60% of the amount of the “Zero Interest-Rate Credits,” “Loans at Subsidized Rate for Companies” and “Zero Interest-Rate Culture Credits” agreed under the framework of Decree No. 322/2020 (as amended) and disbursed until November 5, 2020; |
(b) | 24% of the “Loans at Subsidized Rate for Companies” disbursed until November 6, 2020, at a nominal annual rate of 27%; |
(c) | 7% of the “Loans at Subsidized Rate for Companies” disbursed as of November 6, 2020 at a nominal annual rate of 33%. |
(8) | In the case of financings to MiPyMEs not informed at the Financial System’s Debtors Center (Central de Deudores del Sistema Financiero), the requirement will be reduced by an amount equivalent to 40% of the financings in pesos to MiPyMEs agreed at a nominal annual rate of 24% measured on a monthly average of daily balances from the previous month. |
(9) | In the case of financings included in the “Line of financings for the productive investments of MiPyMEs,” the requirement will be reduced by an amount equivalent to 14% of the financings foreseen in point 4.1. of such line of credits, provided such financings are agreed at an annual nominal interest rate of up to 30%, measured on a monthly average of daily balances from the previous month. |
The financings computed for the deduction provided in points 1 and 4-7 can only be computed in one of November 2019- fromthe above-mentioned points. In addition, the financings thatcomputed for the institution decidesdeduction provided in points 4, 5 and 7 shall (i) continue to subject tobe computed for the special treatmentcorresponding deduction their monthly average daily balances for the financings provided by point 6.4before October 15, 2020, inclusive; (ii) be voluntary and may not be counted against the deductions of the “Credit Policy Rules.”points 4, 5 and 7.
Whenever there is an excessive concentration of liabilities (in holders and/or terms), which implies a significant risk with respect to the individual liquidity of the financial institution and/or has a significant negative effect on the systemic liquidity, additional minimum cash may be set on the liabilities included in the financial entity and/or those complementary measures that are deemed pertinent.
Likewise, the minimum cash requirement may be increased due to non-compliance with the rules on the “Credit Line for productive investment”.investment.”
In addition to the abovementioned requirements, the reserve for any defect in the application of resources in foreign currency net of the balances of cash in the entities, in custody in other entities, in transit and in Transporters of Securities, for a certain month, shall be applied to an amount equal to the minimum cash requirement of the corresponding currency for each month.
The minimum cash reserve must be set up in the same currency or securities or debt instruments for monetary regulation to which the requirement applies, and may include the following:
(1) | Accounts maintained by financial institutions with the Central Bank in Pesos. |
(2) | Accounts of minimum cash maintained by financial institutions with the Central Bank in U.S. dollars, or other foreign currency. |
(3) | Special guarantee accounts for the benefit of electronic clearing houses and to cover settlement of credit card, vouchers, and ATM transactions and immediate transfer funds. |
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(4) | Checking accounts maintained by non-bank financial institutions with commercial banks for the purpose of meeting the minimum reserve requirement. |
(5) | Special accounts maintained with the Central Bank for transactions involving social security payments by the ANSES. |
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(6) | Minimum cash sub-account 60, authorized in the Registration and Settlement Central for Public Debt and Financial Trusts – CRYL (“Central de Registro y Liquidación de Pasivos Públicos y Fideicomisos Financieros– CRYL”) for public securities and securities issued by the Central Bank at their market value. |
These eligible items are subject to review by the Central Bank and may be changed in the future.
Compliance with the minimum cash reserve requirement will be measured on the basis of the monthly average of the daily balances of eligible items maintained during the period to which the minimum cash reserve refers by dividing the aggregate of such balances by the total number of days in the relevant period. The compensation of deficit positions with surplus positions corresponding to different requirements will not be accepted.
The aggregate balances of the eligible items referred to above, maintained as of each daily closing, may not, on any one day during the month,period, be less than 25% of the total required cash reserve, determined for the next preceding period, recalculated on the basis of the requirements and items in force in the month to which the cash reserves relate, without considering the effects of the application of the provisions of section “1.7 Transfers” of the “Minimum Cash” rules. The daily minimum required is 50% when a deficit to the admitted transfer margin occurs in the previous period.
Any deficiencies in meeting the required minimum cash reserve and the daily minimum reserve in Pesos, in foreign currency, or securities or debt instruments for monetary regulation are subject to a penalty in Pesos, equal to 1.5 times the average nominal interest rate of the shorter term peso denominated LELIQs auction published on the last business day of the relevant period or, if not available, the last one available.
LELIQ global daily position
Pursuant to Communication “A” 6661Section 8 “net position in LELIQ and NOTALIQ” of the Central Bank therules “Cash settled and forward transactions, futures, bonds, surety bonds, other derivatives and mutual funds,” financial institutions may maintain a net position in short term LELIQ global including those effectively imputed to integrate the minimum cash requirement in Pesos pursuant to sections 1.3.7.1. and 1.3.17. of the Central Bank rules “Rules of Minimum Cash,” up to an amount equivalent to the monthly average of daily balances of fixed term deposits in Pesos of the non-financial private sector of the previous period.
Financial institutions that have a percentage of time deposits in Pesos constituted by the non-financial private sector with respect to the total deposits in Pesos by such sector (measured as a monthly average of daily balances of the previous period, considering only capital without interest or adjustments) equal to or higher than 20% may maintain a joint positive net position of the banks shall not exceed the larger sum between:longer term LELIQ and variable rate Liquidity Notes (NOTALIQ).
Internal Liquidity Policies of Financial Institutions
Liquidity Coverage Ratio
Pursuant to the Central Bank’s regulations on the liquidity coverage ratio (the “LCR”), financial institutions must adopt management and control policies that ensure the maintenance of reasonable liquidity levels to efficiently manage their deposits and other financial commitments and must comply with the liquidity coverage ratioLCR established thereunder, under a 30-day stress test scenario. Such policies should establish procedures for evaluating the liquidity of the institutions in the framework of prevailing market conditions to allow them to revise projections, take steps to eliminate liquidity constraints and obtain sufficient funds, at market terms, to maintain a reasonable level of assets over the long term. Such policies should also address (i) the concentration of assets and liabilities in specific customers, (ii) the overall economic situation, likely trends and the impact on credit availability, and (iii) the ability to obtain funds by selling government debt securities andand/or own assets.
The organizational structure of the entity must place a specific unit or person in charge of managing liquidity and assign levels of responsibility to the individuals who will be responsible for managing the LCR, which will require daily monitoring. The participation and coordination of the entity’s top management authority (e.g., a CEO) will be necessary.
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In addition, financial institutions must designate a director or advisor who will receive reports at least weekly, or more frequently if circumstances so require, such as when changes in liquidity conditions require new courses of action to safeguard the entity. In the case of branches of foreign financial institutions the reports must be delivered to the highest authority in the country.
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Appointed officers and managers will be responsible for managing the liquidity policy that, in addition to monitoring the LCR, includes taking the necessary steps to comply with minimum cash requirements.
Financial institutions must report the list of such officers and directors, as well as any subsequent changes, to the Superintendency within ten (10) calendar days from the date of any such change.
Liquidity Parameters
In addition to the LCR, there are other parameters that are used as systematic tools of control. These policies contain specific information regarding cash flows, balance structure and available underlying assets free of charge. These parameters, along with the LCR, offer basic information to evaluate the liquidity risk. The included parameters are:
gaps in contractual terms; |
funding concentration; |
available assets free of restrictions; |
LCR for relevant currency; and |
market-related monitoring tools. |
Additionally, Communication “A” 6209, as amended, sets forth that financial institutions must have an adequate stock of high-quality liquid assets (“HQLA”) free of any restrictions which can be immediately converted into cash in order to cover their liquidity needs during a period of 30 days in case of a stress scenario. Also, financial institutions must carry out their own stress tests so as to determine the liquidity level they should maintain in other scenarios, considering a period higher than 30 calendar days.
The LCR must be equal to or greater than 1 (that is to say, the stock of HQLA must not be lower than the total net cash outlays) in the absence of a financial stress scenario. If this is not the case, the LCR may fall below 1.
The Central Bank describes how to categorize a stress scenario, taking into account the following: the partial loss of retail deposits; the partial loss of wholesale non-guaranteed funding capacity; the partial loss of guaranteed funding; additional fund outlays due to situations contractually provided for as a consequence of a significant decline in the financial institution’s credit quality; market volatility increases that have an effect on the quality of guarantees or on the potential future exposure of positions in derivatives; the unforeseen use of credit and liquidity facilities compromised and available but not used that the financial institution may have granted to its clients; and/or the need that the financial institution may experience to repurchase debt or to comply with non-contractual obligations so as to mitigate its reputational risk.
The LCR calculation must be made on a permanent basis and informed to the Central Bank on a monthly basis.
The HQLA can only be made up of the following portfolio assets (consider as Tier 1 (An1)) at the day of the calculation. In order to calculate the LCR, the related assets include, among others, cash in hand, in transit, in armored transportation companies and ATMs; deposits with the Central Bank; certain national public bonds in Pesos or in foreign currency; securities issued or guaranteed by the International Payments Bank, the IMF, the European Central Bank, the European Union or Multilateral Development Banks that comply with certain conditions and debt securities issued by other sovereign entities (or their central banks).
Net Stable Funding Ratio
In August 2017, the Central Bank introducedThe purpose of the net stable funding ratio (“NSFR”), effective as of January 1, 2018. The purpose of this ratio (which complements the LCR) is to encourage that long-term assets be financedallow financial institutions to finance their activities with sufficiently stable resources and, in this way,sources to mitigate the risk of eventual tensefuture stress situations in funding.derived from their funding requirements. By requiring financial institutions to maintain a stable funding profile in relationrelative to the compositionbreakdown of their assetsoff-balance sheetassets and off-balance sheet operations,transactions, the NSFR limits excessivethe strong dependence on short-termshort term wholesale funding, promotes a better assessment of the funding risk of the items on and off balance sheet and off-balance sheet items funding
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risk, and favors the stabilityfunding sources stability. The definitions of the sourcescomponents of funds.
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the NSFR are similar to those set forth in the “Liquidity Coverage Ratio” regulations, unless otherwise expressly set forth herein.
The NSFR is defined as the available amount of stable funding relative to the required amount of stable funding, where: AASF (Available Amount of Stable Funding) is the capital and liabilities of the financial institution – calculated in the manner set forth in Section 2 – that are expected to be available over a one -year term. RASF (Required Amount of Stable Funding) is the amount of funding necessary for such period – calculated in the manner set forth in Section 3 – based on its liquidity and remaining life of the institution’s assets and its off-balance sheet obligations.
The NSFR shall be at all times greater than or equal to 1 (NSFR > 1). It shall be supplemented with the assessment made by the Superintendency. The Superintendency may demand the institution to adopt stricter standards to reflect its funding risk profile, also taking into account the assessment made in connection with the “Risk Management Guidelines for Financial Institutions” in connection with the institution’s liquidity.
The Financial Institutions shall observe the NSFR all times and report it on a quarterly basis to the Superintendency.
Leverage Ratio
Pursuant to Communication “A” 6431, effective as of March 1, 2018, the Central Bank incorporated a ratio to limit the leverage of financial institutions in order to avoid the adverse consequences of an abrupt reduction in leverage in the supply of credit and the economy in general, and reinforce the minimum capital requirement with a minimum capital requirement simple and not based on risk.
The leverage ratio, which must be greater than or equal to 3%, arises from the following expression:
Ratio (as %) = Measure of capital / Measure of exposure where the measure of capital will be the basic net worth, and the measure of the exposure will be the sum of (i) the exposures in the asset (excluding the items corresponding to derivatives and Securities Financing Transactions (SFT)), (ii) exposures by derivatives, (iii) exposures for SFT transactions, and (iv) off-balance-sheet items. Both measures must be calculated based on the closing balances of each quarter.
Interest rate and fee regulations
Maximum lending rates
On December 17, 2015, the Central Bank issued Communication “A” 5853 (as amended by Communication “A” 5891, among others), pursuant to which the provisions7474 sets forth that established maximum interest rates applicable to the lending transactions ceased to have effect in respect of any new transactions conducted as from and including such date. In addition, Communication “A” 5853 established the basic requirement that compensatory interest rates be freely agreed upon among financial institutions and their customers in accordance with established provisions under applicable statutory regulations, such as Central Bank rules which state the maximum interest rate applicable to credit card facilities. Also,transactions shall not exceed a nominal annual rate of 51% in transactions that do not exceed Ps.200.000. If the punitive feetransaction amount exceeds Ps.200.000, the only limit that applies is the one provided in addition to compensatory interest will be freely agreed upon among financial institutions and their customers.Article 16 of the Credit Card Law.
Regulations set forth that the fixed-rate loan agreements shall not contain clauses that allow their modification under certain circumstances, unless those modifications come from decisions taken by the competent authority and the variable-rate loan contracts must clearly specify the parameters that will be used for its determination and periodicity of variation.
With respect to transactions linked to credit cards:cards, in addition to the above mentioned, the Article 16 of the Credit Card Law stablishes that:
in those granted by financial institutions, the rate may not exceed more than 25% of the average of the interest rates applied by the entity, during the immediately preceding month, weighted by the corresponding amount of personal loans withoutin remsecurity interests granted in the same period; |
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in those granted by other issuing entities, the rate may not exceed the simple average of the system’s rates for open market personal loan operations (general customers) by more than 25%, with noin remsecurity interest, published by the Central Bank on a monthly basis, prepared on the basis of information corresponding to the second previous month, taking into account the provisions of the preceding point. |
Punitive fees in credit cards linked financing transactions, may not exceed more than 50% to the compensatory interest rate that the issuer charges for the financing of outstanding debt of credit cards.
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Zero interest-rate financings policy
By means of Communication “A” 6993, dated April 24, 2020, with the purpose of containing the impact the ongoing COVID-19 pandemic, the Central Bank established a zero interest-rate financing policy, applicable only to the eligible clients to be later determined by AFIPtoAFIP to whom the financial institutions may grant credit card financings to be paid in at least 12 equal and consecutive installments after a 6-month grace period. In regards to these loans, the minimum cash requirement will be reduced in accordance with the provisions of Decree No. 332/2020 (as amended and restated). Additionally, companies which are granted a zero interest-rate loan may not, until full repayment: (i) access the foreign exchange market to carry out operations corresponding to the formation of external assets, remittance of family aid and derivatives; and, (ii) sell securities with settlement in foreign currency or transfer them to other depositary entities (contado con liquidación).
Minimum termfixed-term deposit rates
Pursuant to Communication “A” 5853 (as7459, as amended by Communication “A” 5891, among others)7491, for financial institutions included in groups “A” and “B” for purposes of the provisions Central Bank rules on “Minimum Cash,” and for branches or subsidiaries of foreign banks rated as G-SIBs that are excluded from such groups “A” and “B”, a minimum deposit rate shall apply to deposits in Pesos that are not adjustable by UVA or UVI. Such minimum deposit rate shall be timely disclosed by the Central Bank.
As of April 18, 2022, fixed-term deposits which do not exceed a total of Ps.10 million on the date of their constitution and which have been constituted by individuals through financial institutions, will have a passive rate of 97.9% of the monetary policy rate established minimum interest rates applicablefor the day prior to that on which the term deposits ceased to have effectare made, or the last one disclosed, as the case may be. The amount of fixed-term deposits constituted in respectthe name of any new transactions conducted as from and including such date. The remuneration for deposits and term investmentstwo or more individuals will be distributed proportionally among its holders.
For fixed-term deposits not included in the preceding paragraph, the deposit rate will be 93.6% of the monetary policy rate established at a rate freely agreed upon amongfor the parties accordingday prior to that on which the applicable rules for each type of operation.deposits are made, or the last one disclosed, as the case may be.
Fees
On October 6, 2013, the Central Bank issued Communication “A” 5460, grantingregulations grant broad protection to financial services customers.customers since 2013. The protection includes, among other things, the regulation of fees and commissions charged by financial institutions for services provided. FeesAccording to Central Bank rules on “Protection to Financial Services Customers,” fees and charges must represent a real, direct and demonstrable cost and should be supported by a technical and economic justification. It is worth noting that Communication “A” 5514Section 2.3.2.2 of Central Bank rules on “Protection to Financial Services Customers” sets forth an exception tocertain exceptions for the enforcementapplication of Communication “A” 5460 for certain credit agreements that have pledges as collateral and are issued before September 30, 2018.
On June 10, 2014, the Central Bank issued Communications “A” 5591 and “A” 5592, through which established new rules regarding fees and charges, for basic financial productsexample, for insurance services and services. Beginning on the effective date of the rule, financial institutions must have prior authorization from the Central Bank to implement increases to the cost of those services. The rule also specifically defines which financial servicesSMEs for over-the-counter cash deposits.
Fees and charges are considered basic.
On December 23, 2014, the Central Bank issued Communication “A” 5685 amending Communication “A” 5460, setting forth that any increase in commissions of new products or services must have the prior authorization of the Central Bank.
On August 21, 2015, the Central Bank issued Communication “A” 5795, as amended and supplementednot applicable for immediate electronic transfers if such transfers are ordered by several regulations, including but not limited to Communication “A” 5828, establishing additional rules aimed at protecting financial servicesfinal customers by reinforcing regulations that prohibit financial institutions from charging fees and commissions related to insurance products that financial services customers purchase as accessories of financial services, regardless of whether itthe individual or entity which orders the transfer is a customer requestthe same individual or a condition set byentity receiving the financial institution to access the financial service. In this regard, beginning on November 13, 2015, financial institutions may not receive remunerations or profits fromtransfer, and such insurance products or receive remunerations or profits, directly or indirectly, from insurance companies with respect to such products.
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Furthermore, Communication “A” 5828 creates a distinction between “life insurance on debit balances” and “other insurance,” establishing for the former that financial institutions cannot charge users any fee and/or charge associated with such kind of insurance. Financial institutions must purchase life insurance on debit balances with coverage for death or permanent total disability with respect to financings granted to human beings. Alternatively, they can self-insure the risks of death and permanent total disability of financial services clients. In both cases, coverage must fully cover the amount due in case of death or total permanent disability of the beneficiary.
On March 21, 2016, the Central Bank issued Communication “A” 5927 (as supplemented by Communication “A” 5928) that established new rules aimed at protecting the financial user and an increase of the banking services use. In this regard, beginning on April 1, 2016, the electronic transfers are ordered or received by clients categorized as financial services customers would not be charged with fees or commissions. For clients that do not meet this category, as companies, transfers of funds up to Ps.250,000, ordered or received by electronic means, will not be charged fees or commissions. Communication “A” 5927 also established that immediate transfers of funds of up to Ps.100,000 per day and account can be made via home banking every day of the year.
On March 21, 2016, the Central Bank issued Communication “A” 5928, pursuant to which all savingin accounts shall be free, including the use of the corresponding debit card. In this regard, all existing saving accounts shall be free of charge, as well as for new clients. The saving accounts shall not have amount limits, or any charge related to their creation, maintenance or renovation. In addition, pursuant to such regulation, commissions could be increased up to 20%, but such increase must be informed to the client sixty (60) days in advance. Furthermore, as of September 1, 2016 commissions’ caps are eliminated, but financial institutions will have to inform their customers in advance about the commissions that other financial entities are charging.judicial use.
Central Bank issued Communication “A” 6212 effective as of April 1, 2017, which reducesreduced the commissions on credit card and debit card sales commissions onpursuant to a gradual annual plan. Pursuant to ComminicationUnder Communication “A” 6212, the maximum credit card sales commission rate for 2017 is 2.0%was 1.65%, 1.50% and 1.30% for 2018, 2019, 2020 and 2021, respectively, and after,it is expected that such commission rate will be 1.85%, 1.65%, 1.50% andmaintained at 1.30%, respectively. The maximum debit card sales after 2021. Communication “A” 6912 established that financial entities shall not announce increases in commissions to customers of financial services, or the creation of new commissions, for 2017 is 1.0% and for 2018, 2019, 2020 and 2021 and after, will be 0.90%, 0.80%, 0.70% and 0.60%, respectively.
Moreover, pursuant180 business days, except with respect to those commissions which had already been announced. Communication “A” 6681,7158 established that financial entities shall not announce increases in commissions to customers of financial services before February 28, 2021, provided that such commissions were greater than 9%. Additionally, by means of Communication “A” 6945, as amended by Communications “A” 6957, “A” 6963, “A” 7009, “A” 7044, “A” 7107 and “A” 7181, the Central Bank established that until March 31, 2021, any baking transactions made through ATMs would not be subject to any charges or fees. After March 31, 2021, banks are not allowedauthorized to charge fees or commissions for baking transactions made through ATMs, except to SMEs for over-the-counter cash deposits.customers who hold salary accounts, retirement accounts and social plans.
Maximum term for payments to commerces and providers
By virtue of Communication “A” 6680, effective as of May 1, 2019, the Central Bank established a maximum term of ten business days for financial entities to deposit payments to commerces and providers for sales made via credit cards or purchase cards,
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calculated from the sale date. Furthermore, financial entities shall not charge any fee or interest related to such payment term, nor block this payment mechanism in any way.
Mandatory extensionNevertheless, by virtue of credit facilities for productive investments
On July 5, 2012,Communication “A” 6680, the Central Bank issuedexcluded from the scope of the provisions disclosed by Communication “A” 5319, mandating6680 the credit and/or purchase cards issued to individuals or legal entities that are intended for the payment of purchases with a deferred term or more than one month related to their productive activity, i.e. agricultural o distribution activities.
On the other hand, Communication “A” 7305, which was issued on June 11, 2021 and effective as of July 1, 2021, establishes new deadlines for financial institutions to credit the amount of the sales made in one payment by using credit and/or purchase cards to the deposit account opened in the name of the supplier or affiliated business. These new deadlines are: (i) eight business days if they are micro or small companies and/or are individuals, (ii) ten business days for those categorized as medium-sized companies and those whose business activity is “lodging, tourism, gastronomy and/or health services,” and (iii) eighteen business days for the rest of the cases. In all these cases, the new deadlines shall be counted from the date of the purchase by the card holder or beneficiary. The financial entities will not be able to extendcharge any interests or commissions in relation to these deadlines nor shall impede the use of credit facilities for productive investments, according to the terms and conditions described therein. Recently, the Central Bank issued Communications “A” 5874 and 5975 (the “2016 Quota”), “A” 6352 “A” 6259 (the “2017 Quota”) and “A” 6352 (the “2018 Quota”), establishing the regulations applicable to credit facilities for productive investments corresponding for those years. The 2017 Quota and the 2018 Quota are not cumulative and must be complied with, independently, in each year.
Financial institutions subject to this regime are those operating as financial agents of the national, provincial, City of Buenos Aires and/or municipal governments and/or those whose participation in the deposits of the non-financial private sector in Pesos, are equal to or greater than 1% of the total deposits in the financial system. Through Communication “A” 6352 issued on November 3, 2017, the Central Bank started to gradually reduce the percentage of these facilities, until its complete elimination scheduled in December 2018.purchase cards.
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Loans and Housing Units
The Central Bank has adopted measures for taking deposits and extending loans expressed in a special measuring unit adjustable by the CER. These special units are referred to as Adjustable Purchase Value Units (Unidades de Valor Adquisitivo Actualizables, or “UVAs”).
In addition, Law No. 27,271 provides for the adjustment of deposits and loans by reference to the construction index, expressed in a special measuring unit referred to as Housing Units (Unidades de Vivienda or “UVI”)
Consequently, UVAs and UVIs coexist and may be used both with respect to bank loans and deposits.
The initial value of the UVI was Ps.14.05 (the same as the UVA), representing the cost of construction of one thousandth square meter of housing as of March 31, 2016. As of April 28, 2020,2022, the value of UVI and UVA are Ps.48.93were Ps.110.48 and Ps.52.84,Ps.114.44, respectively.
Both units are amended based on the indices published by the INDEC and the Central Bank on their websites.
Foreign Exchange System
On September 1, 2019, with the purpose of strengthening the normal functioning of the economy, fostering a prudent administration of the exchange market, reducing the volatility of financial variables and containing the impact of the variations of financial flows on the real economy, the Argentine government reinstated exchange controls. The new controls apply to access to the foreign exchange market by residents for savings and investment purposes abroad, the payment of external financial debts abroad, the payment of dividends in foreign currency abroad, payments of imports of goods and services, and the obligation to repatriate and settle for Pesos the proceeds from exports of goods and services, among others.
For further information on this topic, please refer to “Item D –“Item 10.D. Exchange ControlsControls.”.
Foreign Currency Lending Capacity
The Regulations on the allocation of deposits in foreign currencies, (including Communication “A” 6428 as amended), establish that the lending capacity from foreign currency deposits, must be applied in the corresponding deposit currency to the following categories:
pre-financing and financing of exports to be made directly or through principals, trustees or other brokers, acting on behalf of the owner of the merchandise; |
other financing of exports which have a flow of future income in foreign currency and verify, in the year prior to granting the financing, a billing in foreign currency for an amount that is reasonably related to that financing; |
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financing to producers, processors or goods collectors, provided that: |
(i) | they have sale contracts for the sale of their goods to an exporter, with a fixed price or fixed in foreign currency -independently of the currency in which the operation is settled- and in the case of fungible goods with quotation, in foreign currency, normal and customary in local or foreign markets, with wide diffusion and easy access to public knowledge; |
(ii) | its main activity is the production, processing and / or collection of fungible goods with quotation, in foreign currency, normal and usual in foreign markets, widely disseminated and easy access to public knowledge, and it is found, in the year prior to the granting of financing, a total billing of these goods for an amount that is reasonably related to that activity and its financing; and also operations aimed to finance service providers directly used in exporting process of goods (such as those provided at port terminals, international loading and unloading services, leasing containers or port warehouses, international freights ). This, provided it is verified that the flow of future income linked to sales to exporters registers a periodicity and magnitude that it is enough for the cancellation of the financing and it is verified, in the year prior to the granting of the financing, a billing to exporters for an amount that is reasonably related to that activity and its financing. |
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financing for manufacturers of goods to be exported, as final products or as part of other goods, by third-party purchasers, provided that such transactions are secured or collateralized in foreign currency by third-party purchasers; |
financing of suppliers of goods and/or services that are part of the production process of fungibles goods with quotation, in foreign currency, normal and usual in local or foreign markets, widely disseminated and easy access to public knowledge, provided they have firm sales contracts for those goods and/or services in foreign currency and/or on said goods; |
financing of investment projects, working capital and/or acquisition of all kinds of goods, including temporary imports of inputs, which increases or are linked to the production of exporting products. Even though the total income of the exporting companies does not come from their exports, the financing may be imputed when the cash flow in foreign currency from their exports, is enough for its cancelation; |
financings to commercial portfolio clients and loans granted for consumption or housing purposes-according to the provisions established in the rules on “Classification of |
foreign currency debt securities or financial trust participation certificates including other payment rights specifically recognized on trust agreements whose underlying assets are loans made by the financial entities in the manners set forth in (a) to (d) above and first sentence of (f), or documents in which cash flows in Pesos or foreign currency have been assigned to the trustee, in foreign currency credit agreements, under the terms and conditions set forth in items mentioned before; |
financings for purposes other than those mentioned in (a) to (d) above, included under the IDB credit program (“Préstamos BID N° 119/OC-AR”), not exceeding 10% of the lending capacity; |
(k) |
(l) | Central Bank bills (Letras y Notas) denominated in dollars; |
(m) | direct investments abroad by companies that reside in Argentina, that seek the development of productive activities of non-financial goods and/or services, either through contributions and/or purchases of shares in companies, to the extent that they are constituted in countries or territories considered cooperators for the purposes of fiscal transparency according to the provisions of article 1 of Decree No. 589/13 as amended; |
financing of investment projects, including working capital, that allow the increase of production in the energy sector and have firm sales contracts and/or endorsements or guarantees in foreign currency. |
national treasury bills in foreign currency, up to an amount equivalent to one third of the total of the applications made in accordance with the provisions of this section; |
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financing of investment projects for bovine cattle, including their working capital, without exceeding 5% of deposits in foreign currency of the entity; |
financing of foreign importers for the acquisition of goods and / or services produced in the country, either directly or through credit lines to foreign banks; and |
Financing of local residents that are secured by letters of credit (“stand-by letters of credit”) issued by foreign banks or multilateral development banks that comply with the provisions of point 3.1. of regulations on “Credit |
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The lending capacity shall be determined for each foreign currency raised, resulting from the aggregate of deposits and inter-financial loans received, which have been reported by the granting financial institution as coming from its foreign currency deposit lending capacity net of the minimum cash requirement on deposits, and such determination being made on the basis of the monthly average of daily balances recorded during each calendar month. Any defect in the application shall give rise to an increase in the minimum cash requirement in the relevant foreign currency.
General Exchange Position
The general exchange position (“GEP”) includes all the liquid external assets of the institution, such as gold, currency and foreign currency notes reserves, sight deposits in foreign banks, investments in securities issued by Organization for Economic Co-operation and Development (OECD) members’ governments with a sovereign debt rating not below “AA,” certificates of time deposits in foreign institutions (rated not less than “AA”), correspondents’ debit and credit balances and third parties funds pending of settlement. It also includes purchases and sales of these assets already arranged and pending settlement involving foreign exchange purchases and sales performed with customers within a term not exceeding two (2) business days and correspondent balances for third-party transfers pending settlement. It does not include, however, foreign currency notes held in custody, term sales and purchases of foreign currency or securities nor direct investments abroad.
Pursuant to Communication “A” 6244, as amended, which entered into force on July 1, 2017, entities can freely determine the level and use of their GEP, thus allowing such entities to manage their exchange positions, both regarding the composition of their assets, as well as the possibility to maintain or transfer their holdings out of the country, with its subsequent impact on the reserves.
Furthermore, the aforementioned regulation establishes that the entities shall carry out arbitrage and foreign exchange operations, to the extent that the counterparty is a branch or agency of local official banks, a foreign financial institution, total or majority ownership of an entity in foreign states, a foreign financial or exchange entity that is not incorporated in countries or territories where the Recommendations of the Financial Action Task Force, or a foreign company dedicated to the trading of banknotes from different countries and / or precious metals in coins or bars of good delivery and whose head office is located in a member country of the Basel Committee for Banking Supervision.
Further changes to the GEP regulation have been introduced by Communications “A” 6770, 6780 and 6780.6856. Prior approval by the Central Bank is required to increase the ownership of foreign currency from the higher of the average foreign currency owned in August 2019 and at the closure of August 31, 2019. Moreover, the institutions are not permitted to buy securities on the secondary market with liquidation on foreign currency.
Foreign Currency Net Global Position
The foreign currency net global position shall consider all assets, liabilities, commitments and other instruments and transactions through financial intermediation in foreign currency or linked to exchamge rate movement, including cash forward transactionsandtransactions and other derivative contracts, deposits in foreign currency in accounts opened with the Central Bank, gold, position, the Central Bank monetary regulation instruments in foreign currency, subordinated debt in foreign currency and debt instruments in foreign currency.
Forward transactions under master agreements executed in authorized domestic markets paid by settlement of the net amount without delivery of the underlying asset are also included. Likewise, certificates or notes issued by financial trusts and claims under common trusts are also included in the relevant proportion, provided that the underlying assets are denominated in foreign currency. The value of the position in currencies other than DollarsU.S. dollars shall be expressed in that currency, at the respective exchange rate published by the Central Bank.
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Decreases in foreign currency assets due to the pre-cancellation of local financing to private sector customers, can only offset the foreign currency net global position up to the original term of maturity with the net increase in holdings of National Treasury securities in foreign currency. At the original maturity of local financing in foreign currency, it may be offset with the purchase of any foreign currency assets computable at the foreign currency net global position.
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Deductible assets when determining a bank’s RPC, Argentine government bonds linked to the growth of the GDP, the included concepts that the financial entity registers in its branches abroad and the loan agreements in Pesos with variable remuneration based on the variation in the price of the U.S. dollars that are not covered by the term investments with viariable remuneration based on the U.S. dollar are excluded from the ratio.
Limits
Negative Foreign Currency Net Global Position (liabilities exceeding assets): the limit is 30% of the RPC of the immediately preceding month (Communication “A” 6781).
Positive Foreign Currency Net Global Position
(assets exceeding liabilities): This daily position (daily balance converted to Pesos at the reference exchange rate of the immediately preceding month) cannot exceed 5% of the RPC of the immediately preceding month.
Positive Foreign Currency Net Global Position in Cash: this daily position (daily balance converted to Pesos at the reference exchange rate of the immediately preceding month) cannot exceed the higher of U.S.$ 2,500,000 or the 4% of the RPC of the immediately preceding month.
As of June 18, 2018 the Central Bank allows that the Positive Foreign Currency Net Global Position may reach up to 30% of the RCP, while the total excess over the general limit originates only as a result of:
(a) | increase in the position in U.S. treasury bills in U.S. dollars with respect to those held as of June 15, 2018; |
(b) | position in national treasury bills in U.S. dollars as of June 15, 2018, maintained as excess admitted to the current limit as of that date; and/or |
(c) | increase in the position in national treasury bills linked to U.S. dollars with respect to those held as of May 13, 2019. |
As provided by Communication “A” 7093, it includes national treasury bills denominated in foreign currency that the institutions receive in exchange for National Treasury Bills – under Law No. 27,556 – that they have imputed to this point on the Business Day immediately preceding the day on which they are delivered in exchange.
The excesses of these ratios are subject to a charge equal to 1.5 times the average nominal interest rate of the shorter term Peso-denominated LELIQs auction published on the last business day of the relevant period or, if not available, the last one available for a shorter term. Charges not paid when due are subject to a charge equal to one and a half times the charge established for excesses.
In addition to the above-mentioned charge, sanctions set forth in section 41 of the FIL shall apply (including caution, warning, fine, temporary or permanent disqualification to dispose of a banking current account, temporary or permanent disqualification to act as promoters, founders, directors, administrators, members of surveillance committees, comptrollers, liquidators, managers, auditors, partner or shareholders, and license revocation).
Fixed Assets and Other Items
The Central Bank determines that the fixed assets and other items maintained by the financial entities must not exceed 100% of the entity’s RPC.
Such fixed assets and other items include the following:
· | Shares of local companies; |
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· | Miscellaneous receivables; |
· | Property and equipment; and |
· | Other assets. |
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The calculation of such assets will be effected according to the month-end balances, net of devaluations, accumulated amortizations and allowances for loan losses.
Non-compliance with the ratio produces an increase in the minimum capital requirements equal to 100% of the excess on the ratio.
Credit Ratings
Since November 28, 2014, Communication “A” 5671, as amended by Communication “A” 6162,6558, supersedes the provisions issued by the Central Bank containing ratings requirements assigned by a local risk rating company. Where provisions require certain international ratings, the criteria set forth by Communication “A” 5671 govern.
The provisions of Communication “A” 5671 are basic guidelines to properly assess the credit risk that financial institutions must observe when implementing Central Bank rules including the requirement of a particular rating and do not replace the credit assessment that each financial institution must make to their counterparts. International credit ratings that refer to these provisions shall be issued by rating agencies that have a code of conduct based on the “Principles of the Code of Conduct for Agents Rate Risk” issued by the International Organization of Securities Commissions (“IOSCO”).
Annex II of Communication “A” 5671 provides a table regarding the new qualification requirements for financial institutions. This table classifies the credit ratings requirements for different transactions.
Debt Classification and Loan Loss Provisions
Credit Portfolio
The regulations on debt classification are designed pursuant to Central Bank rules, which differ from IFRS to establish clear guidelines for identifying and classifying the quality of assets, as well as evaluating the actual or potential risk of a lender sustaining losses on principal or interest, in order to determine (taking into account any loan security) whether the provisions against such contingencies are adequate. Banks must classify their loan portfolios into two different categories: (i) consumer or housing loans and (ii) commercial loans. Consumer or housing loans include housing loans, consumer loans, credit-card financings, loans of up to Ps.29,740,000Ps.14,528,000 to micro-credit institutions and commercial loans of up to Ps.29,740,000Ps.72,640,000 with or without preferred guarantees. All other loans are considered commercial loans. Consumer or housing loans in excess of Ps.29,740,000,Ps.72,640,000, the repayment of which is linked to the evolution of its productive or commercial activity, are classified as commercial loans.
At the entity’s option, financing of a commercial nature of up to Ps.7.9 million,Ps.72,640,000, whether or not such financing has preferred guarantees, may be grouped together with credits for consumption or housing, in such case they will receive the treatment provided for the latter. If a customer has both kinds of loans (commercial and consumer or housing loans), the consumer or housing loans will be added to the commercial portfolio to determine under which portfolio they should be classified based on the amount indicated. In these cases, the loans secured by preferred guarantees shall be considered to be at 50% of its face value.
Under the current debt classification system, each customer, as well as the customer’s outstanding debts, are included within one of six sub-categories. The debt classification criteria applied to the consumer loan portfolio are primarily based on objective factors related to customers’ performance of their obligations or their legal standing, while the key criterion for classifying the commercial loan portfolio is each borrower’s paying ability based on their future cash flow.
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Commercial Loans Classification
The principal criterion by whichused to evaluate a loan pertaining to the commercial portfolio is its borrower’s ability to repay, it, whose ability is mainly measured by such borrower’s future cash flow. Pursuant to Central Bank rules, commercial loans are classified as follows:
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Classification | Criteria | |
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|
| |
Borrowers that demonstrate their ability to comply with their payment obligations. High repayment capacity. | ||
Subject to | Borrowers that, among other criteria, are up to 90 days past due and, although considered to be able to meet all their financial obligations, are sensitive to changes that could compromise their ability to honor debts absent timely corrective measures. | |
Subject to | Borrowers who are unable to comply with their obligations as agreed with the bank and, therefore, formally state, within 60 calendar days after the maturity date, their intention to refinance such debts. The borrower must enter into a refinancing agreement with the bank within 90 calendar days (if up to two lenders are involved) or 180 calendar days (if more than two lenders are involved) after the payment default date. If no agreement has been reached within the established deadline, the borrower must be reclassified to the next category according to the indicators established for each level. | |
With Special Treatment | Borrowers who are unable to comply with their obligations as agreed with the bank performed their first new agreement in the year and payed at least the first payment. | |
Troubled | Borrowers with difficulties honoring their financial obligations under the loan on a regular basis, which, if uncorrected, may result in losses to the bank. | |
With | Borrowers who are highly unlikely to honor their financial obligations under the loan. | |
Irrecoverable | Loans classified as irrecoverable at the time they are reviewed (although the possibility might exist that such loans might be collected in the future). The borrower will not meet its financial obligations with the financial institution. | |
bank rules, a loan is classified as irrecoverable if: (a) | ||
| | |
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Consumer and Housing Loans Classification
The principal criterion used in the assessment of loans in the consumer and housing portfolio is the length of the duration of the default ofon such loans. Under the Central Bank rules, consumer and housing borrowers are classified as follows:
Classification | Criteria(2) | |
Performing | If all payments on loans are current or less than 31 calendar days overdue and, in the case of checking account overdrafts, less than 61 calendar days overdue. | |
Low Risk | Loans upon which payment obligations are overdue for a period of more than 31 and up to 90 calendar days. | |
With Special Treatment | Borrowers who are unable to comply with their obligations as agreed with the bank performed their first new agreement in the year and payed at least the first payment. | |
Medium Risk | Loans upon which payment obligations are overdue for a period of more than 90 and up to 180 calendar days. |
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|
| |
High Risk | Loans in respect of which a legal action seeking collection has been filed or loans having payment obligations overdue for more than 180 calendar days, but less than 365 calendar days. | |
Irrecoverable | Loans in which payment obligations are more than one year overdue or the debtor is insolvent or in bankruptcy or liquidation. | |
Minimum Credit Provisions
The following minimum credit provisions are required to be made by Argentine banks in relation to the credit portfolio category:
Category | With Preferred | Without Preferred |
“Performing” | 1% | 1% |
“Under observation” and “Low risk” | 3% | 5% |
“Under negotiation or refinancing agreement” | 6% | 12% |
“With problems” and “Medium Risk” | 12% | 25% |
“With high risk of insolvency” and “High Risk” | 25% | 50% |
“Irrecoverable” | 50% | 100% |
“Irrecoverable by technical decision” | 100% | 100% |
The Superintendency may require additional provisioning if it determines that the current level is inadequate.
Financial institutions are entitled to record allowances for loan losses in amounts larger than those required by the Argentine Banking GAAP. In such cases and despite the existence of certain exceptions, recording a larger allowance for a commercial loan, to the extent the recorded allowance amount falls into the next credit portfolio category set forth by Argentine Banking GAAP, shall automatically result in the corresponding debtor being recategorized accordingly.
Minimum Frequency for Classification Review
Financial institutions are required to develop procedures for the analysis of credit facilities assuring an appropriate evaluation of a debtor’s financial situation and a periodic revision of such situation taking into consideration objective and subjective conditions of all the risks taken. The procedures established have to be detailed in a manual called “Manual of Procedures for Classification and Allowances” which must be made available for the Superintendency. The frequency of the review of existing classifications must be linked to the importance considering all facilities. The classification analysis shall be duly documented.
In the case of commercial loans, applicable regulations require a minimum frequency of review. Such review must take place: (i) quarterly for clients with indebtedness equal or greater than 5% of the financial entity’s RPC for the prior month and (ii) semi-annually for clients whose indebtedness is (x) higher than the lower of 1% and Ps.19.8 million of the financial entity’s RPC for the prior month, and (y) lower than 5% of the financial entity’s RPC for the prior month. At the end of the first calendar semester, the total review under (i) and (ii) should have covered no less than 50% of the financial entity’s commercial loan portfolio and, if less, it shall be completed by incorporating clients (in descending order) whose total indebtedness is inferior to the limits described in the preceding point (ii)(x).
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In addition, financial institutions have to review the rating assigned to a debtor in certain instances, such as when another financial institution reduces the debtor classification in the “Credit Information Database” (the “Credit Information Database”) and grants 10% or more of the debtor’s total financing in the financial system. Only one-level discrepancy is allowed in relation to the information submitted by financial institutions to the “Credit Information Database” and the lower classification awarded by at least two other banks and total lending from such banks account for 40% or more of the total informed; if there is a greater discrepancy, the financial institution will be required to reclassify the debtor.
Allowances for Loan Losses
The Group recognises the allowance for loan losses under the expected credit losses method included in IFRS 9. The most significant judgements of the model relate to defining what is considered to be a significant increase in credit risk, determining the life of revolving facilities, and in making assumptions and estimates to incorporate relevant information about past events, current conditions and forecasts of economic conditions. A high degree of uncertainty is involved in making estimations using assumptions that are highly subjective and very sensitive to the risk factors.
In note 1.13Note 1.11 of our audited consolidated financial statements, provides more detail of how the expected credit loss allowance is measured.
Priority Rights of Depositors
Under Section 49 of the FIL, in the event of judicial liquidation or bankruptcy of a bank all depositors, irrespective of the type, amount or currency of their deposits, will be senior to the other remaining creditors (such as shareholders of the bank), with exceptions made for certain labor liens (section 53 paragraphs “a” and “b”) and for those creditors backed by a pledge or mortgage, in the following order of priority: (a) deposits of up to Ps.50,000 per person (including all amounts such person deposited in one financial entity), or its equivalent in foreign currency, (b) all deposits of an amount higher than Ps.1,500,000,Ps.50,000, or its equivalent in foreign currency, and (c) the liabilities originated in commercial lines granted to the financial institution and which directly affect international commerce. Furthermore, pursuant to section 53 of the FIL, as amended, Central Bank claims have absolute priority over other claims, except for pledged or mortgaged claims, certain labor claims, the depositors’ claims pursuant to section 49, paragraph e), points i) and ii), debt granted under section 17, paragraphs (b), (c) and (f) of the Central Bank’s Charter (including discounts granted by financial entities due to a temporary lack of liquidity, advances to financial entities with security interest, assignment of rights, pledges or special assignment of certain assets) and debt granted by the Banking Liquidity Fund backed by a pledge or mortgage.
The amendment to section 35 bis of the FIL Law by Law No. 25,780 sets forth that if a bank is in a situation where the Central Bank may revoke its authorization to operate and become subject to dissolution or liquidation by judicial resolution, the Central Bank’s Board of Directors may take certain actions. Among these actions, in the case of excluding the transfer of assets and liabilities to financial trusts or other financial entities, the Central Bank may totally or partially exclude the liabilities mentioned in section 49, paragraph e), as well as debt defined in section 53, giving effect to the order of priority among creditors. Regarding the partial exclusion, the order of priority of point e) section 49 must be followed without giving a different treatment to liabilities of the same grade.
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Mandatory deposit insurance systemDeposit Insurance System
Law No. 24,485 passed on April 12, 1995, as amended, created a Deposit Insurance System, or “SSGD,” which is mandatory for bank deposits, and delegated the responsibility for organizing and implementing the system to the Central Bank. The SSGD is a supplemental protection to the privilege granted to depositors by means of Section 49 of the FIL, as mentioned above.
The SSGD has been implemented through the establishment of a Deposit Guarantee Fund, or “FGD”,“FGD,” managed by a private-sector corporation calledSeguro de Depósitos Sociedad Anónima, (Deposit Insurance Corporation, or “SEDESA”). According to Decree No. 1292/96, the shareholders of SEDESA are the government through the Central Bank and a trust set up by the participating financial institutions. These institutions must pay into the FGD a monthly contribution determined by Central Bank rules. The SSGD is financed through regular and additional contributions made by financial institutions, as provided for in Central Bank Communication “A” 4271, dated December 30, 2004.
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The SSGD covers deposits made by Argentine individuals and legal entities in ArgentinePesos or foreign currency and maintained in accounts with the participating financial institutions, including checking accounts, savings accounts, and time deposits up to the amount of Ps.350,000,Ps.1,500,000, as set forth by Central Bank Communication “A” 5659, dated October 31, 2014, as amended, which pursuant to Communication “A” 6973 of the Central Bank, as of May 1, 2020 the amount covered by the SSGD is currently Ps.1,500,000.amended.
Effective payment on this guaranty will be made within thirty (30) business days after revocation of the license of the financial institution in which the funds are held; such payments are subject to the exercise of the depositor’s priority rights described above.
In view of the circumstances affecting the financial system, Decree No. 214/2002 provided that SEDESA may issue registered securities for the purpose of offering them to depositors in payment of the guarantee in the event it should not have sufficient funds available.
The SSGD does not cover: (i) deposits maintained by financial institutions in other financial institutions, including certificates of deposit bought in the secondary market, (ii) deposits made by persons directly or indirectly affiliated with the institution, (iii) time deposits of securities, acceptances or guarantees, (iv) any transferable time deposits that have been transferred by endorsement, (v) any deposits in which the agreed-upon interest rate is higher than the reference interest rates periodically released by the Central Bank for time deposits, with the exception of those arranged in Pesos at the minimum nominal rate, for persons up to the amount of Ps.1,000,000 per depositor, and demand deposit account balances and available amounts from overdue depositsthey shall also be excluded if these interest rate ceilings are distorted by additional incentives or closed accounts,rewards, and (vi) immobilized balances from deposits and excluded transactions.
Pursuant to Communication “A” 5943, every financial institution is required to contribute to the FGD a monthly amount of 0.015% of the monthly average of daily balances of deposits in local and foreign currency, as determined by the Central Bank.
When fixed term deposits in U.S. dollars of the private non-financial sector are used to purchase Central Bank bills denominated in U.S. dollars, financial institutions must contribute 0.015% of the monthly average of daily balances of the net position of such bills. Prompt contribution of such amounts is a condition precedent to the continuing operation of the financial institution. The first contribution was made on May 24, 1995. The Central Bank may require financial institutions to advance the payment of up to the equivalent of two years of monthly contributions and debit the past due contributions from funds of the financial institutions deposited with the Central Bank. The Central Bank may require additional contributions by certain institutions, depending on its evaluation of the financial condition of those institutions.
When the contributions to the FGD reach the greater of Ps.2 billion or 5.0% of the total deposits of the system, the Central Bank may suspend or reduce the monthly contributions, and reinstate them when the contributions subsequently fall below that level.
GovernmentMeasuresinGovernment Measures in Response to theOngoing COVID-19Pandemicthe Ongoing COVID-19 Pandemic
TheDuring the last years, the Argentine government and the Central Bank issued a series of preventive measures tocontainto contain the spread of COVID-19 and mitigate its economic impact. In this regard,impact on the Argentine economy. On March 19, 2020, the Executive BranchdeclaredArgentine government declared a nationwide lockdown from March 20, 2020 through March 31, 2020, whichhas now beenwhich was extended to May 10, 2020. However, since April 13,several times until November 6, 2020, when the nationaland provincial governments have supervisedcountry shifted towards a gradual relaxation“social distancing” phase, instead of thelockdown and social distancing measures.a strict lockdown.
In this context, the Central Bank issued Communications “A” 6939 and “A” 6942, by means of which it was determinedDecree No. 867/2021 set forth certain sanitary measures that during thelockdown period: (i) financial institutions shall not be open tomust comply with until December 31, 2022, including enforcing the public;mandatory use of masks by individuals in their branches and (ii) the maturitymaintainance of financings granted by local financial institutions scheduled for thelockdown period were postponed. Communication “A” 6949 also waived any punitory interest on unpaid balances in credits granted by financial entities.social distance between such individuals.
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On a different note, byBy means of Communication “A” 6939, as amended, the Central Bank suspended until June 30, 2020, the distribution of dividends by financial entities.entities until December 31, 2021. On December 2021, the Central Bank authorized financial entities to distribute dividends up to 20% of accumulated earnings as of December 31, 2021 in twelve equal monthly and consecutive installments. For more information, please see “Argentine Banking Regulations— “—Liquidity and Solvency Requirements—Requirements applicableApplicable to dividend distribution.Dividend Distribution.”
Through Communication “A” 6945, the Central Bank determined that until June 30, 2020, any operation effected through ATMs will not be subject to any charges or fees.
By virtue of Communication “A” 6964, the Central Bank determined that the unpaid balances of credit card financings due between April 13 and April 30, 2020, shall be automatically refinanced in nine equal consecutive monthly installmentsbeginning after a 3-month grace period. Interest rates on such unpaid balancesmay not exceed an annual nominal rate of 43%. Moreover, by means of Communication “A” 6993, dated April 24, 2020, the Central Bank established a zero interest-rate financings policy, applicable only to the eligible clients to be determined in the future by the AFIP. For more information, see “Argentine Banking Regulations— Credit Card Interest Rate.”
Additionally, on March 25, 2020, the Executive Branch issued Decree No. 312/2020, by means of which both the obligation to close and inhibit checking accounts, as well the imposition of penalties, were suspended until April 30, 2020. Furthermore, Decree No. 319/2020 established the freezing of mortgage payments if the mortagaged property isthe only and permanent residence of the debtor, until September 30, 2020. The Decree also resolved the freezing of UVA pledge loans (créditos prendarios) and the suspension of mortgage foreclosures until September 30, 2020. For more information, please see “Item 3.D—Risk Factors—Risks related to the Argentine financial system—Our asset quality and that of other financial institutions may deteriorate if the Argentine private sector does not fully recover.”
Other measures
Facilities and Government Guarantees to Finance Payment of Salaries: Decree No. 326/2020 created a fund of specific application within the FOGAR (acronym in Spanish forFondo de Garantías Argentino), with the aim of backing financings provided to SMEs by financial entities in order to pay salaries. |
Remote shareholders and board of directors meetings: By means of CNV’s General Resolution No. 830/2020, dated March 3, 2020, publicly offered entities are allowed to hold remote shareholders and board of directors meetings, via electronic means, even if their respective bylaws do not provide for this, respecting the minimum requirements to ensure the integrity of the vote of each participant and the presence of all shareholders and members, respectively. At the first face-to-face meeting after the lockdown period, the shareholders’ meeting shall, with the quorum and the majority for the reform of the bylaws, approve any meetings that have been held remotely. By means of CNV´s interpretation No. 80, the provisions of CNV’s General Resolution No. 830/2020 were restated and extended. |
Time deposits minimum |
Securities-guaranteed transactions prohibition. By means of Communication “A” 6978, as amended, the Central Bank forbid financial institutions to guarantee transactions via securities (caución bursátil). |
Deposit |
● | Creditline for productive investment of MiPyMEs. Pursuant to Communication “A” 7140, as amended, the Central Bank approved the rules for a “Credit line for productive investment of MiPyMEs” (líneas para el financiamiento productivo) destined to the acquisition of capital goods, and/or the construction of facilities necessary for the production of goods and/or services, and the commercialization of goods and/or services, with a maximum annual nominal rate from 35% to 43%. For these credit line, financial institutions are required to maintain a regulatory quota equal to 7.5% of their non-financial private sector deposits. Through Communication “A” 7240, the Central Bank ruled that the balance of credit lines to SMEs shall be equivalent to (i) a minimum quota of 7.5% of the average balance of deposits from private sector as of September 2021, for the 2021/2022 quota, and (ii) a minimum quota of 7.5% of the average balance of deposits from private sector as of March 1, 2022, for the 2022 quota. |
Other restrictionsRestrictions
Pursuant to the FIL, financial institutions cannot create any kind of rights over their assets without the Central Bank’s authorization. Furthermore, in accordance with section 72 of Capital Markets Law, publicly offered companies are forbidden to enter into transactions with their directors, officers or affiliates in terms more favorable than arms-length transactions.
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Capital Markets
Commercial banks are authorized to subscribe for and sell shares and debt securities. At present, there are no statutory limitations as to the amount of securities for which a bank may undertake to subscribe. However, under Central Bank rules, underwriting of debt securities by a bank would be treated as “financial assistance” and, accordingly, until the securities are sold to third parties, such underwriting would be subject to limitations.
The Argentine Capital Markets Law introduced substantial changes to regulations governing markets, stock exchanges and the various agents operating in capital markets, in addition to certain amendments to the CNV’s powers. On September 9, 2013, the CNV published the CNV Rules supplementing the Capital Markets Law. The CNV Rules have been in force since September 18, 2013.
One of the most significant modifications introduced by the Argentine Capital Markets Law and the CNV Rules is that agents and markets must comply with the CNV’s requirements for applying for an authorization to operate, as well as registration requirements. It further provides that each category of agent must meet minimum net worth and liquidity requirements.
Additionally, under the Capital Markets Law, the self-regulation of markets was eliminated, and authorization, supervision, control, as well as disciplinary and regulatory powers, are conferred to the CNV regarding all capital market players.
The Argentine Productive Financing Law modified the Argentine Capital Markets Law and other related laws, and introduced some important changes such as, among others:
reestablished certain markets self-regulation (which had been eliminated by the Argentine Capital Markets Law); |
eliminated the powers granted to the CNV allowing it to appoint observers and intervene a company’s board of directors without first obtaining a court order; |
introduced several changes in the internal organization of the CNV and in the appointment of its board, such as allowing the president of the CNV to have a decisive vote in case of tie in the decision making of the board and adopt urgent resolutions together with two directors in case of exceptional circumstances prevent the assemblies from taking place; |
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empowered the CNV to regulate the private placement of negotiable securities so that these do not qualify as “public offers”; |
as long as a mandatory offer is not required in cases where the buyer acquires control or more than 50% of voting rights shares of a company listed, either directly or indirectly; |
modified some antiquated provisions related to the mutual fund system (such as the solidarity between the asset management company and the custodian, and the double registration of guidelines for investment in the CNV and in the Public Registry of Commerce); |
created a “legal microsystem” for capital markets where certain provisions of the Civil and Commercial Code or Argentine Contest and Bankruptcy Law were not applicable; |
promoted the financing of MiPyMes through the regulation of the issuance of electronic invoices with powers to easily execute them against the debtor and subject to negotiation or discount in the capital markets; |
promoted mortgage financing by improving the regulation of mortgage bills and the securitization of mortgages; |
empowered the CNV to rule crowfunding for entrepreneurs and the promotion of “financial inclusion” through programs and development plans; and |
allowed legal entities incorporated abroad to participate, through a representative duly authorized, at the shareholders’ meetings of the companies authorized by the CNV to make public offerings of their shares, without the need for additional registration. |
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Buenos Aires Deposits of Large Amount Rate (“BADLAR)”
Beginning October 5, 2017, the Central Bank has begun to publish on a daily basis a surveyInterest rate paid for time deposits of more than Ps.1 million, by the average interest rates paid by Banks for their fixed-term deposits of over Ps.20 million, for termsfinancial entities. (Buenos Aires Deposits of between 30 and 35 days (the “TM20”), in order to reflect the behavior of wholesale depositors.
A TM20 denominated in dollars will also be published for deposits for the same term that are for U.S.$20 million or more.Large Amount Rate)
The information published by the Central Bank is broken down by public vs.total financial system and private banks.
Minimum Interest Rate On Time Deposit Rates
Pursuant to Communication “A” 7459, as amended by Communication “A” 7491, for financial institutions included in groups “A” and “B” for purposes of the Central Bank rules on “Minimum Cash,” and for branches or subsidiaries of foreign banks both for operationsrated as G-SIBs that are excluded from such groups “A” and “B”, a minimum deposit rate shall apply to deposits in Pesos that are not adjustable by UVA or UVI. Such minimum deposit rate shall be timely disclosed by the Central Bank.
As of April 18, 2022, fixed-term deposits which do not exceed a total of Ps.10 million on the date of their constitution and foreign currencies.which have been constituted by individuals through financial institutions, will have a passive rate of 97.9% of the monetary policy rate established for the day prior to that on which the deposits are made, or the last one disclosed, as the case may be. The amount of fixed-term deposits constituted in the name of two or more individuals will be distributed proportionally among its holders.
For fixed-term deposits not included in the preceding paragraph, the deposit rate will be 93.6% of the monetary policy rate established for the day prior to that on which the impositions are made, or the last one disclosed, as the case may be.
Central Bank Repo Transactions- Interest Rate
In the passive Repo transactions, the bank that carries it out receives financing from the Central Bank. Sell a security for cash and then buy back that security. Interest rate paid by the Central Bank depends on the type of deposit, the currency, the term, the amount, among others.
Financial Institutions with Economic Difficulties
The FIL provides that any financial institution, including a commercial bank,(i) with its solvency impaired, in the judgment of the Central Bank; (ii) recording deficiencies on the minimum cash reserve requirement during the periods established by the Central Bank; (iii) recording repeated failures to comply with the various limits or technical relations established; or (iv) that could not maintain the minimum asset liability required for its particular class, location or characteristics, must (upon request from the Central Bank and in order to avoid the revocation of its license) prepare a restructuring plan (plan de regularización y saneamiento). The plan must be submitted to the Central Bank on a specified date, no later than thirty (30) calendar days from the date on which a request to that effect is made by the Central Bank. If the institution fails to submit, secure regulatory approval of, or comply with, a restructuring plan, the Central Bank will be empowered to revoke the institution’s license to operate as such, without prejudice to the application of the penalties provided for in the aforementioned law.
The Central Bank may appoint overseers with veto power, require the provision of guarantees and limit or forbid the distribuitiondistribution or remittance of profits, temporarily admit exceptions to the relevant limits and technical relations, exempt or defer the payment of charges and/or fines as provided by the Financial Institutions Law.
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The Central Bank’s charter authorizes the Superintendency to fully or partially suspend, exclusively subject to the approval of the President of the Central Bank, the operations of a financial institution for a term of thirty (30) days if the liquidity or solvency thereof is adversely affected. Such term could be renewed for up to ninety (90) additional days, with the approval of the Central Bank’s Board of Directors. During such suspension term an automatic stay of claims, enforcement actions and precautionary measures is triggered, any commitment increasing the financial institution’s obligations shall be null and void, and debt acceleration and interest accrual shall be suspended.
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Institution restructuringRestructuring to safeguard creditSafeguard Credit and bank depositsBank Deposits
If a financial institution meets the Central Bank’s criteria and is found to be in any of the situations set forth in Section 44 of the FIL, the Central Bank may authorize the restructuring of the financial institution in defense of depositors, prior to revocation of the authorization to operate. The restructuring plan may consist of certain steps, including, among others:
adoption of a list of measures to capitalize or increase the capital of the financial institution; |
revoke the approval granted to the shareholders of the financial institution to hold interests therein; |
exclusion or transfer assets and liabilities; |
judicial intervention of the institution, displacing the statutory administrative authorities, and determine the capabilities needed to comply with the assigned function. |
Revocation of the License to Operate as a Financial Institution
The Central Bank may revoke the license to operate as a financial institution (i)(a) at the request of the legal or statutory authorities of the institution; (b) in the cases contemplated by the Argentine Civil and Commerce Code or in the laws governing its existence as a legal entity; (c) when, to the judgment of the Central Bank, the affections to the solvency and/or liquidity of the institution cannot be solved through a regularization and sanitation program; (d) in the rest of the cases provided by the FIL.LiquidationFIL.
Liquidation of Financial Institutions
As provided in the FIL, the Central Bank must notify the revocation decision to a competent court, which will then determine who will liquidate the entity: the corporate authorities (extrajudicial liquidation) or an independent liquidator appointed by the court for that purpose (judicial liquidation). The court’s decision will be based on whether there are sufficient assurances that the corporate authorities are capable of carrying out such liquidation properly, prior authorization of the Central Bank and in the cases provided by subsections a) and b) of section 44 of the FIL.
Bankruptcy of Financial Institutions
According to the FIL, financial institutions are not allowed to file their own bankruptcy petitions. In addition, the bankruptcy shall not be adjudged until the license to operate as a financial institution has been revoked.
Once the license to operate as a financial institution has been revoked, a court of competent jurisdiction may adjudge the former financial institution in bankruptcy, or a petition in bankruptcy may be filed by the Central Bank or by any creditor of the bank, in this case after a period of sixty (60) calendar days has elapsed since the license was revoked.
Once the bankruptcy has been adjudged, provisions of the Bankruptcy Law No. 24,522 (the “Bankruptcy Law”) and the FIL shall be applicable; provided however that in certain cases, specific provisions of the FIL shall supersede the provisions of the Argentine Bankruptcy Law (i.e. priority rights of depositors).
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Merger and Transfer of Goodwill
Merger and transfer of goodwill may be arranged between entities of the same or different type and will be subject to the prior approval of the Central Bank. The new entity or the buyer must submit a financial-economic structure profile supporting the project in order to obtain authorization from the Central Bank.
Financial System Restructuring Unit
The Financial System Restructuring Unit was created to oversee the implementation of a strategic approach towards those that benefit from assistance provided by the Central Bank. This unit is in charge of rescheduling maturities, determining restructuring strategies and action plans, approving transformation plans, and accelerating repayment of the facilities granted by the Central Bank.
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Holding Companies
On June 28, 2019, the Central Bank ruled, through Communication “A” 6723, with effect from January 1, 2020, that Group “A” financial institutions (in accordance with the “Financial Institutions Authorities” rules) which are controlled by non-financial institutions (as in our case in relation with the Bank) shall comply with the Minimum Capital requirements (please see “Argentine Banking Regulation—(see “—Liquidity and Solvency Requirements—Minimum Capital Requirements”), the Major Exposure to Credit Risk regulations (please see “Argentine Banking Regulation—(see “—Credit Risk Regulation—Large Exposures”), the Liquidity Coverage Ratio (please see “Argentine Banking Regulation—LCR (see “—Internal Liquidity Policies of Financial Institutions—Liquidity Coverage Ratio) and the Net Stable Funding Ratio (please see “Argentine Banking Regulation—(see “—Liquidity Parameters—Net Stable Funding Ratio”) on a consolidated basis comprising the non-financial holding and all its subsidiaries (excluding insurance companies and non-financial subsidiaries).
Additionally, Group “A” financial institutions may not grant direct or indirect financial assistance of any kind to its holding company whenever it is a non-financial institution.
Credit card interest rate
Recently, by virtue of Communication “A” 6964, the Central Bank determined that the unpaid balances of credit cards financings due between April 13, 2020 and April 30, 2020, shall be automatically refinanced for at least one year with three grace months in nine equal and consecutive monthly installments. From April 13, 2020, such unpaid balances shall only accrue compensatory interests, which cannot exceed an annual nominal rate of 43% nor shall they exceed 25% of the resulting from the average interest rates that the entity has applied, during the previous month, taking only into consideration the corresponding amount of personal loans without security guarantees granted in the same period.
Fintech regulationsRegulations
The Central Bank has recently issued CommunicationsCommunication “A” 6885, (repealing Communication “A” 6859), by means of which it began to regulateregulates certain aspects ofFintech operations. Through these communications, itThis communication defined Payment Service Provider (“PSP”) as those non-financial entities in retail payments performing under the global framework of the payment system, such as offering payment accounts to order and/or receive payments.
On January 30, 2020, the Central Bank issued Communication “A” 6885, by means of which it consolidated the rules for the operation of PSPspayments, and establishedcreayred a specific registry for them.PSP operations. Particularly, Communication “A” 6885 forbids entities to operate as PSP if (i) they are not properly incorporated in Argentina; (ii) they are incorporated as a stock exchange, clearing chamber or agent under the CNV Rules; or (iii) if its capital, right votes, administrative or inspection body are integrated by people disqualified for performing financial activities in Argentina by the FIL, condemned by crimes against property, the public administration, the economic and financial order or public faith, privacy violations, illicit association or by section 1.b of the Foreign Exchange Criminal Regime.
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Shareholdings acquired on stock exchanges that do not reach the threshold of 20% of the capital or voting rights are exempt from the provisions of point (iii).
Regarding the registry, Communication “A” 6885 commands that all PSPs that offer payment account must register with the “Registry of Payment Service Providers that Offer Payment Accounts”.Accounts.” Additionally, all PSPs shall comply with a reporting regime to be further regulated by the Central Bank.
Regarding the management of the funds, the regulation provided that all funds credited to payment accounts offered by PSPs shall be (i) available at all times, for an amount at least equivalent to the one credited in the payment account; (ii) deposited in Pesos, in on-sight accounts in Argentine financial entities; and (iii) on an independent on-sight account from the one used for trading for own account (e.g.: creditor or salary payments).
Any breach of the rules as set on the abovementioned communication is submitted to the sanctions of the FIL.
Gender Parity Requirements
On September 3, 2020, by means of Communication “A” 7100, the Central Bank amended the rules on “Guidelines for Corporate in Financial Institutions” (Lineamientos para el gobiernos societario en entidades financieras) to include a requirement of gender parity.
By virtue of such Communication, the Central Bank suggested to financial institutions to consider the progressive incorporation of women on new appointments and/or renewals, until gender parity is achieved. In this regard, the Central Bank defined gender parity as the guideline that aims at equalizing the participation of men and women in labor decision-making spaces, ensuring the right to equal opportunities and non-discrimination on the bases of gender.
Anti-Money Laundering and Terrorism Financing Regime
The concept of money laundering is generally used to denote transactions aimed at introducing funds from illicit activities into the institutional system and thus transform gains from illegal activities into assets of a seemingly legitimate source.
Terrorist financing is the act of providing funds for terrorist activities. This may involve funds raised from legitimate sources, such as personal donations and profits from businesses and charitable organizations, as well as from criminal sources, such as drug trade, weapons and other goods smuggling, fraud, kidnapping and extortion.
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On April 13, 2000, the National Congress passed Law No. 25,246, subsequently(subsequently amended by Laws No. 26,087, 26,119, 26,268, 26,683 and 26.734 (jointly,complemented, the “AML/ CFT Law”), which created at the national level the Anti- Money Laundering and Terrorism Financing Regime (“AML/CFT Regime”), criminalizing money laundering, creating and designating the UIF as the enforcement authority of the regime, and establishing the legal obligation for various public and private sector entities and professionals to provide information and cooperate with the UIF.
The UIF is a decentralized agency that operates with autonomy and financial independency under the Ministry of Economy, and its mission is to prevent and deter the crimes of money laundering and terrorist financing.
The following are certain provisions relating to the AML/CFT Regime established by the AML/ CFT Law and its amending and complementary provisions, including regulations issued by the UIF and the CNV and the Central Bank. It is recommended that investors consult their own legal advisors and read the AML/ CFT Law and its complementary regulations.
Money launderingLaundering and terrorist financingTerrorist Financing in the Argentine Criminal Code
(a)Money laundering
Section 303 of the Argentine Criminal Code (the “ACC”) defines money laundering as a crime committed whenever a person converts, transfers, manages, sells, encumbers, conceals or in any other way puts into circulation in the market, property derived from an unlawful act, with the possible consequence that the origin of the original property or the subordinate property acquires the appearance of a lawful origin, either in a single act or by the repetition of various acts linked to each other. Section 303 of the ACC establishes the following penalties:
(i) | If the amount of the operation exceeds Ps.300,000, imprisonment for a term of three (3) to ten (10) years and fines of two to ten times the amount of the operation shall be imposed. This penalty will be increased by one third of the maximum and half of the minimum, when: |
(a) | the person performs the act on an habitual basis or as a member of an illicit association constituted for the continuous commission of acts of this nature; |
(b) | the person is a public official who committed the act in the exercise or on the occasion of his/her functions. In this case, he/she shall also be subject to a penalty of special disqualification of three to ten years. The same penalty shall be imposed to anyone who has acted in the exercise of a profession or occupation requiring special qualification. |
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(ii) | Anyone who receives money or other property from a criminal offense for the purpose of applying them in an operation as described above, which gives them the possible appearance of a lawful origin, shall be punished with imprisonment for a term of six (6) months to three (3) years. |
(iii) | If the value of the goods does not exceed |
(b) | Penalties for legal persons |
Furthermore, Section 304 of the ACC provides that when the criminal acts have been committed in the name of, or with the intervention of, or for the benefit of a legal person, the following sanctions shall be imposed to the entity jointly or alternatively:
(i) | fine of two (2) to ten (10) times the value of the property subject to the offense; |
(ii) | total or partial suspension of activities, which in no case shall exceed ten (10) years; |
(iii) | debarment for public tenders or bidding processes or any other State-related activities, which in no case shall exceed ten (10) years; |
(iv) | dissolution and liquidation of the legal person when it was created for the sole purpose of committing the offense, or such acts constitute the main activity of the entity; |
(v) | loss or suspension of any State benefit that it may have; |
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(vi) | publication of an extract of the condemnatory sentence at the expense of the legal entity. |
In order to calibrate these sanctions, the Court will take into account the failure to comply with internal rules and procedures, the omission of vigilance over the activity of the authors and participants; the extent of the damage caused, the amount of money involved in the commission of the offense, the size, nature and economic capacity of the legal entity. In the cases in which it is essential to maintain the operational continuity of the entity, or of a public work, or particular service, the sanctions of suspension of activities or dissolution and liquidation of the legal person shall not be applicable.
(c) | Terrorism |
Section 306 of the ACC criminalizes the financing of terrorism. This offense is committed by any person who directly or indirectly collects or provides property or money, with the intention of it being used, or in the knowledge that it will be used, in full or in part:
(i) | to finance the commission of acts which have the aim of terrorising the population or compelling national public authorities or foreign governments or agents of an international organisation to perform or refrain from performing an act (according to section 41.5 of the ACC); |
(ii) | by an organisation committing or attempting to commit crimes for the purpose set out in (i); |
(iii) | by an individual who commits, attempts to commit or participates in any way in the commission of offenses for the purpose set out in (i). |
The penalty is imprisonment for a term of five (5) to fifteen (15) years and a fine of two (2) to ten (10) times the amount of the operation. Likewise, the same penalties shall apply to legal persons as described for the crime of money laundering.
Reporting Subjects obligedObliged to informInform and collaborateCollaborate with the UIF
The AML/CFT Law, in line with international AML/CFT standards, not only designates the UIF as the agency in charge of preventing money laundering and terrorism financing, but also establishes certain obligations to various public and private sector entities and individuals, which are designated as Reporting Subjects (“Sujetos obligados”), which are legally bound to inform and collaborate with the UIF.
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In accordance with the AML/ CFT Law and the regulations complementing it, the following persons, among others, are Reporting Subjects before the UIF:
(i) | banks, financial entities and insurance companies; |
(ii) | exchange agencies and natural and legal persons authorized by the Central Bank to intervene in the purchase and sale of foreign currency with funds in cash or checks issued in foreign currency or through the use of debit or credit cards or in the transfer of funds within or outside the national territory; |
(iii) | settlement and clearing agents, trading agents; natural and/or legal persons registered with the CNV acting in the placement of investment funds or other collective investment products authorized by such agency; crowdfunding companies, global investment advisors and the legal persons acting as financial trustees whose trust securities are authorized for public offering by the CNV, and the agents registered by the above mentioned controlling agency that intervene in the placement of negotiable securities issued within the framework of the above mentioned financial trusts; |
(iv) | government organizations such as the Central Bank, the Federal Public Revenue Administration (“AFIP,” as per its acronym in Spanish), the Superintendence of Insurance of the Nation |
(v) | professionals in the area of economic sciences and notaries public. |
The Reporting Subjects have the following duties:
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(i) | obtaining from clients’ documents that indisputably prove their identity, legal status, domicile and other information, concerning their operations needed to accomplish the intended activity (know your customer policy); |
(ii) | conduct due diligence procedure on their clients and report any suspicious operation or fact (which, in accordance with the usual practices of the area involved, as well as the experience and competence of the Reporting Subjects, are operations that are attempted or completed which were previously identified as unusual operations by the regulated entity, as well as any operation without economic or legal justification or of unusual or unjustified complexity, whether performed in isolated or repeated manner, regardless of the amount); and |
(iii) | refraining from disclosing to the client or third parties the actions being conducted in compliance with the AML/ CFT Law. Within the framework of suspicious operation report analysis, Reporting Subjects shall not object disclosure to UIF of any information required from them alleging that such information is subject to banking, stock market or professional secrecy or confidentiality agreements of a legal or contractual nature. |
Pursuant to Annex I of Resolution No. 154/2018 of the UIF (which establishes the supervision and inspection mechanism of the UIF), both the Central Bank and the CNV are considered “Specific Control Agencies”(“Órganos de Contralor Específico”).In such capacity, they must collaborate with the UIF in the evaluation of compliance with AML/CFT procedures by the Reporting Subjects subject to their control. For these purposes, they are entitled to supervise, monitor and inspect these entities. Denial or obstruction of inspections by the Reporting Subjects may result in administrative penalties by the UIF and criminal penalties.
The Central Bank and the CNV must also comply with the AML/CFT regulations established by the UIF, including the reporting of suspicious transactions. In turn, Reporting Subjects regulated by these agencies are subject to UIF Resolutions No. 30/2017 and 21/2018, respectively. Such regulations provide guidelines that such entities shall adopt and apply to manage, in accordance with their policies, procedures and controls, the risk of being used by third parties for criminal purposes of money laundering and financing of terrorism.
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Essentially, the aforementioned regulations (the consolidated texts of which were subsequently approved by UIF Resolution No. 156/18), change the formal regulatory compliance approach to a risk-based approach (“RBA”), based on the revised recommendations issued by the Financial Action Task Force (the “FATF”) in 2012, in order to ensure that the implemented measures are proportional to the identified risks. Therefore, the Reporting Subjects shall identify and evaluate their risks and, based on this, adopt measures for the management and mitigation of such risks, in order to more effectively prevent money laundering and terrorist financing. Likewise, the provisions of UIF Resolution No. 4/17 established the possibility of conducting special due diligence procedures with respect to clients supervised abroad (formerly called “international investors”) and local clients who are Reporting Subjects to the UIF.
Asset Freezing RegimePrevention of Disposal of Assets Linked to Terrorism Financing
Decree No. 918/2012 establishes the procedures for preventing the freezingdisposal of assets linked to terrorism financing, and the creation and maintenance procedures (including the inclusion and removal of suspected persons) for registries created in accordance with the relevant United Nations Security Council’s resolutions.
Additionally, UIF Resolution No. 29/2013, regulates the implementation of Decree No. 918/2012 and establishes: (i) the procedure to report suspicious transactions of terrorism financing and the persons obligated to do so, and (ii) the administrative freezing of assets procedure on natural or legal persons or entities designated by the United Nations Security Council pursuant to Resolution 1267 (1999) and subsequent, or linked to criminal actions under Section 306 of the Argentine Criminal Code, both prior to the report issued pursuant to UIF Resolutions No. 121 and 229, and as mandated by the UIF after receiving such report.
In order to help the Reporting Subjects to fulfill these duties, Executive Decree No. 489/2019 created the Public Registry of Persons and Entities linked to acts of Terrorism and its Financing (RePET, for its acronym in Spanish), which is an official database that includes the consolidated list of the United Nations Security Council.
Politically Exposed Persons
Resolution No. 134/2018 of the UIF (amended by Resolutions No. 15/2019 and 128/2019), establishes the rules that Reporting Parties must follow regarding clients that are Politically Exposed Persons (PEPs).
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Following the aforementioned RBA, Resolution 134/2018 establishes that Reporting Parties must determine the level of risk at the time of beginning or continuing the contractual relationship with a PEP, and must take due diligence measures, adequate and proportional to the associated risk and the operation or operations involved.
In addition, the UIF has issued the Guide for the management of risks of money laundering and financing of terrorism in relation to customers (and ultimate beneficiaries) that are PEPs, which sets up guidelines for Reporting Parties in order to comply with the Resolution No. 134/2018.
CNV Regulations
The CNV Rules stipulate, among other provisions, that the regulated entitiesreporting subjects under its control shall only perform the operations provided for under the public offering system when these operations are performed or ordered by persons constituted, domiciled or resident in countries, domains, jurisdictions, territories or associated states not considered to be non-cooperative or high risk by the FATF.
Similarly, they establish the payment modalities and control procedures for the reception and delivery of funds from and to clients.
Central Bank Rules
Pursuant to Communication “A” 6399 of the Central Bank, as amended and supplemented, including without limitation, by Communication “A” 6709, Reporting Subjects must keep - for a period of 10 years - written records of the procedure applied in each case for the discontinuation of a client'sclient’s operations. Among these records, they shall keep a copy of any notification sent to the customer requesting further information and/or documentation, the corresponding notices of receipt and the documents identifying the officials who took part in the decision, in accordance with the respective procedural manuals.
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Tax Amnesty System
The voluntary system of declaration under the Argentine Tax Amnesty Law No. 27,260 and its Regulatory Decree No. 895/16 (jointly the “Tax Amnesty System”) established that the information voluntarily submitted under such system may be used for the investigation and punishment of the crimes of money laundering and financing of terrorism. For such purpose, the UIF has the power to communicate information to other public intelligence or investigation agencies, based on a previous resolution of the UIF’s President and provided that there are serious, precise and concordant indications of the commission of money laundering and/or terrorism financing crimes. Furthermore, the AFIP remains obliged to report to the UIF suspicious operations detected within the framework of the Tax Amnesty System and to provide it with all information required by it, not being able to oppose fiscal secrecy.
Corporate Criminal Liability Law
The Corporate Criminal Liability Law No. 27,401 sets forth a criminal liability regime applicable to legal entities involved in certain corruption offenses directly or indirectly committed in their name, on their behalf or in their interest and from which a benefit may arise. The individual offenders may be employees or third parties — even unauthorized third parties, provided that the company ratified the act, even tacitly.
Item 4.COrganizational structure |
The following diagram illustrates our organizational structure as of the date of this annual report. Percentages indicate the ownership interest held.
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The following information is related to our subsidiaries and investees as of the date of this annual report:
| | | | | |
| Jurisdiction of | Name under which the | |||
Subsidiary | | incorporation | | business | |
Banco Supervielle S.A. | | Argentina | | Supervielle | |
IUDÚ Compañ | | Argentina | | IUDÚ | |
Tarjeta Automática S.A. | | Argentina | | Carta Automática, | |
Supervielle Seguros S.A. | | Argentina | | Supervielle Seguros | |
Supervielle Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión S.A. | | Argentina | | Supervielle Asset Management | |
Espacio Cordial de Servicios S.A. | | Argentina | | Cordial | |
Micro Lending S.A.U. | | Argentina | | MILA, IUDÚ Car | |
InvertirOnline S.A.U. | | Argentina | | IOL invertironline | |
InvertirOnline.com Argentina S.A.U. |
| Argentina | | IOL invertironline | |
Supervielle Productores Asesores de Seguros S.A. | | Argentina | | Supervielle Broker de Seguros | |
Supervielle | | Argentina | | N/A | |
Bolsillo Digital S.A.U. | | Argentina | | BOLDI | |
Easy Cambio S.A. | | Argentina | | N/A |
Sofital S.A.F. e I.I. | | Argentina | | N/A |
IOL Holding S.A. | | Uruguay | | N/A |
IOL Agente de Valores S.A. | | Uruguay | | N/A |
Banco Supervielle S.A.
We own 97.10% of the share capital of the Bank and Sofital owns 2.79%. The Bank is a universal commercial bank and our largest subsidiary. The Bank accounted for 92.2% of our total assets as of December 31, 2021. The Bank operates in Argentina, and substantially all of its customers, operations and assets are located in Argentina. It offers a wide variety of financial products and services to retail, corporate and institutional customers.
According to the Central Bank, the Bank ranked eighth in terms of total loans, ninth in terms of deposits, and tenthin terms of total assets among private banks in Argentina as of June 30, 2021, which is the most recent information available as of the date of this
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annual report. In 2021, the Bank continued to be a leader among private banks with respect to the payment of federal benefits to senior citizens in terms of the number of payments made. The Bank is also one of the leading providers among private banks of (i) factoring services in Argentina with a 8.66% market share as of December 31, 2021 and (ii) leasing services, with an estimated market share of approximately 14.06% as of December 31, 2021, which is the most recent information available as of the date of this annual report.
As of December 31, 2021, the Bank on a consolidated basis had total assets of Ps.359.6 billion, a total loan portfolio of Ps.148.8 billion and total deposits of Ps.282.3 billion, and its shareholders’ equity amounted to Ps.39.7 billion. For more information regarding the Bank’s business performance, see “—Business Segments.”
IUDÚ Compañía Financiera S.A.
In August 2011, we purchased IUDÚ, a financial services division of General Electric in Argentina. Prior to our acquisition, IUDÚ had been operating for more than ten years in the Argentine market offering financial products such as credit cards, personal loans, consumer loans and a wide range of insurance products. On November 2, 2020, the shareholders of IUDÚ approved the change of its corporate name from Cordial Compañía Financiera S.A. to IUDÚ Compañía Financiera S.A. This change was approved by the Argentine Central Bank and was registered by the Public Registry of Commerce on April 19, 2021.
Since 2000, IUDÚ has exclusive rights to promote and sell financial and credit products in Walmart Argentina stores nationwide since 2020 through a strategic partnership originally entered into with Walmart Argentina. In November 2020, Walmart Argentina sold the entire operation to Grupo De Narváez, a long-standing company in Argentina operating several retail businesses, which sale has not adversely affected the partnership with IUDÚ. In August 2021, IUDÚ extended the partnership with Grupo De Narváez until August 24, 2026. IUDÚ is is in the process of transforming transforming its business from a model that offered personal loans and credit cards on-site in Chango Más (formerly, Walmart Argentina) stores to a completely digital financial services model that is taking retail deposits to lower cost of funds and offering a growing range of financial services to a broader lower-risk customer base, leveraging its position as a regulated financial entity.
The Bank owns 4,34695% of IUDÚ’s common shares and Grupo Supervielle owns directly the remaining 5%. As of December 31, 2021, IUDÚ had total assets of Ps.16.8 billion, net shareholders’ equity of Ps.1.2 billion and a personal loan portfolio, credit card and car loan on balance of Ps.13.8 billion. For more information regarding the IUDÚ’s business performance, see “—Business Segments.”
Tarjeta Automática S.A.
Tarjeta comprises a network of branches created in 1996 which has strong market positions in the Patagonia region. As of the date of this annual report, Tarjeta has 20 own branches in 9 provinces in Argentina. In December 2012, IUDÚ began to market loans and credit cards products through Tarjeta’s branches in order to offer financial services and insurance products. Grupo Supervielle, the Bank and IUDÚ own 67.6136%, 7.7273% and 24.6591% of Tarjeta’s common shares, respectively.
For more information regarding the Tarjeta’s business performance, see “—Business Segments.”
Espacio Cordial de Servicios S.A.
Espacio Cordial was created in October 2012 and began operating in December 2012. Espacio Cordial provides non-financial services in Argentina within the electronic and tourism industries, by providing customers with financing to purchase household appliances, technology, home products and furniture, wellness and beauty products, and travel products, and within the wellbeing and health industries, by providing customers with financing to access to dentistry, ophthalmology, medical emergencies, and telemedicine services, and to enter into personal, home, car, motorcycle assistance and pet insurance.
We own 95% of the share capital of Cordial Servicios and Sofital owns the remaining 5%. As a result of our corporate restructuring in August 2018, Cordial Servicios became part of the consumer finance segment of Grupo Supervielle.
In June 2019, Cordial Servicios purchased Deautos.com, a digital platform for the sale of new and pre-owned cars which has operated for more than 10 years in Argentina. This acquisition allowed us to create an innovative and disruptive car digital platform which aims to integrate and simplify the offer of financial products, insurance and other services within the online car industry. Our existing relationships with car agencies and dealers supported the creation of this platform. In addition, in 2021, we launched IUDÚ Car, a digital app which aims to simplify car loan financings.
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During 2021, we sold 14,085 home appliances and 125,000 service plans through Espacio Cordial. For more information regarding the Espacio Cordial’s business performance, see “—Business Segments.”
Micro Lending S.A.U.
MILA is a company that provides car financing loans and was acquired by Grupo Supervielle on May 2, 2018. We own 100% of the share capital of MILA.
As of December 31, 2021, MILA had originated, directly or indirectly, a total of 5,540 car loan transactions for an amount of $2,915 million, which represented an increase of 118% in terms of number of car loans generated and an increase of 143% in terms of principal amount of car loans generated, compared to 2020. For more information regarding the MILA’s business performance, see “—Business Segments.”
Supervielle Seguros S.A.
In June 2013, we and Sofital purchased 100% of the shares of Supervielle Seguros (formerly, Aseguradores de Créditos del Mercosur S.A.), which began to operate in October 2014.
Supervielle’s insurance business continues to evolve, expand and transform, while the customer remains our focus. We offer insurance services to our clients to cover their risks associated with their lives, families, homes or businesses. We expect that we will develop a bancassurance distribution model through our insurance segment using product reengineering and expanding the products offered by Supervielle Seguros and Supervielle Productores Asesores de Seguros.
For more information regarding the Supervielle Seguros’ business performance, see “—Business Segments.”
Supervielle Productores Asesores de Seguros S.A.
On December 21, 2018, we created Supervielle Productores Asesores de Seguros and began to operate in the second half of 2019 offering insurance broker services, including in relation to life insurance policies, and wealth and pension insurance premiums. We directly own 95.24004% and indirectly own 99.999989% of its share capital.
For information regarding Supervielle Productores Asesores de Seguros’ business performance, see “—Business Segments.”
Supervielle Asset Management S.A.
Supervielle Asset Management offers customized investment and savings solutions to its clients through investment funds. We participate in the mutual funds market through our “Premier” funds family.
We own 95% of the share capital of SAM and Sofital owns the remaining 5%.
For information regarding Supervielle Asset Management’s business performance, see “—Business Segments.”
Invertironline S.A.U. and Invertionline.com (renamed as “Portal Integral de Inversiones S.A.U.” with registration pending).
IOL invertironline is a digital online broker established 21 years ago that offers brokerage and savings and investment services based on an agile, simple, transparent and innovative platform, suitable for the profile of each client, with the objective of helping our clients increase their savings.
IOL invertironline offers investment alternatives in the Argentine stock market and in the United States and provides our customers with education tools on financing matters.
We own 100% of the share capital of InvertirOnline and Portal Integral de Inversiones S.A.U.
For information regarding IOL invertironline’s business performance, see “—Business Segments.”
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Bolsillo Digital S.A.U.
On June 12, 2019, we created Bolsillo Digital. Bolsillo Digital is Grupo Supervielle’s PSP (“Payment Service Provider”) fintech business which is registered with the Argentine Central Bank. Bolsillo Digital offers in-person and digital payment and collection solutions to businesses. On August 5, 2021, Grupo Supervielle, within the framework of the commercial strategy for its payment services business, transferred all of its shares of Bolsillo Digital to its subsidiary Banco Supervielle S.A.
Bolsillo Digital simplifies small and medium-size businesses transactions reducing the use of cash. As of the date of this annual report, Bolsillo Digital has approximately 20,000 active customers operating throughout Argentina with a particularly strong presence in the Cuyo region, where Bolsillo Digital is the preferred customer payment collection platform for small and medium-size businesses.
Supervielle Agente de Negociación S.A.U. (formerly, known as Futuros del Sur S.A.)
Supervielle Agente de Negociación provides trading agent services and is registered with the CNV. We acquired Supervielle Agente de Negociación in 2019 to expand our financial and investment services to institutional and corporate customers and increase cross selling in an efficient and profitable way.
We own 100% of the share capital of Supervielle Agente de Negociación.
Easy Cambio S.A.
In October 2020, we acquired 100% of the common shares of Easy Cambio S.A., a company authorized by the Central Bank to provide foreign exchange broker services, in order to expand our offer of financial services.
Sofital S.A.F. e I.I.
Sofital is aholding company that owns shares of the same companies owned by Grupo Supervielle. As of the date of this annual report, Sofital holds 2.7944% of the capital stock of the Bank, 5.0% of the capital stock of Cordial Servicios, 5.0% of the capital stock of Supervielle Seguros, 5.0% of the capital stock of SAM and 4.7596% of Supervielle Productores Asesores de Seguros and 0.007% of IOL Holding S.A.
Item 4.DProperty, plants and equipment
The Bank owns 7,916 square meters of office space at Reconquista 330 and at San Martin 344 in Buenos Aires and San Martín/Espejo in Mendoza, for management, administrative and other commercial purposes and for central area personnel. The Bank also owns 15,04615,208 square meters for retail branch properties in Mendoza, Córdoba, San Luis and Buenos Aires, (including 13,001 squares meters of the properties acquired from the financial trust), 1,322and 631 square meters of land in the City of San Luis and the City of Mendoza and 2,832 square meters of properties not related to our core business.Luis.
Supervielle Seguros owns 1,954 square meters of office space located at Reconquista 330 in Buenos Aires.
The rest of our administrative buildings and offices (including our headquarters), branches, sales and collection centers and storage properties are leased pursuant to arm’s length agreements.
We sublease from the Bank the offices where our headquarters are located at Bartolomé Mitre 434, 5th Floor, City of Buenos Aires.
Item 4.ESelected Statistical Information
You should read this information in conjunction with our audited consolidated financial statements and related notes, and the information under “Item 5.A“Item 5.A. Operating Results”Results” included elsewhere in this annual report. We prepared this information from our financial statements, which are prepared in conformity with IFRS. For further information, see notes 1.2Notes 1.1 and 2 to our audited consolidated financial statements.
Average Balance Sheets, Interest earned on Interest-earning Assets and Interest Paid on Interest-bearing Liabilities
The average balances of our interest-earning assets and interest-bearing liabilities, including the related interest that is receivable and payable, are calculated on a daily basis.
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Average balances have been separated between those denominated in Pesos and those denominated in U.S. dollars. The nominal interest rate is the amount of interest earned or paid during the period divided by the related average balance.
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The following tables show average balances, interest amounts and nominal rates for our interest-earning assets and interest-bearing liabilities for the years ended December 31, 2019, 20182021, 2020 and 2017.2019.
Year ended December 31, | |||||||||||||||||||||||||||
2019 | 2018 | 2017 | |||||||||||||||||||||||||
Average Balance | Interest (Paid) | Average Nominal Rate | Average Balance | Interest (Paid) | Average Nominal Rate | Average Balance | Interest (Paid) | Average Nominal Rate | |||||||||||||||||||
(in thousands of Pesos) | |||||||||||||||||||||||||||
ASSETS | |||||||||||||||||||||||||||
Interest-Earning Assets | |||||||||||||||||||||||||||
Investment Portfolio | |||||||||||||||||||||||||||
Government and Corporate Securities | 11,326,914 | 1,976,627 | 17.5% | 12,706,699 | 4,147,662 | 32.6% | 8,024,754 | 1,735,036 | 21.6% | ||||||||||||||||||
Pesos | 7,103,805 | 3,002,584 | 42.3% | 7,037,870 | 1,698,336 | 24.1% | 3,118,790 | 666,711 | 21.4% | ||||||||||||||||||
Dollars | 4,223,109 | (1,025,957 | ) | (24.3 | )% | 5,668,829 | 2,449,326 | 43.2% | 4,905,964 | 1,068,325 | 21.8% | ||||||||||||||||
Securities Issued by the Central Bank | 30,219,625 | 18,714,976 | 61.9% | 22,998,423 | 9,500,771 | 41.3% | 17,662,433 | 4,366,998 | 24.7% | ||||||||||||||||||
Pesos | 30,219,625 | 18,714,976 | 61.9% | 22,998,423 | 9,500,771 | 41.3% | 17,662,433 | 4,366,998 | 24.7% | ||||||||||||||||||
Dollars | — | — | 0.0% | — | — | 0.0% | — | — | 0.0% | ||||||||||||||||||
Total Investment Portfolio | 41,546,539 | 20,691,603 | 49.8% | 35,705,122 | 13,648,433 | 38.2% | 25,687,187 | 6,102,034 | 23.8% | ||||||||||||||||||
Pesos | 37,323,430 | 21,717,559 | 58.2% | 30,036,293 | 11,199,107 | 37.3% | 20,781,223 | 5,033,709 | 24.2% | ||||||||||||||||||
Dollars | 4,223,109 | (1,025,956 | ) | (24.3 | )% | 5,668,829 | 2,449,326 | 43.2% | 4,905,964 | 1,068,325 | 21.8% | ||||||||||||||||
Loans | |||||||||||||||||||||||||||
Loans to the Financial Sector | 555,588 | 189,836 | 34.2% | 1,402,040 | 380,052 | 27.1% | 943,550 | 58,853 | 6.2% | ||||||||||||||||||
Pesos | 487,408 | 183,142 | 37.6% | 1,400,703 | 380,050 | 27.1% | 904,772 | 58,010 | 6.4% | ||||||||||||||||||
Dollars | 68,180 | 6,694 | 9.8% | 1,337 | 2 | 0.1% | 38,778 | 843 | 2.2% | ||||||||||||||||||
Overdrafts | 7,005,832 | 4,566,729 | 65.2% | 10,530,444 | 5,000,550 | 47.5% | 9,073,842 | 2,901,607 | 32.0% | ||||||||||||||||||
Pesos | 7,004,941 | 4,566,729 | 65.2% | 10,529,838 | 5,000,550 | 47.5% | 9,073,665 | 2,901,607 | 32.0% | ||||||||||||||||||
Dollars | 891 | — | 0.0% | 606 | — | 0.0% | 177 | — | 0.0% | ||||||||||||||||||
Promissory notes | 9,343,602 | 5,878,441 | 62.9% | 16,912,839 | 6,272,283 | 37.1% | 17,832,275 | 3,767,218 | 21.1% | ||||||||||||||||||
Pesos | 8,382,758 | 5,797,429 | 69.2% | 15,553,607 | 6,203,437 | 39.9% | 17,216,500 | 3,748,117 | 21.8% | ||||||||||||||||||
Dollars | 960,844 | 81,012 | 8.4% | 1,359,232 | 68,846 | 5.1% | 615,775 | 19,101 | 3.1% | ||||||||||||||||||
Mortgage loans | 8,216,816 | 3,781,641 | 46.0% | 7,410,179 | 3,028,718 | 40.9% | 1,243,094 | 263,172 | 21.2% | ||||||||||||||||||
Pesos | 8,216,816 | 3,781,641 | 46.0% | 7,410,179 | 3,028,718 | 40.9% | 1,243,094 | 263,172 | 21.2% | ||||||||||||||||||
Dollars | — | — | 0.0% | — | — | 0.0% | — | — | 0.0% | ||||||||||||||||||
Automobile and Other Secured Loans | 1,846,408 | 693,000 | 37.5% | 3,021,281 | 757,191 | 25.1% | 439,268 | 75,663 | 17.2% | ||||||||||||||||||
Pesos | 1,846,408 | 693,000 | 37.5% | 3,021,281 | 757,191 | 25.1% | 439,268 | 75,663 | 17.2% | ||||||||||||||||||
Dollars | — | — | 0.0% | — | — | 0.0% | — | — | 0.0% | ||||||||||||||||||
Personal Loans | 22,934,580 | 12,916,398 | 56.3% | 39,352,087 | 16,811,397 | 42.7% | 39,977,166 | 16,547,779 | 41.4% | ||||||||||||||||||
Pesos | 22,934,580 | 12,916,398 | 56.3% | 39,352,087 | 16,811,397 | 42.7% | 39,977,166 | 16,547,779 | 41.4% | ||||||||||||||||||
Dollars | — | — | 0.0% | — | — | 0.0% | — | — | 0.0% | ||||||||||||||||||
Corporate Unsecured Loans | 10,855,345 | 6,141,212 | 56.6% | 13,801,409 | 4,643,906 | 33.6% | 11,240,625 | 3,060,510 | 27.2% | ||||||||||||||||||
Pesos | 10,855,345 | 6,141,212 | 56.6% | 13,801,409 | 4,643,906 | 33.6% | 11,240,625 | 3,060,510 | 27.2% | ||||||||||||||||||
Dollars | — | — | 0.0% | — | — | 0.0% | — | — | 0.0% | ||||||||||||||||||
Credit Card Loans | 12,240,583 | 4,815,023 | 39.3% | 17,003,762 | 5,249,822 | 30.9% | 17,297,617 | 5,053,721 | 29.2% | ||||||||||||||||||
Pesos | 11,735,230 | 4,814,830 | 41.0% | 16,453,795 | 5,249,740 | 31.9% | 16,626,969 | 5,053,564 | 30.4% | ||||||||||||||||||
Dollars | 505,353 | 193 | 0.0% | 549,967 | 82 | 0.0% | 670,648 | 157 | 0.0% | ||||||||||||||||||
Receivables from Financial Leases | 4,439,332 | 1,129,605 | 25.4% | 6,301,405 | 1,417,026 | 22.5% | 5,445,318 | 1,141,614 | 21.0% | ||||||||||||||||||
Pesos | 2,485,309 | 975,764 | 39.3% | 4,676,336 | 1,281,853 | 27.4% | 4,914,898 | 1,093,227 | 22.2% | ||||||||||||||||||
Dollars | 1,954,023 | 153,841 | 7.9% | 1,625,069 | 135,173 | 8.3% | 530,420 | 48,387 | 9.1% | ||||||||||||||||||
Total Loans excl. Foreign trade and U.S.$.loans | 77,438,086 | 40,111,885 | 51.8% | 115,735,446 | 43,560,945 | 37.6% | 103,492,755 | 32,870,137 | 31.8% | ||||||||||||||||||
Pesos | 73,948,795 | 39,870,145 | 53.9% | 112,199,235 | 43,356,842 | 38.6% | 101,636,957 | 32,801,649 | 32.3% | ||||||||||||||||||
Dollars | 3,489,291 | 241,740 | 6.9% | 3,536,211 | 204,103 | 5.8% | 1,855,798 | 68,488 | 3.7% | ||||||||||||||||||
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| | | | | | | | | | | | | | | | | | | |
| | Year ended December 31, |
| ||||||||||||||||
| | 2021 | | 2020 | | 2019 | | ||||||||||||
| | | | | | Average | | | | | | Average | | | | | | Average | |
| | Average | | Interest | | Nominal | | Average | | Interest | | Nominal | | Average | | Interest | | Nominal | |
|
| Balance |
| Earned |
| Rate |
| Balance |
| Earned |
| Rate |
| Balance |
| Earned |
| Rate |
|
| | (in thousands of Pesos) |
| ||||||||||||||||
ASSETS | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
Interest-Earning Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Investment Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government and Corporate Securities |
| 38,616,273 |
| 10,606,113 |
| 27.5 | % | 21,230,724 |
| 9,840,314 |
| 46.3 | % | 23,275,996 |
| 4,061,826 |
| 17.5 | % |
Pesos |
| 27,771,220 |
| 10,502,639 |
| 37.8 | % | 19,627,381 |
| 8,071,266 |
| 41.1 | % | 14,597,810 | | 6,170,094 |
| 42.3 | % |
Dollars |
| 10,845,053 |
| 103,474 |
| 1.0 | % | 1,603,343 |
| 1,769,048 |
| 110.3 | % | 8,678,186 | | (2,108,268) |
| (24.3) | % |
Securities Issued by the Central Bank |
| 62,952,023 |
| 23,275,460 |
| 37.0 | % | 71,825,220 |
| 26,964,670 |
| 37.5 | % | 62,099,162 |
| 38,457,933 |
| 61.9 | % |
Pesos |
| 62,952,023 |
| 23,275,460 |
| 37.0 | % | 71,825,220 |
| 26,964,670 |
| 37.5 | % | 62,099,162 | | 38,457,933 |
| 61.9 | % |
Dollars |
| — |
| — |
| — | % | — |
| — |
| — | % | — | | — |
| — | % |
110
Year ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||
2019 | 2018 | 2017 | ||||||||||||||||||||||||||||||||||||||||||||
Average Balance | Interest (Paid) | Average Nominal Rate | Average Balance | Interest (Paid) | Average Nominal Rate | Average Balance | Interest (Paid) | Average Nominal Rate | ||||||||||||||||||||||||||||||||||||||
(in thousands of Pesos) | ||||||||||||||||||||||||||||||||||||||||||||||
Foreign Trade Loans and U.S.$.loans | 25,486,397 | 1,730,633 | 6.8% | 33,096,074 | 1,798,461 | 5.4% | 20,074,843 | 899,193 | 4.5% | |||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |||||||||||||||||||||||||||
|
| Year ended December 31, |
| |||||||||||||||||||||||||||||||||||||||||||
| | 2021 | | 2020 | | 2019 | | |||||||||||||||||||||||||||||||||||||||
| | | | | | Average | | | | | | Average | | | | | | Average | | |||||||||||||||||||||||||||
| | Average | | Interest | | Nominal | | Average | | Interest | | Nominal | | Average | | Interest | | Nominal | | |||||||||||||||||||||||||||
|
| Balance |
| Earned |
| Rate |
| Balance |
| Earned |
| Rate |
| Balance |
| Earned |
| Rate |
| |||||||||||||||||||||||||||
Total Investment Portfolio | | 101,568,296 | | 33,881,573 | | 33.3 | % | 93,055,944 | | 36,804,984 | | 39.5 | % | 85,375,158 | | 42,519,759 | | 49.8 | % | |||||||||||||||||||||||||||
Pesos | — | — | 0.0% | — | — | 0.0% | — | — | 0.0% | | 90,723,243 | | 33,778,099 | | 37.2 | % | 91,452,601 | | 35,035,936 | | 38.2 | % | 76,696,972 | | 44,628,027 | | 58.2 | % | ||||||||||||||||||
Dollars | 25,486,397 | 1,730,633 | 6.8% | 33,096,074 | 1,798,461 | 5.4% | 20,074,843 | 899,193 | 4.5% | | 10,845,053 | | 103,474 | | 1.0 | % | 1,603,343 | | 1,769,048 | | 110.3 | % | 8,678,186 | | (2,108,268) | | (24.3) | % | ||||||||||||||||||
Total Loans | 102,924,483 | 41,842,518 | 40.7% | 148,831,520 | 45,359,406 | 30.5% | 123,567,598 | 33,769,330 | 27.3% | |||||||||||||||||||||||||||||||||||||
Loans |
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|
|
|
|
|
|
| |||||||||||||||||||||||||||
Loans to the Financial Sector |
| 40,989 |
| 12,551 |
| 30.6 | % | 317,486 |
| 83,137 |
| 26.2 | % | 1,141,693 |
| 390,099 |
| 34.2 | % | |||||||||||||||||||||||||||
Pesos | 73,948,795 | 39,870,145 | 53.9% | 112,199,235 | 43,356,842 | 38.6% | 101,636,957 | 32,801,649 | 32.3% |
| 39,766 |
| 11,749 |
| 29.5 | % | 256,559 |
| 79,321 |
| 30.9 | % | 1,001,588 | | 376,343 |
| 37.6 | % | ||||||||||||||||||
Dollars | 28,975,688 | 1,972,373 | 6.8% | 36,632,285 | 2,002,564 | 5.5% | 21,930,641 | 967,681 | 4.4% |
| 1,223 |
| 802 |
| 65.6 | % | 60,927 |
| 3,816 |
| 6.3 | % | 140,105 | | 13,756 |
| 9.8 | % | ||||||||||||||||||
Repo transactions | 981,998 | 596,797 | 60.8% | 252,162 | 78,349 | 31.1% | — | — | 0.0% | |||||||||||||||||||||||||||||||||||||
Overdrafts |
| 7,381,619 |
| 3,133,108 |
| 42.4 | % | 10,013,128 |
| 4,042,925 |
| 40.4 | % | 14,396,482 |
| 9,384,301 |
| 65.2 | % | |||||||||||||||||||||||||||
Pesos | 981,998 | 596,797 | 60.8% | 252,162 | 73,349 | 31.1% | — | — | 0.0% |
| 7,381,619 |
| 3,133,108 |
| 42.4 | % | 10,012,603 |
| 4,042,925 |
| 40.4 | % | 14,394,651 | | 9,384,301 |
| 65.2 | % | ||||||||||||||||||
Dollars | — | — | 0.0% | — | — | 0.0% | — | — | 0.0% |
| — |
| — |
| — | % | 525 |
| — |
| — | % | 1,831 | | — |
| — | % | ||||||||||||||||||
Total Interest-Earning Assets | 145,453,020 | 63,130,918 | 43.4% | 184,788,804 | 59,086,188 | 32.0% | 149,254,785 | 39,871,364 | 26.7% | |||||||||||||||||||||||||||||||||||||
Promissory notes |
| 27,829,584 |
| 11,194,804 |
| 40.2 | % | 22,397,463 |
| 9,398,204 |
| 42.0 | % | 19,200,432 |
| 12,079,776 |
| 62.9 | % | |||||||||||||||||||||||||||
Pesos | 112,254,223 | 62,184,502 | 55.4% | 142,487,690 | 54,634,298 | 38.3% | 122,418,180 | 37,835,358 | 30.9% |
| 27,783,899 |
| 11,192,936 |
| 40.3 | % | 21,974,408 |
| 9,358,722 |
| 42.6 | % | 17,225,966 | | 11,913,302 |
| 69.2 | % | ||||||||||||||||||
Dollars | 33,198,797 | 946,416 | 2.9% | 42,301,114 | 4,451,890 | 10.5% | 26,836,605 | 2,036,006 | 7.6% |
| 45,685 |
| 1,868 |
| 4.1 | % | 423,055 |
| 39,482 |
| 9.3 | % | 1,974,466 | | 166,474 |
| 8.4 | % | ||||||||||||||||||
Non Interest-Earning Assets | ||||||||||||||||||||||||||||||||||||||||||||||
Cash and due from banks | 40,084,120 | 42,489,403 | 30,192,607 | |||||||||||||||||||||||||||||||||||||||||||
Mortgage loans |
| 15,636,904 |
| 7,062,856 |
| 45.2 | % | 16,070,541 |
| 6,029,525 |
| 37.5 | % | 16,884,968 |
| 7,771,001 |
| 46.0 | % | |||||||||||||||||||||||||||
Pesos | 19,151,085 | 23,105,066 | 17,688,924 |
| 15,636,904 |
| 7,062,856 |
| 45.2 | % | 16,070,541 |
| 6,029,525 |
| 37.5 | % | 16,884,968 | | 7,771,001 |
| 46.0 | % | ||||||||||||||||||||||||
Dollars | 20,933,035 | 19,384,337 | 12,503,683 |
| — |
| — |
| — | % | — |
| — |
| — | % | — |
| — |
| — | % | ||||||||||||||||||||||||
Unlisted equity investments | 40 | — | 4,394 | |||||||||||||||||||||||||||||||||||||||||||
Automobile and Other Secured Loans |
| 3,160,678 |
| 1,548,516 |
| 49.0 | % | 2,402,640 |
| 1,114,558 |
| 46.4 | % | 3,794,236 |
| 1,424,065 |
| 37.5 | % | |||||||||||||||||||||||||||
Pesos | — | — | 4,394 |
| 3,160,678 |
| 1,548,516 |
| 49.0 | % | 2,402,640 |
| 1,114,558 |
| 46.4 | % | 3,794,236 | | 1,424,065 |
| 37.5 | % | ||||||||||||||||||||||||
Dollars | 40 | — | — |
| — |
| — |
| — | % | — |
| — |
| — | % | — |
| — |
| — | % | ||||||||||||||||||||||||
Premises and equipment and miscellaneous and intangible assets and unallocated items | 8,038,882 | 5,776,552 | 4,069,732 | |||||||||||||||||||||||||||||||||||||||||||
Personal Loans |
| 29,797,979 |
| 19,401,947 |
| 65.1 | % | 32,066,247 |
| 21,393,779 |
| 66.7 | % | 47,128,917 |
| 26,542,272 |
| 56.3 | % | |||||||||||||||||||||||||||
Pesos | 8,038,882 | 5,776,552 | 4,069,732 |
| 29,797,979 |
| 19,401,947 |
| 65.1 | % | 32,066,247 |
| 21,393,779 |
| 66.7 | % | 47,128,917 | | 26,542,272 |
| 56.3 | % | ||||||||||||||||||||||||
Dollars | — | — | — |
| — |
| — |
| — | % | — |
| — |
| — | % | — |
| — |
| — | % | ||||||||||||||||||||||||
Allowance for loan losses | (6,351,235 | ) | (8,250,210 | ) | (6,569,557 | ) | ||||||||||||||||||||||||||||||||||||||||
Corporate Unsecured Loans |
| 20,430,653 |
| 6,918,453 |
| 33.9 | % | 26,383,237 |
| 9,029,045 |
| 34.2 | % | 22,306,955 |
| 12,619,750 |
| 56.6 | % | |||||||||||||||||||||||||||
Pesos | (5,442,708 | ) | (7,809,354 | ) | (6,332,636 | ) |
| 20,430,653 |
| 6,918,453 |
| 33.9 | % | 26,383,237 |
| 9,029,045 |
| 34.2 | % | 22,306,955 | | 12,619,750 |
| 56.6 | % | |||||||||||||||||||||
Dollars | (908,527 | ) | (440,856 | ) | (236,921 | ) |
| — |
| — |
| — | % | — |
| — |
| — | % | — |
| — |
| — | % | |||||||||||||||||||||
Other assets | 13,028,974 | 14,372,811 | 17,675,942 | |||||||||||||||||||||||||||||||||||||||||||
Credit Card Loans |
| 26,731,491 |
| 5,927,631 |
| 22.2 | % | 24,268,029 |
| 5,763,900 |
| 23.8 | % | 25,153,520 |
| 9,894,527 |
| 39.3 | % | |||||||||||||||||||||||||||
Pesos | 11,412,769 | 12,755,495 | 15,789,742 |
| 26,412,215 |
| 5,927,611 |
| 224 | % | 23,926,754 |
| 5,763,855 |
| 24.1 | % | 24,115,056 | | 9,894,130 |
| 41.0 | % | ||||||||||||||||||||||||
Dollars | 1,616,205 | 1,617,316 | 1,886,200 |
| 319,276 |
| 20 |
| — | % | 341,275 |
| 45 |
| — | % | 1,038,464 | | 397 |
| — | % | ||||||||||||||||||||||||
Total Non Interest-Earning Assets | 54,800,781 | 54,388,556 | 45,373,118 | |||||||||||||||||||||||||||||||||||||||||||
Pesos | 33,160,028 | 33,827,759 | 31,220,156 | |||||||||||||||||||||||||||||||||||||||||||
Dollars | 21,640,753 | 20,560,797 | 14,152,962 | |||||||||||||||||||||||||||||||||||||||||||
Total Assets | 200,253,801 | 239,177,360 | 194,627,903 | |||||||||||||||||||||||||||||||||||||||||||
Pesos | 145,414,251 | 176,315,449 | 153,638,336 | |||||||||||||||||||||||||||||||||||||||||||
Dollars | 54,839,550 | 62,861,911 | 40,989,567 |
111
Year ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||
2019 | 2018 | 2017 | ||||||||||||||||||||||||||||||||||||||||||||
Average Balance | Interest (Paid) | Average Nominal Rate | Average Balance | Interest (Paid) | Average Nominal Rate | Average Balance | Interest (Paid) | Average Nominal Rate | ||||||||||||||||||||||||||||||||||||||
(in thousands of Pesos) | ||||||||||||||||||||||||||||||||||||||||||||||
LIABILITIES | ||||||||||||||||||||||||||||||||||||||||||||||
Interest-Bearing Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||
Time Deposits | 46,909,708 | 19,855,152 | 42.3% | 43,144,927 | 9,991,637 | 23.2% | 38,639,592 | 5,786,088 | 15.0% | |||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |||||||||||||||||||||||||||
|
| Year ended December 31, |
| |||||||||||||||||||||||||||||||||||||||||||
| | 2021 | | 2020 | | 2019 | | |||||||||||||||||||||||||||||||||||||||
| | | | | | Average | | | | | | Average | | | | | | Average | | |||||||||||||||||||||||||||
| | Average | | Interest | | Nominal | | Average | | Interest | | Nominal | | Average | | Interest | | Nominal | | |||||||||||||||||||||||||||
|
| Balance |
| Earned |
| Rate |
| Balance |
| Earned |
| Rate |
| Balance |
| Earned |
| Rate |
| |||||||||||||||||||||||||||
Receivables from Financial Leases |
| 5,454,306 |
| 1,581,186 |
| 29.0 | % | 5,563,785 |
| 1,063,244 |
| 19.1 | % | 9,122,509 |
| 2,321,257 |
| 25.4 | % | |||||||||||||||||||||||||||
Pesos | 41,118,910 | 19,778,723 | 48.1% | 36,276,233 | 9,906,758 | 27.3% | 34,953,771 | 5,765,429 | 16.5% |
| 3,396,598 |
| 1,434,082 |
| 42.2 | % | 2,370,314 |
| 800,787 |
| 33.8 | % | 5,107,132 | | 2,005,125 | | 39.3 | % | ||||||||||||||||||
Dollars | 5,790,798 | 76,429 | 1.3% | 6,868,694 | 84,879 | 1.2% | 3,685,821 | 20,659 | 0.6% |
| 2,057,708 |
| 147,104 |
| 7.1 | % | 3,193,471 |
| 262,457 |
| 8.2 | % | 4,015,377 | | 316,132 | | 7.9 | % | ||||||||||||||||||
Borrowings from Other Financial Institutions and Unsub Negotiable Obligations | 21,657,316 | 7,966,708 | 36.8% | 37,100,799 | 8,434,082 | 22.7% | 24,935,967 | 4,843,645 | 19.4% | |||||||||||||||||||||||||||||||||||||
Total Loans excl. Foreign trade and U.S.$.loans |
| 136,464,203 |
| 56,781,052 |
| 41.6 | % | 139,482,556 |
| 57,918,317 |
| 41.5 | % | 159,129,712 |
| 82,427,048 |
| 51.8 | % | |||||||||||||||||||||||||||
Pesos | 13,664,014 | 7,542,643 | 55.2% | 26,956,510 | 8,040,293 | 29.8% | 22,983,905 | 4,783,624 | 20.8% |
| 134,040,311 |
| 56,631,258 |
| 42.2 | % | 135,463,303 |
| 57,612,517 |
| 42.5 | % | 151,959,469 | | 81,930,289 |
| 53.9 | % | ||||||||||||||||||
Dollars | 7,993,302 | 424,065 | 5.3% | 10,144,289 | 393,789 | 3.9% | 1,952,062 | 60,021 | 3.1% |
| 2,423,892 |
| 149,794 |
| 6.2 | % | 4,019,253 |
| 305,800 |
| 7.6 | % | 7,170,243 | | 496,759 |
| 6.9 | % | ||||||||||||||||||
Subordinated Loans and Negotiable Obligations | 2,203,968 | 136,687 | 6.2% | 2,097,037 | 133,540 | 6.4% | 3,668,433 | 325,257 | 8.9% | |||||||||||||||||||||||||||||||||||||
Foreign Trade Loans and U.S.$.loans |
| 18,411,188 |
| 1,243,547 |
| 6.8 | % | 30,443,210 |
| 2,193,377 |
| 7.2 | % | 52,372,718 |
| 3,556,327 |
| 6.8 | % | |||||||||||||||||||||||||||
Pesos | — | — | 0.0% | — | — | 0.0% | — | — | 0.0% |
| — |
| — |
| — | % | — |
| — |
| — | % | — | | — |
| — | % | ||||||||||||||||||
Dollars | 2,203,968 | 136,687 | 6.2% | 2,097,037 | 133,540 | 6.4% | 3,668,433 | 325,257 | 8.9% |
| 18,411,188 |
| 1,243,547 |
| 6.8 | % | 30,443,210 |
| 2,193,377 |
| 7.2 | % | 52,372,718 | | 3,556,327 |
| 6.8 | % | ||||||||||||||||||
Total Interest-Bearing Liabilities | 70,770,992 | 27,958,547 | 39.5% | 82,342,763 | 18,559,259 | 22.5% | 67,243,992 | 10,954,990 | 16.3% | |||||||||||||||||||||||||||||||||||||
Total Loans |
| 154,875,391 |
| 58,024,599 |
| 37.5 | % | 169,925,766 |
| 60,111,694 |
| 35.4 | % | 211,502,430 |
| 85,983,375 |
| 40.7 | % | |||||||||||||||||||||||||||
Pesos | 54,782,924 | 27,321,366 | 49.9% | 63,232,743 | 17,947,051 | 28.4% | 57,937,676 | 10,549,053 | 18.2% |
| 134,040,311 |
| 56,631,258 |
| 42.2 | % | 135,463,303 |
| 57,612,517 |
| 42.5 | % | 151,959,469 | | 81,930,289 |
| 53.9 | % | ||||||||||||||||||
Dollars | 15,988,068 | 637,181 | 4.0% | 19,110,020 | 612,208 | 3.2% | 9,306,316 | 405,937 | 4.4% |
| 20,835,080 |
| 1,393,341 |
| 6.7 | % | 34,462,463 |
| 2,499,177 |
| 7.3 | % | 59,542,961 | | 4,053,086 |
| 6.8 | % | ||||||||||||||||||
Low and Non-Interest Bearing Deposits | ||||||||||||||||||||||||||||||||||||||||||||||
Savings Accounts | 32,185,349 | 65,344 | 0.2% | 39,527,134 | 63,538 | 0.2% | 35,708,329 | 9,271 | 0.0% | |||||||||||||||||||||||||||||||||||||
Repo transactions |
| 51,181,877 |
| 17,721,161 |
| 34.6 | % | 25,634,934 |
| 6,558,958 |
| 25.6 | % | 2,017,935 |
| 1,226,375 |
| 60.8 | % | |||||||||||||||||||||||||||
Pesos | 16,677,758 | 60,885 | 0.4% | 21,970,349 | 58,885 | 0.3% | 25,006,000 | 6,461 | 0.0% |
| 51,181,877 |
| 17,721,149 |
| 34.6 | % | 25,634,934 |
| 6,558,958 |
| 25.6 | % | 2,017,935 | | 1,226,375 |
| 60.8 | % | ||||||||||||||||||
Dollars | 15,507,591 | 4,459 | 0.0% | 17,556,785 | 4,653 | 0.0% | 10,702,329 | 2,810 | 0.0% |
| — |
| 12 |
| — | % | — |
| — |
| — | % | — | | — |
| — | % | ||||||||||||||||||
Special Checking Accounts | 25,168,448 | 6,010,413 | 40.1% | 34,033,872 | 7,826,914 | 30.0% | 14,016,710 | 1,555,341 | 13.4% | |||||||||||||||||||||||||||||||||||||
Total Interest-Earning Assets |
| 307,625,563 |
| 109,627,333 |
| 35.6 | % | 288,616,644 |
| 103,475,636 |
| 35.9 | % | 298,895,523 |
| 129,729,508 |
| 43.4 | % | |||||||||||||||||||||||||||
Pesos | 14,892,493 | 5,973,650 | 40.1% | 25,989,349 | 7,795,154 | 30.0% | 11,512,318 | 1,546,597 | 13.4% |
| 275,945,431 |
| 108,130,506 |
| 39.2 | % | 252,550,838 |
| 99,207,410 |
| 39.3 | % | 230,674,376 | | 127,784,691 |
| 55.4 | % | ||||||||||||||||||
Dollars | 10,275,955 | 36,763 | 0.4% | 8,044,523 | 31,760 | 0.4% | 2,504,392 | 8,744 | 0.3% |
| 31,680,132 |
| 1,496,827 |
| 4.7 | % | 36,065,806 |
| 4,268,226 |
| 11.8 | % | 68,221,147 | | 1,944,818 |
| 2.9 | % | ||||||||||||||||||
Checking Accounts | 23,987,398 | 29,679,527 | 27,130,608 | |||||||||||||||||||||||||||||||||||||||||||
Pesos | 15,110,011 | 17,312,704 | 18,674,236 | |||||||||||||||||||||||||||||||||||||||||||
Dollars | 8,877,387 | 12,366,823 | 8,456,372 | |||||||||||||||||||||||||||||||||||||||||||
Other Liabilities | 24,556,832 | 24,469,574 | 25,654,959 | |||||||||||||||||||||||||||||||||||||||||||
Pesos | 19,825,696 | 22,013,436 | 20,012,444 | |||||||||||||||||||||||||||||||||||||||||||
Dollars | 4,731,136 | 2,456,138 | 5,642,515 | |||||||||||||||||||||||||||||||||||||||||||
Non-Controlling Interest Result | 232,677 | 430,932 | -69,908 | |||||||||||||||||||||||||||||||||||||||||||
Pesos | 232,677 | 430,932 | -69,908 | |||||||||||||||||||||||||||||||||||||||||||
Dollars | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
Stockholders’ equity | 23,352,105 | 28,693,558 | 24,943,213 | |||||||||||||||||||||||||||||||||||||||||||
Pesos | 23,352,105 | 28,693,558 | 24,943,213 | |||||||||||||||||||||||||||||||||||||||||||
Dollars | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
Total Low and Non-Interest Bearing Deposits | 129,482,809 | 156,834,597 | 127,383,911 | |||||||||||||||||||||||||||||||||||||||||||
Pesos | 90,090,740 | 116,410,328 | 100,078,303 | |||||||||||||||||||||||||||||||||||||||||||
Dollars | 39,392,069 | 40,424,269 | 27,305,608 | |||||||||||||||||||||||||||||||||||||||||||
Total Liabilities and Stockholders’ equity | 200,253,801 | 239,177,360 | 194,627,903 | |||||||||||||||||||||||||||||||||||||||||||
Pesos | 144,873,664 | 179,643,071 | 158,015,979 | |||||||||||||||||||||||||||||||||||||||||||
Dollars | 55,380,137 | 59,534,289 | 36,611,924 |
112
| | | | | | | | | | | | | | | | | | |
|
| Year ended December 31, | ||||||||||||||||
| | 2021 | | 2020 | | 2019 | ||||||||||||
| | | | | | Average | | | | | | Average | | | | | | Average |
| | Average | | Interest | | Nominal | | Average | | Interest | | Nominal | | Average | | Interest | | Nominal |
|
| Balance |
| Earned |
| Rate |
| Balance |
| Earned |
| Rate |
| Balance |
| Earned |
| Rate |
Non Interest-Earning Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
| 45,849,950 |
|
|
|
|
| 61,750,936 |
|
|
|
|
| 82,369,991 |
|
|
|
|
Pesos |
| 20,998,567 |
|
|
|
|
| 31,857,151 |
|
|
|
|
| 39,354,106 |
|
|
|
|
Dollars |
| 24,851,383 |
|
|
|
|
| 29,893,785 |
|
|
|
|
| 43,015,885 |
|
|
|
|
Unlisted equity investments |
| — |
|
|
|
|
| — |
|
|
|
|
| 82 |
|
|
|
|
Pesos |
| — |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
Dollars |
| — |
|
|
|
|
| — |
|
|
|
|
| 82 |
|
|
|
|
Premises and equipment and miscellaneous and intangible assets and unallocated items |
| 26,111,689 |
|
|
|
|
| 24,189,282 |
|
|
|
|
| 16,519,326 |
|
|
|
|
Pesos |
| 26,111,689 |
|
|
|
|
| 24,189,282 |
|
|
|
|
| 16,519,326 |
|
|
|
|
Dollars |
| — |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
Allowance for loan losses |
| (11,928,028) |
|
|
|
|
| (12,994,005) |
|
|
|
|
| (13,051,332) |
|
|
|
|
Pesos |
| (10,499,691) |
|
|
|
|
| (11,025,820) |
|
|
|
|
| (11,184,374) |
|
|
|
|
Dollars |
| (1,428,337) |
|
|
|
|
| (1,968,185) |
|
|
|
|
| (1,866,958) |
|
|
|
|
Other assets |
| 31,280,226 |
|
|
|
|
| 25,385,563 |
|
|
|
|
| 26,773,607 |
|
|
|
|
Pesos |
| 30,294,776 |
|
|
|
|
| 23,135,828 |
|
|
|
|
| 23,452,422 |
|
|
|
|
Dollars |
| 985,450 |
|
|
|
|
| 2,249,735 |
|
|
|
|
| 3,321,185 |
|
|
|
|
| | | | | | | | | | | | | | | | | | |
| | Year ended December 31, | ||||||||||||||||
| | 2021 | | 2020 | | 2019 | ||||||||||||
| | | | | | Average | | | | | | Average | | | | | | Average |
| | Average | | Interest | | Nominal | | Average | | Interest | | Nominal | | Average | | Interest | | Nominal |
|
| Balance |
| Earned |
| Rate |
| Balance |
| Earned |
| Rate |
| Balance |
| Earned |
| Rate |
Total Non Interest-Earning Assets | | 91,313,837 | | | | | | 98,331,776 | |
| |
| | 112,611,674 | |
| |
|
Pesos | | 66,905,341 | | | | | | 68,156,441 | |
| |
| | 68,141,480 | |
| |
|
Dollars | | 24,408,496 | | | | | | 30,175,335 | |
| |
| | 44,470,194 | |
| |
|
Total Assets |
| 398,939,400 |
| |
| |
| 386,948,420 |
|
|
|
|
| 411,507,197 |
|
|
|
|
Pesos |
| 342,850,772 |
| |
| |
| 320,707,279 |
|
|
|
|
| 298,815,856 |
|
|
|
|
Dollars |
| 56,088,628 |
| |
| |
| 66,241,141 |
|
|
|
|
| 112,691,341 |
|
|
|
|
113
| | | | | | | | | | | | | | | | | | | |
|
| Year ended December 31, |
| ||||||||||||||||
| | 2021 | | 2020 | | 2019 |
| ||||||||||||
| | | | | | Average | | | | | | Average | | | | | | Average |
|
| | Average | | Interest | | Nominal | | Average | | Interest | | Nominal | | Average | | Interest | | Nominal | |
|
| Balance |
| Paid |
| Rate |
| Balance |
| Paid |
| Rate |
| Balance |
| Paid |
| Rate |
|
| | (in thousands of Pesos) |
| ||||||||||||||||
LIABILITIES | |
| |
| |
| |
| |
| |
| |
| |
| |
|
|
Interest-Bearing Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
| �� |
|
|
|
| |
Special Checking Accounts |
| 82,864,471 |
| 21,139,712 |
| 25.5 | % | 60,629,003 |
| 9,547,244 |
| 15.7 | % | 51,719,355 |
| 12,350,968 |
| 23.9 | % |
Pesos |
| 69,760,546 |
| 21,099,066 |
| 30.2 | % | 47,698,436 |
| 9,511,495 |
| 19.9 | % | 30,603,005 | | 12,275,423 |
| 40.1 | % |
Dollars |
| 13,103,925 |
| 40,646 |
| 0.3 | % | 12,930,567 |
| 35,749 |
| 0.3 | % | 21,116,350 | | 75,545 |
| 0.4 | % |
Time Deposits |
| 117,135,443 |
| 37,594,565 |
| 32.1 | % | 107,937,616 |
| 29,546,822 |
| 27.4 | % | 96,396,086 |
| 40,800,913 |
| 42.3 | % |
Pesos |
| 111,721,305 |
| 37,576,185 |
| 33.6 | % | 99,789,987 |
| 29,428,487 |
| 29.5 | % | 84,496,411 | | 40,643,857 |
| 48.1 | % |
Dollars |
| 5,414,138 |
| 18,380 |
| 0.3 | % | 8,147,629 |
| 118,335 |
| 1.5 | % | 11,899,675 | | 157,056 |
| 1.3 | % |
Borrowings from Other Financial Institutions and Unsub Negotiable Obligations |
| 12,495,616 |
| 1,565,703 |
| 12.5 | % | 23,273,600 |
| 3,602,664 |
| 15.5 | % | 44,504,231 |
| 16,371,013 |
| 36.8 | % |
Pesos |
| 4,045,686 |
| 1,283,631 |
| 31.7 | % | 8,602,027 |
| 2,938,803 |
| 34.2 | % | 28,078,569 | | 15,499,590 |
| 55.2 | % |
Dollars |
| 8,449,930 |
| 282,072 |
| 3.3 | % | 14,671,573 |
| 663,861 |
| 4.5 | % | 16,425,662 | | 871,423 |
| 5.3 | % |
Subordinated Loans and Negotiable Obligations |
| 1,364,139 |
| 91,692 |
| 6.7 | % | 3,210,847 |
| 214,352 |
| 6.7 | % | 4,528,996 |
| 280,882 |
| 6.2 | % |
Pesos |
| 24,540 |
| — |
| — | % | — |
| — |
| — | % | — | | — |
| — | % |
Dollars |
| 1,339,599 |
| 91,692 |
| 6.8 | % | 3,210,847 |
| 214,352 |
| 6.7 | % | 4,528,996 | | 280,882 |
| 6.2 | % |
Total Interest-Bearing Liabilities |
| 213,859,669 |
| 60,391,672 |
| 28.2 | % | 195,051,066 |
| 42,911,082 |
| 22.0 | % | 197,148,668 |
| 69,803,776 |
| 35.4 | % |
Pesos |
| 185,552,077 |
| 59,958,882 |
| 32.3 | % | 156,090,450 |
| 41,878,785 |
| 26.8 | % | 143,177,985 | | 68,418,870 |
| 47.8 | % |
Dollars |
| 28,307,592 |
| 432,790 |
| 1.5 | % | 38,960,616 |
| 1,032,297 |
| 2.6 | % | 53,970,683 | | 1,384,906 |
| 2.6 | % |
| | | | | | | | | | | | | | | | | | | |
|
| Year ended December 31, |
| ||||||||||||||||
| | 2021 | | 2020 | | 2019 |
| ||||||||||||
| | | | | | Average | | | | | | Average | | | | | | Average |
|
| | Average | | Interest | | Nominal | | Average | | Interest | | Nominal | | Average | | Interest | | Nominal |
|
|
| Balance |
| Paid |
| Rate |
| Balance |
| Paid |
| Rate |
| Balance |
| Paid |
| Rate |
|
| | (in thousands of Pesos) |
| ||||||||||||||||
Low and Non-Interest Bearing Deposits |
| 91,161,469 |
| |
| |
| 100,803,275 |
| |
| |
| 115,430,966 |
| |
|
|
|
Savings Accounts |
| 54,524,991 |
| 100,764 |
| 0.2 | % | 59,600,473 |
| 62,760 |
| 0.1 | % | 66,138,583 |
| 134,277 |
| 0.2 | % |
Pesos |
| 39,137,600 |
| 96,700 |
| 0.2 | % | 42,040,759 |
| 58,037 |
| 0.1 | % | 34,271,596 | | 125,114 |
| 0.4 | % |
Dollars |
| 15,387,391 |
| 4,064 |
| 0 | % | 17,559,714 |
| 4,723 |
| — | % | 31,866,987 | | 9,163 |
| — | % |
Checking Accounts |
| 36,636,478 |
|
|
|
|
| 41,202,802 |
|
|
|
|
| 49,292,383 |
|
|
|
|
|
Pesos |
| 34,528,456 |
|
|
|
|
| 38,411,648 |
|
|
|
|
| 31,049,989 |
|
|
|
|
|
Dollars |
| 2,108,022 |
|
|
|
|
| 2,791,154 |
|
|
|
|
| 18,242,394 |
|
|
|
|
|
Other Liabilities |
| 40,695,107 |
|
|
|
|
| 38,931,620 |
|
|
|
|
| 50,462,526 |
|
|
|
|
|
Pesos |
| 37,363,742 |
|
|
|
|
| 34,057,119 |
|
|
|
|
| 40,740,383 |
|
|
|
|
|
Dollars |
| 3,331,365 |
|
|
|
|
| 4,874,501 |
|
|
|
|
| 9,722,143 |
|
|
|
|
|
Non-Controlling Interest Result |
| — |
|
|
|
|
| 237,268 |
|
|
|
|
| 478,135 |
|
|
|
|
|
Pesos |
| — |
|
|
|
|
| 237,268 |
|
|
|
|
| 478,135 |
|
|
|
|
|
Dollars |
| — |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
|
Stockholders’ equity |
| 53,223,155 |
|
|
|
|
| 51,925,191 |
|
|
|
|
| 47,986,902 |
|
|
|
|
|
Pesos |
| 53,223,155 |
|
|
|
|
| 51,925,191 |
|
|
|
|
| 47,986,902 |
|
|
|
|
|
Dollars |
| — |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
|
Total Low and Non-Interest Bearing Deposits |
| 185,079,731 |
|
|
|
|
| 191,897,354 |
|
|
|
|
| 214,358,529 |
|
|
|
|
|
Pesos |
| 164,252,953 |
|
|
|
|
| 166,671,985 |
|
|
|
|
| 154,527,005 |
|
|
|
|
|
Dollars |
| 20,826,778 |
|
|
|
|
| 25,225,369 |
|
|
|
|
| 59,831,524 |
|
|
|
|
|
Total Liabilities and Stockholders’ equity |
| 398,939,400 |
|
|
|
|
| 386,948,420 |
|
|
|
|
| 411,507,197 |
|
|
|
|
|
Pesos |
| 349,805,030 |
|
|
|
|
| 322,762,435 |
|
|
|
|
| 297,704,990 |
|
|
|
|
|
Dollars |
| 49,134,370 |
|
|
|
|
| 64,185,985 |
|
|
|
|
| 113,802,207 |
|
|
|
|
|
114
Changes in Interest Income and Interest Expense; Volume and Rate Analysis
The following tables allocate, by currency of denomination, changes in our interest income and interest expense. The changes are segregated for each major category of interest-earning assets and interest-bearing liabilities into amounts attributable to changes in the average volume and changes in their respective nominal interest rates for the year ended December 31, 20192021 compared to the year ended December 31, 2018,2020, and for the year ended December 31, 20182020 compared to the year ended December 31, 2017.2019. We have calculated volume variances based on movements in average balances over the period and rate variance based on changes in interest rates on average interest-earning assets and average interest-bearing liabilities. We have allocated variances caused by changes in both volume and rate to volume. As stated above under “Presentation“Presentation of Financial and Other Information,” we have prepared our audited consolidated financial statements for 2019, 20182021, 2020 and 20172019 under IFRS. Data for past years has been prepared under our prior accounting framework, Argentine Banking GAAP, which is not comparable with data prepared under IFRS.
Year ended December 31, | ||||||||||||||||||
2019/2018 | 2018/2017 | |||||||||||||||||
Increase (Decrease) Due to Changes in | ||||||||||||||||||
Volume | Rate | Net Change | Volume | Rate | Net Change | |||||||||||||
(in thousands of Pesos) | ||||||||||||||||||
ASSETS | ||||||||||||||||||
Interest-Earning Assets | ||||||||||||||||||
Investment Portfolio | ||||||||||||||||||
Government and Corporate Securities | 379,090 | (2,550,125 | ) | (2,171,035 | ) | 1,275,339 | 1,137,287 | 2,412,626 | ||||||||||
Pesos | 27,869 | 1,276,379 | 1,304,248 | 945,729 | 85,896 | 1,031,625 | ||||||||||||
Dollars | 351,221 | (3,826,504 | ) | (3,475,283 | ) | 329,610 | 1,051,391 | 1,381,001 | ||||||||||
Securities Issued by the Central Bank | 4,472,081 | 4,742,123 | 9,214,204 | 2,204,326 | 2,929,447 | 5,133,773 | ||||||||||||
Pesos | 4,472,081 | 4,742,123 | 9,214,204 | 2,204,326 | 2,929,447 | 5,133,773 | ||||||||||||
Dollars | — | — | — | — | — | — | ||||||||||||
Total Investment Portfolio | 4,851,171 | 2,191,998 | 7,043,169 | 3,479,665 | 4,066,734 | 7,546,399 | ||||||||||||
Pesos | 4,499,950 | 6,018,502 | 10,518,452 | 3,150,055 | 3,015,343 | 6,165,398 | ||||||||||||
Dollars | 351,221 | (3,826,504 | ) | (3,475,283 | ) | 329,610 | 1,051,391 | 1,381,001 | ||||||||||
Loans | ||||||||||||||||||
Loans to the Financial Sector | (336,605 | ) | 146,388 | (190,217 | ) | 134,504 | 186,695 | 321,199 | ||||||||||
Pesos | (343,168 | ) | 146,259 | (196,909 | ) | 134,560 | 187,480 | 322,040 | ||||||||||
Dollars | 6,563 | 129 | 6,692 | (56 | ) | (785 | ) | (841 | ) | |||||||||
Overdrafts | (2,297,985 | ) | 1,864,164 | (433,821 | ) | 691,527 | 1,407,416 | 2,098,943 | ||||||||||
Pesos | (2,297,985 | ) | 1,864,164 | (433,821 | ) | 691,527 | 1,407,416 | 2,098,943 | ||||||||||
Dollars | — | — | — | — | — | — | ||||||||||||
Promissory Notes | (4,992,875 | ) | 4,599,033 | (393,842 | ) | (625,575 | ) | 3,130,640 | 2,505,065 | |||||||||
Pesos | (4,959,286 | ) | 4,553,278 | (406,008 | ) | (663,232 | ) | 3,118,552 | 2,455,320 | |||||||||
Dollars | (33,589 | ) | 45,755 | 12,166 | 37,657 | 12,088 | 49,745 | |||||||||||
Mortgage loans | 371,240 | 381,683 | 752,923 | 2,520,636 | 244,910 | 2,765,546 | ||||||||||||
Pesos | 371,240 | 381,683 | 752,923 | 2,520,636 | 244,910 | 2,765,546 | ||||||||||||
Dollars | — | — | — | — | — | — | ||||||||||||
Automobile and Other Secured Loans | (440,957 | ) | 376,766 | (64,191 | ) | 647,102 | 34,426 | 681,528 | ||||||||||
Pesos | (440,957 | ) | 376,766 | (64,191 | ) | 647,102 | 34,426 | 681,528 | ||||||||||
Dollars | — | — | — | — | — | — | ||||||||||||
Personal Loans | (9,246,084 | ) | 5,351,085 | (3,894,999 | ) | (267,037 | ) | 530,655 | 263,618 | |||||||||
Pesos | (9,246,084 | ) | 5,351,085 | (3,894,999 | ) | (267,037 | ) | 530,655 | 263,618 | |||||||||
Dollars | — | — | — | — | — | — | ||||||||||||
Corporate Unsecured Loans | (1,666,682 | ) | 3,163,988 | 1,497,306 | 861,654 | 721,742 | 1,583,396 | |||||||||||
Pesos | (1,666,682 | ) | 3,163,988 | 1,497,306 | 861,654 | 721,742 | 1,583,396 |
146
115
| | | | | | | | | | | | |
| | Year ended December 31, | ||||||||||
| | 2021/2020 | | 2020/2019 | ||||||||
| | Increase (Decrease) Due to Changes in | ||||||||||
| | | | | | | | | | | | Net |
|
| Volume |
| Rate |
| Net Change |
| Volume |
| Rate |
| Change |
|
| (in thousands of Pesos) | ||||||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
Interest-Earning Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Investment Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
Government and Corporate Securities |
| 3,168,048 |
| (2,402,250) |
| 765,799 |
| (5,737,744) |
| 11,516,232 |
| 5,778,488 |
Pesos |
| 3,079,872 |
| (648,499) |
| 2,431,373 |
| 2,068,284 |
| (167,112) |
| 1,901,172 |
Dollars |
| 88,176 |
| (1,753,751) |
| (1,665,574) |
| (7,806,028) |
| 11,683,344 |
| 3,877,316 |
Securities Issued by the Central Bank |
| (3,280,716) |
| (408,493) |
| (3,689,210) |
| 3,651,363 |
| (15,144,626) |
| (11,493,263) |
Pesos |
| (3,280,716) |
| (408,493) |
| (3,689,210) |
| 3,651,363 |
| (15,144,626) |
| (11,493,263) |
Dollars |
| — |
| — |
| — |
| — |
| — |
| — |
Total Investment Portfolio |
| (112,668) |
| (2,810,743) |
| (2,923,411) |
| (2,086,381) |
| (3,628,394) |
| (5,714,775) |
Pesos |
| (200,844) |
| (1,056,992) |
| (1,257,837) |
| 5,719,647 |
| (15,311,738) |
| (9,592,091) |
Dollars |
| 88,176 |
| (1,753,751) |
| (1,665,574) |
| (7,806,028) |
| 11,683,344 |
| 3,877,316 |
Loans |
|
|
|
|
|
|
|
|
|
|
|
|
Loans to the Financial Sector |
| (103,213) |
| 32,627 |
| (70,586) |
| (235,301) |
| (71,661) |
| (306,962) |
Pesos |
| (64,053) |
| (3,519) |
| (67,572) |
| (230,342) |
| (66,680) |
| (297,022) |
Dollars |
| (39,160) |
| 36,146 |
| (3,014) |
| (4,959) |
| (4,981) |
| (9,940) |
Overdrafts |
| (1,116,714) |
| 206,897 |
| (909,817) |
| (1,769,399) |
| (3,571,976) |
| (5,341,376) |
Pesos |
| (1,116,714) |
| 206,897 |
| (909,817) |
| (1,769,399) |
| (3,571,976) |
| (5,341,376) |
Dollars |
| — |
| — |
| — |
| — |
| — |
| — |
Promissory Notes |
| 2,324,964 |
| (528,364) |
| 1,796,600 |
| 1,877,536 |
| (4,559,108) |
| (2,681,572) |
Pesos |
| 2,340,394 |
| (506,180) |
| 1,834,214 |
| 2,022,323 |
| (4,576,903) |
| (2,554,580) |
Dollars |
| (15,430) |
| (22,184) |
| (37,614) |
| (144,787) |
| 17,795 |
| (126,992) |
Mortgage loans |
| (195,865) |
| 1,229,196 |
| 1,033,331 |
| (305,566) |
| (1,435,911) |
| (1,741,476) |
Pesos |
| (195,865) |
| 1,229,196 |
| 1,033,331 |
| (305,566) |
| (1,435,911) |
| (1,741,476) |
Dollars |
| — |
| — |
| — |
| — |
| — |
| — |
Automobile and Other Secured Loans |
| 371,387 |
| 62,571 |
| 433,958 |
| (645,546) |
| 336,039 |
| (309,507) |
Pesos |
| 371,387 |
| 62,571 |
| 433,958 |
| (645,546) |
| 336,039 |
| (309,507) |
Dollars |
| — |
| — |
| — |
| — |
| — |
| — |
Personal Loans |
| (1,476,906) |
| (514,927) |
| (1,991,832) |
| (10,049,428) |
| 4,900,935 |
| (5,148,493) |
Pesos |
| (1,476,906) |
| (514,927) |
| (1,991,832) |
| (10,049,428) |
| 4,900,935 |
| (5,148,493) |
Dollars |
| — |
| — |
| — |
| — |
| — |
| — |
Corporate Unsecured Loans |
| (2,015,730) |
| (94,862) |
| (2,110,592) |
| 1,395,012 |
| (4,985,717) |
| (3,590,705) |
Pesos |
| (2,015,730) |
| (94,862) |
| (2,110,592) |
| 1,395,012 |
| (4,985,717) |
| (3,590,705) |
Dollars |
| — |
| — |
| — |
| — |
| — |
| — |
Credit Card Loans |
| 557,803 |
| (394,072) |
| 163,731 |
| (45,454) |
| (4,085,173) |
| (4,130,627) |
Pesos |
| 557,804 |
| (394,048) |
| 163,756 |
| (45,361) |
| (4,084,914) |
| (4,130,275) |
Dollars |
| (1) |
| (24) |
| (25) |
| (93) |
| (259) |
| (352) |
Receivables from Financial Leases |
| 352,114 |
| 165,828 |
| 517,942 |
| (992,155) |
| (265,857) |
| (1,258,012) |
Pesos |
| 433,309 |
| 199,986 |
| 633,295 |
| (924,607) | | (279,731) | | (1,204,338) |
Dollars |
| (81,195) |
| (34,158) |
| (115,353) |
| (67,549) | | 13,874 | | (53,675) |
Total Loans excl. Foreign trade and U.S.$.loans |
| (1,302,160) |
| 164,895 |
| (1,137,265) |
| (12,350,282) |
| (13,738,429) |
| (26,088,710) |
Pesos |
| (1,166,374) |
| 185,115 |
| (981,259) |
| (10,552,914) | | (13,764,858) | | (24,317,772) |
Dollars |
| (135,786) |
| (20,220) |
| (156,006) |
| (1,797,368) | | 26,429 | | (1,770,939) |
Foreign Trade Loans and U.S.$.loans |
| (812,679) |
| (137,151) |
| (949,830) |
| (1,579,981) |
| 217,031 |
| (1,362,950) |
Pesos |
| — |
| — |
| — |
| — | | — | | — |
Dollars |
| (812,679) |
| (137,151) |
| (949,830) |
| (1,579,981) | | 217,031 | | (1,362,950) |
Total Loans |
| (2,114,839) |
| 27,744 |
| (2,087,095) |
| (12,350,282) |
| (13,521,398) |
| (25,871,680) |
Pesos |
| (1,166,374) |
| 185,115 |
| (981,259) |
| (10,552,914) |
| (13,764,858) |
| (24,317,772) |
Year ended December 31, | ||||||||||||||||||
2019/2018 | 2018/2017 | |||||||||||||||||
Increase (Decrease) Due to Changes in | ||||||||||||||||||
Volume | Rate | Net Change | Volume | Rate | Net Change | |||||||||||||
(in thousands of Pesos) | ||||||||||||||||||
Dollars | - | - | - | - | - | - | ||||||||||||
Credit Card Loans | (1,935,990 | ) | 1,501,191 | (434,799 | ) | (55,271 | ) | 251,372 | 196,101 | |||||||||
Pesos | (1,935,973 | ) | 1,501,063 | (434,910 | ) | (55,253 | ) | 251,429 | 196,176 | |||||||||
Dollars | (17 | ) | 128 | 111 | (18 | ) | (57 | ) | (75 | ) | ||||||||
Receivables from Financial Leases | (834,326 | ) | 546,906 | (287,420 | ) | 25,659 | 249,753 | 275,412 | ||||||||||
Pesos | (860,224 | ) | 554,136 | (306,088 | ) | (65,393 | ) | 254,019 | 188,626 | |||||||||
Dollars | 25,898 | (7,230 | ) | 18,668 | 91,052 | (4,266 | ) | 86,786 | ||||||||||
Total Loans excl. Foreign trade and U.S.$.loans | (21,380,264 | ) | 17,931,204 | (3,449,060 | ) | 3,933,199 | 6,757,609 | 10,690,808 | ||||||||||
Pesos | (21,379,119 | ) | 17,892,422 | (3,486,697 | ) | 3,804,564 | 6,750,629 | 10,555,193 | ||||||||||
Dollars | (1,145 | ) | 38,782 | 37,637 | 128,635 | 6,980 | 135,615 | |||||||||||
Foreign Trade Loans and U.S.$.loans | (516,729 | ) | 448,901 | (67,828 | ) | 707,582 | 191,686 | 899,268 | ||||||||||
Pesos | — | — | — | — | — | — | ||||||||||||
Dollars | (516,729 | ) | 448,901 | (67,828 | ) | 707,582 | 191,686 | 899,268 | ||||||||||
Total Loans | (21,896,993 | ) | 18,380,105 | (3,516,888 | ) | 4,640,781 | 6,949,295 | 11,590,076 | ||||||||||
Pesos | (21,379,119 | ) | 17,892,422 | (3,486,697 | ) | 3,804,564 | 6,750,629 | 10,555,193 | ||||||||||
Dollars | (517,874 | ) | 487,683 | (30,191 | ) | 836,217 | 198,666 | 1,034,883 | ||||||||||
Repo transactions | 443,549 | 74,899 | 518,448 | 78,349 | — | 78,349 | ||||||||||||
Pesos | 443,549 | 74,899 | 518,448 | 78,349 | — | 78,349 | ||||||||||||
Dollars | — | — | — | — | — | — | ||||||||||||
Total Interest-Earning Assets | (21,453,444 | ) | 18,455,004 | (2,998,440 | ) | 4,719,130 | 6,949,295 | 11,668,425 | ||||||||||
Pesos | (20,935,570 | ) | 17,967,321 | (2,968,249 | ) | 3,882,913 | 6,750,629 | 10,633,542 | ||||||||||
Dollars | (517,874 | ) | 487,683 | (30,191 | ) | 836,217 | 198,666 | 1,034,883 | ||||||||||
LIABILITIES | ||||||||||||||||||
Interest-Bearing Liabilities | ||||||||||||||||||
Time Deposits | 2,315,163 | 7,548,352 | 9,863,515 | 400,486 | 3,805,063 | 4,205,549 | ||||||||||||
Pesos | 2,329,390 | 7,542,575 | 9,871,965 | 361,154 | 3,780,175 | 4,141,329 | ||||||||||||
Dollars | (14,227 | ) | 5,777 | (8,450 | ) | 39,332 | 24,888 | 64,220 | ||||||||||
Borrowings from Other Financial Institutions and Unsub Negotiable Obligations | (7,451,677 | ) | 6,984,303 | (467,374 | ) | 1,502,917 | 2,087,520 | 3,590,437 | ||||||||||
Pesos | (7,337,562 | ) | 6,839,912 | (497,650 | ) | 1,184,905 | 2,071,764 | 3,256,669 | ||||||||||
Dollars | (114,115 | ) | 144,391 | 30,276 | 318,012 | 15,756 | 333,768 | |||||||||||
Subordinated Loans and Negotiable Obligations | 6,632 | (3,485 | ) | 3,147 | (100,067 | ) | (91,650 | ) | (191,717 | ) | ||||||||
Pesos | — | — | — | — | — | — | ||||||||||||
Dollars | 6,632 | (3,485 | ) | 3,147 | (100,067 | ) | (91,650 | ) | (191,717 | ) | ||||||||
Total Interest-Bearing Liabilities | (5,129,882 | ) | 14,529,170 | 9,399,288 | 1,803,336 | 5,800,933 | 7,604,269 | |||||||||||
Pesos | (5,008,172 | ) | 14,382,487 | 9,374,315 | 1,546,059 | 5,851,939 | 7,397,998 | |||||||||||
Dollars | (121,710 | ) | 146,683 | 24,973 | 257,277 | (51,006 | ) | 206,271 | ||||||||||
Low and Non-Interest Bearing Deposits | ||||||||||||||||||
Savings Accounts | (19,911 | ) | 21,717 | 1,806 | (6,320 | ) | 60,587 | 54,267 | ||||||||||
Pesos | (19,322 | ) | 21,322 | 2,000 | (8,136 | ) | 60,560 | 52,424 | ||||||||||
Dollars | (589 | ) | 395 | (194 | ) | 1,816 | 27 | 1,843 | ||||||||||
Special Checking Accounts | (4,443,168 | ) | 2,626,667 | (1,816,501 | ) | 4,364,062 | 1,907,511 | 6,271,573 | ||||||||||
Pesos | (4,451,151 | ) | 2,629,647 | (1,821,504 | ) | 4,342,190 | 1,906,367 | 6,248,557 | ||||||||||
Dollars | 7,983 | (2,980 | ) | 5,003 | 21,872 | 1,144 | 23,016 |
116
| | | | | | | | | | | | |
| | Year ended December 31, | ||||||||||
| | 2021/2020 | | 2020/2019 | ||||||||
| | Increase (Decrease) Due to Changes in | ||||||||||
|
| Volume |
| Rate |
| Net Change |
| Volume |
| Rate |
| Net Change |
Dollars | | (948,465) | | (157,371) | | (1,105,836) | | (1,797,368) | | 243,460 | | (1,553,908) |
Repo transactions |
| 8,845,341 |
| 2,316,849 |
| 11,162,191 |
| 6,042,649 |
| (710,066) |
| 5,332,583 |
Pesos |
| 8,845,341 |
| 2,316,849 |
| 11,162,191 |
| 6,042,649 |
| (710,066) |
| 5,332,583 |
Dollars |
| — |
| — |
| — |
| — |
| — |
| — |
Total Interest-Earning Assets |
| 6,730,502 |
| 2,344,593 |
| 9,075,095 |
| (6,307,633) |
| (14,231,464) |
| (20,539,097) |
Pesos |
| 7,678,968 |
| 2,501,964 |
| 10,180,931 |
| (4,510,265) |
| (14,474,923) |
| (18,985,189) |
Dollars |
| (948,465) |
| (157,371) |
| (1,105,836) |
| (1,797,368) |
| 243,460 |
| (1,553,908) |
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Interest-Bearing Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Time Deposits |
| 4,003,683 |
| 4,044,060 |
| 8,047,743 |
| 4,455,646 |
| (15,709,737) |
| (11,254,091) |
Pesos |
| 4,012,963 |
| 4,134,736 |
| 8,147,699 |
| 4,510,140 | | (15,725,510) |
| (11,215,370) |
Dollars |
| (9,280) |
| (90,676) |
| (99,956) |
| (54,494) | | 15,774 |
| (38,720) |
Borrowings from Other Financial Institutions and Unsub Negotiable Obligations |
| 6,673,220 |
| 4,919,248 |
| 11,592,468 |
| 3,386,351 |
| (6,190,075) |
| (2,803,724) |
Pesos |
| 6,672,682 |
| 4,914,889 |
| 11,587,571 |
| 3,408,982 | | (6,172,910) |
| (2,763,928) |
Dollars |
| 538 |
| 4,359 |
| 4,897 |
| (22,631) | | (17,165) |
| (39,796) |
Subordinated Loans and Negotiable Obligations |
| (1,653,342) |
| (383,619) |
| (2,036,961) |
| (6,733,350) |
| (6,034,999) |
| (12,768,349) |
Pesos |
| (1,445,654) |
| (209,518) |
| (1,655,172) |
| (6,653,981) | | (5,906,806) |
| (12,560,787) |
Dollars |
| (207,688) |
| (174,101) |
| (381,789) |
| (79,369) | | (128,193) |
| (207,562) |
Total Interest-Bearing Liabilities |
| 9,023,561 |
| 8,579,689 |
| 17,603,250 |
| 1,108,647 |
| (27,934,811) |
| (26,826,164) |
Pesos |
| 9,239,991 |
| 8,840,107 |
| 18,080,098 |
| 1,265,141 | | (27,805,226) |
| (26,540,085) |
Dollars |
| (216,430) |
| (260,418) |
| (476,848) |
| (156,494) | | (129,584) |
| (286,079) |
Low and Non-Interest Bearing Deposits |
|
|
|
|
|
|
|
|
|
|
|
|
Special Checking Accounts |
| (7,747) |
| 45,751 |
| 38,004 |
| 6,877 |
| (78,395) |
| (71,518) |
Pesos |
| (7,173) |
| 45,836 |
| 38,663 |
| 10,725 | | (77,803) |
| (67,078) |
Dollars |
| (574) |
| (85) |
| (659) |
| (3,848) | | (592) |
| (4,440) |
117
Interest-earning Assets: Net Interest Margin and Spread
The following table analyzes, by currency of denomination, our levels of average interest-earning assets and net interest income, and illustrates the comparative margins and spreads for each of the years indicated.
Year ended December 31, | |||||||||
2019 | 2018 | 2017 | |||||||
(in thousands of Pesos, except percentages) | |||||||||
Average interest-earning assets(1)(2) | |||||||||
Pesos | 112,254,223 | 142,487,690 | 122,418,180 | ||||||
Dollars | 33,198,797 | 42,301,114 | 26,836,605 | ||||||
Total | 145,453,020 | 184,788,804 | 149,254,785 | ||||||
Net interest earned | |||||||||
Pesos | 28,828,601 | 28,833,208 | 25,733,247 | ||||||
Dollars | 268,013 | 3,803,269 | 1,618,515 | ||||||
Total | 29,096,614 | 32,636,477 | 27,351,762 | ||||||
Net Interest Margin | |||||||||
Pesos | 25.7% | 20.2% | 21.0% | ||||||
Dollars | 0.8% | 9.0% | 6.0% | ||||||
Weighted average yield(3) | 20.0% | 17.7% | 18.3% | ||||||
Yield Spread | |||||||||
Pesos | 16.8% | 15.1% | 18.1% | ||||||
Dollars | 1.2% | 9.1% | 5.7% | ||||||
Weighted interest spread(4) | 16.8% | 15.0% | 16.0% | ||||||
Gross Yield | |||||||||
Pesos | 55.4% | 38.3% | 30.9% | ||||||
Dollars | 2.9% | 10.5% | 7.6% |
| | | | | | | |
| | Year ended December 31, |
| ||||
|
| 2021 |
| 2020 |
| 2019 |
|
|
| (in thousands of Pesos, except percentages) | | ||||
Average interest-earning assets(1)(2) |
|
|
|
|
|
| |
Pesos |
| 275,945,431 |
| 252,550,838 |
| 230,674,376 |
|
Dollars |
| 31,680,132 |
| 36,065,806 |
| 68,221,147 |
|
Total |
| 307,625,563 |
| 288,616,644 |
| 298,895,523 |
|
Net interest earned |
|
|
|
|
|
|
|
Pesos |
| 48,074,924 |
| 57,270,589 |
| 59,240,706 |
|
Dollars |
| 1,059,973 |
| 3,231,205 |
| 550,749 |
|
Total |
| 49,134,897 |
| 60,501,794 |
| 59,791,455 |
|
Net Interest Margin |
|
|
|
|
|
|
|
Pesos |
| 17.4 | % | 22.7 | % | 25.7 | % |
Dollars |
| 3.3 | % | 9.0 | % | 0.8 | % |
Weighted average yield(3) |
| 16.0 | % | 21.0 | % | 20.0 | % |
Yield Spread |
|
|
|
|
|
|
|
Pesos |
| 12.5 | % | 18.1 | % | 16.8 | % |
Dollars |
| 3.7 | % | 10.0 | % | 0.2 | % |
Weighted interest spread(4) |
| 13.1 | % | 19.0 | % | 16.8 | % |
Gross Yield |
|
|
|
|
|
|
|
Pesos |
| 39.2 | % | 39.3 | % | 55.4 | % |
Dollars |
| 4.7 | % | 11.8 | % | 2.9 | % |
(1) | Includes all loans, leasing agreements and investments (including public and private bonds and Central Bank notes) and other receivables from financial intermediation that earn interest. |
(2) | These figures represent daily averages. |
(3) | Takes into account the average interest earned on interest-earning assets and is weighted in accordance with the volume of each asset. |
(4) | Takes into account the average interest earned on interest-earning assets, net of average interest paid on interest-bearing liabilities. |
118
Investment Portfolio
We own, manage and trade a portfolio of securities issued by the Argentine government, the Central Bank, and other public sector and corporate issuers. The following table sets out our investments in ArgentineArgentina and other governments and corporate securities, as of December 31, 2019, 20182021 and 20172020 by type and currency of denomination.
| | | | | |
|
| 12/31/2021 |
| 12/31/2020 |
|
Debt Securities at fair value through profit or loss | | | | | |
LOCAL | | | | | |
Government securities | | | | | |
Argentine Bonds in pesos disc, Mat 12/31/21 |
| 4,892,247 |
| — |
|
Treasury Bill in pesos aj CER 1,20% Mat 03/18/22 |
| 2,999,345 |
| 241,007 |
|
Treasury Bill in pesos aj CER Mat.10/21/22 |
| 2,970,000 |
| — |
|
Treasury Bonus in pesos Aj CER 1,40% Mat.03/25/23 |
| 1,812,860 |
| 442,082 |
|
Treasury Bill in pesos aj CER Mat.02/28/22 |
| 1,267,107 |
| — |
|
Treasury Bill in pesos a disc. Mat.03/31/22 |
| 1,264,325 |
| — |
|
Argentine BondsU$S STEP UP 04/29/22 |
| 799,323 |
| — |
|
Treasury Bonds in pesos Mat. 02/06/2023 |
| 517,592 |
| — |
|
Treasury Bill in pesos aj CER Mat. 03/31/22 |
| 433,764 |
| — |
|
Títulos Discount Denominados in pesos 2033 |
| 327,592 |
| 176,650 |
|
Treasury bonds in dollars 4% maturity August 5, 2021 |
| 405,622 |
| 647,908 |
|
Argentine National Bonds 2,5% in pesos 07/22/2021 (TC21) |
| — |
| 8,161 |
|
Bocon – Consolidation Bonus in pesos 8 serie (PR15) |
| 2,286 |
| 6,714 |
|
Treasury Bill in pesos aj CER 2026 ( TX26) |
| 3,571 |
| — |
|
Argentine National Bonus. U$S STEP UP Mat.07/09/30 |
| 5,975 |
| — |
|
Treasury Bonds (TO23) |
| 3,451 |
| — |
|
Treasury Bill in pesos aj CER Mat 07/29/2022 |
| 134,072 |
| — |
|
Discount Securities in pesos 2033 CER |
| 3,407 |
| — |
|
Treasury Bill in pesos Mat 12/31/2021 |
| 43,802 |
| — |
|
Others | | 1,151,518 |
| 11,857,912 | |
|
| | | | |
Securities issued by the Central Bank |
| |
| |
|
Liquidity Central Bank Bills Mat 01/11/2022 |
| 356,358 |
| — |
|
Liquidity Central Bank Bills Mat. 01/20/2022 |
| 19,616 |
| — |
|
Liquidity Central Bank Bills Mat. 01/07/2021 | | — |
| 450,076 | |
Liquidity Central Bank Bills Mat. 01/26/2021 | | — |
| 441,373 | |
Liquidity Central Bank Bills Mat. 12/31/2021 | | — |
| 22,641 | |
| | | | | |
Corporate Securities |
|
|
|
|
|
On Santander Rio in pesos CL,25 Mat,06/10/22 |
| 254,644 |
| — |
|
On Ypf Energía Elec in pesos CL.7 Mat.05/20/22 |
| 52,858 |
| — |
|
On Pyme Venturino in pesos Mat.10/05/23 |
| 4,016 |
| — |
|
On Telecom Arg in pesos CL.6 Mat.12/10/21 |
| — |
| 108,519 |
|
On Telecom Arg in pesos CL,7 Mat,12/10/23 | | — |
| 245,280 | |
On Ypf S,A Cl,5 in pesos Mat,01/24/21 CG | | — |
| 252,489 | |
Others | | 32,334 |
| — | |
| | | | | |
Total debt securities at fair value through profit or loss |
| 19,757,685 |
| 14,900,812 |
|
119
| | | | |
|
| 12/31/2021 |
| 12/31/2020 |
OTHER DEBT SECURITIES |
|
|
|
|
Measure at fair value through changes in Other Comprehensive Income |
|
|
|
|
LOCAL |
|
|
|
|
Government securities |
|
|
|
|
Treasury Bonds Step al U$S 04/29/22 |
| 3,732,233 |
| 7,246,104 |
Treasury Bonds in pesos Mat 02/06/2023 |
| 3,692,500 |
| — |
Treasury Bill in pesos Aj CER 1,50% Mat,03/25/24 |
| 1,272,112 |
| 898,009 |
Treasury Bill in pesos a desc. Mat 08/16/22 |
| 1,038,000 |
| — |
Treasury Bill in pesos a desc. Mat. 04/29/22 |
| 883,000 |
| — |
Bono Tesoro in pesos Aj CER 1,40% Vto.03/25/23 |
| 592,751 |
| 472,707 |
Treasury Bonds Nac in pesos Badlar+200 04/03/22 |
| 545,082 |
| — |
Treasury Bonds in pesos a desc. Mat 01/31/22 |
| 461,269 |
| — |
Bono Pcia Bs As in pesos Canc Deuda Mat,09/07/22 |
| 7,271 |
| — |
Treasury bonds TV22 |
| 414,717 |
| 329,243 |
Treasury Bill in pesos Aj CER X31M2 |
| 181,146 |
| — |
Treasury Bonds in pesos AJ,CER 1,20%-Mat,03/18/2022 C,G, (TX22) | | 172,238 |
| — |
Treasury Bill in pesos Aj CER Mat, 02/28/2022 | | 367,612 |
| — |
BONO TESORO NACIONAL DLK 0.30% 04/28//23 | | 52,404 |
| — |
Treasury Bonds in pesos Aj CER 1,20% Mat 03/18/22 | | — |
| 377,354 |
Treasury bonds T2V1 | | — |
| 195,205 |
Treasury Bonus in pesos AJ,CER 1,20%-Mat,03/18/2022 C,G, (TX22) | | — |
| 48,898 |
Otros | | — |
| 595,395 |
| | | | |
Securities issued by the Central Bank |
|
|
|
|
Liquidity Central Bank Bills Mat 01/18/22 |
| 17,668,890 |
| — |
Liquidity Central Bank Bills Mat.01/25/22 |
| 11,695,596 |
| — |
Liquidity Central Bank Bills Mat.01/11/22 |
| 8,403,763 |
| — |
Liquidity Central Bank Bills Mat.01/04/22 |
| 6,970,971 |
| — |
Liquidity Central Bank Bills Mat.01/20/22 |
| 6,857,221 |
| — |
Liquidity Central Bank Bills Mat.01/06/22 |
| 5,465,856 |
| — |
Liquidity Central Bank Bills Mat.01/19/21 |
| — |
| 14,801,382 |
Liquidity Central Bank Bills Mat.01/05/21 |
| — |
| 6,006,396 |
Liquidity Central Bank Bills Mat.01/21/21 |
| — |
| 5,908,489 |
Liquidity Central Bank Bills Mat.01/07/21 |
| — |
| 5,544,435 |
Others |
| — |
| 10,277,044 |
| | | | |
Corporate Securities |
|
|
|
|
On MSU S.A. Cl. 2 UVA Mat.08/06/23 | | 111,292 | | — |
On Cent ter Gen/Med UVA Mat.11/12/24 | | 54,418 | | — |
On Newsan Cl.9 $ Mat.08/26/22 | | 53,284 | | — |
Others |
| 32 |
| 48 |
120
| | | | |
|
| 12/31/2021 |
| 12/31/2020 |
Measure at amortized cost |
|
|
|
|
LOCAL |
| |
|
|
Public bonds |
|
|
|
|
Treasury Bonus in pesos Fixed rate 22% Mat,05/21/22 |
| 8,236,566 |
| 8,428,822 |
Argentine Sovereign Bond, in pesos Badlar+200 04/03/2022 |
| — |
| 382,519 |
National Treasury Bonus T2V1 |
| — |
| 157,275 |
| | | | |
Securities issued by the Central Bank |
|
|
|
|
Others |
| 16 |
| 5,389 |
| | | | |
Total other debt securities |
| 78,930,240 |
| 61,674,714 |
Investments in equity instruments |
|
|
|
|
Measured at fair value through profit and loss |
|
|
|
|
LOCAL |
|
|
|
|
Ternium Arg S.A |
| 33,451 |
| 80 |
Pampa Energía S.A. |
| 24,701 |
| 12,507 |
Aluar SA |
| 18,141 |
| 78 |
Grupo Financiero Galicia SA | | 16,273 |
| 113,027 |
Loma Negra S.A. | | 16,086 |
| 4,798 |
YPF SA | | 9,628 |
| 269 |
Transener SA | | 7,290 |
| — |
Banco Macro SA | | 6,089 |
| 207 |
Bolsas y Mercados Arg. $ Ord. (BYMA) | | 3,765 |
| 97 |
Edenor SA | | 3,461 |
| — |
Others |
| 18,128 |
| 454 |
| | | | |
Measured at fair value through changes in Other Comprehensive Income |
|
|
|
|
LOCAL |
|
|
|
|
Others |
| 107,267 | (1) | 44,070 |
| | | | |
Total investments in equity instruments |
| 264,280 |
| 175,587 |
Total |
| 98,952,205 |
| 76,751,113 |
As of December 31, | |||||||||
2019 | 2018 | 2017 | |||||||
(in thousand of Pesos) | |||||||||
Debt Securities at fair value through profit or loss | |||||||||
LOCAL | |||||||||
Government securities | |||||||||
Treasury bills in dollars maturity September 13, 2019 | 158,290 | — | — | ||||||
Treasury bills in dollars maturity November 15, 2019 | 126,313 | — | — | ||||||
Treasury bills in dollars maturity November 15, 2019 | 22,659 | — | — | ||||||
Treasury bonds in Pesos maturity June 21, 2020 | 7,726 | — | — | ||||||
Argentine sovereign bonds in dollars 5.625% maturity 2022 | 3,948 | — | — | ||||||
Argentine sovereign bonds in dollars 8.00% maturity 2020 | 4,464 | — | — | ||||||
Argentine sovereign bonds in dollars 8.75% maturity 2024 | 8,059 | — | — | ||||||
Argentine sovereign bonds in Pesos 2.5% maturity 2021 | 14,989 | — | — | ||||||
Argentine sovereign bonds in Pesos maturity 2020 | 13,492 | — | — | ||||||
Debt securities of the Province of Buenos Aires in Pesos maturity April 12, 2025 | 8,093 | — | — | ||||||
Treasury bills in dollars maturity May 10, 2019 | — | 1,905,860 | — | ||||||
Others | 104,038 | 3,835,569 | 3,533,563 | ||||||
Securities issued by the Central Bank: | |||||||||
Liquidity Central Bank bills maturity January 2, 2019 | — | 9,214,982 | — | ||||||
Liquidity Central Bank bills maturity January 4, 2019 | — | 4,592,608 | — | ||||||
Liquidity Central Bank bills maturity January 8, 2019 | — | 1,521,039 | — | ||||||
Liquidity Central Bank bills maturity January 7, 2019 | — | 1,142,615 | — | ||||||
Liquidity Central Bank bills maturity January 3, 2019 | — | 920,007 | — | ||||||
Central Bank bills in Pesos maturity January 17, 2018 – 273 days | — | — | 18,714,875 | ||||||
Central Bank bills in Pesos maturity July 18, 2018 – 273 days | — | — | 377,137 | ||||||
Central Bank bills in Pesos maturity June 21, 2018 – 274 days | — | — | 474,123 | ||||||
Central Bank bills in Pesos maturity May 16, 2018 – 273 days | — | — | 279,364 | ||||||
Central Bank bills in Pesos maturity February 21, 2018 – 280 days | — | — | 1,818,327 | ||||||
Others | — | — | 585,039 | ||||||
Corporate Securities: | |||||||||
YPF S.A. notes class 41 in Pesos – Maturity September 24, 2020 | — | 50,925 | 115,921 | ||||||
Bco Galicia Bs.As. notes class S2 – Maturity April 26, 2021 | — | 38,906 | — | ||||||
Credimas 33 financial trust debt securities Class A | — | 2,466 | — | ||||||
Quickfood Class 9 Maturity November 11, 2022 | 1,075 | 2,417 | 3,836 | ||||||
YPF S.A. notes class 28 at 8,75% – Maturity April 4, 2024 | — | 1,283 | — | ||||||
YPF S.A. notes class 36 – Maturity February 10, 2020 | — | 18,652 | — | ||||||
Others | 95,355 | — | — | ||||||
Total debt securities at fair value through profit or loss | 568,501 | 23,247,329 | 25,902,185 | ||||||
OTHER DEBT SECURITIES | |||||||||
Measure at fair value through changes inOther Comprehensive Income | |||||||||
LOCAL | |||||||||
Securities issued by the Central Bank: | |||||||||
Liquidity Central Bank bills maturity January 7, 2020 | 5,435,852 | — | — | ||||||
Liquidity Central Bank bills maturity January 8, 2020 | 918,038 | — | — | ||||||
Liquidity Central Bank bills maturity January 3, 2020 | 543,264 | — | — | ||||||
Liquidity Central Bank bills maturity January 6, 2020 | 249,023 | — | — | ||||||
Liquidity Central Bank bills maturity January 2, 2020 | 24,962 | — | — | ||||||
Corporate bonds | |||||||||
Others | 32 | 49 | 73 | ||||||
Measure at amortized cost | |||||||||
LOCAL | |||||||||
Public bonds | |||||||||
Treasury bonds in Pesos maturity November 21, 2020 | 3,090,168 | 4,754,852 | — | ||||||
Treasury bills in dollars maturity March 15, 2019 – 203 days | — | 1,599,488 | — | ||||||
Treasury bills in dollars maturity January 26, 2018 | — | — | 274,499 | ||||||
Treasury bills in dollars maturity April 27, 2018 | — | — | 101,830 | ||||||
Treasury bills in dollars maturity April 13, 2018 | — | — | 65,522 | ||||||
Treasury bills in Pesos maturity April 30, 2019 | — | 1,032 | — | ||||||
Treasury bills in Pesos maturity January 31, 2019 | — | 223,902 | — | ||||||
Others | 191,760 | 5,490 | — |
As of December 31, | |||||||||
2019 | 2018 | 2017 | |||||||
(in thousand of Pesos) | |||||||||
Central Bank bills | |||||||||
Others | — | — | 231,421 | ||||||
Corporate bonds | |||||||||
Prear S.2 notes – Maturity February 15, 2019 | — | 3,938 | 5,646 | ||||||
Mbt 1 financial trust debt securities class A | — | 1,863 | 4,034 | ||||||
Credimas 32 | — | — | 129,508 | ||||||
Catalinas Coop. 1 PyMe notes September 19, 2018 | — | — | 2,294 | ||||||
OCOX6 Soc Com del Plata notes | — | — | 20 | ||||||
Ind Met Pescarmona notes Cl 12 | — | — | 204 | ||||||
Productos de Agua S.A. | — | — | 93 | ||||||
Others | 5,457 | 41,247 | — | ||||||
Total other debt securities | 10,458,556 | 6,631,861 | 815,144 | ||||||
Investments in equity instruments | |||||||||
Measured at fair value through profit and loss | |||||||||
LOCAL | |||||||||
YPF S.A. | — | 1,664 | 18,797 | ||||||
Grupo Financiero Galicia S.A. | 5,796 | 801 | — | ||||||
Loma Negra S.A. | — | — | 53,413 | ||||||
Tenaris S.A. | — | — | 5,122 | ||||||
Pampa Energía S.A. | — | — | 8,978 | ||||||
Measured at fair value through changes inOther Comprehensive Income | |||||||||
LOCAL | |||||||||
Others | 8,783 | 13,540 | 19,651 | ||||||
Total investments in equity instruments | 14,579 | 16,005 | 105,961 | ||||||
Total | 11,041,636 | 29,895,195 | 26,823,290 |
(1) | Includes an equity investment in Modo of Ps.36,957 thousand. The |
Remaining Maturity of Investment Portfolio
The following table analyzes the remaining maturities of our investment portfolio as of December 31, 2019 based on their terms when issued.
Maturing | |||||||||||||||
Within 1 year | Within 1 year but within 5 years | Within 5 year but within 10 years | After 10 years | Total amount | |||||||||||
(Book value in thousands of Pesos, except percentages) | |||||||||||||||
Debt Securities at fair value through profit or loss | |||||||||||||||
LOCAL | |||||||||||||||
Government securities | |||||||||||||||
Treasury bills in dollars maturity September 13, 2019 | 158,290 | — | — | — | 158,290 | ||||||||||
Treasury bills in dollars maturity November 15, 2019 | 126,313 | — | — | — | 126,313 | ||||||||||
Treasury bills in dollars maturity November 15, 2019 | 22,659 | — | — | — | 22,659 | ||||||||||
Treasury bonds in Pesos maturity June 21, 2020 | 7,726 | — | — | — | 7,726 | ||||||||||
Argentine sovereign bonds in dollars 5.625% maturity 2022 | 3,948 | — | — | — | 3,948 | ||||||||||
Argentine sovereign bonds in dollars 8.00% maturity 2020 | 4,464 | — | — | — | 4,464 | ||||||||||
Argentine sovereign bonds in dollars 8.75% maturity 2024 | 8,059 | — | — | — | 8,059 |
Maturing | |||||||||||||||
Within 1 year | Within 1 year but within 5 years | Within 5 year but within 10 years | After 10 years | Total amount | |||||||||||
(Book value in thousands of Pesos, except percentages) | |||||||||||||||
Argentine sovereign bonds in Pesos 2.5% maturity 2021 | 14,989 | — | — | — | 14,989 | ||||||||||
Argentine sovereign bonds in Pesos maturity 2020 | 13,492 | — | — | — | 13,492 | ||||||||||
Debt securities of the Province of Buenos Aires in Pesos maturity April 12, 2025 | 8,093 | — | — | — | 8,093 | ||||||||||
Others | 104,038 | — | — | — | 104,038 | ||||||||||
Corporate Securities | |||||||||||||||
Quickfood Class 9 Maturity November 11, 2022 | — | 1,075 | — | — | 1,075 | ||||||||||
Others | 95,355 | — | — | — | 95,355 | ||||||||||
Total debt securities at fair value through profit or loss | 567,426 | 1,075 | — | — | 568,501 | ||||||||||
OTHER DEBT SECURITIES | |||||||||||||||
Measure at fair value through changes inOther Comprehensive Income | |||||||||||||||
LOCAL | |||||||||||||||
Securities issued by the Central Bank: | |||||||||||||||
Liquidity Central Bank bills maturity January 7, 2020 | 5,435,852 | — | — | — | 5,435,852 | ||||||||||
Liquidity Central Bank bills maturity January 8, 2020 | 918,038 | — | — | — | 918,038 | ||||||||||
Liquidity Central Bank bills maturity January 3, 2020 | 543,264 | — | — | — | 543,264 | ||||||||||
Liquidity Central Bank bills maturity January 6, 2020 | 249,023 | — | — | — | 249,023 | ||||||||||
Liquidity Central Bank bills maturity January 2, 2020 | 24,962 | — | — | — | 24,962 | ||||||||||
Corporate bonds | |||||||||||||||
Other | 32 | — | — | — | 32 | ||||||||||
Measure at amortized cost | |||||||||||||||
LOCAL | |||||||||||||||
Public bonds | |||||||||||||||
Treasury bonds in Pesos maturity November 21, 2020 | 3,090,168 | — | — | — | 3,090,168 | ||||||||||
Others | 191,760 | — | — | — | 191,760 | ||||||||||
Corporate bonds | |||||||||||||||
Others | 5,457 | — | — | — | 5,457 | ||||||||||
Total other debt securities | 10,458,556 | — | — | — | 10,458,556 | ||||||||||
Investments in equity instruments | |||||||||||||||
Measured at fair value through profit and loss | |||||||||||||||
LOCAL | |||||||||||||||
Grupo Financiero Galicia SA | 5,796 | — | — | — | 5,796 | ||||||||||
Measured at fair value through changes inOther Comprehensive Income | |||||||||||||||
LOCAL | |||||||||||||||
Others | 8,783 | — | — | — | 8,783 | ||||||||||
Total investments in equity instruments | 14,579 | — | — | — | 14,579 | ||||||||||
Total | 11,040,561 | 1,075 | 11,041,636 |
Loan and other Financing
The following table analyzes our loan and other financing by type as of December 31, 2019, 2018 and 2017:
Grupo Supervielle S.A. | |||||||||
As of December 31, | |||||||||
2019 | 2018 | 2017 | |||||||
Loans and other financings | (in thousands of Pesos) | ||||||||
To the non-financial public sector | 28,872 | 50,460 | 74,060 | ||||||
To the financial sector | 64,522 | 613,101 | 902,009 | ||||||
To the non-financial private sector and foreign residents: | |||||||||
Overdrafts | 5,598,311 | 7,292,439 | 8,214,818 | ||||||
Promissory notes | 19,620,906 | 24,107,254 | 35,192,489 | ||||||
Mortgage loans | 7,917,020 | 8,220,484 | 3,519,931 | ||||||
Automobile and other secured loans | 1,219,936 | 2,369,848 | 712,552 | ||||||
Personal loans | 16,295,241 | 29,266,364 | 38,064,143 | ||||||
Credit card loans | 12,953,381 | 14,168,278 | 18,093,001 | ||||||
Foreign trade loans and U.S. dollar loans | 18,150,746 | 29,069,507 | 25,473,973 | ||||||
Others | 9,726,326 | 5,976,288 | 5,197,256 | ||||||
Receivables from financial leases | 3,186,689 | 5,231,202 | 5,672,816 | ||||||
Less: allowance for loan losses | (6,751,939 | ) | (7,593,590 | ) | (7,115,689 | ) | |||
Total loans and other financings | 88,010,011 | 118,771,635 | 134,001,359 |
As stated above under “Presentation of Financial and Other Information”, we have prepared our audited consolidated financial statements for 2019, 2018 and 2017 under IFRS. Data for past years has been prepared under our prior accounting framework, Argentine Banking GAAP, which is not comparable with data prepared under IFRS.
Grupo Supervielle S.A. | ||||||
As of December 31, | ||||||
2016 | 2015 | |||||
(in thousands of Pesos) | ||||||
Loans and financings | ||||||
To the non-financial public sector | 4,306 | 8,778 | ||||
To the financial sector | 473,414 | 181,734 | ||||
To the non-financial private sector and foreign residents: | ||||||
Overdrafts | 3,110,097 | 1,634,870 | ||||
Promissory notes(1)(2) | 9,101,773 | 5,707,289 | ||||
Mortgage loans | 78,057 | 50,032 | ||||
Automobile and other secured loans | 65,076 | 104,469 | ||||
Personal loans | 9,916,776 | 6,018,601 | ||||
Credit card loans | 6,678,578 | 5,677,922 | ||||
Foreign trade loans and U.S. dollar loans | 5,311,475 | 618,410 | ||||
Others | 1,056,104 | 763,469 | ||||
Less: allowance for loan losses | (899,147 | ) | (617,313 | ) | ||
Total loans | 34,896,509 | 20,148,261 | ||||
Other receivables from financial transactions(3) | ||||||
Unlisted corporate bonds | 29,166 | 14,243 | ||||
Others | 669,119 | 423,640 | ||||
Plus: accrued interest and adjustment receivables | 1 | 1 | ||||
Less: allowances | (5,807 | ) | (5,944 | ) | ||
Total other receivables from financial transactions | 692,479 | 431,940 | ||||
Receivables from financial leases | 1,543,109 | 1,090,368 | ||||
Less: Allowances for receivables from financial leases | (15,254 | ) | (15,391 | ) | ||
Total receivables from financial leases | 1,527,855 | 1,074,977 | ||||
Total financing | 37,116,843 | 21,655,178 |
152
Loan and financing portfolio, including the loan portfolio outstanding in each of the financial trusts created in connection with our securitizations, is not a measure defined by Argentine Banking GAAP. This measure represents our loan and financing portfolio as of each period end derived from our balance sheet plus the loan portfolio outstanding in each of the financial trusts created in connection with our securitizations for the same periods. The measure is an important indicator of our loan origination and administration capacity. The loan portfolio outstanding in all of the financial trusts created in connection with our securitizations totaled Ps.1.4 billion and Ps.2.7 billion as of December 31, 2016 and 2015, respectively. These measures have inherent limitations, such as the lack of comparability, the absence of a standard defining how to perform calculations so that these calculations are uniformly applied and the fact that they are not audited. To mitigate these limitations, we have procedures in place to calculate these measures using the appropriate Argentine Banking GAAP or other regulations. Although these measures are frequently used in the evaluation of performance, they have the above mentioned limitations as analytical tools, and should not be considered in isolation, or as a substitute for, analysis of results as reported under Argentine Banking GAAP.
The following table sets forth information describing variationsout the weighted average yield for each range of maturities, to debt securities that are not held at fair value:
| | | | | | | | | | | |
| | Grupo Supervielle S.A. |
| ||||||||
| | As of December 31, 2021 |
| ||||||||
| | | | | | After 5 | | | | |
|
| | | | After 1 year | | year | | | | | |
Debt securities that are not held at | | Within 1 | | through | | through | | After 10 | | | |
fair value |
| year |
| 5 years |
| 10 years |
| years |
| Total | |
Weighted average yield | | 23.9 | % | — | % | — | | — | | 23.9 | % |
The weighted average yield was calculated as the sum of each bond’s returns divided by the sum of each bond’s average holding considering their remaining maturity.
121
The following table sets out the aggregate book value of securities from a single issuer that exceeds 10% of Grupo Supervielle Shareholder´s Equity:
| | | | | |
|
| |
| %Shareholder´s |
|
Single Issuer | | 12/31/2021 | | Equity | |
Argentine government* | | 40,451,283 | | 79 | % |
Central Bank |
| 57,438,287 |
| 112 | % |
|
| 97,889,570 | | | |
*Includes Ps.8.2 billion of Treasury Bonds considered in ourthe Minimum Reserve Requirements.
Loans and other Financing
Our loan and other financing portfolio taking into account the impactare included in Note 26 to our audited consolidated financial statements. Loans and The Other Financing of transfers toour audited consolidated financial trusts created in connection with our securitizations as of the dates indicated below:statements.
Grupo Supervielle S.A. | ||||||
As of December 31, | ||||||
2016 | 2015 | |||||
(in thousands of Pesos) | ||||||
Total loan and financing portfolio (net of allowances for loan losses) | 37,116,843 | 21,655,178 | ||||
Personal loan portfolio outstanding in each of the financial trusts (net of allowances for loan losses)(1) | 1,367,117 | 2,465,621 | ||||
Receivables from financial leases outstanding in each of the financial trusts (net of allowances for receivables from financial leases)(1) | 46,310 | 244,922 | ||||
Total financing including loan and financing portfolio outstanding in each of our financial trusts | 38,530,270 | 24,365,721 |
Maturity Composition of the Loan and Other Financing
The following table analyzes our loan and other financing as of December 31, 20192021 by type and by the time remaining to maturity. Loans and other financings are stated before deduction of allowances for loan losses.
Grupo Supervielle S.A. | ||||||||||||
Maturing as of December 31, 2019 | ||||||||||||
Within 1 year | After 1 year through 5 years | After 5 years | Total | |||||||||
(in thousands of Pesos except percentages) | ||||||||||||
Loans and other financing | ||||||||||||
To the non-financial public sector | 7,020 | 21,852 | — | 28,872 | ||||||||
To the financial sector | 33,000 | 31,522 | — | 64,522 | ||||||||
To the non-financial private sector and foreign residents: | ||||||||||||
Overdrafts | 5,598,311 | — | — | 5,598,311 | ||||||||
Promissory notes | 18,873,616 | 741,225 | 6,065 | 19,620,906 | ||||||||
Mortgage loans | 711 | 29,197 | 7,887,112 | 7,917,020 | ||||||||
Automobile and other secured loans | 579,389 | 640,547 | — | 1,219,936 | ||||||||
Personal loans | 4,239,510 | 11,953,520 | 102,211 | 16,295,241 | ||||||||
Credit card loans | 12,403,975 | 549,406 | — | 12,953,381 | ||||||||
Foreign trade loans and U.S. dollar loans | 12,716,652 | 5,277,101 | 156,993 | 18,150,746 | ||||||||
Others | 8,017,025 | 1,707,310 | 1,991 | 9,726,326 | ||||||||
Receivables from financial leases | 1,364,037 | 1,809,706 | 12,946 | 3,186,689 | ||||||||
Total loans and other financing | 63,833,246 | 22,761,386 | 8,167,318 | 94,761,950 |
| | | | | | | | | | |
| | Grupo Supervielle S.A. | ||||||||
| | Maturing as of December 31, 2021 | ||||||||
| | | | After 1 | | After 5 | | | | |
| | | | year | | year | | | | |
| | Within 1 | | through | | through | | After 15 | | |
|
| year |
| 5 years |
| 15 years |
| years |
| Total |
| | (in thousands of Pesos except percentages) | ||||||||
Loans and other financing | |
| |
| |
| |
| |
|
| | | | | | | | | | |
To the non-financial public sector |
| 22,738 |
| — |
| — |
| — |
| 22,738 |
To the financial sector |
| 5,160 |
| 71,672 |
| — |
| — |
| 76,832 |
To the non-financial private sector and foreign residents: |
|
|
|
|
|
|
|
|
|
|
Overdrafts |
| 5,099,460 |
| — |
| — |
| — |
| 5,099,460 |
Promissory notes |
| 41,031,831 |
| 5,617,525 |
| — |
| — |
| 46,649,356 |
Mortgage loans |
| 4,862,345 |
| 70,357 |
| 1,461,981 |
| 9,244,135 |
| 15,638,819 |
Automobile and other secured loans |
| 1,664,033 |
| 2,141,197 |
| — |
| — |
| 3,805,230 |
Personal loans |
| 6,998,510 |
| 19,947,136 |
| 637,687 |
| 93 |
| 27,583,426 |
Credit card loans |
| 29,615,072 |
| 635,377 |
| — |
| — |
| 30,250,449 |
Foreign trade loans and U.S. dollar loans |
| 5,004,621 |
| 5,059,664 |
| 787,346 |
| — |
| 10,851,631 |
Others |
| 18,171,313 |
| 1,359,102 |
| 16,973 |
| — |
| 19,547,388 |
Receivables from financial leases |
| 246,049 |
| 5,658,390 |
| 92,380 |
| — |
| 5,996,819 |
Total loans and other financing |
| 112,721,132 |
| 40,560,420 |
| 2,996,367 |
| 9,244,228 |
| 165,522,148 |
122
Interest Rate Sensitivity
The following table analyzes the amount of our loan and other financing portfolio as of December 31, 2019 by type ofdue after one year at fixed and variable interest rate. Loans and financings are stated before deduction of allowances for loan losses.
| | | | | | |
| | Grupo Supervielle S.A. | ||||
| | Amount due after one year at | ||||
| | Fixed | | Variable | | |
|
| interest rate |
| interest rate |
| Total |
|
| (in thousands of Pesos except percentages) | ||||
Loans and other financing |
|
|
|
|
|
|
| | | | | | |
To the non-financial public sector |
| — |
| — |
| — |
To the financial sector |
| 71,672 |
| — |
| 71,672 |
To the non-financial private sector and foreign residents: |
|
|
|
|
|
|
Overdrafts |
|
|
|
|
|
|
Promissory notes |
| 3,420,451 |
| 2,197,074 |
| 5,617,525 |
Mortgage loans |
| — |
| 10,776,474 |
| 10,776,474 |
Automobile and other secured loans |
| 1,927,516 |
| 213,681 |
| 2,141,197 |
Personal loans |
| 20,580,214 |
| 4,702 |
| 20,584,916 |
Credit card loans |
| 635,377 |
| — |
| 635,377 |
Foreign trade loans and U.S. dollar loans |
| 5,847,010 |
| — |
| 5,847,010 |
Others |
| 1,000,124 |
| 375,951 |
| 1,376,075 |
Receivables from financial leases |
| 4,294,925 |
| 1,455,845 |
| 5,750,770 |
Total loans and other financing |
| 37,777,289 |
| 15,023,726 |
| 52,801,015 |
Loans and other financings — Classification
The following table presents our loan and other financing, before the deduction for allowances for loan losses:
Grupo Supervielle | ||||||||||||||||
Assets Before Allowances | As of | |||||||||||||||
Stage 1 | Stage 2 | Stage 3 | December 31, 2019 | |||||||||||||
Promissory notes | 8,009,641 | 220,628 | 284,448 | 8,514,717 | ||||||||||||
Unsecured corporate loans | 9,974,477 | 363,545 | 768,167 | 11,106,189 | ||||||||||||
Overdrafts | 4,339,933 | 88,118 | 1,170,260 | 5,598,311 | ||||||||||||
Mortgage loans | 6,030,357 | 1,139,227 | 747,436 | 7,917,020 | ||||||||||||
Automobile and other secured loans | 799,642 | 260,651 | 159,643 | 1,219,936 | ||||||||||||
Personal loans | 14,047,805 | 1,115,171 | 1,132,265 | 16,295,241 | ||||||||||||
Credit card loans | 11,850,570 | 560,447 | 542,364 | 12,953,381 | ||||||||||||
Foreign Trade Loans | 16,198,790 | 615,514 | 1,336,442 | 18,150,746 | ||||||||||||
Other financings | 7,742,824 | 93,942 | 75,911 | 7,912,677 | ||||||||||||
Other receivables from financial transactions | 1,844,597 | 16,506 | 45,940 | 1,907,043 | ||||||||||||
Receivables from financial leases | 2,818,321 | 184,319 | 184,049 | 3,186,689 | ||||||||||||
Total as of December 31, 2019 | 83,656,957 | 4,658,068 | 6,446,925 | 94,761,950 |
Grupo Supervielle | ||||||||||||||||
Assets Before Allowances | As of | |||||||||||||||
Stage 1 | Stage 2 | Stage 3 | December 31, 2018 | |||||||||||||
Promissory notes | 11,040,711 | 728,667 | 372,861 | 12,142,239 | ||||||||||||
Unsecured corporate loans | 9,566,113 | 2,115,729 | 277,612 | 11,959,454 | ||||||||||||
Overdrafts | 6,888,246 | 1,096,622 | 181,025 | 8,165,893 | ||||||||||||
Mortgage loans | 8,362,500 | 216,941 | 14,937 | 8,594,378 | ||||||||||||
Automobile and other secured loans | 1,945,195 | 163,435 | 279,678 | 2,388,308 | ||||||||||||
Personal loans | 24,712,374 | 3,388,932 | 2,630,599 | 30,731,905 | ||||||||||||
Credit card loans | 12,498,927 | 916,4 | 781,512 | 14,196,839 | ||||||||||||
Foreign Trade Loans | 18,771,657 | 854,199 | 1,561,731 | 21,187,587 | ||||||||||||
Other financings | 8,008,012 | 1,386,762 | 175,934 | 9,570,708 | ||||||||||||
Other receivables from financial transactions | 2,039,401 | 18,592 | 32,756 | 2,090,749 | ||||||||||||
Receivables from financial leases | 4,942,686 | 265,384 | 129,095 | 5,337,165 | ||||||||||||
Total as of December 31, 2018 | 108,775,822 | 11,151,663 | 6,437,740 | 126,365,225 |
Grupo Supervielle | ||||||||||||||||
Assets Before Allowances | As of | |||||||||||||||
Stage 1 | Stage 2 | Stage 3 | December 31, 2017 | |||||||||||||
Promissory notes | 21,539,389 | 304,588 | 64,107 | 21,908,084 | ||||||||||||
Unsecured corporate loans | 11,837,372 | 355,029 | 95,527 | 12,287,928 | ||||||||||||
Overdrafts | 8,790,546 | 136,896 | 98,409 | 9,025,851 | ||||||||||||
Mortgage loans | 3,622,440 | 94,996 | 2,067 | 3,719,503 | ||||||||||||
Automobile and other secured loans | 694,197 | 26,076 | 1,533 | 721,806 | ||||||||||||
Personal loans | 31,439,231 | 3,856,644 | 4,354,438 | 39,650,313 | ||||||||||||
Credit card loans | 16,015,173 | 1,319,547 | 791,471 | 18,126,191 | ||||||||||||
Foreign Trade Loans | 18,866,859 | 128,883 | 6,814 | 19,002,556 | ||||||||||||
Other financings | 8,895,926 | 68,508 | 63,355 | 9,027,789 | ||||||||||||
Other receivables from financial transactions | 1,811,863 | 29,302 | 25,852 | 1,867,017 | ||||||||||||
Receivables from financial leases | 5,592,890 | 101,748 | 85,373 | 5,780,011 | ||||||||||||
Total as of December 31, 2017 | 129,105,886 | 6,422,217 | 5,588,946 | 141,117,049 |
As stated above under “Presentation of Financial and Other Information”, we have prepared our audited consolidated financial statements for 2019, 2018 and 2017 under IFRS. Data for past years has been prepared under our prior accounting framework, Argentine Banking GAAP, which is not comparable with data prepared under IFRS.
Grupo Supervielle S.A. | ||||||||||||||||
Year ended December 31, | ||||||||||||||||
2016 | % | 2015 | % | |||||||||||||
(in thousands of Pesos, except percentages) | ||||||||||||||||
Loan portfolio categories | ||||||||||||||||
Normal situation(1) | 34,057,394 | 95.1% | 19,613,596 | 94.5% | ||||||||||||
Subject to special monitoring-under observation- in negotiation or subject to refinancing agreements/low risk(2) | 726,232 | 2.0% | 470,003 | 2.3% | ||||||||||||
With problems/ medium risk(3) | 498,572 | 1.4% | 264,492 | 1.3% | ||||||||||||
High risk of insolvency/ high risk(4) | 494,126 | 1.4% | 364,649 | 1.8% | ||||||||||||
Uncollectible(5) | 18,533 | 0.1% | 52,533 | 0.3% | ||||||||||||
Uncollectible, classified as such under regulatory requirements(6) | 799 | 0.0% | 301 | 0.0% | ||||||||||||
Total loans | 35,795,656 | 100.0% | 20,765,574 | 100.0% | ||||||||||||
Other receivables from financial transactions portfolio categories | ||||||||||||||||
Normal situation(1) | 648,582 | 92,9% | 407,884 | 93.1% | ||||||||||||
Subject to special monitoring-under observation- in negotiation or subject to refinancing agreements/low risk(2) | 20,568 | 2.9% | 13,022 | 3.0% | ||||||||||||
With problems/ medium risk(3) | 12,822 | 1.8% | 6,048 | 1.4% | ||||||||||||
High risk of insolvency/ high risk(4) | 14,746 | 2.1% | 7,902 | 1.8% | ||||||||||||
Uncollectible(5) | 1,562 | 0.2% | 3,028 | 0.7% | ||||||||||||
Uncollectible, classified as such under regulatory requirements(6) | 6 | 0.0% | — | 0.0% | ||||||||||||
Total Other receivables from financial transactions | 698,286 | 100.0% | 437,884 | 100.0% | ||||||||||||
Categories of receivables from financial leases | ||||||||||||||||
Normal situation(1) | 1,510,245 | 97.9% | 1,065,057 | 97.7% | ||||||||||||
Subject to special monitoring-under observation- in negotiation or subject to refinancing agreements/low risk(2) | 18,114 | 1.2% | 12,113 | 1.1% | ||||||||||||
With problems/ medium risk(3) | 5,331 | 0.3% | 1,674 | 0.2% | ||||||||||||
High risk of insolvency/ high risk(4) | 9,386 | 0.6% | 10,987 | 1.0% | ||||||||||||
Uncollectible(5) | 33 | 0.0% | 537 | — | ||||||||||||
Uncollectible, classified as such under regulatory requirements | — | 0.0% | — | 0.0% | ||||||||||||
Total receivables from financial leases | 1,543,109 | 100.0% | 1,090,368 | 100.0% |
Amounts Past Due Loans and Other Financing
The following table analyzes amounts past due in our loan and other financing portfolio, by type of loan and other financing as of the dates indicated.
The past due loans listed in the table below include loans of the Bank, Tarjeta, Espacio Cordial, CCFIUDÚ and MILA past due more than 90 days.
Grupo Supervielle S.A. | ||||||||||||
As of December 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Past Due | ||||||||||||
Loans and other Financing | ||||||||||||
To the non-financial private sector and foreign residents | ||||||||||||
Overdrafts | 1,146,669 | 503,127 | 101,526 | |||||||||
Promissory notes | 246,342 | 319,291 | 43,617 | |||||||||
Mortgage loans | 747,385 | 14,858 | — | |||||||||
Automobile and other secured loans | 55,296 | 284,065 | 182 | |||||||||
Personal loans | 1,098,388 | 2,255,072 | 2,259,214 | |||||||||
Credit card loans | 540,727 | 838,231 | 703,979 | |||||||||
Foreign trade loans | 2,319,503 | 1,589,120 | 2,969 | |||||||||
Other loans | 644,931 | 740,112 | 199,329 | |||||||||
Receivables from financial leases | 269,143 | 369,324 | 96,100 | |||||||||
Total Past Due Loans and other financing | 7,068,384 | 6,913,200 | 3,406,916 | |||||||||
Past Due Financings | ||||||||||||
With Preferred Guarantees | 2,517,891 | 882,571 | 148,582 | |||||||||
Without Guarantees | 4,550,493 | 6,030,629 | 3,258,334 | |||||||||
Total Past Due Financings | 7,068,384 | 6,913,200 | 3,406,916 |
| | | | | | |
| | Grupo Supervielle S.A. | ||||
| | Year ended December 31, | ||||
|
| 2021 |
| 2020 |
| 2019 |
Past Due |
|
|
|
| |
|
Loans and other Financing |
|
|
|
| |
|
To the non-financial private sector and foreign residents |
|
|
|
| |
|
Overdrafts |
| 107,127 |
| 422,448 | | 2,356,323 |
Promissory notes |
| 40,871 |
| 219,077 | | 506,215 |
Mortgage loans |
| 445,945 |
| 780,790 | | 1,535,823 |
Automobile and other secured loans |
| 1,846,900 |
| 276,051 | | 62,455 |
Personal loans |
| 1,869,504 |
| 249,336 | | 2,257,109 |
Credit card loans |
| 365,355 |
| 226,281 | | 1,111,155 |
Foreign trade loans |
| 1,304,041 |
| 2,735,516 | | 4,766,412 |
Other loans |
| 450,955 |
| 775,121 | | 1,325,287 |
Receivables from financial leases |
| 26,175 |
| 144,895 | | 553,070 |
Total Past Due Loans and other financing |
| 6,456,873 |
| 5,829,517 | | 14,473,848 |
Past Due Financings |
|
|
|
| |
|
With Preferred Guarantees |
| 1,791,586 |
| 3,441,791 | | 5,122,912 |
Without Guarantees |
| 4,665,286 |
| 2,387,726 | | 9,350,937 |
Total Past Due Financings |
| 6,456,873 |
| 5,829,517 | | 14,473,848 |
As stated above under “Presentation of Financial and Other Information”, we have prepared our audited consolidated financial statements for 2019, 2018 and 2017 under IFRS. Data for past years has been prepared under our prior accounting framework, Argentine Banking GAAP, which is not comparable with data prepared under IFRS.
156
Grupo Supervielle S.A. | ||||||||
Year ended December 31, | ||||||||
2016 | 2015 | |||||||
(in thousands of Pesos) | ||||||||
Past Due Loans | ||||||||
To the non-financial private sector and foreign residents | ||||||||
Overdrafts | 51,259 | 4,413 | ||||||
Promissory notes(1) | 23,695 | 50,026 | ||||||
Unsecured corporate loans | 46,789 | 141,557 | ||||||
Mortgage loans | 6,141 | 47 | ||||||
Automobile and other secured loans | 857 | 1,060 | ||||||
Personal loans | 558,722 | 123,072 | ||||||
Credit card loans | 202,698 | 256,475 | ||||||
Foreign trade loans | 2,562 | 47,476 | ||||||
Other loans | 13,102 | 36,629 | ||||||
Past Due Loans | ||||||||
Total Past Due Loans | 905,825 | 660,755 | ||||||
Other receivables from financial transactions | ||||||||
Others | 8,322 | 1,946 | ||||||
Total Past Due Other receivables from financial transactions | 8,322 | 1,946 | ||||||
Receivables from financial leases | 21,602 | 113,375 | ||||||
Total Past Due Financings | 935,749 | 776,076 | ||||||
Past Due Financings | ||||||||
With Preferred Guarantees | 70,901 | 119,075 | ||||||
Without Guarantees | 864,848 | 657,001 | ||||||
Total Past Due Financings | 935,749 | 776,076 |
Analysis of the Allowance for Loan Losses
The table below sets forth annual variations inanalysis of the allowances for loan losses for the years ended December 31, 2019, 2018are included in Note 1.11 and 2017. See “Item 5.A Operating Results—Critical Accounting Policies—Allowances for Loan Losses”, and note 1.12Note 26 of our audited consolidated financial statements,statements. See “Item 5.E. Critical Accounting Estimates—Allowances for more detailLoan Losses.”
123
The following table analyses the ratio of howallowances for loans losses to total loans:
| | | | | | | |
| | Grupo Supervielle S.A. |
| ||||
| | Year ended December 31, |
| ||||
|
| 2021 |
| 2020 |
| 2019 |
|
Allowances for loan losses |
| 10,047,819 |
| 12,716,401 | | 13,874,750 | |
Loans and other financing |
| 165,522,148 |
| 171,801,618 | | 194,729,014 | |
Allowances as a percentage of Loans |
| 6.07 | % | 7.40 | % | 7.13 | % |
The following table analyzes the expected credit loss allowances is measured.
Grupo Supervielle S.A. | ||||||||||||||||
ECL Allowance | ||||||||||||||||
Stage 1 | Stage 2 | Stage 3 | Total | |||||||||||||
Balance at the beginning of the year 2018 | 2,212,268 | 1,762,950 | 3,618,372 | 7,593,590 | ||||||||||||
Transfers | ||||||||||||||||
1 to 2 | (61,394 | ) | 311,209 | — | 249,815 | |||||||||||
1 to 3 | (92,597 | ) | — | 3,446,674 | 3,354,077 | |||||||||||
2 to 3 | — | (217,452 | ) | 747,949 | 530,497 | |||||||||||
2 to 1 | 54,696 | (336,834 | ) | — | (282,138 | ) | ||||||||||
3 to 2 | — | 9,708 | (31,725 | ) | (22,017 | ) | ||||||||||
3 to 1 | 15,515 | — | (112,975 | ) | (97,460 | ) | ||||||||||
Net changes of financial assets | (587,501 | ) | (715,925 | ) | 1,543,541 | 240,115 | ||||||||||
Write-Offs | - | - | (5,029,098 | ) | (5,029,098 | ) | ||||||||||
Exchange Differences and Others | 64,173 | 25,054 | 125,331 | 214,558 | ||||||||||||
Gross carrying amount at December 31, 2019 | 1,605,160 | 838,710 | 4,308,069 | 6,751,939 |
Grupo Supervielle S.A. | ||||||||||||||||
ECL Allowance | ||||||||||||||||
Stage 1 | Stage 2 | Stage 3 | Total | |||||||||||||
Balance at the beginning of the year 2017 | 2,601,836 | 1,542,565 | 2,971,288 | 7,115,689 | ||||||||||||
Transfers | ||||||||||||||||
1 to 2 | (111,310 | ) | 652,494 | — | 541,184 | |||||||||||
1 to 3 | (113,691 | ) | — | 1,608,825 | 1,495,134 | |||||||||||
2 to 3 | — | (234,756 | ) | 433,741 | 198,985 | |||||||||||
2 to 1 | 35,469 | (144,782 | ) | — | (109,313 | ) | ||||||||||
3 to 2 | — | 27,351 | (116,916 | ) | (89,565 | ) | ||||||||||
3 to 1 | 4,421 | — | (56,700 | ) | (52,279 | ) | ||||||||||
Net changes of financial assets | (214,161 | ) | (82,519 | ) | 2,787,456 | 2,490,776 | ||||||||||
Write-Offs | — | — | (4,017,832 | ) | (4,017,832 | ) | ||||||||||
Exchange Differences and Others | 9,704 | 2,597 | 8,510 | 20,811 | ||||||||||||
Gross carrying amount at December 31, 2018 | 2,212,268 | 1,762,950 | 3,618,372 | 7,593,590 |
Grupo Supervielle S.A. | ||||||||||||||||
ECL Allowance | ||||||||||||||||
Stage 1 | Stage 2 | Stage 3 | Total | |||||||||||||
Balance at the beginning of the year 2016 | 1,671,137 | 1,208,107 | 2,419,985 | 5,299,229 | ||||||||||||
Transfers | ||||||||||||||||
1 to 2 | (67,559 | ) | 528,247 | — | 460,688 | |||||||||||
1 to 3 | (56,315 | ) | — | 1,270,440 | 1,214,125 | |||||||||||
2 to 3 | — | (145,482 | ) | 404,024 | 258,542 | |||||||||||
2 to 1 | 34,017 | (151,973 | ) | — | (117,956 | ) | ||||||||||
3 to 2 | — | 27,633 | (104,852 | ) | (77,219 | ) | ||||||||||
3 to 1 | 6,106 | — | (96,698 | ) | (90,592 | ) | ||||||||||
Net changes of financial assets | 1,003,203 | 74,923 | 1,904,413 | 2,982,539 | ||||||||||||
Write-Offs | — | — | (2,827,349 | ) | (2,827,349 | ) | ||||||||||
Exchange Differences and Others | 11,247 | 1,111 | 1,324 | 13,682 | ||||||||||||
Gross carrying amount at December 31, 2017 | 2,601,836 | 1,542,566 | 2,971,287 | 7,115,689 |
ratio of net charge-offs to average loans, disclosed by loan category.
As stated above under “Presentation of Financial and Other Information”, we have prepared our audited consolidated financial statements for 2019, 2018 and 2017 under IFRS. Data for past years has been prepared under our prior accounting framework, Argentine Banking GAAP, which is not comparable with data prepared under IFRS.
| | | | | | | | | | | | | | | | | | | |
| | Grupo Supervielle S.A. |
| ||||||||||||||||
| | As of December 31, |
| ||||||||||||||||
| | 2021 | | 2020 |
| 2019 |
| ||||||||||||
| | | | Write-offs | | Net Charge- | | | | Write-offs | | Net Charge- |
| | | Write-offs | | Net Charge- |
|
| | | | and | | offs/average | | | | and | | offs/average | | | | and | | offs/average | |
|
| Average |
| reversals |
| loans |
| Average |
| reversals |
| loans | | Average |
| reversals |
| loans | |
Loans: | | | | | |
| |
| |
| |
|
|
| |
| |
|
|
Promissory notes | | 27,829,584 | | (205,010) | | (0.74) | % | 22,397,462 | | (245,946) | | (1.10) | % | 19,200,432 | | (318,668) | | (1.66) | % |
Unsecured corporate loans |
| 20,430,653 |
| (3,948,719) |
| (19.33) | % | 26,383,237 | | (1,297,497) |
| (4.92) | % | 22,306,955 | | (753,802) |
| (3.38) | % |
Overdrafts |
| 7,381,619 |
| (341,551) |
| (4.63) | % | 10,013,128 | | (2,063,781) |
| (20.61) | % | 14,396,482 | | (231,134) |
| (1.61) | % |
Mortgage loans |
| 15,636,904 |
| (9,050) |
| (0.06) | % | 16,070,541 | | (1,050,884) |
| (6.54) | % | 16,884,968 | | — |
| — | % |
Automobile and other secured loans |
| 3,160,678 |
| (37,128) |
| (1.17) | % | 2,402,640 | | (209,650) |
| (8.73) | % | 3,794,236 | | (435,340) |
| (11.47) | % |
Personal loans |
| 29,797,979 |
| (1,932,996) |
| (6.49) | % | 32,066,247 | | (2,651,468) |
| (8.27) | % | 47,128,917 | | (5,292,218) |
| (11.23) | % |
Credit card loans |
| 26,731,491 |
| (908,004) |
| (3.40) | % | 24,268,029 | | (1,575,774) |
| (6.49) | % | 25,153,520 | | (1,861,793) |
| (7.40) | % |
Foreign Trade Loans |
| 18,411,188 |
| (92,200) |
| (0.50) | % | 30,443,210 | | (382,891) |
| (1.26) | % | 52,372,718 | | (1,368,479) |
| (2.61) | % |
Loans to the Financial Sector |
| 40,989 |
| — |
| — |
| 317,486 | | — |
| — |
| 1,141,693 | | — |
| — |
|
Receivables from financial leases |
| 5,454,306 |
| (130,877) |
| (2.40) | % | 5,563,785 | | (148,928) |
| (2.68) | % | 9,122,509 | | (73,004) |
| (0.80) | % |
Total |
| 154,875,391 |
| (7,605,535) |
| (4.91) | % | 169,925,765 |
| (9,626,820) |
| (5.67) | % | 211,502,430 |
| (10,334,436) |
| (4.89) | % |
Grupo Supervielle S.A. | ||||||||
Year ended December 31, | ||||||||
2016 | 2015 | |||||||
(in thousands of Pesos) | ||||||||
Balance at the beginning of the year | 638,648 | 429,358 | ||||||
Provisions charged to income | 1,057,637 | 543,844 | ||||||
Write-offs and reversals(1) | (776,077 | ) | (334,554 | ) | ||||
Other adjustments | — | — | ||||||
Balance at the end of year | 920,208 | 638,648 | ||||||
Provisions net of write-offs and reversals | 1.1% | 1.2% | ||||||
Provisions charged to income | ||||||||
Promissory notes(2) | 58,557 | 2,228 | ||||||
Unsecured corporate loans | 34,929 | 31,089 | ||||||
Overdrafts | 67,737 | 27,392 | ||||||
Mortgage loans | 2,348 | 58 | ||||||
Automobile and other secured loans | 1,512 | 941 | ||||||
Personal loans | 542,792 | 265,770 | ||||||
Credit cards loans | 231,421 | 185,849 | ||||||
Foreign Trade Loans | 67,737 | 1,820 | ||||||
Other financings | 14,943 | 8,507 | ||||||
Other receivables from financial transactions | 11,453 | 5,957 | ||||||
Receivables from financial leases | 24,208 | 14,233 | ||||||
1,057,637 | 543,844 |
158
Grupo Supervielle S.A. | ||||||||
Year ended December 31, | ||||||||
2016 | 2015 | |||||||
(in thousands of Pesos) | ||||||||
Write-offs and reversals | ||||||||
Promissory notes(2) | (40,049 | ) | (6,858 | ) | ||||
Unsecured corporate loans | (39,488 | ) | (4,403 | ) | ||||
Overdrafts | (32,948 | ) | (10,895 | ) | ||||
Mortgage loans | — | (294 | ) | |||||
Automobile and other secured loans | (2,636 | ) | (2,608 | ) | ||||
Personal loans | (372,784 | ) | (186,248 | ) | ||||
Credit cards loans | (254,072 | ) | (108,206 | ) | ||||
Foreign Trade Loans | — | — | ||||||
Other financings | (14,393 | ) | (3,852 | ) | ||||
Other receivables from financial transactions | (7,291 | ) | (5,234 | ) | ||||
Receivables from financial leases | (12,416 | ) | (5,956 | ) | ||||
(776,077 | ) | (334,554 | ) |
Allocation of the Allowance for Loan Losses and Other Financing
The following table allocates the allowanceallocation of allowances for loan and other financing losses by category of loans are included in Note 1.11 and sets forth the percentage distributionNote 26 of the total allowances for each of the years ended December 31, 2019, 2018 and 2017.
Grupo Supervielle S.A. | |||||||||||||||||||||||||||
As of December 31, | |||||||||||||||||||||||||||
2019 | 2018 | 2017 | |||||||||||||||||||||||||
Amount | % of Total Financing | % of Financing Category | Amount | % of Total Financing | % of Financing Category | Amount | % of Total Financing | % of Financing Category | |||||||||||||||||||
(in thousand of Pesos, except percentages) | |||||||||||||||||||||||||||
Loans: | |||||||||||||||||||||||||||
Promissory notes | 284,693 | 4.2% | 4.3% | 284,927 | 3.8% | 3.8% | 261,296 | 3.7% | 3.7% | ||||||||||||||||||
Unsecured corporate loans | 541,700 | 8.0% | 8.2% | 378,195 | 5.0% | 5.1% | 287,890 | 4.0% | 4.1% | ||||||||||||||||||
Overdrafts | 692,564 | 10.3% | 10.5% | 432,073 | 5.7% | 5.8% | 476,226 | 6.7% | 6.8% | ||||||||||||||||||
Mortgage loans | 386,081 | 5.7% | 5.8% | 147,917 | 1.9% | 2.0% | 45,334 | 0.6% | 0.6% | ||||||||||||||||||
Automobile and other secured loans | 112,124 | 1.7% | 1.7% | 265,518 | 3.5% | 3.6% | 27,019 | 0.4% | 0.4% | ||||||||||||||||||
Personal loans | 2,171,684 | 32.2% | 32.8% | 3,637,929 | 47.9% | 48.8% | 3,779,555 | 53.1% | 53.9% | ||||||||||||||||||
Credit card loans | 1,167,572 | 17.3% | 17.6% | 1,690,892 | 22.3% | 22.7% | 1,917,236 | 26.9% | 27.4% | ||||||||||||||||||
Foreign Trade Loans | 534,815 | 7.9% | 8.1% | 420,085 | 5.5% | 5.6% | 75,937 | 1.1% | 1.1% | ||||||||||||||||||
Other financings | 735,265 | 10.9% | 11.1% | 201,165 | 2.6% | 2.7% | 138,445 | 1.9% | 2.0% | ||||||||||||||||||
Total Loans | 6,626,498 | 98.1% | 100.0% | 7,458,701 | 98.2% | 100.0% | 7,008,938 | 98.5% | 100.0% | ||||||||||||||||||
Other receivables from financial transactions | 40,353 | 0.6% | 100.0% | 37,748 | 0.5% | 100.0% | 25,868 | 0.4% | 100.0% | ||||||||||||||||||
Receivables from financial leases | 85.088 | 1.3% | 100.0% | 97,140 | 1.3% | 100.0% | 80,883 | 1.1% | 100.0% | ||||||||||||||||||
Total | 6,751,939 | 100.0% | 100.0% | 7,593,589 | 100.0% | 100.0% | 7,115,689 | 100.0% | 100.0% |
As stated above under “Presentation of Financial and Other Information”, we have prepared our audited consolidated financial statementsstatements. See “Item 5.E. Critical Accounting Estimates—Allowances for 2019, 2018 and 2017 under IFRS. Data for past years has been prepared under our prior accounting framework, Argentine Banking GAAP, which is not comparable with data prepared under IFRS.
159 Loan Losses”.
124
Grupo Supervielle S.A. | ||||||||||||||||||
Year ended December 31, | ||||||||||||||||||
2016 | 2015 | |||||||||||||||||
Amount | % of Total Financing | % of Financing Category | Amount | % of Total Financing | % of Financing Category | |||||||||||||
Loans: | ||||||||||||||||||
Promissory notes(1) | 74,272 | 8.1% | 8.3% | 53,627 | 8.4% | 8.7% | ||||||||||||
Unsecured corporate loans | 41,020 | 4.5% | 4.6% | 50,545 | 7.9% | 8.2% | ||||||||||||
Overdrafts | 47,237 | 5.1% | 5.3% | 43,902 | 6.9% | 7.1% | ||||||||||||
Mortgage loans | 2,203 | 0.2% | 0.2% | 815 | 0.1% | 0.1% | ||||||||||||
Automobile and other secured loans | 993 | 0.1% | 0.1% | 2,535 | 0.4% | 0.4% | ||||||||||||
Personal loans | 446,552 | 48.6% | 49.7% | 225,616 | 35.3% | 36.5% | ||||||||||||
Credit card loans | 158,166 | 17.2% | 17.6% | 212,423 | 33.3% | 34.4% | ||||||||||||
Foreign Trade Loans | 33,777 | 3.7% | 3.8% | 11,212 | 1.8% | 1.8% | ||||||||||||
Other financings | 94,927 | 10.3% | 10.5% | 16,638 | 2.6% | 2.7% | ||||||||||||
Total Loans | 899,147 | 97.7% | 100.0% | 617,313 | 96.7% | 100.0% | ||||||||||||
Other receivables from financial transactions | 5,807 | 0.6% | 100.0% | 5,944 | 0.9% | 100.0% | ||||||||||||
Receivables from financial leases | 15,254 | 1.7% | 100.0% | 15,391 | 2.4% | 100.0% | ||||||||||||
Total | 920,208 | 100.0% | 100.0% | 638,648 | 100.0% | 100.0% |
Loans and Other Financing Portfolio by Economic Activity
The table below analyzes our loan and other financing portfolio according to the borrower’s main economic activity as of December 31, 2019, 20182021 and 2017.2020.
Grupo Supervielle S.A. | ||||||||||||||||||
As of December 31, | ||||||||||||||||||
2019 | 2018 | 2017 | ||||||||||||||||
Loan Portfolio | % of Loan Portfolio | Loan Portfolio | % of Loan Portfolio | Loan Portfolio | % of Loan Portfolio | |||||||||||||
Oils and oilseeds | 271,726 | 0.3% | 392,996 | 0.3% | 334,471 | 0.2% | ||||||||||||
Agriculture, crops and fruit | 3,401,331 | 3.6% | 5,511,726 | 4.4% | 6,815,415 | 4.8% | ||||||||||||
Manufactured foodstuff, cattle beef | 2,812,100 | 3.0% | 3,229,219 | 2.6% | 2,220,309 | 1.6% | ||||||||||||
Household items, sales / Trading | 191,346 | 0.2% | 256,426 | 0.2% | 1,493,302 | 1.1% | ||||||||||||
Automotive vehicles and car parts | 1,603,689 | 1.7% | 2,961,449 | 2.3% | 3,395,824 | 2.4% | ||||||||||||
Sugar | 688,792 | 0.7% | 788,242 | 0.6% | 1,553,579 | 1.1% | ||||||||||||
Foreign and local banks | 12,804 | 0.0% | 41,927 | 0.0% | 943,469 | 0.7% | ||||||||||||
Alcoholic beverages | 138,543 | 0.1% | 373,962 | 0.3% | 333,613 | 0.2% | ||||||||||||
Civil construction | 5,683,637 | 6.0% | 7,710,792 | 6.1% | 2,704,144 | 1.9% | ||||||||||||
Road works and specialized construction | 4,028,745 | 4.3% | 3,982,059 | 3.2% | 7,776,841 | 5.5% | ||||||||||||
Cooperatives and small financial institutions | 2,513,993 | 2.7% | 5,974,994 | 4.7% | 7,318,176 | 5.2% | ||||||||||||
Private and public mail services | 2,234 | 0.0% | 5,063 | 0.0% | 43,431 | 0.0% | ||||||||||||
Cattle raising | 1,125,568 | 1.2% | 1,764,965 | 1.4% | 452,050 | 0.3% | ||||||||||||
Leather | 272,573 | 0.3% | 203,010 | 0.2% | 274,812 | 0.2% | ||||||||||||
Electricity and gas distribution | 1,624,274 | 1.7% | 1,376,568 | 1.1% | 2,578,091 | 1.8% | ||||||||||||
Home appliances, audio and video devices, production and importation | 68,816 | 0.1% | 366,755 | 0.3% | 537,346 | 0.4% | ||||||||||||
Hydrocarbon extraction and production | 10,627 | 0.0% | 49,697 | 0.0% | 813,607 | 0.6% | ||||||||||||
Families and individuals(1) | 40,587,580 | 42.8% | 54,441,690 | 43.1% | 64,692,997 | 45.8% | ||||||||||||
Hypermarkets and supermarkets | 254,553 | 0.3% | 68,375 | 0.1% | 3,522,127 | 2.5% |
| | | | | | | | | | | | | | |
| | Grupo Supervielle S.A. |
| |||||||||||
| | As of December 31, |
| |||||||||||
| | 2021 | | 2020 |
| | 2019 |
| ||||||
| | | | % of | | | | % of |
| | | | % of |
|
| | Loan | | Loan | | Loan | | Loan | | | Loan | | Loan | |
|
| Portfolio |
| Portfolio |
| Portfolio |
| Portfolio | | | Portfolio |
| Portfolio | |
Oils and oilseeds | | 718,538 | | 0.4 | % | 454,796 | | 0.3 | % | | 558,377 | | 0.3 | % |
Agriculture, crops and fruit | | 10,654,884 | | 6.4 | % | 13,061,795 | | 7.6 | % | | 6,989,491 | | 3.6 | % |
Manufactured foodstuff, cattle beef |
| 8,398,900 |
| 5.1 | % | 9,003,551 |
| 5.2 | % | | 5,778,664 |
| 3.0 | % |
Household items, sales / Trading |
| 418,265 |
| — | % | 83,249 |
| — | % | | 393,202 |
| — | % |
Automotive vehicles and car parts |
| 2,458,797 |
| 1.5 | % | 2,818,157 |
| 1.6 | % | | 3,295,466 |
| 1.7 | % |
Sugar |
| 972,617 |
| 0.6 | % | 1,208,742 |
| 0.7 | % | | 1,415,418 |
| 0.7 | % |
Foreign and local banks |
| 43,019 |
| — | % | 10,555 |
| — | % | | 26,311 |
| — | % |
Alcoholic beverages |
| 386,641 |
| 0.2 | % | 231,656 |
| 0.1 | % | | 284,696 |
| 0.1 | % |
Civil construction |
| 1,186,026 |
| 0.7 | % | 4,351,226 |
| 2.5 | % | | 11,679,466 |
| 6.0 | % |
Road works and specialized construction |
| 4,179,606 |
| 2.5 | % | 4,603,866 |
| 2.7 | % | | 8,278,782 |
| 4.3 | % |
Cooperatives and small financial institutions |
| 6,762,022 |
| 4.1 | % | 4,583,845 |
| 2.7 | % | | 5,166,075 |
| 2.7 | % |
Private and public mail services |
| 15,193 |
| — | % | 22,001 |
| — | % | | 4,591 |
| — | % |
Cattle raising |
| 2,812,508 |
| 1.7 | % | 3,367,336 |
| 2.0 | % | | 2,312,962 |
| 1.2 | % |
Leather |
| 285,952 |
| 0.2 | % | 419,972 |
| 0.2 | % | | 560,118 |
| 0.3 | % |
Electricity and gas distribution |
| 1,544,942 |
| 0.9 | % | 3,393,275 |
| 2.0 | % | | 3,337,767 |
| 1.7 | % |
Home appliances, audio and video devices, production and importation |
| 340,934 |
| — | % | 69,484 |
| — | % | | 141,412 |
| — | % |
Hydrocarbon extraction and production |
| 243,014 |
| 0.1 | % | 205,798 |
| 0.1 | % | | 21,838 |
| 0.0 | % |
Families and individuals(1) |
| 77,208,052 |
| 46.6 | % | 79,075,148 |
| 46.0 | % | | 83,404,566 |
| 42.8 | % |
Hypermarkets and supermarkets |
| 477,602 |
| 0.3 | % | 324,891 |
| 0.2 | % | | 523,088 |
| 0.3 | % |
Machines and tools – Production, sale and/or lease |
| 1,299,156 |
| 0.8 | % | 1,588,816 |
| 0.9 | % | | 2,057,536 |
| 1.1 | % |
Motorcycles, parts and accessories |
| 1,969 |
| — | % | 25,085 |
| — | % | | 59,147 |
| — | % |
Paper and cardboard |
| 769,666 |
| 0.5 | % | 937,550 |
| 0.5 | % | | 1,277,218 |
| 0.7 | % |
Plastic - Manufactures |
| 743,077 |
| 0.4 | % | 1,025,946 |
| 0.6 | % | | 1,567,834 |
| 0.8 | % |
Metal products |
| 1,044,349 |
| 0.6 | % | 1,428,241 |
| 0.8 | % | | 1,563,135 |
| 0.8 | % |
Pharmaceutical products and laboratories |
| 1,047,699 |
| 0.6 | % | 1,001,446 |
| 0.6 | % | | 1,397,222 |
| 0.7 | % |
Chemical products |
| 1,467,135 |
| 0.9 | % | 1,826,181 |
| 1.1 | % | | 1,895,595 |
| 1.0 | % |
Waste collection and recycling |
| 2,442,987 |
| 1.5 | % | 1,776,357 |
| 1.0 | % | | 1,771,938 |
| 0.9 | % |
Corporate services |
| 2,001,128 |
| 1.2 | % | 2,314,522 |
| 1.3 | % | | 2,420,309 |
| 1.2 | % |
Health services |
| 2,132,547 |
| 1.3 | % | 1,424,801 |
| 0.8 | % | | 1,104,499 |
| 0.6 | % |
Mineral extraction and production |
| 2,317,786 |
| 1.4 | % | 635,008 |
| 0.4 | % | | 9,146,541 |
| 4.7 | % |
Telecommunications |
| 39,553 |
| — | % | 35,104 |
| — | % | | 64,036 |
| — | % |
Textile industry |
| 4,367,024 |
| 2.6 | % | 3,108,228 |
| 1.8 | % | | 3,900,564 |
| 2.0 | % |
Cargo transportation |
| 2,859,299 |
| 1.7 | % | 2,217,298 |
| 1.3 | % | | 4,147,751 |
| 2.1 | % |
Wine industry |
| 6,124,065 |
| 3.7 | % | 5,874,417 |
| 3.4 | % | | 7,241,571 |
| 3.7 | % |
Real estate agencies |
| 133,978 |
| 0.1 | % | 306,920 |
| 0.2 | % | | 433,199 |
| 0.2 | % |
Other(2) |
| 17,623,218 |
| 10.6 | % | 18,986,351 |
| 11.1 | % | | 20,508,627 |
| 10.5 | % |
Total |
| 165,522,148 |
| 100.0 | % | 171,801,618 |
| 100.0 | % | | 194,729,014 |
| 100.0 | % |
160 (1)Loans for personal consumption.
(2)Includes all other industries. None of such industries exceeds 1% of the total loan and other financing portfolio.
125
Grupo Supervielle S.A. | ||||||||||||||||||
As of December 31, | ||||||||||||||||||
2019 | 2018 | 2017 | ||||||||||||||||
Loan Portfolio | % of Loan Portfolio | Loan Portfolio | % of Loan Portfolio | Loan Portfolio | % of Loan Portfolio | |||||||||||||
Machines and tools – Production, sale and/or lease | 1,001,269 | 1.1% | 2,302,697 | 1.8% | 1,377,353 | 1.0% | ||||||||||||
Motorcycles, parts and accessories | 28,783 | 0.0% | 82,802 | 0.1% | — | 0.0% | ||||||||||||
Paper and cardboard | 621,539 | 0.7% | 496,765 | 0.4% | 623,036 | 0.4% | ||||||||||||
Plastic – Manufactures | 762,963 | 0.8% | 1,769,193 | 1.4% | 1,871,958 | 1.3% | ||||||||||||
Metal products | 760,676 | 0.8% | 248,930 | 0.2% | 354,041 | 0.3% | ||||||||||||
Pharmaceutical products and laboratories | 679,937 | 0.7% | 834,913 | 0.7% | 1,180,162 | 0.8% | ||||||||||||
Chemical products | 922,463 | 1.0% | 2,125,822 | 1.7% | 890,539 | 0.6% | ||||||||||||
Waste collection and recycling | 862,287 | 0.9% | 944,545 | 0.7% | 873,639 | 0.6% | ||||||||||||
Corporate services | 1,177,807 | 1.2% | 1,321,297 | 1.0% | 1,430,578 | 1.0% | ||||||||||||
Health services | 537,488 | 0.6% | 916,310 | 0.7% | 817,804 | 0.6% | ||||||||||||
Mineral extraction and production | 4,451,027 | 4.7% | 5,510,443 | 4.4% | 2,829,145 | 2.0% | ||||||||||||
Telecommunications | 31,162 | 0.0% | 69,958 | 0.1% | 35,361 | 0.0% | ||||||||||||
Textile industry | 1,898,151 | 2.0% | 2,478,583 | 2.0% | 1,253,183 | 0.9% | ||||||||||||
Cargo transportation | 2,018,441 | 2.1% | 2,431,584 | 1.9% | 1,796,995 | 1.3% | ||||||||||||
Wine industry | 3,524,002 | 3.7% | 3,442,195 | 2.7% | 2,332,249 | 1.7% | ||||||||||||
Real estate agencies | 210,810 | 0.2% | 353,081 | 0.3% | 552,593 | 0.4% | ||||||||||||
Other(2) | 9,980,214 | 10.5% | 11,536,192 | 9.1% | 15,094,808 | 10.7% | ||||||||||||
Total | 94,761,950 | 100.0% | 126,365,225 | 100.0% | 141,117,048 | 100.0% |
As stated above under “Presentation of Financial and Other Information”, we have prepared our audited consolidated financial statements for 2019, 2018 and 2017 under IFRS. Data for past years has been prepared under our prior accounting framework, Argentine Banking GAAP, which is not comparable with data prepared under IFRS.
Grupo Supervielle S.A. | ||||||||||||
As of December 31, | ||||||||||||
2016 | 2015 | |||||||||||
Loan Portfolio | % of Loan Portfolio | Loan Portfolio | % of Loan Portfolio | |||||||||
(in thousands of Pesos, except percentages) | ||||||||||||
Oils and oilseeds | 31,452 | 0.1% | 40,392 | 0.2% | ||||||||
Agriculture, crops and fruit | 1,217,849 | 3.2% | 780,888 | 3.5% | ||||||||
Manufactured foodstuff, cattle beef | 611,499 | 1.6% | 373,955 | 1.7% | ||||||||
Household items, sales / Trading | 744,842 | 2.0% | 162,113 | 0.7% | ||||||||
Automotive vehicles and car parts | 360,406 | 0.9% | 267,917 | 1.2% | ||||||||
Sugar | 256,371 | 0.7% | 117,589 | 0.5% | ||||||||
Foreign and local banks | 127,058 | 0.3% | — | — | ||||||||
Alcoholic beverages | 260,210 | 0.7% | 135,636 | 0.6% | ||||||||
Civil construction | 745,777 | 2.0% | 590,772 | 2.7% | ||||||||
Road works and specialized construction | 1,772,852 | 4.7% | 1,090,153 | 4.9% | ||||||||
Cooperatives and small financial institutions | 1,171,755 | 3.1% | 339,852 | 1.5% | ||||||||
Private and public mail services | 42,326 | 0.1% | 36,510 | 0.2% | ||||||||
Cattle raising | 221,898 | 0.6% | 116,047 | 0.5% | ||||||||
Leather | 89,509 | 0.2% | 73,699 | 0.3% | ||||||||
Electricity and gas distribution | 315,947 | 0.8% | 66,588 | 0.3% | ||||||||
Home appliances, audio and video devices, production and importation | 371,177 | 1.0% | 61,281 | 0.3% | ||||||||
Hydrocarbon extraction and production | 400,658 | 1.1% | 12,610 | 0.1% | ||||||||
Families and individuals(1) | 19,222,165 | 50.5% | 13,733,797 | 61.6% | ||||||||
Hypermarkets and supermarkets | 1,324,768 | 3.5% | 391,316 | 1.8% |
161
Grupo Supervielle S.A. | ||||||||||||
As of December 31, | ||||||||||||
2016 | 2015 | |||||||||||
Loan Portfolio | % of Loan Portfolio | Loan Portfolio | % of Loan Portfolio | |||||||||
(in thousands of Pesos, except percentages) | ||||||||||||
Machines and tools – Production, sale and/or lease | 963,616 | 2.5% | 183,052 | 0.8% | ||||||||
Motorcycles, parts and accessories | — | 0.0% | — | 0.0% | ||||||||
Paper and cardboard | 141,229 | 0.4% | 70,663 | 0.3% | ||||||||
Plastic – Manufactures | 265,851 | 0.7% | 309,765 | 1.4% | ||||||||
Metal products | 55,185 | 0.1% | 56,168 | 0.3% | ||||||||
Pharmaceutical products and laboratories | 517,629 | 1.4% | 243,158 | 1.1% | ||||||||
Chemical products | 146,341 | 0.4% | 68,864 | 0.3% | ||||||||
Waste collection and recycling | 294,848 | 0.8% | 273,732 | 1.2% | ||||||||
Corporate services | 318,056 | 0.8% | 88,831 | 0.4% | ||||||||
Health services | 142,107 | 0.4% | 59,358 | 0.3% | ||||||||
Mineral extraction and production | 555,825 | 1.5% | 69,567 | 0.3% | ||||||||
Telecommunications | 2,964 | 0.0% | 5,402 | 0.0% | ||||||||
Textile industry | 159,865 | 0.4% | 250,000 | 1.1% | ||||||||
Cargo transportation | 447,220 | 1.2% | 322,362 | 1.5% | ||||||||
Wine industry | 662,557 | 1.7% | 396,564 | 1.8% | ||||||||
Real estate agencies | 93,432 | 0.2% | 42,974 | 0.2% | ||||||||
Other(2) | 3,981,807 | 10.5% | 1,712,001 | 6.6% | ||||||||
Total | 38,037,051 | 100.0% | 22,293,826 | 100% |
Composition of Deposits
The following table sets out the composition of each category of deposits by currency of denomination that exceeded 10% of average total deposits at December 31, 2019, 20182021 and 2017.2020.
Grupo Supervielle S.A. | |||||||||||||||||||||||||||||||
As of December 31, | |||||||||||||||||||||||||||||||
2019 | 2018 | 2017 | |||||||||||||||||||||||||||||
Average balance | Average nominal rate | Average balance | Average nominal rate | Average balance | Average nominal rate | ||||||||||||||||||||||||||
(in thousands of Pesos, except percentages) | |||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | ||||||||||||||||||
| | Grupo Supervielle S.A. |
| ||||||||||||||||||||||||||||
| | As of December 31, |
| ||||||||||||||||||||||||||||
| | 2021 | | 2020 |
| 2019 |
| ||||||||||||||||||||||||
| | | | Average | | | | Average |
| | | Average |
| ||||||||||||||||||
| | Average | | nominal | | Average | | nominal | | Average | | nominal | | ||||||||||||||||||
|
| balance |
| rate |
| balance |
| rate | | balance |
| rate | | ||||||||||||||||||
Deposits in domestic bank offices by local depositors | |
| |
| |
| |
|
|
| |
|
| ||||||||||||||||||
Non-interest-bearing current accounts | �� | |
| |
| |
| |
|
|
| |
|
| |||||||||||||||||
Average |
|
|
|
|
|
|
|
| |
|
|
| | ||||||||||||||||||
Pesos | 15,144,990 | 0.4% | 17,312,428 | 0.0% | 18,674,184 | 0.0% |
| 28,153,316 |
| — | % | 32,266,165 |
| — | % | 31,121,868 |
| — | % | ||||||||||||
Dollars | 8,877,387 | 0.0% | 12,366,823 | 0.0% | 8,456,372 | 0.0% |
| 1,718,812 |
| — | % | 2,344,623 |
| — | % | 18,242,394 |
| — | % | ||||||||||||
Total | 24,022,377 | 0.2% | 29,679,251 | 0.0% | 27,130,556 | 0.0% |
| 29,872,128 |
| — | % | 34,610,788 |
| — | % | 49,364,262 |
| — | % | ||||||||||||
Savings accounts | |||||||||||||||||||||||||||||||
Average | |||||||||||||||||||||||||||||||
Pesos | 16,672,056 | 0.4% | 21,964,924 | 0.3% | 24,999,682 | 0.0% | |||||||||||||||||||||||||
Dollars | 15,486,372 | 0.0% | 17,535,136 | 0.0% | 10,684,751 | 0.0% | |||||||||||||||||||||||||
Total | 32,158,428 | 0.2% | 39,500,060 | 0.2% | 35,684,433 | 0.0% | |||||||||||||||||||||||||
Special checking accounts | |||||||||||||||||||||||||||||||
Average | |||||||||||||||||||||||||||||||
Pesos | 14,927,905 | 43.3% | 25,989,349 | 30.0% | 11,512,318 | 13.4% | |||||||||||||||||||||||||
Dollars | 11,497,205 | 0.3% | 8,044,522 | 0.4% | 2,504,392 | 0.3% | |||||||||||||||||||||||||
Total | 26,425,110 | 24.6% | 34,033,871 | 23.0% | 14,016,710 | 11.1% | |||||||||||||||||||||||||
Time deposits | |||||||||||||||||||||||||||||||
Average | |||||||||||||||||||||||||||||||
Pesos | 41,793,356 | 48.8% | 36,273,834 | 27.3% | 34,952,926 | 16.5% | |||||||||||||||||||||||||
Dollars | 5,790,578 | 1.3% | 6,865,968 | 1.2% | 3,685,821 | 0.6% | |||||||||||||||||||||||||
Total | 47,583,934 | 43.1% | 43,139,802 | 23.2% | 38,638,747 | 15.0% |
162
| | | | | | | | | | | | | |
| | Grupo Supervielle S.A. |
| ||||||||||
| | As of December 31, |
| ||||||||||
|
| 2021 |
| 2020 |
| 2019 |
| ||||||
| | | | Average | | | | Average |
| | | Average |
|
| | Average | | nominal | | Average | | nominal | | Average | | nominal | |
| | balance | | rate | | balance | | rate | | balance | | rate | |
Savings accounts | |
| |
| |
| |
|
|
| |
|
|
Average | |
| |
| |
| |
|
|
| |
|
|
Pesos |
| 31,956,291 |
| 0.3 | % | 35,343,171 |
| 0.2 | % | 34,259,879 |
| 0.4 | % |
Dollars |
| 12,529,645 |
| — | % | 14,739,617 |
| — | % | 31,823,384 |
| — | % |
Total |
| 44,485,936 |
| 0.2 | % | 50,082,787 |
| 0.1 | % | 66,083,263 |
| 0.2 | % |
Special checking accounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 57,363,992 |
| 36.8 | % | 42,966,550 |
| 22.2 | % | 30,675,774 |
| 43.3 | % |
Dollars |
| 10,684,512 |
| 0.4 | % | 10,861,924 |
| 0.3 | % | 23,625,932 |
| 0.3 | % |
Total |
| 68,048,504 |
| 31.1 | % | 53,828,475 |
| 17.8 | % | 54,301,706 |
| 24.6 | % |
Time deposits |
|
|
| |
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 91,189,710 |
| 41.2 | % | 84,454,763 |
| 35.0 | % | 85,882,349 |
| 48.8 | % |
Dollars |
| 4,414,511 |
| 0.40 | % | 6,844,165 |
| 1.80 | % | 11,899,222 |
| 1.30 | % |
Total |
| 95,604,221 |
| 39.4 | % | 91,298,928 |
| 32.5 | % | 97,781,571 |
| 43.1 | % |
126
| | | | | | | | | | | | |
| | Grupo Supervielle S.A. | ||||||||||
| | As of December 31, | ||||||||||
| | 2021 | | 2020 |
| 2019 | ||||||
| | | | Average | | | | Average | | | | Average |
| | Average | | nominal | | Average | | nominal | | Average | | nominal |
|
| balance |
| rate |
| balance |
| rate |
| balance |
| rate |
| | (in thousands of Pesos, except percentages) | ||||||||||
Deposits in domestic bank offices by foreign depositors |
|
|
|
|
|
|
|
| |
|
|
|
Non-interest-bearing current accounts |
|
|
|
|
|
|
|
| |
|
|
|
Average |
|
|
|
|
|
|
|
| |
|
|
|
Pesos |
| 58 |
| |
| 356 |
|
| | 966 |
|
|
Dollars |
| — |
| |
| — |
|
| | — |
|
|
Total |
| 58 |
| |
| 356 |
|
| | 966 |
|
|
Savings accounts |
|
|
| |
|
|
|
| |
|
|
|
Average |
|
|
| |
|
|
|
| |
|
|
|
Pesos |
| 3,623 |
| |
| 3,929 |
|
| | 11,715 |
|
|
Dollars |
| 16,731 |
| |
| 10,880 |
|
| | 43,606 |
|
|
Total |
| 20,354 |
| |
| 14,809 |
|
| | 55,321 |
|
|
Time deposits |
|
|
| |
|
|
|
| |
|
|
|
Average |
|
|
| |
|
|
|
| |
|
|
|
Pesos |
| 5,459 |
| |
| 7,876 |
|
| | 5,357 |
|
|
Dollars |
| — |
| |
| — |
|
| | 452 |
|
|
Total |
| 5,459 |
| |
| 7,876 |
|
| | 5,809 |
|
|
Grupo Supervielle S.A. | ||||||||||||||||||
As of December 31, | ||||||||||||||||||
2019 | 2018 | 2017 | ||||||||||||||||
Average balance | Average nominal rate | Average balance | Average nominal rate | Average balance | Average nominal rate | |||||||||||||
(in thousands of Pesos, except percentages) | ||||||||||||||||||
Deposits in domestic bank offices by foreign depositors | ||||||||||||||||||
Non-interest-bearing current accounts | ||||||||||||||||||
Average | ||||||||||||||||||
Pesos | 470 | 277 | 52 | |||||||||||||||
Dollars | — | — | — | |||||||||||||||
Total | 470 | 277 | 52 | |||||||||||||||
Savings accounts | ||||||||||||||||||
Average | ||||||||||||||||||
Pesos | 5,701 | 5,426 | 6,319 | |||||||||||||||
Dollars | 21,220 | 21,650 | 17,577 | |||||||||||||||
Total | 26,921 | 27,076 | 23,896 | |||||||||||||||
Time deposits | �� | |||||||||||||||||
Average | ||||||||||||||||||
Pesos | 2,607 | 2,400 | 845 | |||||||||||||||
Dollars | 220 | 2,727 | — | |||||||||||||||
Total | 2,827 | 5,127 | 845 |
| | | | | | |
|
| 2021 |
| 2020 |
| 2019 |
|
| (in thousands of Pesos) | ||||
Uninsured deposits |
| 191,034,412 |
| 161,421,727 |
| 96,244,392 |
Maturity of Deposits
The following table sets forth information regarding the maturity of our time deposits exceeding Ps.100,000the SEDESA insurance limit at December 31, 2019.2021.
| | | |
| | Grupo Supervielle S.A. | |
| | As of December 31, | |
| 2021 | ||
| | (in thousands of Pesos) | |
Time Deposits | |||
3 months or less; | 64,035,624 | ||
Over 3 months | 633,050 | ||
Over 6 months | 58,608 | ||
Over 12 months | — | ||
Total Time Deposits(1) |
64,727,282
163 (1)Only principal. Excludes the CER and UVA adjustment.
Law No. 24485 and Decree No. 540/95 established the creation of the Deposit Insurance System to cover the risk attached to bank deposits, in addition to the system of privileges and safeguards envisaged in the Financial Institutions Law.
The maximum amount for this insurance system to demand deposits and time deposits denominated either in Pesos and/or in foreign currency was set at Ps.1,000,000 as from March 1, 2019 and increased to Ps.1,500,000 as of May 1, 2020.
This system does not cover deposits made by other financial institutions (including time deposit certificates acquired through a secondary transaction), deposits made by parties related to Banco Supervielle, either directly or indirectly, deposits of securities, acceptances or guarantees and those deposits set up at an interest rate exceeding the one established regularly by the Argentine Central Bank.
127
Short-term Borrowings
The table below shows our short-term borrowings as of the dates indicated.
Grupo Supervielle S.A. | ||||||||||||||||||
As of December 31, | ||||||||||||||||||
2019 | 2018 | 2017 | ||||||||||||||||
Amount | Annualized Rate | Amount | Annualized Rate | Amount | Annualized Rate | |||||||||||||
(in thousands of Pesos, except percentages) | ||||||||||||||||||
International banks and Institutions: | ||||||||||||||||||
Total amount outstanding at the end of the reported period | 8,072,223 | 5.3% | 10,439,002 | 17.3% | 6,321,550 | 3.3% | ||||||||||||
Average during period | 6,342,320 | 18.9% | 7,659,521 | 17.3% | 1,926,077 | 3.5% | ||||||||||||
Maximum monthly average | 8,892,296 | 12,667,825 | 4,922,815 | |||||||||||||||
Financing received from Argentine financial institutions: | ||||||||||||||||||
Total amount outstanding at the end of the reported period | 927,573 | 19.2% | 2,003,652 | 46.8% | 106,520 | 20.6% | ||||||||||||
Average during period | 1,332,398 | 67.0% | 3,704,668 | 61.8% | 2,076,397 | 22.8% | ||||||||||||
Maximum monthly average | 1,751,669 | 6,667,832 | 4,555,244 | |||||||||||||||
Other(1) | ||||||||||||||||||
Total amount outstanding at the end of the reported period | 9,623,856 | 0.0% | 9,573,892 | 16.0% | 12,033,720 | 0.0% | ||||||||||||
Average during year | 4,890,716 | 0.0% | 12,812,696 | 25.0% | 7,282,397 | 0.0% | ||||||||||||
Maximum monthly average | 6,340,259 | 17,207,184 | 8,028,690 | |||||||||||||||
Unsubordinated Corporate Bonds | ||||||||||||||||||
Total amount outstanding at the end of the reported period | 5,708,153 | 26.4% | 13,409,387 | 31.7% | 18,867,881 | 26.2% | ||||||||||||
Average during year | 9,770,219 | 34.1% | 4,584,315 | 40.8% | 1,401,671 | 29.1% | ||||||||||||
Maximum monthly average | 11,381,990 | 5,173,354 | 4,822,099 |
| | | | | | | | | | | | | |
| | Grupo Supervielle S.A. |
| ||||||||||
| | As of December 31, |
| ||||||||||
| | 2021 | | 2020 |
| 2019 |
| ||||||
|
| |
| Annualized |
| |
| Annualized |
| |
| Annualized |
|
| | Amount | | Rate | | Amount | | Rate |
| Amount | | Rate |
|
| | (in thousands of Pesos, except percentages) |
| ||||||||||
International banks and Institutions: |
|
|
|
|
|
|
|
| |
|
|
| |
Total amount outstanding at the end of the reported period |
| 5,133,972 |
| 2.9 | % | 7,844,837 |
| 3.7 | % | 16,587,839 |
| 5.3 | % |
Average during period |
| 5,963,154 |
| 4.8 | % | 36,390,955 |
| 5.7 | % | 13,033,013 |
| 18.9 | % |
Maximum monthly average |
| 7,029,625 |
| |
| 80,307,454 |
| |
| 18,273,030 |
| |
|
Financing received from Argentine financial institutions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amount outstanding at the end of the reported period |
| 1,103,220 |
| 32.5 | % | 943,950 |
| 30.2 | % | 1,906,096 |
| 19.2 | % |
Average during period |
| 974,468 |
| 18.3 | % | 1,266,003 |
| 35.3 | % | 2,737,982 |
| 67.0 | % |
Maximum monthly average |
| 1,296,141 |
| |
| 1,626,881 |
| |
| 3,599,554 |
| |
|
Other(1) |
|
|
|
|
|
|
|
|
| |
|
|
|
Total amount outstanding at the end of the reported period |
| 14,164,564 |
| — | % | 13,778,542 |
| — | % | 19,776,334 |
| — | % |
Average during year |
| 10,867,525 |
| — | % | 13,309,503 |
| — | % | 10,050,071 |
| — | % |
Maximum monthly average |
| 14,354,476 |
| |
| 16,240,642 |
| |
| 13,028,777 |
| |
|
Unsubordinated Corporate Bonds |
|
|
|
|
|
|
|
|
| |
|
|
|
Total amount outstanding at the end of the reported period |
| 1,008,488 |
| 34.1 | % | 6,259,903 |
| 34.3 | % | 11,729,845 |
| 26.4 | % |
Average during year |
| 2,166,239 |
| 14.4 | % | 7,714,807 |
| 26.5 | % | 20,077,099 |
| 34.1 | % |
Maximum monthly average |
| 4,230,181 |
| |
| 10,659,219 |
| |
| 23,389,173 |
| |
|
(1)Includes mainly collections and other transactions on behalf of third parties, miscellaneous (payment orders abroad) and social security payment orders pending settlement.
128
Return on Equity and Assets
The following table presents certain selected financial information and ratios for the dates indicated.
Grupo Supervielle S.A. | |||||||||
As of December 31, | |||||||||
2019 | 2018 | 2017 | |||||||
(in thousands of Pesos, except percentages) | |||||||||
Net Income for the year attributable to owners of the parent company | (2,151,600 | ) | (4,658,050 | ) | (1,160,465 | ) | |||
Average total assets(1) | 200,253,801 | 239,177,360 | 194,627,903 | ||||||
Average shareholders’ equity | 23,352,105 | 28,693,558 | 24,943,213 | ||||||
Shareholders’ equity at the end of the period attributable to owners of the parent company | 23,415,797 | 26,080,725 | 30,873,343 | ||||||
Net income as a percentage of: | |||||||||
Average total assets | (1.1% | ) | (1.9% | ) | (0.6% | ) | |||
Average shareholders’ equity | (9.2% | ) | (16.2% | ) | (4.7% | ) | |||
Declared cash dividends | 426,000 | 466,112 | 505,129 | ||||||
Dividend payout ratio(2) | (19.8% | ) | (10.0% | ) | (43.5% | ) | |||
Average shareholders’ equity as a percentage of average total assets | 11.7% | 12.0% | (12.8% | ) |
| | | | | | | |
| | Grupo Supervielle S.A. |
| ||||
| | As of December 31, |
| ||||
|
| 2021 |
| 2020 |
| 2019 |
|
Net Income for the year attributable to owners of the parent company |
| (1,734,541) | | 5,282,780 | | (4,421,383) |
|
Average total assets(1) |
| 398,939,400 | | 386,948,418 | | 411,507,198 |
|
Average shareholders’ equity |
| 53,223,155 | | 51,925,191 | | 47,986,902 |
|
Shareholders’ equity at the end of the period attributable to owners of the parent company |
| 51,509,505 | | 53,812,414 | | 48,117,782 |
|
Net income as a percentage of: |
|
|
|
|
|
|
|
Average total assets |
| (0.4) | % | 1.4 | % | (1.1) | % |
Average shareholders’ equity |
| (3.3) | % | 10.2 | % | (9.2) | % |
Declared cash dividends |
| 252,504 | | 514,711 | | 800,089 |
|
Dividend payout ratio(2) |
| (14.6) | % | 9.7 | % | (18.1) | % |
Average shareholders’ equity as a percentage of average total assets |
| 13.3 | % | 13.4 | % | 11.7 | % |
(1) | Calculated on a daily basis. |
(2) | Calculated by dividing dividend paid in the year by net income for the year attributable to owners of the parent company under IFRS. As mentioned in |
164
Minimum Capital Requirements
Our main subsidiary, the Bank, is required to satisfy minimum capital requirements. The following table sets forth the Bank and CCF’sIUDÚ’s consolidated minimum capital requirements set by the Superintendency as of the dates indicated.
129
As stated above under “Presentation of Financial and Other Information”,Information,” we have prepared our audited consolidated financial statements for 2019, 20182021, 2020 and 20172019 under IFRS. Minimum capital requirements have been prepared in accordance with the rules of the Argentine Central Bank, which is not comparable to data prepared under IFRS.
Year ended December 31, | |||||||||
2019 | 2018 | 2017 | |||||||
(in thousands of Pesos) | |||||||||
Calculation of excess capital: | |||||||||
Allocated to assets at risk | 7,164,842 | 6,090,341 | 4,710,391 | ||||||
Allocated to Bank premises and equipment, intangible assets and equity investment assets | 826,133 | 370,233 | 191,549 | ||||||
Market risk | 251,739 | 301,724 | 121,155 | ||||||
Public sector and securities in investment account | 11,472 | 96,882 | 131,109 | ||||||
Operational Risk | 2,349,952 | 1,486,516 | 1,016,501 | ||||||
Required minimum capital under Central Bank regulations | 10,604,138 | 8,345,696 | 6,170,705 | ||||||
Basic net worth | 16,991,091 | 11,847,865 | 9,903,099 | ||||||
Complementary net worth | 1,033,734 | 1,163,939 | 913,256 | ||||||
Deductions | (2,999,716 | ) | (867,798 | ) | (386,192 | ) | |||
Total capital under Central Bank regulations | 15,025,109 | 12,144,006 | 10,430,163 | ||||||
Excess capital | 4,420,971 | 3,798,310 | 4,259,458 | ||||||
Credit Risk Weighted Assets(1) | 96,585,712 | 79,580,781 | 60,939,300 | ||||||
Risk Weighted Assets(1) | 129,638,218 | 101,933,777 | 75,301,392 | ||||||
Selected capital and liquidity ratios: | |||||||||
Regulatory capital/risk weighted assets | 15.6% | 15.3% | 13.9% | ||||||
Tier 1 Capital / Risk Weighted assets | 10.8% | 10.8% | 12.6% | ||||||
Average shareholders’ equity as a percentage of average total assets | 10.4% | 9.9% | 10.5% | ||||||
Total liabilities as a multiple of total shareholders’ equity | 7.1 | x | 9.4 | x | 8.2 | x | |||
Cash as a percentage of total deposits | 28.2% | 35.1% | 18.2% | ||||||
Liquid assets as a percentage of total deposits(2) | 28.7% | 47.4% | 42.4% |
| | | | | | | |
| | December 31, |
| ||||
|
| 2021 |
| 2020 |
| 2019 |
|
Calculation of excess capital: | | | | | | | |
Allocated to assets at risk |
| 12,957,481 |
| 9,047,140 |
| 7,164,842 |
|
Allocated to Bank premises and equipment, intangible assets and equity investment assets |
| 2,035,689 |
| 1,350,035 |
| 826,133 |
|
Market risk |
| 965,159 |
| 551,765 |
| 251,739 |
|
Interest rate risk |
| — |
| — |
| — |
|
Public sector and securities in investment account |
| 34,489 |
| 27,651 |
| 11,472 |
|
Operational Risk |
| 4,805,957 |
| 3,233,793 |
| 2,349,952 |
|
Required minimum capital under Central Bank regulations |
| 20,798,775 |
| 14,210,384 |
| 10,604,138 |
|
Basic net worth |
| 42,938,440 |
| 30,242,263 |
| 16,991,091 |
|
Complementary net worth |
| 1,564,272 |
| 1,090,865 |
| 1,033,734 |
|
Deductions |
| (11,770,286) |
| (7,028,227) |
| (2,999,716) |
|
Total capital under Central Bank regulations |
| 32,732,426 |
| 24,304,901 |
| 15,025,109 |
|
Excess capital |
| 11,933,651 |
| 10,094,517 |
| 4,420,971 |
|
Risk Weighted Assets(1) |
| 254,513,436 |
| 173,834,352 |
| 129,638,218 |
|
Selected capital and liquidity ratios: |
|
|
|
|
|
|
|
Regulatory capital/risk weighted assets |
| 12.9 | % | 14.0 | % | 11.6 | % |
Average shareholders’ equity as a percentage of average total assets |
| 12.5 | % | 11.2 | % | 10.4 | % |
Total liabilities as a multiple of total shareholders’ equity |
| 8.1 |
| 7.5 |
| 7.1 |
|
Cash as a percentage of total deposits |
| 11.1 | % | 20.3 | % | 28.7 | % |
Liquid assets as a percentage of total deposits(2) |
| 49.2 | % | 49.7 | % | 36.5 | % |
Tier 1 Capital / Risk Weighted assets |
| 12.2 | % | 13.4 | % | 10.8 | % |
(1) | Risk Weighted Assets includes operational risk weighted assets, market risk weighted assets, and credit risk weighted assets. Operational risk weighted assets and market risk weighted assets are calculated by multiplying their respective required minimum capital under Central Bank regulations by 12.5. Credit Risk Weighted Assets is calculated by applying the respective credit risk weights to our assets, following Central Bank regulations. |
(2) | Liquid assets include cash, |
As of December 31, 2019,2021, the Bank’s Tier 1 capital ratio on a consolidated basis with CCFIUDÚ was 10.8%, same as it was12.2% compared to 13.4% as of December 31, 2018.2020. Including the funds retained atliquidity held by the holding company (Grupo Supervielle) level after the follow-on equity offering of Grupo Supervielle,, which are available for further capital injections into its subsidiaries or for investments for further growth, the consolidated pro-forma Tier 1 capital ratio as of December 31, 20192021 was 11.3%12.7%. The bank’s Tier 1 ratio coincides with CET 1 ratio. Tier 1 Capital Ratio reflected: 1) higher deductions from Tier 1 capital on increased IT investments, ii) impact on net results on accelerated headcount efficiencies in the quarter, iii) write offs that reduced the expected loss regulatory easing on capital, and iv) a 10% increase in risk weighted assets, which was more than offset by inflation adjustment of capital.
As of December 31, 2019,2021, the Bank’s total capital ratio on a consolidated basis with CCFIUDÚ was 11.6%12.9% compared to 11.9%13.9% as of December 31, 2018.2020. Including the funds retained atheld by the holding company (Grupo Supervielle) level available for future capital injections to our subsidiaries in orderwhich could be used to fund our growth strategy, the consolidated pro-forma total capital ratio as of December 31, 20192021 was 12.1%13.3%.
130
Item 5. | Operating and Financial Review and Prospects |
Item 5.AOperating Results
This section contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including, without limitation, those set forth in “Forward-looking“Forward-looking Statements,,” “Item 3.D“Item 3.D. Risk Factors,,” and the matters set forth in this annual report generally.
This discussion should be read in conjunction with our audited consolidated financial statements which are included elsewhere in this annual report.
Financial Presentation
Our audited consolidated financial statements are prepared in accordance with IFRS as issued by the IASB. We adopted IFRS for
“Financial Reporting in Hyperinflationary Economies” (IAS 29) requires that the first time forfinancial statements of an entity whose functional currency is one of a hyperinflationary economy be measured in terms of the year ended on December 31, 2018, with a transitioncurrent unit of measurement at the closing date of January 1, 2017.
the reporting period, regardless of whether they are based on the historical cost method or the current cost method. This requirement also includes the comparative information in financial statements. Our audited consolidated financial statements are presented by applying “Financial reporting in hyperinflationary economies” (IAS 29). During 2018, Argentina met the criteria to be considered a hyperinflationary economy as inflation exceeded 100%stated in the last three years on a cumulative basis, together with other characteristicsmeasurement unit current as of the economic environment that indicate the existence of hyperinflation. Accordingly, financial statements were restated for the changes in the general pricing power of the functional currency, using the consumer pricing index (CPI) published by the INDEC.December 31, 2021.
Our segment disclosure for the years ended December 31, 2019, 20182021, 2020 and 20172019 is presented on a basis that corresponds with our internal reporting structure and is consistent with the manner in which our Board of Directors regularly evaluates the components of our operations in deciding how to allocate resources and in assessing the performance of our business.
We measure the performance of each of our business segments primarily in terms of net income (i.e., net revenues–or financial income and service fee income, net of financial expenses and service fee expenses–after deducting loan loss provisions and administrative costs directly attributable to the segment). Net income excludes the financial expenses incurred by Grupo Supervielle at the holding level in connection with its funding arrangements (although substantially all the proceeds of such arrangements have been contributed as capital to the subsidiaries through which the segments are operated), as well as transactions between segments, which are reflected under “Adjustments.”
In 20192021 we operated our business through the following segments:
· |
|
· | Corporate Banking: Through the Bank, we offer large corporations |
· | Treasury: | |
· | Consumer Finance: |
131
· | Insurance: Through Supervielle Seguros, Grupo Supervielle offers insurance products, primarily personal accidents insurance, protected bag insurance, life insurance and integral insurance policies for entreprenuers and SMEs. Supervielle Seguros is continuously offering new products to the different customer segments of Grupo Supervielle companies: high net worth individuals (Identité), senior citizens, entrepreneurs and SMEs, customers of the Consumer Finance and Corporate Banking segments. |
· |
Asset Management and Other Services: |
New Accounting Standards and Interpretations issued by the IASB adopted by Grupo Supervielle:
AsBelow is a list of January 1, 2019,New Standards and Interpretations issued by the application ofIASB adopted by Grupo Supervielle.
·Amendments to IFRS 16 “Leases” entered into force. This rule eliminates the distinction between the “financial leasing” agreements that are recorded in the statement of financial positionCOVID-19 Rent Concessions
·Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and “operating leases,” for which recognition of future lease installments was not required.
IFRS 16 provides for what were previously called “lease liabilities” the recognition of an asset, given the right to use of the assets included in the lease contracts from the date they are available for use, and a liability, equal to the present value of the payments to be made in the term of the contract, considering the implicit discount— Interest rate in the lease agreement, if it can be determined, or an incremental reference indebtedness rate.
In the initial application of this rule, we have opted for the simplified retrospective application scheme provided in the transitional provisions of IFRS 16, and therefore we did not modify comparative information as of December 31, 2018. Accordingly, certain comparisons between periods may be affected.benchmark (IBOR) reform — Phase 2
See Note 101.1.3 to our audited consolidated financial statements for a more comprehensive discussion of the effects of the adoption of these new standards.
167
Overview
The lease liability includes fixed payments (including fixed paymentsWe operate in substance), less any incentives receivable; variable lease payments that depend ona complex economic context both nationally and internationally. In recent months, the usebehavior of an index or rate, initially measured using the index or rate as at the commencement date; the amounts payableinternational markets has been affected by the Group under residual value guarantees; the exercise priceadvance of the purchase option if the Group is reasonably certain to exercise that option;Delta and payments of penalties for terminating the lease, if the lease term reflects the Group exercising an option to terminate the lease. The costOmicron variants of the assets for rightCOVID-19, the persistence of use includes the amount of the initial measurement of the liability, the payments made before the date of initial application, the initial direct costssignificant global inflationary pressures, and the associated restoration costs.
Subsequently,geopolitical conflict between Russia and Ukraine, among other factors. Consequently, the assets for rightglobal economic recovery continues to progress, but at a slower pace than previously forecasted. The current global context appears to be converging towards a scenario of usemore moderate economic growth with tightening of financing conditions, to which are measured at cost minus accumulated depreciation and accumulated lossesadded additional inflationary pressures due to impairment, if any. The depreciation ofdelays in production chains and the asset is calculated using the method of linear depreciationrise in the termprices of some raw materials. The U.S. Federal Reserve has begun to reduce the contract or useful life ofliquidity injected into the asset, whichever is lower. The lease liability is increased by the accrual of interests and remedied to reflect changes in payments, the scope of the contract and the discount rate.
The Ongoing COVID-19 Pandemic
In December 2019, a novel strain of coronavirus (SARS-COV-2) was reported to have surfaced in Wuhan, China. COVID-19 has since spread across the world, including to Argentina,markets (a process known as tapering) and on March 11,16, 2022, the U.S. Federal Reserve approved an increase of 0.25% in interest rates, the first increase since December 2018. According to the latest projections by the members of the Monetary Policy Committee of the U.S. Federal Reserve, during 2022 there would be additional rises in interest rates.
Before the COVID-19 pandemic, the Argentine economy was contracting and 2020 was the World Health Organization declared COVID-19 a pandemic. By late April, around 4,000 cases had been confirmedthird consecutive year of economic crisis in Argentina. In response,countries around the world, including Argentina, have adopted extraordinary measures to contain the spread of the virus, including imposing travel restrictions and closing borders, requiring closures of non-essential businesses, instructing residents to practice social distancing, issuing stay at home orders, implementing quarantines and similar actions. The ongoing pandemic and these extraordinary government measures are disrupting global economic activity and resulting in significant volatility in global financial markets.
According to recent IMF estimates released on April 14, 2020,data published by the INDEC, the Argentina’s GDP increased by 10.3% in 2021, mainly as a result of the COVID-19 pandemic,implementation of vaccination programs, which enabled the globallifting of certain mobility restrictions that had been enforced in Argentina until the end of 2020, and to the increase in commodity prices, which resulted in an increase in U.S. dollar exports. As a result, the Argentine economy is expected to contract sharply by 3% in 2020, in a drastic downgrade fromrecovered after its forecast of 6.3% growth in January 2020. Also, the IMF changed its outlook for Latin America’s growth, from a 1.6% growth under the estimates published in January to an expectedsignificant contraction of the region’s economy by 5.2% in 2020, with a forecast for Brazil’s economy to contract by 5.3% (Brazil being the main trading partner of Argentina). As regards Argentina, according to the recent IMF estimates, the country’s economy is expected to contract by 5.7%9.9% in 2020. However, Argentina’s real GDP for the fourth quarter of 2021 real GDP was still 3.7% below Argentina’s real GDP for the fourth quarter of 2017.See “Item 5.D—Trend Information.”
The Argentine government has adopted multiple measures in response to the COVID-19 pandemic, including a nationwide mandatory lockdown that began on March 19, 2020 and has been extended several times, most recently through May 10, 2020. The government has also required the mandatory shutdown of businesses not considered essential.
At the same time, in order to mitigate the economic impact of the COVID-19 pandemic and mandatory lockdown and shutdown of non-essential businesses, the Argentine government has adopted social aid, monetary and fiscal measures, including the following:
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In addition, by means of Communication “A” 6939, the Central Bank suspended, until June 30, 2020, the distribution of dividends by financial entities, including the Bank.
For more information, see “Item 4.B.—Business Overview—Argentine Banking Regulations—Government Measures in Response to the Ongoing COVID-19 Pandemic.”
The ongoing COVID-19 pandemic and government measures taken to contain the spread of the virus are adversely affecting our business and results of operations. Our branches were required to remain closed during the second half of March 2020, and have subsequently only gradually been allowed to open with limited operations. As of the date of this annual report, banks are permitted to open to provide limited services to clients with prior appointments, in each case with prior appointment, provided that certain health and safety requirements set forth by the Central Bank are complied with.
Since early March 2020, our management has been actively monitoring the evolution of the ongoing COVID-19 pandemic and the impact it may have on our business. Measures have been taken rapidly as the situation continued to evolve, focusing mainly in protecting our employees and customers and ensuring the continuity of our operations. On March 13, 2020, even before the nationwide lockdown was declared, we implemented a protocol by whicha significant part of our workforce (including elder employees and pregnant women) started to work remotely. We have allocated additional resources to the provision of laptops for such employees, and have made investments in new VPN licenses to enhance the security of working remotely. Remote work may nonetheless exacerbate certain risks to our business, including an increased reliance on information technology resources, increased risk of phishing and other cybersecurity attacks, and increased risk of unauthorized dissemination of sensitive personal information.
More recently, we have taken other measures such as the implementation of a back-to-work protocol for essential employees, which includes the rotation of teams within our branches, the incorporation of medical personnel to our crisis management teams, the monitoring of COVID-19 positive cases, online psychological assistance for employees, and online yoga and gym classes. As of the date of this annual report, approximately 90% of our central areas employees are working remotely.
Since 2018, we have made significant progress on the digital transformation of our operations, focusing on an enhanced customer experience. Since the beginning of the COVID-19 pandemic crisis in Argentina, with the main goal of protecting the health and safety of our customers, specially senior citizens (which are a significant portion of our customers’ base and are more vulnerable to the effects of the virus), we have been encouraging our customers to use our available digital channels. Since the senior citizens’ segment is generally less familiar with our online or mobile banking platforms, we implemented a direct and free exclusive telephone line to assist them and released tutorials through social media with instructions on how to operate online. Additionally, we made numerous debit cards reprints and deliveries as well as debit card resets for non-user clients, we adapted our existing biometric recognition technology for our customers to withdraw money from the ATMs without a debit card, and we released additional features in our mobile app for senior citizens with the purpose of reducing their need to personally attend a branch.
With respect to SMEs, we have made available loans promoted by the Central Bank at a 24% interest rate, to assist them with payroll payments and working capital needs. We have also launched specific credit lines for SMEs in the health and the transportation sectors. As of the date of this annual report, the Bank has granted loans at a 24% interest rate for an approximate amount of Ps. 5 billion.
Grupo Supervielle has announced a donation of Ps.10 million to social organizations located throughout the country, funds which will be applied to social initiatives related to the COVID-19 pandemic, such as the purchase of medical equipment for health centers and the provision of food for the most vulnerable communities in the City of Buenos Aires and the Provinces of Buenos Aires, Mendoza and San Luis.
Weface various risks arising from the economic impact of the pandemic and related government measures which are difficult to predict accurately at this time. These risks include (i) a higher risk of impairment of our assets, (ii) lower revenues as a consequence of the temporary restrictions on charging certain fees to customers, and as a result of lower interest rates on loans promoted by the Central Bank, (iii) a possible significant increase in loan defaults and credit losses, with a consequent increase in loan loss provisions, and (iv) a decrease in credit demand and in our business activity in general, particularly new retail lending. Certain factors that could offset tthese risks include (i) the reduction of the cost of funding, which has been decreasing since the beginning of the COVID-19 pandemic crisis, and (ii) the structure of our liabilities, as we estimate we will not face liquidity contraints as a result of the pandemic.
We are continuing to monitor the impact of the ongoing COVID-19 pandemic on the Group, and will take and implement all possible actions to preserve health of our employees and to ensure continuity of our operations. Grupo Supervielle will continue focusing on improving efficiency while keeping its differentiated strategy to capture growth, remaining flexible under this particularly volatile and challenging scenario. The ultimate impact of the pandemic on our business, results of operations and financial condition remains highly uncertain and will depend on future developments outside of our control, including the intensity and duration of the pandemic and the government measures taken in order to contain the virus or mitigate the economic impact.
See “Item 3. Key Information—D. Risk Factors.—3.D. Risk Factors—Risks Relating to Argentina—The ongoing COVID-19 pandemic and government measures to containlimit the spread of the virus are adversely affectinghave disrupted the global and Argentine economies, and affected, and could continue to affect, our business and results of operations,operations.” In recent years, the dynamics of the Argentine financial system continued contracting in real terms. As of December 31, 2021, the ratio of total private sector loans and deposits of the Argentine financial system to GDP remained at levels below the average observed in other countries in the region and the world, with this ratio estimated to be 8.3% and 14.8%, respectively, below the levels existing in 2020.
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In the current extraordinary context in Argentina, we continue to balance risk and profitability by managing the credit cycle and excess liquidity through asset and liability management. We also continue to face further pressures as conditions are evolving rapidly, we cannot accurately predicta result of higher cost of funds resulting from the ultimatefloor on interest rates on time deposits and subsidized rates on mandatory credit lines to SMEs. In addition, new and existing regulations may continue to impact on the Group.”fees which are charged to customers. In terms of expenses, we continued to exercise strict control on our recurring costs, although our investments made in order to accelerate our digital transformation and to improve our service across our branches resulted in certain temporary increases in our costs.
The Argentine Economy and Financial System
Introduction
During 2019In 2021, according to recent available estimates of the IMF, the world economy deceleratedeconomic activity expanded by 5.9%, as a result of the recovery from the crisis caused by the Covid-19 pandemic, which broke out by late 2019 in China and escalated during the first two months of 2020.
This performance is mainly dueexplained by the GDP increase by 5% and 6.5% in developed countries and emerging countries, respectively. With respect to the uncertainty derived fromrecovery dynamics, most economies showed an improvement since the commercial conflict between Chinalast quarter of 2020. However, as of the first and second quarters of 2021, the activity level started to grow as a result of the lifting of mobility restrictions following the commencement of vaccination campaigns.
In respect of the vaccination campaign, a key factor which explains the growth of the economic activity, by late December 2021, a significant portion of the world population had a full vaccination scheme, which was mainly driven by developed countries such as the United States, the United Kingdom, France, Italy and Canada among others. As for Latin America, Chile and Uruguay led the vaccination efforts in the region ahead of the other countries, reaching around 80% of vaccinated people as of December 2021. On the other hand, Brazil, Colombia, Peru, Bolivia and Paraguay accelerated the campaign between the second and third quarters of the year, fully vaccinating over half of their population. As for Argentina, vaccination began in January 2021, but the dynamics accelerated sharply from July; thus, by December 2021, about 71% of the population had been vaccinated with two doses.
During 2021, the currencies of most of Argentina’s trade partners depreciated as against the US dollar. Only China, Vietnam and Canada evidenced a nominal appreciation of their currencies. In contrast, the Chilean peso depreciated by 16%, the Brazilian real by 10% and the possibilityeuro by 8%. During the first half of the year most of the currencies remained neutral as against the US dollar while the trend to depreciation intensified during the second half of 2021 as a disorderly Brexit.result of the strengthening of the U.S. dollar. As to Argentina, the peso depreciated by 23% in a context in which the Central Bank decelerated the depreciation rate in an attempt to reduce the inflation rate. Prices continued accelerating and the exchange rate ended at 18% below the inflation rate, resulting in an appreciation in real terms of 3.4% on average in the year and of 17.4% year-on-year pursuant to the Multilateral Real Exchange Rate Index prepared by the Central Bank.
CommoditiesThe recovery of commodities, which had begun in April 2020, with the lifting of mobility restrictions at world level and the reopening of world trade, continued in 2021. The price of commodities grew by 32.4% accumulated as of October 2021 and hit its record in the year during such month, to then fall by 4.1% until December. As a good performance in 2019, withresult, prices increasing by 9.4%accumulated a 27.1% increase year-on-year as compared to 2018, according to Thomson Reuters CRY Index.the closing of 2020 and 34% taking into account the average of each year. In particular,contrast, the prices of commodities exported by Argentina, grewmeasured by 6.5% during the year according to the commodities price index releasedprepared by the Central Bank.
As regards interest rates, as from August 2019, the US Federal Reserve put a brake on the upward rate process, reducing its interest rate target to 1.75% per annum. International stock markets showed a significant recovery with a lower volatilityBank, grew by 20.1% year- on-year, while they increased by 39.6% as compared to the prior year dueannual average.
In respect of interest rates, the U.S. Federal Reserve decided to more lenient monetary policies.
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With respectmaintain its target at 0.25% (with a minimum lower than 0% and a median of 0.125%) throughout 2021 to Argentina,extend the 2019 macroeconomic context posed challenges dueeconomic recovery. However, acceleration of inflation in the United States, which reached 7% in 2021, could be a factor for change in policies regarding interest rates in 2022. In fact, the most recent dot plot of the U.S. Federal Reserve, which shows projections for the federal funds rate, reflects that 10 out of 18 participants expect three rate rises for this year. Thus, according to the primary presidential elections heldmedian of such projections, the interest rate target in August2022 my go to 0.875% from the current 0.125%. Additionally, in November, the U.S. Federal Reserve started to reduce the pace of purchase of Treasury bonds and mortgage-backed securities by U.S.$15 billion, which were later reduced further in December to U.S.$30 billion.
Global financial markets reflected heterogeneous behaviors at world level in line with the general elections helddiscrepancies in October, generating significant volatility in financial markets. During 2019, the Argentine economy was bound under the IMF arrangement program with a restrictiveeconomic recovery and their monetary policy and a contracting fiscal deficit. However,. In the reactionfirst half of both markets and economic players2021, according to the outcomeMSCI index, global equities accumulated an 11.4% rise while those of emerging markets rose by 6.5% and those of developed markets rose by 12.2%. However, as from June, these contrasts intensified. Specifically, stocks from emerging countries dropped by 10.4% in the second half of the PASO in August gave rise to an immediate reversionyear, while those of certain still budding positive trends in some indicators such as inflation and activity levels, resulting indeveloped markets increased by 7.1%. As a larger deterioration of economic variables. With domestic and internationalresult, global stock markets virtually closed for the Argentine government to take more public debt, the former Macri administration decided to reprofile the short-term debt, thus adding pressure on the exchange rate and foreign currency-denominated deposits. Following the PASO elections, reserves dropped by US$21,527 million, ending the year with a stock of US$44,781.
As to activity levels, 2019 ended with the economy in recession for the second year in a row, accumulating a fall of 2.2% as of December of such year and maintaining a similar trend to that of 2018, when economic activity levels went down by 2.5% on average.
In connection with fiscal accounts, 2019 closed with a fiscal deficit of 0.44% as compared to the GDP, which represents an improvement over 2018. The general inflation rate for 2019 was of 53.8%, which represented an increase compared to the 47.6% inflation rate for 2018.
In order to improve fiscal accounts, the new Fernández administration, which took office on December 10, 2019, proposed to the Argentine Congress the “Social Solidarity and Production Reactivation” bill which was passed into law (Law No. 27,541) on December 21, 2019. The new law provided, among other things, for a rise of up to 30% in export taxes, personal assets taxes and taxes on the purchase of U.S. dollars for saving purposes and for payment of services in U.S. dollars. In addition, on January 21, 2020, the “Foreign Public Debt Sustainability Management” law was enacted16.8%, mainly led by the Argentine Congress. The new Fernández administration also decided to compulsorily extend the payment term of certain debt securities issued both in foreign and local currency. In the midst of debt restructuring negotiations, on April 5, 2020 the Argentine government issued Decree No. 346/2020, throughdeveloped markets which the repayment of Argentine law-governed dollar-denominated notes was postponed.
The banking industry’s evolution was also affected by high volatility, high inflation, low economic activity and high rates. Total deposits from the private sector in the financial system increased in 2019 by 25%, showing an increase in Peso-denominated deposits but a strong fall in U.S. dollar-denominated deposits as from August. Peso-denominated deposits grew by 35%, U.S. dollar-denominated deposits measured20.1% in Pesos increased by 6%, ascontrast to emerging markets which accumulated a resultdrop of the rise of the nominal exchange rate, though, if measured in U.S. dollars, deposits dropped by 33%. On the other hand, total loans to the private sector grew only 15% in the year, well below the inflation level. Loans in Pesos to the private sector rose by 19% while loans in U.S. dollars measured in the original currency dropped by 33%4.6%.
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The Argentine Economy
Beginning in December 2001 and for most of 2002, Argentina experienced one of the most severe crises in its history which nearly left its economy at a standstill and deeply affected its financial sector. Between 2004 and 2009, the Argentine economy and the financial sector recovered considerably. Since 2009, the Argentine economy has shown increased volatility. Macroeconomic conditions in 2020 were mainly marked by the health crisis that had a strong impact on activity levels.
The table below includes certain economic indicators in Argentina for the years indicated:
December 31, | |||||||||
2017 | 2018 | 2019 | |||||||
GDP real growth (%) | 2.7 | (2.5 | ) | (2.2 | ) | ||||
Primary fiscal balance (excludes interest) (as a % of GDP) | (3.9 | ) | (2.4 | ) | 0.4 | (3) | |||
Total public debt (as a % of GDP) | 56.6 | 86.0 | 91.6 | (1) | |||||
Trade balance (in million U.S.$) | (8,293 | ) | (3,700 | ) | 15,991 | ||||
Total deposits (as a % of GDP) | 23.0 | 27.3 | 17.0 | (2) | |||||
Loans to the private sector (as a % of GDP) | 15.1 | 14.6 | 9.6 | (2) | |||||
Unemployment rate-end year- (%) | 7.2 | 9.1 | 8.9 | ||||||
Inflation in consumer prices –Dec./Dec. - CPI INDEC (%) | 24.8 | 47.6 | 53.8 | ||||||
Average nominal exchange rate (in Ps.Per U.S.$) | 16.57 | 28.09 | 48.24 |
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| | December 31, | ||||
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| 2019 |
| 2020 |
| 2021 |
GDP real growth (%) |
| (2.2) |
| (9.9) |
| 10.3 |
Primary fiscal balance (excludes interest) (as a % of GDP) (2) |
| 0.4 |
| 6.5 | | 2.2 |
Total public debt (as a % of GDP) (3) |
| 88.8 |
| 102.8 |
| 82.2 |
Trade balance (in million U.S.$) |
| 15,991 |
| 12,528 |
| 14,750 |
Total deposits (as a % of GDP) (1) |
| 14.7 |
| 15.6 |
| 14.8 |
Loans to the private sector (as a % of GDP) (1) |
| 9.8 |
| 9.9 |
| 8.3 |
Unemployment rate-end year- (%) |
| 8.9 |
| 11.0 | | 8.2 |
Inflation in consumer prices –Dec./Dec. - CPI INDEC (%) |
| 53.8 |
| 36.1 |
| 50.9 |
Average nominal exchange rate (in Ps.Per U.S.$) |
| 48.24 |
| 84.15 |
| 95.16 |
Source: INDEC, Central Bank and City of Buenos Aires.Aires
(1) As of June 30, 2019
(2) Company estimates based on Central Bank information
(3) (2)Company estimates based on information published by the Ministry of Economy
In 2017, Argentina’s GDP recovered(3)Information published by 2.7%, recording 0.3%, 2.1%, 3.8% and 4.5% year-on-year growth rates for the four quartersMinistry of the year, respectively.Economy as of September 30, 2021
In 2018, Argentina’s GDP decreased by 2.5%. As regards quarterly evolution, the economic activity recorded a positive year-on-year growth rate only in the first quarter (4.1%) and then negative rates in the second (-3.8%), third quarter (-3.7%) and in the fourth quarter (-6.2%).
In 2019, Argentina’s GDP decreased by 2.2% recording (5.8)%, 0.0%, 1.7% and (1.1)% year-on-year growth rates for the four quarters of the year, respectively.
Foreign Trade and Foreign Exchange Market
During 20192021, the trade balance accumulated a surplus amounted to US$15,992of U.S.$14,747 million, which impliesimplied an improvement as compared toover the US$3,701positive result of U.S.$12,528 million deficit of 2018reached in 2020, and the US$8,308 million deficitthus trade surpluses were recorded in 2017.three consecutive years after six years of negative results. The trade balance dynamics changed dueis mainly the result of three factors: the strong recovery of the economic activity, the dynamics of the foreign exchange gap and the prices of commodities. The first two resulted in imports reaching 49%, above 2020 levels, i.e. U.S.$63,186 million. The best performing imports in 2021 were fuels and lubricants (121.3%) and parts and accessories for capital goods (56.6%). Exports also recorded a great performance with U.S.$77,934 million, 42% up against 2020, including the rise of 49.9% in industrial manufacturing and of 45.1% in fuels and energy.
As regards international reserves, in 2021 and in contrast to the fall2019 and 2020, accumulated reserves were recorded in the activity level started by mid-2018 and which went on during 2019, worsening afteramount of U.S.$275 million, ending the exchange depreciation which took place in August 2019. In fact, while exports rose by 5.4% during the year imports dropped by 25%, evidencing the greatest year-on-year fall in August (-30%).
In 2019 (unlike the past three years), international reserves recorded a strong decrease (US$21,025 million), with a stock of US$44,781U.S.$39,662 million. During the year, there were two distinct periods: from March to July where reserves increased by U.S.$2,965 million thanks to the seasonality of the agricultural sector’s foreign exchange settlement and August, when the Central Bank increased its reserves by U.S.$4,274 million by reason of Special Drawing Rights (“SDRs”) distributed by the IMF to all member countries in the context of the global crisis caused by the COVID-19 pandemic. As regards the final result and the most relevant components giving rise to this dynamics, the Central Bank purchased foreign currency for U.S.$5,049 million, accumulated U.S.$3,187 million and U.S.$1,199 million from Public Sector and minimum cash transactions, respectively, honored payments to international agencies for U.S.$2,028 million, while in terms of intervention of the foreign exchange gap, some U.S.$7,133 were drained.
The nominal exchange rate ended 2021 at U.S.$102.75, which meant a rise of the U.S. dollar value during the year end.of U.S.$18.6 or a peso devaluation of approximately 22.1%. The exchange rate dynamics throughout the year was markedstable under a controlled depreciation scheme implemented by the strong reductionCentral Bank which was constantly below monthly inflation rates recorded during the year. During 2021, the exchange restrictions imposed by late 2019 continued and even some were tightened which maintained and even increased the foreign exchange rate gap during certain months. In fact, the blue chip swap (arising from the difference in the quotation of international reserves on several occasionsArgentine stocks measured in pesos and in U.S. dollars) reached 115% above the official exchange rate in November as a result of the uncertainty derived fromcaused by the presidential elections, sale of foreign currencylegislative election held during that month. Foreign exchange tensions reduced and the fall of deposits in U.S. dollars in the financial system. Following the PASO elections, reserves dropped by US$21,527 million. Given the constant exit of reserves as a result of the prevailing uncertainty, the Central Bank established exchange controls as of September 1, 2019, which were intensified following the general elections held on October 27, 2019. With these recent limits, a brake was placed on the exit of reserves and a subsequent increase was recorded of US$1,375 million.
The nominal dollar/peso exchange rate at the end of 2019 was US$1.00 to Ps.59.89, which meant a devaluation of Ps.22.8 or 58% as compared to the close of the prior year. The exchange rate throughoutgap ended the year was more or less stable until the PASO elections in August (when the exchange rate rose by +16%)approximately at 105%. As a result of the prevailing uncertainty, the Central Bank was forced to intervene on a daily basis in the exchange market with U.S. dollars net sales of US$7,456 millions - which did not manage to contain devaluation pressures - and imposed greater exchange controls by the end of October.
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Labor Market
In 2019, wages grew by 40.9% year-on-year2021, salaries showed an accumulated growth of 49.5% as a result of the rise of wages of 43.8% toNovember (last available data). Private sector registered employeesemployees’ salaries accumulated 53.1% and of 29.5% toin the non-registered private sector employees.39%. In addition, withinturn, the accumulated increase in the public sector was much lower, by 54.5%.
The employment level during 2021 showed a strong recovery in line with the normalization of the economic activity, which not only recovered the level shown prior to the breakout of the pandemic in February 2010, but was even higher than such record. Taking into account the data until October, the total number of registered employees, wagesworkers increased approximately by 394,907 in terms of work positions as compared to December 2020, which implied a rise of 3.3%. This is mainly the result of an increase in the number of registered workers in the private sector grew by 44.3% and by 42.9%(111,325), registered workers in the public sector. In all cases,sector (69,127), private household workers (2,323) and self-employed/Small Taxpayers’ Simplified Scheme workers (212,132). As compared to the wage increase was well below inflation, thus causingtotal employment composition prior to the falloutbreak of real wages.the pandemic, a change can be perceived: registered workers in the private sector went from 49.7% to 48.1% (but have not yet recovered the February 2020 level), registered workers in the public sector went from 23.3% to 26.9% (above the pre-pandemic level) and self-employed workers went from 19.8% to 21%.
TheOn the other hand, unemployment raterates of the first, second and third quarter was 10.1%quarters were 10.2%, 10.6%9.6% and 9.7%8.2%, respectively, averaging 10.1%9.3% in the first three quarters of the year. Comparing theThe average unemployment rates with those recorded inrate showed a drop of 240 basis points as compared to the first three quarters of 2018, there was an increase of 90 basis points2020 (from 9.2%11.7% in 20182020 to 10.1%9.3% in 2019)2021). On the other hand,In addition, the activity rate increasedwent from 46.5%42.4% in the fourththird quarter of 20182020 to 47.2%46.7% in the fourththird quarter of 2019.2021.
Fiscal Balance
The Argentine public sector recorded in 20192021 a primary fiscal deficit (without consideringwithout extraordinary income)revenues of Ps.208,766.7Ps.980,241 million (-0.96%(approximately 2.2% of the GDP) while the financial deficit reached Ps.933,052was Ps.1,664,482 million (-4.28%(3.7% of the GDP). In 2019During the year, fiscal accounts improved significantly due to two factors: in the first place, an additional of approximately Ps.311,373 million (0.7% of the GDP) was collected on account of the Extraordinary Solidarity Contribution. On the other hand, in September, revenues for $427,401 million (1% of the GDP) were recorded from the extraordinary income was receivedallocation of SDRs by the national government fromIMF under the transfercontext of Lotería Nacional to the ambit of City of Buenos Aires (Ps.4,813.6 million recorded as current income). In addition, proceeds were received byglobal COVID-19 pandemic crisis. Thus, without considering these extraordinary revenues, the national government from the sale of fixed assets by public companies (Ps.44,595.5 million) and transfers by FGS to ANSES to finance thePrograma de Reparación Histórica (Historic Reparation Program for Retirees) (Ps.64,236 million), both recorded as capital proceeds. The primary income for 2019, taking into account the aforementioned extraordinary income, resulted in a primary deficit of Ps.95,121.6 million. In GDP terms, this would be equalhave amounted to -0.44% percentage points. In such scenario,Ps.1,719,013 million (3.8%) and the financial deficit would increasehave amounted to Ps.819,406.9Ps.2,403,254 million which, in GDP terms, would account for -3.76% percentage points. The worsening(5.4% of the financial deficit is dueGDP). During 2021, revenues grew by 83.4% year-on-year (21.5% above inflation rates) and 68.2% without considering the aforementioned extraordinary revenues. The recovery in revenues was partly linked to the economic recovery throughout the year while the primary expense increased by 49.6%, reaching 9.6% below inflation rates. Its components included the year-on-year 12.2% drop in real terms of social benefits, which had strongly increased in 2020. In turn, the capital expenditure and the expense on subsidies reflected a material growth, with 54.3% and 31.4% year-on-year rises in real terms, respectively. The acceleration in the subsidy expenditure results from the fact that in 2019 Ps.724,285.3rates remained frozen throughout the whole year and accumulated more than two years without adjustments.
In 2021, Ps.684,241 million were paid (not includingas interest, a 26% rise against 2020 (-16.5% in real terms), representing 7.7% of the intra-public sector interest paid) on account of debt interest, an increase of 86.2% year-on-year, representing 18.4% of total incomerevenues of the Argentine public sector. Total incomesector (11.2% in 2020). Without considering extraordinary revenues, interest expense accounted for 2019 amounted to Ps.3,937,073.5 million, an increase8.4% of 51.4% year-on-year, while primary expense amounted to Ps.4,032,195.1 million, representing an increase of 37.2% year-on-year.total revenues.
In order to improve fiscal accounts, the “Social Solidarity and Production Reactivation” bill mentioned above which was passed into law (Law No. 27,541) on December 21, 2019. The new law provided, among other things, a rise of up to 30%As in export taxes, personal assets taxes and taxes on the purchase of U.S. dollars for saving and for payment of services in U.S. dollars. In turn, this law suspended pension increases for 180 days.
Once again2020, one of the critical aspects of the year forwas access to financing by the Argentine Treasury was access to financing. Asas a resultlarge portion of the closure of international financial markets in 2018, the government entered into two stand-by arrangements with the IMF; by virtue of the last of them the agreement amount increased by Ps.5,335 million (approximately US$7,100 million) reaching a total of US$57,000 million, and disbursements were rescheduled, with an advance of Ps.9,600 million (approximately US$13,400 million) until December 2018, thus totaling US$28,400 million for 2018, and Ps.16,300 (approximately US$22,650 million) in 2019. However, the IMF suspended disbursements after September of 2019, overriding the program; therefor the total amount disbursed as of the closing of 2019 was of approximately US$44,500 million (Ps.31,914 million). Due to the overriding of the arrangement with the IMF and the closure of the international financial markets following the PASO elections, the governmentprimary deficit had to reschedule the due date of certain treasury bills (“Letes”, “Lecaps”, “Lelink” and “Lecer”) with holders, except for individuals, which consisted in paying 15% of services on the due date, 25% within three months and the remaining 60% six months following the original due date. With the change of government on December 10, 2019, consideration of the public sector debt became a relevant matter and on January 21, 2020, the “Foreign Public Debt Sustainability Management” bill was introduced in the Argentine Congress. Upon its enactment on February 12, 2020, the Executive Branch was authorized to perform all necessary acts to recover and ensure the sustainability of the Argentine public debt.be financed through monetary issuance. In addition, the national government was authorized to issue debt securities tofact, the Central Bank financial aid in 2020 amounted to U.S.$1,700,312 million, 2% higher than the financial deficit for an amountthe year. However, in September, when the revenues for SDRs allocation were computed, the Treasury paid U.S.$427,401 million on account of uptemporary advances and reduced its stock. Excluding this drop, the Central Bank’s monetary assistance to US$ 4,517 billionthe Treasury in exchange for reserves to be applied solely to meet Argentina’s foreign currency-denominated debt obligations.
Argentina’s Sovereign Debt Restructuring
The new Fernández administration has publicly announced its intention to renegotiate the terms and conditions2021 ended in U.S.$2,127,713 million, 88% of the government’s indebtedness withfinancial deficit (without considering the IMF. Also,revenues for SDRs of for the new Fernández administration has initiated negotiations with creditorsExtraordinary Solidarity Contribution). More precisely, Temporary Advances totaled U.S.$912,599 million (123.8% higher than in order2020) while profit transfers amounted to restructure its current peso and U.S. dollar denominated public debt. In this context, on February 5, 2020,$787,712 million (a 51% fall). On the Argentine Congress passed Law No. 27,544, by virtue of whichother hand, in 2021 the sustainability of sovereign debt is declared as a national priority, authorizing the Ministry of Economy to renegotiate new terms and conditions with Argentina’s creditors within certain parameters. Notwithstanding the foregoing,Government secured net financing in the midst ofdomestic market for approximately U.S.$748,712 million, 77% higher than the U.S.$424,000 million secured in 2020. Treasury debt restructuring negotiations, on April 5, 2020 the Argentine government issued Decree No. 346/2020, through which the repayment of Argentine law-governed dollar-denominated notes was postponed.
On April 21, 2020, the Argentine government launched an exchange offer with the aim of refinancing its external indebtedness in a manner which does not compromise the development and potential growth of Argentina over the next several years. To that end, the Argentine government proposed to effect an exchange of different series of foreign currency-denominated bonds (in U.S. dollars, Euros and Swiss Francs) and governed by English or New York law, issued both under its 2005 and 2016 indentures for new series of U.S. dollar or Euro-denominated amortizing bonds maturing between 2030 and 2047, to be issued by the Argentine government under its 2016 indenture. As informed by the Minister of Economy and pursuantplacements where especially influenced as from June when due to the exchange documents filed with the Securities Exchange Commission (“SEC”), in general terms, the Argentine government’s exchange offer involves a reduction in interest payment burdenCommunication “A” 7290 of 62% (US$37.9 billion), a decrease in principal payments of 5.4% (US$3.6 billion) and a grace period of approximately 3 years before principal payments become due. The period for creditors under each bond series to give their consent or to reject the exchange (and to chose which series of new bonds to receive in exchange for their eligible bonds, in case of acceptance) is scheduled to expire on May 8, 2020, unless extended. Announcement of the results of the exchange is scheduled for May 11, 2020, while the settlement of the new bonds is scheduled to take place on May 13, 2020.
As of the date of this annual report, the exchange offer is still open and there is uncertainty as to whether the Argentine government will be able to successfully carry out the exchange and restructure its foreign financial indebtedness.
See “Item 3.D—Risk Factors—Risks Relating to Argentina—The Argentine government’s ability to obtain financing from international markets is limited, which may impair its ability to implement reforms and foster economic growth, which may negatively impact our financial condition or cash flows.”
Monetary Policy
During 2019, the Central Bank, announced different changesbanks were authorized to use Treasury bonds for their minimum cash requirements.
Monetary Policy
During 2021, the Central Bank adopted a monetary policy in line with that implemented during 2020, and as access to the debt market remained restricted for Argentina, once again the Central Bank was forced to provide financial assistance to the Treasury
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throughout 2021. In such context, the monetary program (implemented in October 2018), intendedauthority maintained interest rates at levels similar to reinforce the contracting bias ofthose recorded by late 2020, with the monetary policy. The most relevant changes include the eliminationpolicy rate (interest rate of the June 2019 seasonal adjustment of the monetary base and subsequent increases until December 2019. In addition, a goal was set to maintain the monetary base at level of February 2019 (Ps.1,343.2 billion) and to authorize the sale of foreign currency even within the non-intervention zone establishedsecurities issued by the Central Bank “LELIQs”) at 38% throughout the year in case of excess volatility, overriding the intervention limit of US$150 million.
In spiteorder to absorb part of the fact that, sincegreater monetary base issued throughout the effective date ofyear. However, the program,rates remained negative in real terms with a view to sustaining the economic recovery through credit policies for the most affected sectors through Líneas de Financiamiento a la Inversión Productiva (LFIP) which continued being the main vehicle to channel production credits for Micro, Small and Medium-Sized Companies under favorable financial terms.
As regards the foreign exchange policy, the Central Bank had metcontinued with its controlled depreciation scheme in 2021. However, in an attempt to reduce the acceleration and inflationary trends, the monetary base target, followingauthority started to decelerate the PASO elections, it was forced to stop implementing the program, after being unable to sustain the intervention and non-intervention zone scheme and having to relax compliance with the monetary base target.
During the first part of 2019, the interest rate set by the monetary policy decreased to the minimum of 43.94% p.a. on February 14, 2019 to then go up to 74.07% per annum on May 2, 2019 and gradually decrease again until the PASO elections. Following these elections, LELIQ interest rates rose until reaching the historical cap of 85.99% per annum to then go down and end the year at 55% per annum representing a slight decrease of 4 percentage points as compared to the closepace of the prior year (however, if we considerforeign exchange depreciation, which was below the inflation rate throughout the year. In fact, while in 2020 depreciation was 0.2% on average above monthly inflation rates, in 2021 such percentage was -1.67%, causing a strong appreciation of each year, the rate in 2019 was 21 percentage points above the 2018 rate).
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real exchange rate.
Inflation
Argentina has faced and continues to face inflationary pressures. From 2011 to date, Argentina experienced increases in inflation as measured by CPI and WPI that reflected the continued growth in the levels of private consumption and economic activity (including exports and public and private sector investment), which applied upward pressure on the demand for goods and services.
On January 8, 2016, based on its determination that the INDEC had failed to produce reliable statistical information, particularly with respect to CPI, GDP and foreign trade data, as well as poverty and unemployment rates, former President Macri declared a state of administrative emergency for the national statistical system and the INDEC until December 31, 2016. The INDEC suspended publication of certain statistical data pending reorganization of its technical and administrative structure to recover its ability to produce reliable statistical information. The INDEC published official CPI figures published by the City of Buenos Aires and the Province of San Luis for reference for the first four months of 2016. In June 2016, the INDEC began publishing an official inflation rate using its new methodology for calculating the CPI.
According to the available public information based on data from the City of Buenos Aires, CPI grew 38.0% in 2014, 26.9% in 2015, 41.0% in 2016 and 26.1% in 2017, while according to the data of the Province of San Luis, CPI grew 31.9% in 2013, 39.0% in 2014, 31.6% in 2015, 31.4% in 2016 and 24.3% in 2017.
On July 11, 2017, the INDEC started to publish a national CPI (the “National CPI”). The National CPI is based on a survey conducted by INDEC and several provincial statistical offices in 39 urban areas encompassing each of the Republic’s provinces. Results are not reported by the provinces, but on a national level and for six statistical regions: the Greater Buenos Aires Metropolitan area (which is the CPI that resumed publication in June 2016), the Cuyo region, the Northeast region, the Northwest region, the Central (Pampeana) Region and the Southern (Patagonia) region. For the period of January through December 2019,2021, accumulated inflation using the National CPI was 53.8%50.9% compared to 47.6%36.1% for 2018.2020 and 53.8% for 2019. In the past, the Argentine government has implemented programs to control inflation and monitor prices for essential goods and services, including attempts to freeze the price of certain supermarket products, and price support arrangements agreed between the Argentine government and private sector companies in several industries and markets that did not address the structural causes of inflation and failed to reduce inflation. Adjustments approved by the Argentine government in electricity and gas tariffs, as well as the increase in the price of gasoline have been passed through to prices, creating additional inflationary pressures.
The National CPI is prepared in accordance with current international standards and classifies individual consumption by purpose, previously used in the preparation of the former CPI. The adoption of the National CPI brings Argentina’s statistical practice in line with the OECD guidelines as well as the methodology followed by the statistical divisions of several international organizations, including the United Nations, World Bank, IMF, Economic Commission for Latin America and the Caribbean, and the Inter-American Development Bank.
According toThe general inflation rate (measured by the INDEC,Consumer Price Index) reflected a 50.9% increase in 2019 inflation was 53.8%2021 while the core inflation rate (excluding the effect of regulated and seasonal goods prices) was 56.7%at 54.9%. This accounts for an increase of 14.8% and 15.4%, respectively, as compared to the 47.6% rate2020 inflation rate. The inflation dynamics during 2021 was relatively similar in the four quarters and 47.7% corewas regularly above 3% on a monthly basis. After an average monthly inflation rate in 2018. This accounts for a rise of 6.2 and 8.9 percentage points, respectively, with regard to the 2018 inflation rate. Inflation was more or less volatile during 2019. After an increase4.1% in the first quarter, price increase decelerated in the second quarter and in part of 2019, inflation decelerated until August, from 4.7% per month in March to 2.2% in July. However, after the devaluation followingthird quarter as a result of the PASO elections, prices accelerated andever-increasing foreign exchange appreciation. In fact, the inflation rate hit 4%during such quarters was of 3.5% and 3% per month on average, respectively. Finally, the last quarter was somewhat heterogeneous as, in August and 5% in September, endingNovember, the year with a monthlygovernment implemented price freeze measures which took the inflation rate of 3.7%to 2.5%. The inflation rate accelerated
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again in December 2019.to 3.8% returning to values close to those recorded in the first quarter. On the other hand, seasonal prices grew by 50.1% while regulated prices grew only by 37.7%, evidencing the continuation of the rate freeze.
TheAt geographic level, the greatest year-on-year price increases were recorded in the northeastern region of the country (57.6%Patagonia area (51.6%), northwestern region of the country (55.5%), Cuyo region (54.7%) and Patagonia region (54%) while in the City of Buenos Aires and Greater Buenos Aires (GBA) area (51.4%), both above average, and in the Northwest region (50.8%). In contrast, in the Cuyo, Pampeana and Northeast regions the inflation rate was below the national average (52.9%)(50.6%, 50.5% and 49.7%, respectively).
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As regards inflation components during 2021, goods recorded an increase in 2019, prices of goods increased53.7% while services rose by 58.4% while prices of services increased by 45.7%44.2%. As in 2018, suchThese data show an increase was due to the strong peso devaluation, as the rise in the exchange rate impacts more on goods than on services due to the tradable nature of goods.relative price imbalance.
During periods of high inflation, effective wages and salaries tend to fall and consumers adjust their consumption patterns to eliminate unnecessary expenses. The increase in inflationary risk may erode macroeconomic growth and further limit the availability of financing, causing a negative impact on our operations. See “Item 3.D—“Item 3.D. Risk Factors—Risks Relating to Argentina—If the current levels of inflation continue or increase, the Argentine economy and our financial position and business could be adversely affected.affected.”
The Financial System
During 2019 the managementThe dynamics of the financial system continued to be affected by the COVID-19 pandemic throughout 2021, like in the vast majority of countries. However, the economic activity started to grow as of the first and second quarters of 2021, with the lifting of mobility restrictions as a result of the vaccination campaigns. Therefore, although certain measures remained effective that had been implemented by the Central Bank in 2021 to mitigate the financial pressure on debtors and to promote the access to financing for those most affected by the recession caused by the pandemic, other measures were gradually lifted.
The following measures were discontinued: (i) automatic 12-month refinancing of unpaid balances of credit cards due in April and September 2020 at a 43% and 40% interest rate, respectively; (ii) automatic rescheduling of unpaid loan payments due as end of April 2020 and throughout 2020; (iii) freezing of UVA instalments; (iv) flexibilization of criteria for debtor classification and allowance for bad debts; and (v) prohibition to charge fees on certain products.
The following measures continued in force: (i) payment by financial entities of a minimum interest rate on time deposits; (ii) suspension of distribution of dividends of financial entities; and (iii) grant of credit lines and loans to SMEs at preferential rates, among other. The financial system liquidity was a key issue givenmanagement remained high, as in recent years. In fact, the significant market uncertainty that caused material outflows of deposits in U.S. dollars industry-wide. The broad liquidity ratio (including not only cash but also Central Bank instruments and the 2020 Argentine Treasury Bonds recordedeligible as reserve requirements) of the banks inon aggregate reached 58.8% of deposits in December 2019,66.3%, recording an increase of more than 300 basis points4.2% as compared to the prior year, accordingclose of 2020. Additionally, the foreign exchange liquidity of the financial system continued to information published by the Central Bank.be historically high, ending at 81.8% in 2021, a 3.6% increase as compared to 2020.
In addition,The solvency ratios inof the financial system continued to be historically high. The regulatory capital adequacy ratio of the sector totaled 17.4%26.2% of the risk weighted assets (RWA), according to the DecemberOctober data, published by the Central Bank, which represents aan excess adequacy of almost two times excess adequacy (201%(222%) according tothat stipulated by applicable regulations.
In 2017, total deposits increased by Ps.477.4 billion, representing a 24.3% increase from 2016, as reported byDue to the Central Bank. Public sector deposits increased by Ps.19.6 billioncontraction of the financial system in 2017, representing a 4.5% increase from 2016. Non-financialreal terms in recent years, the deposit and loan to GDP ratio in the private sector deposits increased by Ps.452.5 billionfinancial system is below the average of other countries in 2017, representing a 29.8% increase from 2016, primarily driven by a Ps.294.8 billion increase, or a 25.5% increase in Pesothe region and the world. The penetration both of deposits and by Ps.182.9 billion increase, or a 47.2% increaseloans continues being lower than the levels recorded before the 1999-2002 crisis.
According to December 2021 data, the deposit to GDP ratio was 14.8% and the loan to GDP ratio was 8.3% as compared to 15.6% and 9.9%, respectively, in foreign currency deposits. In terms of Peso deposits, the most significant were savings accounts, registering a Ps.144.9 billion increase or 43.8% increase from 2016 followed by time deposits, which increased by Ps.107.2 billion or 21.5% from 2016 and checking accounts, which increased by Ps.29.8 billion or 10.3% from 2016.
2020. The Central Bank reported that non-financial private sector loans increased by Ps.546.7 billion or 51.7% from 2016. This increase was mainly due to an increase in foreign currency loans, which grew by Ps.134.1 billion or 93.3% from 2016, while loans denominated in local currency increased by Ps.413.3 billion or 45.2%. The total amount of Peso loans increased in every category. With respect to loans to businesses, overdrafts increased by Ps.18.2 billion or 17.9% and secured loans increased by Ps.88.2 billion or 43.9%. With respect to consumer credit, credit card loans increased by Ps.56.4 billion or 23.8% and personal loans grew by Ps.130.7 billion or 59.1%. Finally, mortgages and pledge loans each registered an increase of Ps.68.8 and Ps.35.1 billion, representing an increase of 112.6% and 65.8%, respectively.
In 2018, total deposits increased by Ps.1,597.6 billion, representing a 66.6% increase from 2017, as reported by the Central Bank. Non-financial private sector deposits increased by Ps.1,196.1 billion in 2018, representing a 61.5% increase from 2017, primarily driven by a Ps.596.1 billion increase, or a 41.2% increase in Peso deposits and by Ps.600.0 billion increase, or a 120.9% increase in foreign currency deposits (expressed in dollars, foreign currency deposits increased by U.S.$2.6 billion or 9.7% from 2017). In terms of Peso deposits, the most significant were time deposits registering a Ps.516.6 billion increase or 70.7% followed by checking accounts which increased by Ps.231.3 billion or 44.4% and savings accounts, which increased a Ps.231.3 billion or 44.4% from 2017.
The Central Bank reported that non-financial private sector loans increased by Ps.523.8 billion or 32.6% from 2017. This increase was mainly due to an increase in foreign currency loans expressed in Pesos, which grew by Ps.302.6 billion or 108.9% from 2017 mainly due to the impact of the devaluation of the Argentinian Peso, while loans denominated in local currency increased by Ps.221.3 billion or 16.7%. With respect to loans to businesses, overdrafts increased by Ps.20.8 billion or 17.4% and secured loans decreased by Ps.37.2 billion or 12.9%. With respect to consumer credit, credit card loans increased by Ps.91.0 billion or 31.0% and personal loans grew by Ps.62.4 billion or 17.7%. Furthermore, mortgages and pledge loans each registered an increase of Ps.80.8 and Ps.9.4 billion, representing an increase of 62.3% and 10.6%, respectively.
In 2019 private sector total deposits in the private sector financial system increased by 25.4%, closing the year at Ps.3,935,385 million. By currency, deposits51.8% in 2021, totaling Ps.9,296,964 million, only a 0.6% above inflation. Deposits in Pesos ended the year at Ps.2,770,847recorded a 58.8% growth, or 5.2% in real terms, reaching Ps.7,742,706 million increasing by 35.5%, whileand U.S. dollar deposits in U.S. dollars measured in Pesos slightly increasedtotaled Ps.1,554,258 million, up by 6.4% totaling Ps.1,164,538 million,24.4%, (17.5% below the price increase) while the same deposits measured in U.S. dollars dropped by 32.8% asdollar showed a resultslight recovery of the outflows exit recorded following the uncertainty generated0.9% after the PASO elections. Bysharp 17.7% fall in 2020. According to type of depositdeposits in Pesos in the private sector, the CER/UVA adjusted time deposits showed a greater increase: 200.8% in nominal terms and 99.4% in real terms, in a scenario of great price acceleration. Although they remain a small part of the deposits in Pesos in the increase was led byprivate sector, their share on the total went from 1.1% to 2,1% in 2021. Savings and checking accounts (7.67%) and, to a lesser extent, by savings deposit accounts (25.4%), while fixed term deposits recorded a lower activity (24.7%). Checking accounts hadshowed a good performance, as from August 2019, increasingwith increases of 63.5% and 57.1%, 8.3% and 4.1% above inflation respectively. Like in 2020, the good performance of savings accounts was due to the direct transfers to the private sector made by 55.2% for the year, comparedGovernment due to 2018.the health crisis.
The Central Bank reported that non-financialAdditionally, total private sector loans increased 15.3% and totaled Ps.2,462,891 million.at year end amounted to Ps.4,423,908 million, an year-on-year increase of 40.6% on average (-6.8% in real terms). Private sector loans in Pesos grew by 18.6%;48%, 1.9% below inflation, after the poor performance was due9.8% increase in real terms in 2020, reaching a credit to GDP ratio penetration of 7.9%, and maintaining a very low percentage of U.S. dollar loans granted, which only represent 1.1% of the high interest rates and the economic recession. On the other hand, a great dispersion in products was observed: pledge and personaltotal loan penetration. The breakdown of loans dropped by 17% and 4.9%, respectively, mortgageproduct showed that car loans increased only 2.1%, documents by 19.5%123.3% (48%
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in real terms) while advances and credit cards recorded the best performance, rising 48.7% and 48.4%, respectively.
According todiscount of commercial papers increased by 56.8% (3.9% above inflation). Mortgage loans were the Central Bank, ROAA was 5.1%worst performing loans in 2019, as compared to 4.1% in 2018, and ROAE for the financial system was 44.4% in 2019, as compared to 36.1% in 2018. Further, the Central Bank indicated that the net interest margin was 21.8% of assets in 2019, as compared to 15.3% in 2018. Net income from services represented 1.9% of assets in 2019, as compared to 1.8% of assets in 2018. Loan loss provisions resulting from the2021, with a 30.6% increase, in private loan delinquencies totaled 1.8% of assets in 2019, as compared to 1.5% of assets in 2018.i.e. 13.5% below inflation.
Argentine Financial System Statistics from 20102012 to 2019.2021.
The following table shows the 20102012 to 20192021 evolution of major financial statements items for the financial system:
December 31, | ||||||||||||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | |||||||||||||||||||||
(in millions of Pesos) | ||||||||||||||||||||||||||||||
Assets | 510,304 | 628,381 | 790,026 | 1,004,775 | 1,340,548 | 1,847,314 | 2,645,673 | 3,468,783 | 5,531,805 | 6.733,723 | ||||||||||||||||||||
Liabilities | 452,752 | 558,264 | 699,205 | 883,086 | 1,172,335 | 1,620,451 | 2,348,461 | 3,067,587 | 4,921,168 | 5,836,745 | ||||||||||||||||||||
Shareholders’ equity | 57,552 | 70,117 | 90,820 | 121,689 | 168,213 | 226,863 | 297,212 | 401,196 | 610,637 | 896,979 | ||||||||||||||||||||
Capital, contributions, reserves | 41,204 | 44,587 | 59,395 | 73,219 | 89,307 | 126,264 | 212,157 | 311,814 | 389,773 | 562,788 | ||||||||||||||||||||
Retained earning | 16,348 | 25,530 | 31,426 | 48,471 | 78,907 | 100,600 | 85,055 | 89,382 | 224,521 | 334,190 | ||||||||||||||||||||
Loans | 230,127 | 332,317 | 433,925 | 563,344 | 649,206 | 886,046 | 1,136,954.6 | 1,691,214 | 2,278,387 | 2,728,821 | ||||||||||||||||||||
Non-financial public sector | 25,907 | 31,346 | 39,951 | 48,438 | 51,470 | 75,254 | 52,25 | 37,738 | 49,351 | 104,130 | ||||||||||||||||||||
Financial sector | 5,018 | 9,263 | 10,299 | 13,049 | 10,729 | 13,199 | 26,426 | 44,306 | 61,653 | 58,154 | ||||||||||||||||||||
Non-financial private sector | 199,202 | 291,708 | 383,674 | 501,857 | 604,062 | 819,174 | 1,085,655 | 1,655,049 | 2,254,400 | 2,721,077 | ||||||||||||||||||||
Provisions | (6,232 | ) | (7,173 | ) | (9,596 | ) | (13,117 | ) | (17,054 | ) | (21,581 | ) | (27,952 | ) | (45,879 | ) | (87,016 | ) | (154,540 | ) | ||||||||||
Deposits | 376,344 | 462,517 | 595,764 | 752,422 | 979,388 | 1,355,353 | 1,969,029 | 2,445,998 | 4,085,244 | 4,838,130 | ||||||||||||||||||||
Non-financial public sector | 115,954 | 129,885 | 163,691 | 202,434 | 256,996 | 291,104 | 441,890 | 457,657 | 864,851 | 763,188 | ||||||||||||||||||||
Non-financial private sector | 257,595 | 328,463 | 427,857 | 544,331 | 720,645 | 1,062,590 | 1,521,687 | 1,981,988 | 3,207,397 | 4,056,973 | ||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
| | December 31, | ||||||||||||||||||
|
| 2012 |
| 2013 |
| 2014 |
| 2015 |
| 2016 |
| 2017 |
| 2018 |
| 2019 |
| 2020 |
| 2021(1) |
| | (in billons of Pesos) | ||||||||||||||||||
Assets |
| 790 | | 1,006 | | 1,341 | | 1,847 | | 2,646 | | 3,469 | | 5,532 | | 6,741 | | 10,902 | | 13,355 |
Liabilities |
| 699 | | 884 | | 1,172 | | 1,620 | | 2,348 | | 3,068 | | 4,921 | | 5,831 | | 9,210 | | 11,215 |
Shareholders’ equity |
| 90.82 | | 122 | | 168 | | 227 | | 297 | | 401 | | 611 | | 911 | | 1,692 | | 2,139 |
Loans |
| 325 | | 551 | | 649 | | 886 | | 1,137.0 | | 1,691 | | 2,278 | | 2,724 | | 3,556 | | 4,047 |
Non-financial public sector |
| 31 | | 48 | | 51.47 | | 75 | | 52.83 | | 38 | | 49 | | 104 | | 98 | | 115 |
Financial sector |
| 9 | | 13 | | 11 | | 13 | | 26 | | 44 | | 62 | | 58 | | 69 | | 60 |
Non-financial private sector |
| 292 | | 502 | | 604 | | 819 | | 1,086 | | 1,655 | | 2,254 | | 2,721 | | 3,608 | | 4,116 |
Provisions |
| (7) | | (12) | | (17) | | (22) | | (28) | | (46) | | (87) | | (159) | | (219) | | (244) |
Deposits |
| 463 | | 752 | | 979 | | 1,355 | | 1,969 | | 2,446 | | 4,085 | | 4,839 | | 8,050 | | 9,899 |
Non-financial public sector |
| 131 | | 203 | | 257 | | 291 | | 0.44 | | 0.46 | | 865 | | 763 | | 1,442 | | 1,796 |
Non-financial private sector |
| 330 | | 548 | | 721 | | 1,063 | | 1,522 | | 1,982 | | 3,207 | | 4,058 | | 6,579 | | 8,075 |
Source: Central Bank. Figures are expressed in original currency, not adjusted for inflation.
(1) | Figures as of June 30, 2021. |
The table below shows the evolution of the number of financial institutions in the system:
December 31, | ||||||||||||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | |||||||||||||||||||||
(in millions of Pesos) | ||||||||||||||||||||||||||||||
Banks | 64 | 64 | 65 | 66 | 65 | 62 | 63 | 62 | 63 | 63 | ||||||||||||||||||||
Public banks | 12 | 12 | 12 | 12 | 12 | 13 | 13 | 13 | 13 | 13 | ||||||||||||||||||||
Private banks | 52 | 52 | 53 | 54 | 53 | 49 | 50 | 49 | 50 | 50 | ||||||||||||||||||||
Private argentine capital banks | 32 | 31 | 33 | 34 | 33 | 32 | 33 | 33 | 34 | 34 | ||||||||||||||||||||
Foreign capital domestic banks | 11 | 12 | 11 | 11 | 11 | 10 | 10 | 9 | 9 | 9 | ||||||||||||||||||||
Foreign financial institution branch banks | 9 | 9 | 9 | 9 | 9 | 7 | 7 | 7 | 7 | 7 | ||||||||||||||||||||
Financial companies | 14 | 14 | 14 | 15 | 15 | 15 | 14 | 14 | 14 | 15 | ||||||||||||||||||||
Credit unions | 2 | 2 | 2 | 1 | 1 | 1 | 1 | 1 | 1 | 0 | ||||||||||||||||||||
Total financial institutions | 80 | 80 | 81 | 82 | 81 | 78 | 78 | 77 | 78 | 78 |
| | | | | | | | | | | | | | | | | | | | |
| | December 31, | ||||||||||||||||||
|
| 2012 |
| 2013 |
| 2014 |
| 2015 |
| 2016 |
| 2017 |
| 2018 |
| 2019 |
| 2020 |
| 2021(1) |
Banks |
| 65 |
| 66 |
| 65 |
| 62 |
| 63 |
| 62 |
| 63 |
| 63 |
| 64 |
| 64 |
Public banks |
| 12 |
| 12 |
| 12 |
| 13 |
| 13 |
| 13 |
| 13 |
| 13 |
| 13 |
| 13 |
Private banks |
| 53 |
| 54 |
| 53 |
| 49 |
| 50 |
| 49 |
| 50 |
| 50 |
| 51 |
| 51 |
Private argentine capital banks |
| 33 |
| 34 |
| 33 |
| 32 |
| 33 |
| 33 |
| 34 |
| 34 |
| 35 |
| 35 |
Foreign capital domestic banks |
| 11 |
| 11 |
| 11 |
| 10 |
| 10 |
| 9 |
| 9 |
| 9 |
| 9 |
| 10 |
Foreign financial institution branch banks |
| 9 |
| 9 |
| 9 |
| 7 |
| 7 |
| 7 |
| 7 |
| 7 |
| 7 |
| 6 |
Financial companies |
| 14 |
| 15 |
| 15 |
| 15 |
| 14 |
| 14 |
| 14 |
| 15 |
| 15 |
| 15 |
Credit unions |
| 2 |
| 1 |
| 1 |
| 1 |
| 1 |
| 1 |
| 1 |
| — |
| — |
| — |
Total financial institutions |
| 81 |
| 82 |
| 81 |
| 78 |
| 78 |
| 77 |
| 78 |
| 78 |
| 79 |
| 79 |
Source: Central Bank. Figures are expressed in original currency, not adjusted for inflation.
(1) | Figures as of June 30, 2021 |
The graph belowfollowing table shows the 2004 to 2021 evolution of loanssome key performance indicators of the financial system:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, | ||||||||||||||||||||||||||||||||||
|
| 2004 |
| 2005 |
| 2006 |
| 2007 |
| 2008 |
| 2009 |
| 2010 |
| 2011 |
| 2012 |
| 2013 |
| 2014 |
| 2015 |
| 2016 |
| 2017 |
| 2018 |
| 2019 |
| 2020 |
| 2021 |
| | (in billons of Pesos) |
| | | | | | | | | | | | | | | | ||||||||||||||||||
Non-Performing Loans ratio |
| 18.6 |
| 7.6 | | 4.5 | | 3.2 | | 3.1 | | 3.5 | | 2.1 | | 1.4 | | 1.7 | | 1.7 | | 2.0 | | 1.7 | | 1.8 | | 1.8 | | 3.1 | | 5.7 | | 3.9 | | 4.3 |
NPL Coverage Ratio |
| 96.9 |
| 114.8 | | 107.6 | | 114.4 | | 116.4 | | 111.8 | | 142.8 | | 171.2 | | 141.0 | | 147.8 | | 139.7 | | 148.4 | | 130.9 | | 138.8 | | 120.6 | | 98.5 | | 151.1 | | 114.0 |
ROAA Private Banks |
| (1.0) |
| 0.5 | | 2.2 | | 1.6 | | 1.9 | | 3.0 | | 3.2 | | 3.0 | | 3.2 | | 3.7 | | 4.3 | | 4.1 | | 3.7 | | 3.2 | | 4.2 | | 7.3 | | 2.7 | | 1.4 |
ROAA Financial System |
| (0.5) |
| 0.9 | | 1.9 | | 1.5 | | 1.6 | | 2.3 | | 2.8 | | 2.7 | | 2.9 | | 3.4 | | 4.1 | | 4.1 | | 3.6 | | 2.7 | | 4.1 | | 5.1 | | 2.4 | | 1.1 |
ROAE Private Banks |
| (8.1) | | 4.1 | | 15.3 | | 10.9 | | 15.2 | | 22.9 | | 24.5 | | 25.6 | | 26.4 | | 29.1 | | 32.1 | | 31.2 | | 29.4 | | 26.6 | | 35.6 | | 59.2 | | 16.6 | | 8.1 |
ROAE Financial System |
| (4.2) | | 7.0 | | 14.3 | | 11.0 | | 13.4 | | 19.2 | | 22.6 | | 25.3 | | 25.7 | | 29.5 | | 32.7 | | 32.4 | | 29.6 | | 23.4 | | 36.1 | | 44.4 | | 16.4 | | 7.3 |
Source:
NPL and deposits growth in Argentina:
Source:NPL Coverage: Central Bank. Figures are expressed following Argentine Banking GAAP as of DecemnberGAAP. Until December 31, 2019 and therefore dodid not apply IFRS 9 provisions, and theyprovisions. Figures are expressed in original currency and not adjusted for inflation. 2020 information is impacted by i) the relief program ruled by the Central Bank amid the pandemic which allowed debtors to reschedule their loan payments originally maturing between April 2020 and March 2021, together with the automatic rescheduling of unpaid credit card balances due April and September 2020, and ii) the Central Bank regulatory easing on debtor classifications amid the pandemic (adding a 60-days grace period before
138
loans are classified as non-performing) and the suspension of mandatory reclassification of customers that are non-performing with other banks, but performing with Supervielle introduced in 1Q20 and extended until June 30, 2021.
The graph below shows the evolution of the private loans portfolio composition in Argentina:
Source:ROAA and ROAE: Central Bank. Figures are expressed following Argentine Banking GAAP as of DecemnberGAAP. Until December 31, 2019 and therefore dodid not apply IFRS 9 provisions, and theyprovisions. Figures are expressed in original currency and not adjusted for inflation.
The graph below shows the evolution of non-performing loan ratios in Argentina:
Source: Since January 2020, Central Bank. FiguresBank figures are expressed following Argentine Banking GAAP as of Decemnber 31, 2019 and therefore do not apply IFRS 9 provisions, and they are in original currency and not adjusted for inflation.
applying hyperinflation accounting
The following graph shows the evolution of non-performing loans coverage, measured as allowances over non-performing loans:
Source: Central Bank. Figures are expressed following Argentine Banking GAAP as of Decemnber 31, 2019 and therefore do not apply IFRS 9 provisions, and they are in original currency and not adjusted for inflation.
The following graphs show the evolution of ROAA and ROAE in Argentina:
Source: Central Bank. Figures are expressed following Argentine Banking GAAP as of Decemnber 31, 2019 and therefore do not apply IFRS 9 provisions, and they are in original currency and not adjusted for inflation.
Source: Central Bank. Figures are expressed following Argentine Banking GAAP as of Decemnber 31, 2019 and therefore do not apply IFRS 9 provisions, and they are in original currency and not adjusted for inflation.
The following tables show market share of Argentine banks in terms of assets, loans and deposits as of December 31, 2019June 30, 2021 according to the Central Bank:
Market Share of Assets | Market Share of Loans | |||
Banco de la Nación Argentina S.A. | 19.7% | Banco de la Nación Argentina S.A. | 17.2% | |
Banco Santander Río S.A. | 9.2% | Banco de Galicia y Buenos Aires S.A. | 11.1% | |
Banco de Galicia y Buenos Aires S.A. | 8.9% | Banco Santander Río S.A. | 9.8% | |
Banco de la Provincia de Buenos Aires | 8.1% | Banco de la Provincia de Buenos Aires | 8.8% | |
BBVA Banco Francés S.A. | 6.4% | Banco Macro S.A. | 8.0% | |
Banco Macro S.A. | 6.3% | BBVA Banco Francés S.A. | 6.8% | |
HSBC Bank Argentina S.A. | 4.4% | Banco de la Ciudad de Buenos Aires | 4.2% | |
Banco de la Ciudad de Buenos Aires | 3.7% | HSBC Bank Argentina S.A. | 3.9% | |
Credicoop Cooperativo Limitado | 3.4% | ICBC S.A. | 3.4% | |
ICBC S.A. | 3.3% | Banco Patagonia S.A. | 3.1% | |
Citibank N.A. | 2.8% | Banco Supervielle S.A. | 2.9% | |
Banco Patagonia S.A. | 2.8% | Banco de la Provincia de Córdoba S.A. | 2.1% | |
Banco de la Provincia de Córdoba S.A. | 2.1% | BICE SA | 1.7% | |
Banco Supervielle S.A. | 2.0% | Itau Argentina | 1.5% | |
Nuevo Santa Fe | 1.4% | Banco Hipotecario S.A. | 1.4% |
| | | |
Market Share of | June 30, 2021 | ||
Banco de la Nación Argentina S.A. | 18.1 | % | |
Banco Santander Río S.A. | 11.4 | % | |
Banco de Galicia y Buenos Aires S.A. | 11.0 | % | |
Banco de la Provincia de Buenos Aires | 8.3 | % | |
BBVA Banco Francés S.A. | 7.0 | % | |
Banco Macro S.A. | 6.7 | % | |
Banco de la Ciudad de Buenos Aires | 3.7 | % | |
ICBC S.A. | 3.4 | % | |
HSBC Bank Argentina S.A. | 3.4 | % | |
Banco Patagonia S.A. | 2.8 | % | |
Banco Supervielle S.A. | 2.7 | % | |
Banco de la Provincia de Córdoba S.A. | 2.4 | % | |
Itau Argentina | 1.7 | % | |
Credicoop Cooperativo Limitado | 1.7 | % | |
Citibank N.A. | 1.5 | % |
| | | |
Market Share of Deposits | June 30, 2021 | ||
Banco de la Nación Argentina S.A. | 20.5 | % | |
Banco de la Provincia de Buenos Aires | 10.2 | % | |
Banco Santander Río S.A. | 8.9 | % | |
Banco de Galicia y Buenos Aires S.A. | 8.9 | % | |
BBVA Banco Francés S.A. | 6.1 | % | |
Banco Macro S.A. | 4.9 | % | |
Credicoop Cooperativo Limitado | 4.2 | % | |
Banco de la Ciudad de Buenos Aires | 3.6 | % | |
HSBC Bank Argentina S.A. | 3.5 | % | |
Banco Patagonia S.A. | 3.0 | % | |
ICBC S.A. | 2.9 | % | |
Banco de la Provincia de Córdoba S.A. | 2.7 | % | |
Banco Supervielle S.A. | 2.4 | % | |
Citibank N.A. | 2.2 | % | |
Nuevo Santa Fe | 1.9 | % |
Source: Central Bank.
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With respect to the distribution network, as of December 31, 2019,June 30, 2021, the financial system had 7734,584 branches, 6018,361 self-service terminals and 17,24017,636 ATMs, with coverage throughout Argentina.
The table below shows the distribution of the network by jurisdiction as of December 31, 2019.
Jurisdiction | Branches | ATMs | Self-Service Terminals | |||
City of Buenos Aires | 855 | 2,717 | 1,832 | |||
Buenos Aires | 1,504 | 5,245 | 2,198 | |||
Catamarca | 26 | 180 | 28 | |||
Córdoba | 497 | 1,749 | 542 | |||
Corrientes | 107 | 349 | 69 | |||
Chaco | 68 | 396 | 72 | |||
Chubut | 72 | 282 | 92 | |||
Entre Ríos | 138 | 546 | 205 | |||
Formosa | 29 | 160 | 20 | |||
Jujuy | 35 | 220 | 86 | |||
La Pampa | 109 | 215 | 31 | |||
La Rioja | 28 | 158 | 36 | |||
Mendoza | 179 | 688 | 335 | |||
Misiones | 67 | 340 | 136 | |||
Neuquén | 93 | 360 | 99 | |||
Río Negro | 82 | 310 | 149 | |||
Salta | 73 | 386 | 156 | |||
San Juan | 41 | 226 | 88 | |||
San Luis | 50 | 201 | 81 | |||
Santa Cruz | 51 | 218 | 65 | |||
Santa Fe | 487 | 1,507 | 1,021 | |||
Santiago del Estero | 60 | 266 | 52 | |||
Tucumán | 97 | 411 | 160 | |||
Tierra del Fuego | 25 | 110 | 48 | |||
Total | 4,773 | 17,240 | 7,601 |
Presentation of Financial Statements in Pesos.Pesos; Inflation.
Historically, inflation in Argentina has played a significant role in influencing the economic conditions in Argentina and, in turn, the operations and financial results of companies operating in Argentina, such as Grupo Supervielle.
Argentina has faced and continues to face inflationary pressures. From 2011 to date, Argentina experienced increases in inflation as measured by the WPI that reflected the continued growth in the levels of private consumption and economic activity (including exports and public and private sector investment), which applied upward pressure on the demand for goods and services.
During periods of high inflation, effective wages and salaries tend to fall and consumers tend to accelerate their consumption patterns and also eliminate unnecessary expenses. The increase in inflationary risk may erode macroeconomic growth and further limit the availability of financing, causing a negative impact on our operations.
139
IAS 29 requires that financial statements of any entity whose functional currency is the currency of a hyperinflationary economy, be stated in terms of the measuring unit current at the end of the reporting period. IAS 29 does not establish a setan inflation rate beyond which an economy is deemed to be experiencing hyperinflation. However, hyperinflation is commonly understood to occur when changes in price levels are close to or exceed 100% on a cumulative basis over the last three years, along with other several macroeconomic-related qualitative factors. Following this criteria, Argentine economy must beis considered hyperinflationary according to IAS 29 starting July 1, 2018. As a consequence, financial statements for the year ended on December 31, 20192021 have been stated in terms of the measuring unit current at the consolidated financial statement date.
181
The following table shows the rate of inflation, as measured by the variations in the WPI and the CPI, according to INDEC and the evolution of the reference stabilization coefficient (“CER”,CER,” per its Spanish acronym) index and UVA used to adjust the principal of certain of our assets and liabilities, for the periods indicated.
Year ended December 31, | |||||||||
2019 | 2018 | 2017 | |||||||
(in percentages) | |||||||||
Price Indices:(1) | |||||||||
WPI | 58.5% | 73.5% | 18.8% | ||||||
CPI | 53.8% | 47.6% | 24.8% | ||||||
Adjustment Index: | |||||||||
CER | 51.6% | 47.2% | 22.6% | ||||||
UVA(2) | 51.84% | 46.86% | 21.15% |
| | | | | | | |
| | Year ended December 31, |
| ||||
|
| 2021 |
| 2020 |
| 2019 |
|
|
| (in percentages) | | ||||
Price Indices:(1) |
|
|
|
|
|
| |
WPI |
| 51.3 | % | 35.4 | % | 58.5 | % |
CPI |
| 50.9 | % | 36.1 | % | 53.8 | % |
Adjustment Index: |
|
|
|
|
|
|
|
CER |
| 51.57 | % | 36.14 | % | 51.6 | % |
UVA(2) |
| 51.60 | % | 36.18 | % | 51.84 | % |
(1)Source: INDEC, Central Bank
(2)UVAs are inflation adjusted units introduced in September 2016.
Currency Composition of our Consolidated Financial Statements
The following table sets forth our assets and liabilities denominated in Pesos, in Pesos adjusted by the CER and in foreign currency, at the dates indicated.
Grupo Supervielle S.A. | |||||||||
As of December 31, | |||||||||
2019 | 2018 | 2017 | |||||||
(in thousands of Pesos) | |||||||||
Assets | |||||||||
In Pesos, unadjusted | 95,896,845 | 143,945,976 | 156,102,012 | ||||||
In Pesos, adjusted by CER | 10,869,018 | 8,644,021 | 3,701,966 | ||||||
In Foreign Currency(1) | 41,918,828 | 65,442,813 | 48,223,810 | ||||||
Total Assets | 148,684,691 | 218,032,810 | 208,027,788 | ||||||
Liabilities and Shareholders’ Equity | |||||||||
In Pesos, unadjusted, including Shareholders’ Equity | 109,265,568 | 155,348,939 | 166,841,090 | ||||||
In Pesos, Adjusted by the CER | 1,454,200 | 128,807 | 23,385 | ||||||
In Foreign Currency(1) | 37,964,923 | 62,555,064 | 41,163,313 | ||||||
Total Liabilities and Shareholders’ Equity | 148,684,691 | 218,032,810 | 208,027,788 |
| | | | | | |
| | Grupo Supervielle S.A. | ||||
| | As of December 31, | ||||
|
| 2021 |
| 2020 |
| 2019 |
|
| (in thousands of Pesos) | ||||
Assets |
|
|
|
|
|
|
In Pesos, unadjusted |
| 332,346,994 |
| 293,120,784 |
| 197,061,142 |
In Pesos, adjusted by the CER |
| 14,714,577 |
| 16,405,875 |
| 22,335,054 |
In Foreign Currency(1) |
| 43,341,471 |
| 66,666,603 |
| 86,140,182 |
Total Assets |
| 390,403,042 |
| 376,193,262 |
| 305,536,378 |
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
In Pesos, unadjusted, including Shareholders’ Equity |
| 348,379,897 |
| 318,903,045 |
| 224,532,909 |
In Pesos, Adjusted by the CER |
| 4,424,220 |
| 2,194,995 |
| 2,988,279 |
In Foreign Currency(1) |
| 37,598,925 |
| 55,095,222 |
| 78,015,191 |
Total Liabilities and Shareholders’ Equity |
| 390,403,042 |
| 376,193,261 |
| 305,536,378 |
(1) | Converted into Pesos based on the reference exchange rates reported by the Central Bank for December 31, |
Critical Accounting Policies
In the preparation of our audited consolidated financial statements, we have relied on variables and assumptions derived from historical experience and various other factors that we deemed reasonable and relevant. Although we review these estimates and assumptions in the ordinary course of business, the presentation of our financial condition and results of operation often requires our management to make judgments regarding the effects of matters that are inherently uncertain on the carrying value of our assets and liabilities and, consequently, our results of operations.
An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact our audited consolidated financial statements.
In order to provide an understanding about how management forms its judgments about future events, including the variables and assumptions underlying the estimates, and the sensitivity of those judgments to different variables and conditions, we summarize our main critical accounting policies under IFRS.
a- Fair value of derivatives and other instruments
The fair value of financial instruments that do not list in active markets are measured through the use of valuation techniques. Such techniques are validated and regularly reviewed by qualified independent personnel of the area that developed such techniques. All models are evaluated and adjusted before being use in order to make sure that results express current information and comparative market prices. As long as possible, models use only observable information; however, factors such as credit risk (own or counterparty), volatilities and correlations require the use of estimates. Changes in assumptions regarding such factors may impact on the fair value reported for financial instruments.
The information on instruments that have not been valuated based on the market information is included in Note 6. In this regard, the Senior Management decides whether significant risks and property benefits of financial assets and financial lease are transferred to the counterparty, especially those of higher risk.
b- Allowances for loan losses
We assess on a forward-looking basis the expected credit losses (“ECL”) associated with its debt instrument assets carried at amortised cost and at fair value through other comprehensive income, and with the exposure arising from loan commitments and financial guarantee contracts. We recognize a loss allowance for such losses at each reporting date. The measurement of ECL reflects:
For further information, see note 1.12 to our audited consolidated financial statements.
c- Impairment of Non-Financial Assets
Intangible assets with definite useful life and property, plant and equipment are amortized or depreciated on a straight-line basis during their estimated useful life. We monitor the conditions associated with these assets to determine whether the events and circumstances require a review of the remaining amortization or depreciation term and whether there are factors or circumstances indicating impairment in the value of the assets which might not be recoverable.
Identifying the indicators of impairment of property, plant and equipment and intangible assets requires the use of judgment. We have concluded that there were no indicators of impairment for any of the years reported in its consolidated financial statements.
Assets with indefinite useful life are tested for impairment. This process require Management to make judgements, including the identification of cash-generating units, the identification and allocation of assets and liabilities to a cash-generating unit and the definition of their recoverable value. When calculating the recoverable value of a cash-generating unit, we use estimates and significant judgments and assumptions.
Although we believe that assumptions and forecasts used are suitable in virtue of the information available for the administration, changes in assumptions or circumstances may require changes in the assessment. Negative changes in assumptions used in impairment tests of assets with indefinite useful life may result in a potential impairment recognition.
183
d- Structured Entities.
Assessing whether we control a structured entity, requires the management to make judgments.
The management assesses its exposure to risks and rewards, as well as its ability to make decisions and direct the relevant activities of such structured entity. Structured entities controlled by us are subject to consolidation. The following elements were used to determine if we control a structured entity:
e- Income tax and deferred tax
A significant level of judgment is required to determine current and deferred tax assets and liabilities. Current income tax is measured at the amount expected to be paid while deferred income tax is measured based on the temporary differences between the carrying amount of assets and liabilities and their tax base, at the rates expected to be in force at the time of reversal of such differences.
Deferred tax assets and Loss Carryforward are recognized when future taxable income is expected to exist to offset such temporary differences or losses, based on the Senior Management’s assumptions about the amounts and timing of such future taxable income. Then, it is necessary to determine whether tax assets are likely to be used and offset against future taxable income. Current results may differ from these estimates, such as changes in the applicable tax laws or the outcome of the final review of the tax returns by tax authorities and tax courts.
Future taxable income and the number of tax benefits likely to be available in the future are based on a medium term business plan prepared by management on the basis of reasonable expectations.
Results of Operations for the Years Ended December 31, 2019, 20182021 and 20172020
We discuss below: (i)below our results of operations for the year ended December 31, 20192021 as compared with our results of operations for the year ended December 31, 2018; and (ii)2020. We expressly state that our results of operations for the year ended December 31, 20182020 as compared with our results of operations for the year ended December 31, 2017.
184 2019 is hereby incorporated by reference to
140
“Item 5.A. Operating Results” of the Form 20-F for the year ended December 31, 2020 filed by us with the U.S. Securities and Exchange Commission under the file number 001-37777, as amended by the Form 20-F/A filed by us with the SEC under the same file number.
Selected Ratios
| | | | | | | |
|
| 2021 |
| 2020 |
| 2019 |
|
SELECTED RATIOS |
|
|
|
|
|
| |
Return on average equity (1) |
| (3.3) | % | 10.2 | % | (9.2) | % |
Return on average assets (2) |
| (0.4) | % | 1.4 | % | (1.1) | % |
Net Interest Margin (3) |
| 17.3 | % | 21.5 | % | 21.0 | % |
Net Fee Income Ratio (4) |
| 20.7 | % | 18.9 | % | 20.2 | % |
Efficiency Ratio (5) |
| 74.7 | % | 64.4 | % | 60.2 | % |
Cost/assets (6) |
| 11.3 | % | 12.1 | % | 11.8 | % |
Basic earnings per share (in Pesos) (7) |
| (3.8) |
| 11.6 |
| (9.7) |
|
Diluted earnings per share (in Pesos) |
| N/A |
| N/A |
| N/A |
|
Basic earnings per share (in U.S.$.) (8) |
| (0.0) |
| 0.1 |
| (0.1) |
|
Diluted earnings per share (in U.S.$.) (8) |
| N/A |
| N/A |
| N/A |
|
Liquidity and Capital |
| |
|
|
|
|
|
Loans to Total Deposits (9) |
| 57.4 | % | 63.7 | % | 106.5 | % |
Total Equity / Total Assets |
| 13.2 | % | 14.3 | % | 15.7 | % |
Pro forma Consolidated Capital / Risk weighted assets (10) |
| 13.3 | % | 14.4 | % | 12.1 | % |
Pro forma Consolidated Tier1 Capital / Risk weighted assets (10) |
| 12.7 | % | 13.8 | % | 11.3 | % |
LCR Pro forma(10) |
| 109.6 | % | 111.4 | % | 150.3 | % |
Risk Weighted Assets/Assets (10) |
| 65.2 | % | 69.7 | % | 87.2 | % |
Asset Quality |
| |
|
|
|
|
|
Non-performing loans as a percentage of Total Loans |
| 4.3 | % | 3.7 | % | 7.4 | % |
Allowances as a percentage of Total Loans |
| 6.1 | % | 7.4 | % | 7.1 | % |
Cost of risk (11) |
| 5.8 | % | 7.7 | % | 7.5 | % |
Cost of risk, net (12) |
| 4.9 | % | 7.3 | % | 7.1 | % |
Coverage Ratio(13) |
| 145.0 | % | 208.8 | % | 96.0 | % |
Other Data |
| |
|
|
|
|
|
Dividends paid to ordinary shares (Ps.million) |
| 514,711 |
| 800,089 |
| 957,827 |
|
Dividends paid to the preferred shares (Ps.million) |
| — |
| — |
| — |
|
Dividends per common share (Ps.) |
| 1.1 |
| 1.8 |
| 2.1 |
|
Dividends per preferred share (Ps.) |
| — |
| — |
| — |
|
(1) | Attributable comprehensive income divided by average shareholders’ equity, calculated on a daily basis and measured in local currency. |
(2) | Attributable Comprehensive Income divided by average assets, calculated on a daily basis and measured in local currency. |
(3) | Net interest income + Net income from financial instruments at fair value through profit or loss + Result from derecognition of assets measured at amortized cost + Exchange rate differences on gold and foreign currency, divided by average interest-earning assets. Since 2019, the Net Interest Margin ratio (“NIM”) also includes the exchange rate differences and net gains or losses from currency derivatives representing more accurately our financial margin and spreads. This ratio coincides with the net financial margin ratio published in previous years (now renamed as NIM). |
(4) | Net services fee income + Income from insurance activities divided by the sum of Net interest income + Net income from financial instruments at fair value through profit or loss + Result from derecognition of assets measured at amortized cost + Exchange rate differences on gold and foreign currency, net Services fee income, Income from insurance activities, etc. |
(5) | Personnel, Administrative expenses and Depreciation & Amortization divided by the sum of Net interest income + Net income from financial instruments at fair value through profit or loss + Result from derecognition of assets measured at amortized cost + Exchange rate differences on gold and foreign currency, net Services fee income, Income from insurance activities and Other net operating income. |
(6) | Administration expenses divided by average assets, calculated on a daily basis. |
(7) | Basic earnings per share (in Pesos) are based upon the weighted average of Grupo Supervielle’s outstanding shares, which were 456,722,322 for the year ended December 31, 2021, 2020 and 2019. |
(8) | Peso amounts have been translated into U.S. dollars at the reference exchange rate reported by the Central Bank as of December 31, 2021 which was Ps.102.75 to U.S.$1.00. |
141
(9) | Loans and Leasing before allowances divided by total deposits. |
(10) | For the calculation of these line items, see “Item 4.B. Business Overview—Banking Regulation and Supervision.” Proforma ratios include the liquidity retained at the holding company (Grupo Supervielle) level, which are available for future capital injections to our subsidiaries in order to fund our growth strategy. |
(11) | Loan loss provisions divided by average loans, calculated on a daily basis. |
(12) | Loan loss provisions including recovered loan loss provisions divided by average loans, calculated on a daily basis. |
(13) | Allowances for loan losses divided by non-performing loans. |
Attributable Comprehensive Income and Attributable Net Income
Grupo Supervielle S.A. | |||||||||||||||
As of December 31 | Change December 31, | ||||||||||||||
2019 | 2018 | 2017 | 2019/2018 | 2018/2017 | |||||||||||
$ | $ | $ | % | % | |||||||||||
(in thousands of Pesos, except percentages) | |||||||||||||||
Consolidated Income Statement Data IFRS | |||||||||||||||
Interest income | 44,794,595 | 46,790,036 | 34,250,524 | (4.3 | )% | 36.6% | |||||||||
Interest expenses | (34,913,451 | ) | (26,787,390 | ) | (12,782,957 | ) | 30.3% | 109.6% | |||||||
Net interest income | 9,881,144 | 20,002,646 | 21,467,567 | (50.6 | )% | (6.8 | )% | ||||||||
Net income from financial instruments (NIFFI) at fair value through profit or loss | 20,960,966 | 9,707,395 | 5,454,354 | 115.9% | 78.0% | ||||||||||
Exchange rate difference on gold and foreign currency | (324,070 | ) | 1,733,237 | 604,734 | (118.7 | )% | 186.6% | ||||||||
NIFFI and Exchange Rate Differences | 20,636,896 | 11,440,632 | 6,059,088 | 80.4% | 88.8% | ||||||||||
Net Financial Income | 30,518,040 | 31,443,278 | 27,526,655 | (2.9 | )% | 14.2% | |||||||||
Services fee income | 8,599,607 | 9,118,706 | 9,327,965 | (5.7 | )% | (2.2 | )% | ||||||||
Services fee expense | (2,243,970 | ) | (2,181,620 | ) | (1,877,412 | ) | 2.9% | 16.2% | |||||||
Income from insurance activities | 1,393,356 | 1,305,522 | 1,383,709 | 6.7% | (5.7 | )% | |||||||||
Net Service Fee Income | 7,748,993 | 8,242,608 | 8,834,262 | (6.0 | )% | (6.7 | )% | ||||||||
Sub Total | 38,267,033 | 39,685,886 | 36,360,917 | (3.6 | )% | 9.1% | |||||||||
Result from exposure to changes in the purchasing power of money | (5,359,565 | ) | (9,253,021 | ) | (3,986,190 | ) | (42.1 | )% | 132.1% | ||||||
Other operating income | 2,755,267 | 3,805,134 | 2,827,476 | (27.6 | )% | 34.6% | |||||||||
Loan loss provisions | (7,736,868 | ) | (7,967,031 | ) | (6,204,348 | ) | (2.9 | )% | 28.4% | ||||||
Net Operating Income | 27,925,867 | 26,270,968 | 28,997,855 | 6.3% | (9.4 | )% | |||||||||
Personnel expenses | 14,164,289 | 13,504,300 | 13,439,165 | 4.9% | 0.5% | ||||||||||
Administration expenses | 7,573,543 | 8,615,396 | 7,566,294 | (12.1 | )% | 13.9% | |||||||||
Depreciations and impairment of non-financial assets | 1,814,671 | 665,154 | 956,819 | 172.8% | (30.5 | )% | |||||||||
Other operating expenses | 6,358,291 | 6,633,161 | 6,394,542 | (4.1 | )% | 3.7% | |||||||||
Operating income | (1,984,927 | ) | (3,147,043 | ) | 641,035 | N.A. | N.A. | ||||||||
Income / (loss) before taxes | (1,984,927 | ) | (3,147,043 | ) | 641,035 | N.A. | N.A. | ||||||||
Income tax | (168,695 | ) | (1,555,074 | ) | (1,802,869 | ) | (89.2 | )% | (13.7 | )% | |||||
Net loss for the year | (2,153,622 | ) | (4,702,117 | ) | (1,161,834 | ) | (54.2 | )% | 304.7% | ||||||
Net loss for the year attributable to owners of the parent company | (2,151,600 | ) | (4,658,050 | ) | (1,160,465 | ) | (53.8 | )% | 301.4% | ||||||
Net loss for the year attributable to non-controlling interest | (2,022 | ) | (44,067 | ) | (1,369 | ) | (95.4 | )% | 3118.9% | ||||||
Other Comprehensive Income | (47,833 | ) | 371,617 | 72,120 | -112.9% | 415.3% | |||||||||
Other comprehensive income attributable to parent company | (47,701 | ) | 371,231 | 72,100 | -112.8% | 414.9% | |||||||||
Other comprehensive income attributable to non-controlling interest | (132 | ) | 386 | 20 | -134.2% | 1830.0% | |||||||||
Comprehensive Loss | (2,201,455 | ) | (4,330,500 | ) | (1,089,714 | ) | (49.2 | )% | 297.4% | ||||||
Comprehensive loss for the year attributable to owners of the parent company | (2,199,301 | ) | (4,286,819 | ) | (1,088,365 | ) | (48.7 | )% | 293.9% | ||||||
Comprehensive loss for the year attributable to non-controlling interest | (2,154 | ) | (43,681 | ) | (1,349 | ) | (95.1 | )% | 3137.7% | ||||||
Return on Average Shareholders’ Equity | (9.1% | ) | (16.2% | ) | (4.7% | ) | |||||||||
Return on Average Assets | (1.1% | ) | (1.9% | ) | (0.6% | ) |
| | | | | | | |
|
| Grupo Supervielle S.A. |
| ||||
| | | | | | Change |
|
| | | | | | December | |
| | As of December 31, | | 31, | | ||
| | 2021 | | 2020 | | 2021/2020 |
|
|
| Ps. |
| Ps. |
| % | |
Consolidated Income Statement Data | |
| |
| |
|
|
Interest income | | 103,431,881 | | 97,659,056 | | 5.9 | % |
Interest expenses |
| (60,499,507) |
| (43,136,686) |
| 40.3 | % |
Net interest income |
| 42,932,374 |
| 54,522,370 |
| (21.3) | % |
Net income from financial instruments at fair value through profit or loss |
| 8,889,470 |
| 5,004,594 |
| 77.6 | % |
Result from derecognition of assets measured at amortized cost |
| 254,187 |
| 991,715 |
|
| |
Exchange rate difference on gold and foreign currency |
| 992,383 |
| 1,606,842 |
| (38.2) | % |
NIFFI and Exchange Rate Differences |
| 10,136,040 |
| 7,603,151 |
| 33.3 | % |
Net Financial Income |
| 53,068,414 |
| 62,125,521 |
| (14.6) | % |
Commissions income |
| 16,665,264 |
| 17,348,966 |
| (3.9) | % |
Commissions expense |
| (5,080,481) |
| (5,355,815) |
| (5.1) | % |
Income from insurance activities |
| 2,271,246 |
| 2,522,921 |
| (10.0) | % |
Net Service Fee Income |
| 13,856,029 |
| 14,516,072 |
| (4.5) | % |
Sub Total |
| 66,924,443 |
| 76,641,593 |
| (12.7) | % |
Other operating income |
| 5,376,874 |
| 5,704,765 |
| (5.7) | % |
Result from exposure to changes in the purchasing power of the currency |
| (7,807,754) |
| (6,475,891) |
| 41.2 | % |
Loan loss provisions |
| (8,929,921) |
| (13,003,712) |
| (31.3) | % |
Net Operating Revenue |
| 55,563,642 |
| 62,866,755 |
| (11.6) | % |
Personnel expenses |
| (25,591,322) |
| (27,436,458) |
| (6.7) | % |
Administration expenses |
| (15,355,579) |
| (15,574,998) |
| (1.4) | % |
Depreciations and impairment of premises and equipment |
| (4,225,142) |
| (3,633,207) |
| 16.3 | % |
Other operating expenses |
| (11,848,050) |
| (9,924,079) |
| 19.4 | % |
Operating income |
| (1,456,451) |
| 6,298,013 |
| (123.1) | |
Results before taxes from continuing operations |
| (1,456,451) |
| 6,298,013 |
| (123.1) | |
Income tax |
| (279,907) |
| (1,013,887) |
| (72.4) | % |
Net (loss) / income for the year |
| (1,736,358) |
| 5,284,126 |
| (132.9) | % |
Net (loss) / income for the year attributable to parent company |
| (1,734,541) |
| 5,282,780 |
| (132.8) | % |
Net (loss) / income for the year attributable to non-controlling interest |
| (1,817) |
| 1,346 |
| (235.0) | % |
Total Other Comprehensive (loss) / income |
| (53,725) |
| 1,213,106 |
| (104.4) | % |
Other comprehensive (loss) / income attributable to parent company |
| (53,657) |
| 1,211,932 |
| (104.4) | % |
Other comprehensive (loss) / income attributable to non-controlling interest |
| (68) |
| 1,174 |
| (105.8) | % |
Total Comprehensive (loss) / income |
| (1,790,083) |
| 6,497,232 |
| (127.6) | % |
Total comprehensive (loss) / income attributable to parent company |
| (1,788,198) |
| 6,494,712 |
| (127.5) | % |
Total comprehensive (loss) / income attributable to non-controlling interest |
| (1,885) |
| 2,520 |
| (174.8) | % |
Return on Average Shareholders’ Equity |
| (3.3) | % | 10.2 | % |
| |
Return on Average Assets |
| (0.4) | % | 1.4 | % |
| |
142
Attributable comprehensivenet income in 20192021 amounted to a Ps.2.2Ps.1.7 billion loss, as compared to a Ps.4.3Ps.5.3 billion gain in 2020. Net Income for the year was impacted by several factors, including: (i) low credit demand from the private sector, which is at historic lows; (ii) increasing Central Bank regulations on volumes and prices of banking assets and liabilities impacting financial margin, including minimum interest rates on time deposits; (iii) higher turnover tax, mainly from the City of Buenos Aires but also from other Provinces; (iv) higher expenses incurred in accelerating our strategy to capture operating efficiencies; and (v) an increase in loan loss in 2018.provisions at IUDÚ due to the impact of the pandemic on its customers base and following the Central Bank deferral programs regulations that rescheduled loan installment maturities along 12 months.
Attributable net income in 2019 amounted to a Ps.2.2 billion loss, as compared to a Ps.4.7 billion loss in 2018.
ROAA and ROAE were (1.1%)(0.4)% and (9.1%)(3.3)%, respectively, in 2019,2021, as compared to (1.9%)1.4% and (16.2%)10.2%, respectively, in 2018.
185
Attributable comprehensive income in 2018 amounted to a Ps.4.3 billion loss, as compared to a Ps.1.1 billion loss in 2017.
Attributable net income in 2018 amounted to a Ps.4.7 billion loss, as compared to a Ps.1.2 billion loss in 2017.
ROAA and ROAE were (1.9%) and (16.2 %), respectively, in 2018, as compared to (0.6%) and (4.7%), respectively, in 2017.
2019 Compared to 20182020.
In 2019.2021, attributable comprehensive income amounted to a Ps 2.2Ps.1.8 billion loss. a Ps.2.1 billion increaseloss, compared to a Ps.4.3Ps.6.5 billion gain in 2020, mainly as a result of: (i) a Ps.9.1 billion decrease in net financial income, to Ps.53.1 billion from Ps.62.1 billion in 2020; (ii) a Ps.2.3 billion increase in Other expenses, net to Ps.6.5 billion from Ps.4.2 billion in 2020; (iii) a Ps.1.3 billion increase in result from exposure to changes in the purchasing power of the currency to Ps.7.8 billion in 2021, compared to Ps.6.5 billion in 2020; (iv) a Ps.53.7 million loss in 2018.
The main factors explaining the performance were:
other comprehensive income compared to Ps.1.2 billion gain in 2020; (v) a Ps.408.4 million decrease in net services fee income, to Ps.11.6 billion from Ps.12.0 billion in 2020; and (vi) a Ps.251.7 million decrease in income from insurance activities, to Ps.2.3 billion from Ps.2.5 billion in 2020. These factors were partially offset by:
2018 Compared to 2017
In 2018, attributable comprehensive income amounted to (i) a Ps 4.3 billion loss, a Ps.3.2Ps.4.1 billion decrease comparedin Loan Loss Provisions to Ps.8.9 billion from Ps.13.0 billion in 2020; (ii) a Ps.1.1Ps.1.5 billion lossdecrease in 2017.personnel and administrative expenses and Depreciation and Amortization (“D&A”) to Ps.45.2 billion from Ps.46.6 billion in 2020, and (ii) a Ps.826.4 million decrease in income tax expenses to Ps.187.5 million from Ps.1.0 billion in 2020.
The main factors explaining the decrease were:
186
These factors were partially offset by:
Net Financial Income (Net Interest Income -NII-, Net Income from Financial Instruments -NIFFI- and Exchange Rate Differences on Gold and Foreign Currency)
Net Financial Income
Net financial income in 20192021 amounted to Ps.30.5 billion and net financial margin was 21.0%, compared to Ps.31.4 billion, and 17.0%, respectively, in 2018.
The increase in net interest margin reflects higher volumes invested in high-yield Central Bank seven-days LELIQS and the higher interest rates of those instruments, also supported by the 370 basis points increase in net interest margin loans in Pesos driven by themarket interest rates increase trend. These were partially offset by the mark to market impact accounting of short term Pesos and U.S. dollars local treasury notes following the debt reprofiling announced by the Argentine government in August 2019.
Net financial income in 2018 amounted to Ps.31.4Ps.53.1 billion and net interest margin (“NIM”) was 17.0%17.2%, compared to Ps.27.5Ps.62.1 billion, and 18.4%21.5%, respectively, in 2017.2020. This decrease was mainly explained by: (i) a lower Ps. spread reflecting the 5,300 bp increase in cost of funds derived from the impact of regulatory minimum rates on time deposits; (ii) weak credit demand; and (iii) a lower yield on the investment portfolio.
Breakdown Net Interest Income, NIFFINIM in Ps. decreased to 17.4% from 22.6% reflecting lower spreads, including: (i) a 530 basis points increase in cost of funds derived from the impact of minimum rates on time deposits, the rise in average market interest rates, and Exchange Rate Differencesa higher share of remunerated deposits; (ii) a lower yield on the investment portfolio; (iii) weak credit demand with a 1.1% decrease in Peso loan portfolio while interest earned on those loans decreased 30 basis points.
Grupo Supervielle S.A. | |||||||||||||||
As of December 31, | Change | ||||||||||||||
2019 | 2018 | 2017 | 2019/2018 | 2018-2017 | |||||||||||
$ | $ | $ | % | % | |||||||||||
Net Interest Income | 9,881,144 | 20,002,646 | 21,467,567 | (50.6 | )% | (6.8 | )% | ||||||||
NIFFI and Exchange Rate differences | 20,636,896 | 11,440,632 | 6,059,088 | 80.4% | 88.8% | ||||||||||
Total | 30,518,040 | 31,443,278 | 27,526,655 | (2.9 | )% | 14.2% |
The following table sets forth a breakdown of our net interest income, and net income from financial institutions (“NIFFI”), result from derecognition of assets measured at amortized cost and exchange rate differences as of December 31, 2021 and 2020:
| | | | | | | | |
| | Grupo Supervielle S.A. | ||||||
| | As of December 31, | ||||||
|
| 2021 |
| 2020 |
|
| Change |
|
| | $ | | $ | | | % | |
Net Interest Income |
| 42,932,374 |
| 54,522,370 |
|
| (21.3) | % |
NIFFI, Result from derecognition of assets measured at amortized cost and Exchange Rate differences |
| 10,136,040 |
| 7,603,151 |
|
| 33.3 | % |
Total |
| 53,068,414 |
| 62,125,521 |
|
| (14.6) | % |
NIM by currency
Grupo Supervielle S.A. | |||||||||
As of December 31, | |||||||||
2019 | 2018 | 2017 | |||||||
(in percentages) | |||||||||
Net interest margin | 21.0% | 17.0% | 18.4% | ||||||
Pesos | 28.2% | 20.0% | 20.8% | ||||||
Dollars | (3.4% | ) | 6.9% | 7.7% |
| | | | | |
| | Grupo Supervielle S.A. | |||
| | As of December 31, | |||
|
| 2021 |
| 2020 |
|
|
| (in percentages) | |||
Net Interest Margin Breakdown |
|
|
|
| |
Total NIM |
| 17.3 | % | 21.5 | % |
Ps.NIM |
| 17.4 | % | 22.6 | % |
U.S.$NIM |
| 15.7 | % | 13.9 | % |
Loan Portfolio NIM |
| 18.4 | % | 21.6 | % |
Ps.NIM |
| 20.5 | % | 25.9 | % |
U.S.$NIM |
| 5.3 | % | 4.4 | % |
Investment Portfolio NIM |
| 15.1 | % | 23.1 | % |
Ps.NIM |
| 15.5 | % | 21.7 | % |
U.S.$NIM |
| 12.0 | % | 101.2 | % |
143
Grupo Supervielle S.A. | |||||||||
As of December 31, | |||||||||
2019 | 2018 | 2017 | |||||||
(in percentages) | |||||||||
Net Interest Margin Breakdown | |||||||||
Total NIM | 21.0% | 17.0% | 18.4% | ||||||
Ps.NIM | 28.2% | 20.0% | 20.8% | ||||||
U.S.$NIM | (3.4% | ) | 6.9% | 7.7% | |||||
Loan Portfolio NIM | 18.7% | 16.4% | 18.9% | ||||||
Ps.NIM | 24.2% | 20.5% | 22.4% | ||||||
U.S.$.NIM | 4.8% | 3.9% | 2.9% | ||||||
Investment Portfolio NIM | 18.6% | 22.7% | 15.4% | ||||||
Ps.NIM | 28.5% | 19.2% | 14.3% | ||||||
U.S.$NIM | (68.7% | ) | 41.7% | 20.2% |
Since 2019,2020, the NIM also includes the exchange rate differences and net gains or losses from currency derivatives representing more accurately our financial margin and spreads. This ratio coincides with the net financial margin ratio published in previous yearsuntil 2018 (now renamed as NIM).
Net Interest Income
2019 Compared to 2018
Net interest income in 20192021 totaled Ps.9.9Ps.42.9 billion, a 50.6%21.3% decrease from the Ps.20.0Ps.54.5 billion recorded in 2018. This was explained by:
2018 Compared to 2017
Net interest income increased 5.9% in 2018 totaled Ps.20.0 billion, a 6.8% decrease from the Ps.21.5 billion recorded in 2017. Additional deposits to fund new investments in high-yield short term Central Bank securities resulted in higher interest expenses, impacting net interest income, while yields from the investment in those securities held for trading purposes are recorded in the net income from financial instruments.2021.
i) Interest Income
2019 Compared to 2018
Interest income in 20192021 totaled Ps.44.8Ps.103.4 billion, a 4.3% decrease5.9% increase from the Ps.46.8Ps.97.7 billion recorded in 2018,2020, primarily due to 17.1% increase in the 30.8%volume of Central Bank securities and Repo transactions and 150 basis points increase in the average yield on those assets. This was partially offset by the 8.9% decrease in average balance of loans, while interest on loans increased 1,000209 basis points following the increase in market interest rates.points.
Yields from investments in high-yield short term Central Bank securities were recorded in NIFFI following the fair value through profit or loss accounting methodology.
188
2018 Compared to 2017
Interest income in 2018 totaled Ps. 46.8 billion, a 36.6% increase from the Ps.34.3 billion recorded in 2017. This increase was primarily the resultAs of an increase in average loans.
OurDecember 31, 2021 and 2020, our interest income was comprised of the following:
Grupo Supervielle S.A. | |||||||||||||||
Year ended December 31, | Change December 31, | ||||||||||||||
2019 | 2018 | 2017 | 2019/2018 | 2018/2017 | |||||||||||
Ps. | Ps. | Ps. | % | % | |||||||||||
Interest on overdrafts | 4,566,729 | 5,000,550 | 2,901,607 | (8.7 | )% | 72.3% | |||||||||
Interest on promissory notes | 5,878,441 | 6,272,282 | 3,767,219 | (6.3 | )% | 66.5% | |||||||||
Interest on mortgage loans | 3,781,641 | 3,028,718 | 263,172 | 24.9% | 1050.9% | ||||||||||
Interest on automobile and other secured loans | 693,000 | 757,191 | 75,662 | (8.5 | )% | 900.8% | |||||||||
Interest on personal loans | 12,916,398 | 16,811,397 | 16,547,779 | (23.2 | )% | 1.6% | |||||||||
Interest on corporate unsecured loans | 6,141,212 | 4,643,906 | 3,060,511 | 32.2% | 51.7% | ||||||||||
Interest on credit cards loans | 4,815,023 | 5,249,821 | 5,053,721 | (8.3 | )% | 3.9% | |||||||||
Interest on foreign trade loans | 1,730,633 | 1,798,461 | 899,192 | (3.8 | )% | 100.0% | |||||||||
Interest on leases | 1,129,605 | 1,417,026 | 1,141,613 | (20.3 | )% | 24.1% | |||||||||
Other | 3,141,913 | 1,810,684 | 540,048 | 73.5% | 235.3% | ||||||||||
Total | 44,794,595 | 46,790,036 | 34,250,524 | (4.3 | )% | 36.6% |
| | | | | | | |
| | Grupo Supervielle S.A. | |||||
| | Year ended December 31, | |||||
|
| 2021 |
| 2020 |
| 2021/2020 |
|
|
| Ps. |
| Ps. |
| % | |
Interest on overdrafts |
| 3,133,108 |
| 4,042,925 |
| (22.5) | % |
Interest on promissory notes |
| 11,194,804 |
| 9,398,203 |
| 19.1 | % |
Interest on personal loans |
| 19,401,947 |
| 21,393,779 |
| (9.3) | % |
Interest on corporate unsecured loans |
| 6,918,453 |
| 9,029,045 |
| (23.4) | % |
Interest on credit cards loans |
| 5,927,631 |
| 5,763,900 |
| 2.8 | % |
Interest on mortgage loans |
| 7,062,856 |
| 6,029,525 |
| 17.1 | % |
Interest on automobile and other secured loans |
| 1,548,516 |
| 1,114,558 |
| 38.9 | % |
Interest on foreign trade loans |
| 1,243,547 |
| 2,193,377 |
| (43.3) | % |
Interest on leases |
| 1,581,186 |
| 1,063,245 |
| 48.7 | % |
Interest on government and corporate securities measured at amortized cost |
| 27,672,634 |
| 30,979,499 |
| (10.7) | % |
Other* |
| 17,747,199 |
| 6,651,000 |
| 166.8 | % |
Total |
| 103,431,881 |
| 97,659,056 |
| 5.9 | % |
* Includes results from securities issued by the Central Bank, results from other securities recorded as available for sale and results from Repo Transactions with the Central Bank.
144
The following table sets forth our yields on interest-earning assets:
As of December 31, | ||||||||||||||||||
2019 | 2018 | 2017 | ||||||||||||||||
Average Balance | Average Nominal Rate | Average Balance | Average Nominal Rate | Average Balance | Average Nominal Rate | |||||||||||||
Interest-Earning Assets | ||||||||||||||||||
Investment Portfolio | ||||||||||||||||||
Government and Corporate Securities | 11,326,914 | 17.5% | 12,706,699 | 32.6% | 8,024,754 | 21.6% | ||||||||||||
Securities Issued by the Central Bank | 30,219,625 | 61.9% | 22,998,423 | 41.3% | 17,662,433 | 24.7% | ||||||||||||
Total Investment Portfolio | 41,546,539 | 49.8% | 35,705,122 | 38.2% | 25,687,187 | 23.8% | ||||||||||||
Loans | ||||||||||||||||||
Loans to the Financial Sector | 555,588 | 34.2% | 1,402,040 | 27.1% | 943,550 | 6.2% | ||||||||||||
Overdrafts | 7,005,832 | 65.2% | 10,530,444 | 47.5% | 9,073,842 | 32.0% | ||||||||||||
Promissory Notes | 9,343,602 | 62.9% | 16,912,839 | 37.1% | 17,832,275 | 21.1% | ||||||||||||
Mortgage loans | 8,216,816 | 46.0% | 7,410,179 | 40.9% | 1,243,094 | 3.1% | ||||||||||||
Automobile and Other Secured Loans | 1,846,408 | 37.5% | 3,021,281 | 25.1% | 439,268 | 17.2% | ||||||||||||
Personal Loans | 22,934,580 | 56.3% | 39,352,087 | 42.7% | 39,977,166 | 41.4% | ||||||||||||
Corporate Unsecured Loans | 10,855,345 | 56.6% | 13,801,409 | 33.6% | 11,240,625 | 27.2% | ||||||||||||
Credit Card Loans | 12,240,583 | 39.3% | 17,003,762 | 30.9% | 17,297,617 | 29.2% | ||||||||||||
Receivables from Financial Leases | 4,439,332 | 25.4% | 6,301,405 | 22.5% | 5,445,318 | 21.0% | ||||||||||||
Total Loans excl. Foreign trade and U.S.$.loans | 77,438,086 | 51.8% | 115,735,446 | 37.6% | 103,492,755 | 31.8% | ||||||||||||
Foreign Trade Loans and U.S.$.loans | 25,486,397 | 6.8% | 33,096,074 | 5.4% | 20,074,843 | 4.5% | ||||||||||||
Total Loans | 102,924,483 | 40.7% | 148,831,520 | 30.5% | 123,567,598 | 27.3% | ||||||||||||
Repo transactions | 981,998 | 60.8% | 252,162 | 31.1% | — | 0.0% | ||||||||||||
Total Interest-Earning Assets | 145,453,020 | 43.4% | 184,788,804 | 32.0% | 149,254,785 | 26.7% |
| | | | | | | | | |
| | Grupo Supervielle S.A. | |||||||
| | Year ended December 31, | |||||||
| | 2021 | | 2020 |
| ||||
| | | | Average | | | | Average |
|
| | Average | | Nominal | | Average | | Nominal |
|
|
| Balance |
| Rate |
| Balance |
| Rate |
|
Interest-Earning Assets |
|
|
|
|
|
|
|
| |
Investment Portfolio |
|
|
|
|
|
|
|
| |
Government and Corporate Securities |
| 38,616,273 |
| 27.5 | % | 21,230,724 |
| 46.3 | % |
Securities Issued by the Central Bank |
| 62,952,023 |
| 37.0 | % | 71,825,220 |
| 37.5 | % |
Total Investment Portfolio |
| 101,568,296 |
| 33.4 | % | 93,055,944 |
| 39.6 | % |
Loans |
|
|
| |
|
|
|
|
|
Loans to the Financial Sector |
| 40,989 |
| 30.6 | % | 317,486 |
| 26.2 | % |
Overdrafts |
| 7,381,619 |
| 42.4 | % | 10,013,128 |
| 40.4 | % |
Promissory Notes |
| 27,829,584 |
| 40.2 | % | 22,397,463 |
| 42.0 | % |
Mortgage loans |
| 15,636,904 |
| 45.2 | % | 16,070,541 |
| 37.5 | % |
Automobile and Other Secured Loans |
| 3,160,678 |
| 49.0 | % | 2,402,640 |
| 46.4 | % |
Personal Loans |
| 29,797,979 |
| 65.1 | % | 32,066,247 |
| 66.7 | % |
Corporate Unsecured Loans |
| 20,430,653 |
| 33.9 | % | 26,383,237 |
| 34.2 | % |
Credit Card Loans |
| 26,731,491 |
| 22.2 | % | 24,268,029 |
| 23.8 | % |
Receivables from Financial Leases |
| 5,454,306 |
| 29.0 | % | 5,563,785 |
| 19.1 | % |
Total Loans excl. Foreign trade and U.S.$.loans |
| 136,464,203 |
| 41.6 | % | 139,482,556 |
| 41.5 | % |
Foreign Trade Loans and U.S.$.loans |
| 18,411,188 |
| 6.8 | % | 30,443,210 |
| 7.2 | % |
Total Loans |
| 154,875,391 |
| 37.5 | % | 169,925,766 |
| 35.4 | % |
Repo transactions |
| 51,181,877 |
| 34.6 | % | 25,634,934 |
| 25.6 | % |
Total Interest-Earning Assets |
| 307,625,563 |
| 35.6 | % | 288,616,644 |
| 35.9 | % |
2019 Compared to 2018
The average balance of loans excluding foreign trade loans and U.S. dollars loans totaled Ps.77.4Ps.136.5 billion in 2019,2021, representing a 33.1%2.2% decrease from Ps.115.7Ps.139.5 billion in 2018.2020. The decrease in the average balance of our total loan portfolio (excluding foreign trade loans and U.S. dollar loans) is mainly explained by the following changes in our financial statements:average balance portfolio: (i) 41.7%a 22.6% or Ps.16.4Ps.6.0 billion decrease in Corporate Unsecured loans; (ii) a 26.3% or Ps.2.6 billion decrease in overdraft; and (iii) a 7.1% or Ps.2.3 billion decrease in personal loans, (ii) 28.0% or Ps.4.8 billion decrease in credit cards, (iii) 44.8% or Ps.7.6 billion decrease in promissory notes, (iv) 33.5% or Ps.3.5 billion decrease in overdraft, (v) 21.3% or Ps.2.9 billion decrease in corporate unsecured loans, and (vi) 29.6% or Ps.1.9 billion decrease in receivables from financial leases.loans. These were partially offset by a 10.9%24.3% or Ps. 806.6 millionPs.5.4 billion increase in mortgage loans.
189
corporate unsecured loans and 10.2% or Ps.2.5 billion increase in credit cards loans
Other interest incomeInterest on public and corporate securities measured at amortized cost amounted to Ps.3.1Ps.27.7 billion in 2019 compared to Ps.1.8 billon in 2018.2021. This line itemmainly reflects results from investments in securitiesheld to maturity or availableavailable forsale. sale.
The average interest rate on total loans (excluding foreign trade loans and U.S. dollar loans) increased to 51.8%41.6% in 20192021 from 37.6%41.5% in 2018.2020. Average BADLAR increased 1,450420 basis points in 20192021 to 48.9%34.1% compared to 34.3%29.9% in 2018.2020.
2018 Compared to 2017
The average balance of loan excluding foreign trade and US dollars loans totaled Ps.115.7 billion in 2018, representing a 11.8% increase from Ps.103.5 billion in 2017. The increase in the average balance of our total loan portfolio (excluding foreign trade loans and U.S. dollar loans) was mainly explained by the following changes in our financial statements: i). a 496.1%, or Ps.6.2 billion increase in mortgages from Ps.1.2 billion to Ps.7.4 billion, ii). a 22.8%, or Ps.2.6 billion, increase in corporate unsecured loans from Ps.11.2 billion to Ps. 13.8 billion, iii). a 587.8%, or Ps.2.6 billion increase in Automobile and Other Secured Loans from Ps.439.3 million to Ps.3.0 billion mainly due to the residual portfolio of Mila at the moment of the acquisition, iv). a 15.7%, or Ps.856.1 million, increase in receivables from financial leases. These increases were partially offset by i). 1.6% or Ps.625.1 million decrease in personal loans and 1.7% or Ps.293.9 million decrease in credit cards.
Other Interest Income amounted to Ps.1.8 billion in 2018 comparing to Ps.540.0 in 2017, reflecting higher results from investments securities held to maturity or available for sale, recorded at amortized cost.
The average interest rate on total loans (excluding foreign trade loans and U.S. dollar loans) increased to 37.6% in 2018 from 31.8% in 2017. Average BADLAR increased 1,370 basis points in 2018 to 34.3% compared to 20.6% in 2017.
ii) Interest Expenses
OurAs of December 31, 2021 and 2020, our Interest expenses were comprised of the following:
As of December 31, | Change December 31, | ||||||||||||||
2019 | 2018 | 2017 | 2019/2018 | 2018/2017 | |||||||||||
$ | $ | $ | % | % | |||||||||||
Interest on special checking accounts | 6,010,413 | 7,890,452 | 1,564,612 | -23.8% | 404.3% | ||||||||||
Interest on time deposits | 19,855,152 | 9,991,638 | 5,786,089 | 98.7% | 72.7% | ||||||||||
Interest on other liabilities from financial transactions | 7,692,607 | 7,296,529 | 4,460,915 | 5.4% | 63.6% | ||||||||||
Interest on financing from the financial sector | 274,101 | 1,137,554 | 382,729 | -75.9% | 197.2% | ||||||||||
Other | 1,081,178 | 471,217 | 588,612 | 129.4% | -19.9% | ||||||||||
Total | 34,913,451 | 26,787,390 | 12,782,957 | 30.3% | 109.6% |
| | | | | | | |
| | Grupo Supervielle S.A. | |||||
| | Year ended December 31, | |||||
|
| 2021 |
| 2020 |
| 2021/2020 |
|
|
| Ps. |
| Ps. |
| % |
|
Interest on special checking accounts |
| 21,139,712 |
| 9,547,244 |
| 121.4 | % |
Interest on time deposits |
| 37,594,565 |
| 29,546,822 |
| 27.2 | % |
Interest on other liabilities from financial transactions |
| 1,382,903 |
| 3,450,463 |
| (59.9) | % |
Interest on financing from the financial sector |
| 182,801 |
| 152,200 |
| 20.1 | % |
Other |
| 199,527 |
| 439,957 |
| (54.6) | % |
Total |
| 60,499,507 |
| 43,136,686 |
| 40.3 | % |
2019 Compared to 2018
145
Interest expenses for 20192021 totaled Ps.34.9Ps.60.5 billion,. a 30.3%40.3% increase from Ps.26.8Ps.43.1 billion for 2018.2020. This increase was due to the 1,270620 basis points increase in the average rate of interest bearing liabilities rate. This was partially offset by a 17.6% or Ps. 20.4 billion decreaserate, mainly due to Ps.95.9 billion inthe full impact of minimum floor on interest rates on time deposits while the average balance of interest-bearing liabilities while the average balance of total low andincreased 9.6%. This was partially offset by 3.6% or Ps.6.9 billion decrease in non-interest bearing deposits decreased 18.8% or Ps. 13.0 billion to Ps.56.2Ps.185.0 billion.
Other financial expenses in 2019 totaled Ps.1.1 billion, compared to Ps.471.2. million in 2018.
2018 Compared to 2017
Interest expenses for 2018 totaled Ps.26.8 billion, a 109.6% increase from Ps.12.8 billion for 2017. This increase was attributable to a 43.2% increase in the average balance Cost of our interest-bearing liabilities, a 730funds increased 530 basis points increaseto 19.8% in the average rate and partially offset by a 10.1% increase2021 from 14.5% in low or non-interest bearing deposits.
Other financial expenses in 2018 totaled Ps.471.2 million, compared to Ps.588.6 million in 2017.2020.
The following table sets forth our yields on interest-bearing liabilities:
Grupo Supervielle S.A. | ||||||||||||||||||
As of December 31, | ||||||||||||||||||
2019 | 2018 | 2017 | ||||||||||||||||
Average Balance | Average Nominal Rate | Average Balance | Average Nominal Rate | Average Balance | Average Nominal Rate | |||||||||||||
Interest-Bearing Liabilities | ||||||||||||||||||
Special Checking Accounts | 25,168,448 | 23.9% | 34,033,872 | 23.0% | 14,016,710 | 11.1% | ||||||||||||
PS.Savings Accounts | 14,892,493 | 40.1% | 25,989,349 | 30.0% | 11,512,318 | 13.4% | ||||||||||||
Fx Savings Accounts | 10,275,955 | 0.4% | 8,044,523 | 0.4% | 2,504,392 | 0.3% | ||||||||||||
Time Deposits | 46,909,708 | 42.3% | 43,144,927 | 23.2% | 38,639,592 | 15.0% | ||||||||||||
PS.Time Deposits | 41,118,910 | 48.1% | 36,276,233 | 27.3% | 34,953,771 | 16.5% | ||||||||||||
Fx Time Deposits | 5,790,798 | 1.3% | 6,868,694 | 1.2% | 3,685,821 | 0.6% | ||||||||||||
Borrowings from Other Financial Instruments and Unsubordinated Negotiable Obligations | 21,657,316 | 36.8% | 37,100,799 | 22.7% | 24,935,967 | 19.4% | ||||||||||||
Subordinated Loans and Negotiable Obligations | 2,203,968 | 6.2% | 2,097,037 | 6.4% | 3,668,433 | 8.9% | ||||||||||||
Total Interest-Bearing Liabilities | 95,939,440 | 35.4% | 116,376,635 | 22.7% | 81,260,702 | 15.4% | ||||||||||||
Low and Non-Interest Bearing Deposits | ||||||||||||||||||
Savings Accounts | 32,185,349 | 0.2% | 39,527,134 | 0.2% | 35,708,329 | 0.0% | ||||||||||||
PS.Savings Accounts | 16,677,758 | 0.4% | 21,970,349 | 0.3% | 25,006,000 | 0.0% | ||||||||||||
Fx Savings Accounts | 15,507,591 | 0.0% | 17,556,785 | 0.0% | 10,702,329 | 0.0% | ||||||||||||
Checking Accounts | 23,987,398 | 29,679,527 | 27,130,608 | |||||||||||||||
PS.Checking Accounts | 15,110,011 | 17,312,704 | 18,674,236 | |||||||||||||||
Fx Checking Accounts | 8,877,387 | 12,366,823 | 8,456,372 | |||||||||||||||
Total Low and Non-Interest Bearing Deposits | 56,172,747 | 69,206,661 | 62,838,937 | |||||||||||||||
Total Interest-Bearing Liabilities and Low and Non-Interest Bearing Deposits | 152,112,187 | 22.4% | 185,583,296 | 14.3% | 144,099,639 | 8.7% |
liabilities and low and non-interest bearing deposits as of December 31, 2021 and 2020:
2019 Compared to 2018
| | | | | | | | | |
|
| Grupo Supervielle S.A. | |||||||
| | As of December 31, | |||||||
| | 2021 | | 2020 |
| ||||
| | | | Average | | | | Average |
|
| | Average | | Nominal | | Average | | Nominal |
|
|
| Balance |
| Rate |
| Balance |
| Rate |
|
Interest-Bearing Liabilities |
|
|
|
|
|
|
|
| |
Special Checking Accounts |
| 82,864,471 |
| 25.5 | % | 60,629,003 |
| 15.7 | % |
Ps. Savings Accounts |
| 69,760,546 |
| 30.2 | % | 47,698,436 |
| 19.9 | % |
Fx Savings Accounts |
| 13,103,925 |
| 0.3 | % | 12,930,567 |
| 0.3 | % |
Time Deposits |
| 117,135,443 |
| 32.1 | % | 107,937,616 |
| 27.4 | % |
Ps. Time Deposits |
| 111,721,305 |
| 33.6 | % | 99,789,987 |
| 29.5 | % |
Fx Time Deposits |
| 5,414,138 |
| 0.3 | % | 8,147,629 |
| 1.5 | % |
Borrowings from Other Financial Instruments and Unsubordinated Negotiable Obligations |
| 12,495,616 |
| 12.5 | % | 23,273,600 |
| 15.5 | % |
Subordinated Loans and Negotiable Obligations |
| 1,364,139 |
| 6.7 | % | 3,210,847 |
| 6.7 | % |
Total Interest-Bearing Liabilities |
| 213,859,669 |
| 28.2 | % | 195,051,066 |
| 22.0 | % |
Low and Non-Interest Bearing Deposits |
|
|
|
|
|
|
|
| |
Savings Accounts |
| 54,524,991 |
| 0.2 | % | 59,600,473 |
| 0.1 | % |
Ps. Savings Accounts |
| 39,137,600 |
| 0.2 | % | 42,040,759 |
| 0.1 | % |
Fx Savings Accounts |
| 15,387,391 |
| 0.0 | % | 17,559,714 |
| 0.0 | % |
Checking Accounts |
| 36,636,478 |
| |
| 41,202,802 |
| |
|
Ps. Checking Accounts |
| 34,528,456 |
| — | % | 38,411,648 |
| — | % |
Fx Checking Accounts |
| 2,108,022 |
| — | % | 2,791,154 |
| — | % |
Total Low and Non-Interest Bearing Deposits |
| 91,161,469 |
| — | % | 100,803,275 |
| — | % |
Total Interest-Bearing Liabilities and Low and Non-Interest Bearing Deposits |
| 305,021,138 |
| 19.8 | % | 295,854,341 |
| 14.5 | % |
Average balance of our interest-bearing liabilities in 20192021 totaled Ps.95.9Ps.213.9 billion, compared to Ps.116.4Ps.195.1 billion in 2018. This decrease2020. The Ps.18.8 billion increase was mainly due toexplained by: (i) a 41.6%46.3% or Ps.22.1 billion increase to Ps.69.8 billion in the average balance of interest-bearing special checking accounts from Ps.47.7 billion in 2020; (ii) a 12.0% increase to Ps.111.7 billion in the average balance of time deposits in Pesos. These were partially offset by 46.3% or Ps.10.8 billion decrease to Ps.21.7 billion in the average balance of our borrowings from other financial institutions, and (ii) a Ps.8.9 billion decrease in average balance of interest-bearing special checking accounts to Ps.25.2 billion from Ps.34.0 billion. These were partially offset by a 8.7% increase to Ps.46.9 billion in the average balance of time deposits.institutions.
Average balance of our low or non-interest-bearing deposits in 20192021 totaled Ps.56.2Ps.91.2 billion, compared to Ps.69.2Ps.100.8 billion in 2018.2020. This decrease was mainly due to (i) a 18.6%10.1% or Ps. 7.3Ps.3.9 billion decrease to Ps.32.2 billion in the average balance of our non-interest-bearing checking accounts in Pesos; (ii) a 6.9% or Ps.2.9 billion decrease in average balance of our savings accounts in Pesos; and (ii)(iii) a 19,.2%12.4% or Ps. 5.7Ps.2.2 billion decrease to Ps.24.0 billion in non-interest bearing checking accounts.savings accounts in U.S. dollars.
Out of our total average interest-bearing deposits of Ps 104.3Ps.254.5 billion in 2019, Ps.31.62021, Ps.33.9 billion were U.S. dollar-denominated deposits and Ps.72.7Ps.220.6 billion were Peso-denominated, compared to Ps.32.5Ps.38.6 billion and Ps.84.2Ps.189.5 billion, respectively, in 2018.
191
2020.
Out of our total average non-interest-bearing deposits of Ps.24.0Ps.36.6 billion for 2019, Ps. 8.92021, Ps.2.1 billion were U.S. dollar-denominated deposits and Ps.15.1Ps.34.5 billion were Peso-denominated deposits, compared to Ps12.4Ps.2.8 billion and Ps.17.3Ps.38.4 billion, respectively, in 2018.2020.
The average rate paid on interest-bearing liabilities and low or non-interest-bearing deposits for 20192021 was 22.4%19.8%, 810530 basis points above the 14.3%14.5% average rate for 2018. For 2019,2020. As of December 31, 2021, Peso-denominated time deposits accrued interestinterests at an average
146
rate of 48.1%33.6%, 2,080410 basis points above the 27.3%29.5% average interest rate accrued in 2018.2020. In 2019,2021, U.S. dollar-denominated time deposits accrued interest at an average rate of 1.3%,100.3%, 120 basis points abovebelow the 1.2%1.5% average interest rate accrued in 2018.2020.
OurAs of December 31, 2021, our average balance of borrowings from other financial institutions and unsubordinated negotiable obligations in 20192021 was Ps.21.7Ps.12.5 billion, compared to Ps.37.1Ps.23.3 billion in 2018. The2020. As of December 31, 2021, the average cost of borrowings from other financial institutions and unsubordinated negotiable obligations increased 1,410 basis points to 36.8%decreasedto 12.5% from 15.5% in 2019, from 22.7% in 2018.2020.
OurAs of December 31, 2021, our average balance of subordinated loans and subordinated negotiable obligations in both 2019 was Ps. 2.2Ps.1.4 billion, compared to Ps. 2.1Ps.3.2 billion in 2018. The2020. As of December 31, 2021, the average rate of subordinated negotiable obligations (denominated in U.S. dollars or U.S. dollar-linked) was 6.2%6.7%, the same as in 2019, compared to 6.4% in 2018.
2018 Compared to 2017
Average balance of our interest-bearing liabilities in 2018 totaled Ps.116.4 billion, compared to Ps.81.3 billion in 2017. This increase was mainly due to (i) a Ps.20.0 billion increase in average balance of interest-bearing special checking accounts to Ps.34.0 billion from Ps.14.0 billion, and a (ii) 48.8% increase to Ps.37.1 billion, in the average balance of our borrowings from other financial institutions, and (iii) 11.7% increase to Ps.43.1 billion, increase in the average balance of time deposits.
Average balance of our low or non-interest-bearing deposits in 2018 totaled Ps.69.2 billion, compared to Ps.62.8 billion in 2017. This increase was mainly due to (i) a 10.7% increase to Ps.39.5 billion in the average balance of savings accounts, and (ii) a 9.4% increase to Ps.29.7 billion in non-interest bearing checking accounts.
Out of our total average interest-bearing deposits of Ps 116.7 billion in 2018, Ps.32.5 billion were U.S. dollar-denominated deposits and Ps.84.2 billion were Peso-denominated, compared to Ps.16.9 billion and Ps.71.5 billion, respectively, in 2017.
Out of our total average non-interest-bearing deposits of Ps.29.7 billion for 2018, Ps.12.4 billion were U.S. dollar-denominated deposits and Ps.17.3 billion were Peso-denominated, compared to Ps.8.5 billion and Ps.18.7 billion, respectively, in 2017.
The average rate paid on interest-bearing liabilities and low or non-interest-bearing deposits for 2018 was 14.3%, 560 basis points above the 8.7% average rate for 2018. For 2018, Peso-denominated time deposits accrued interest at an average rate of 27.3%, 1,080 basis points above the 16.5% average interest rate accrued in 2017. In 2018, U.S. dollar-denominated time deposits accrued interest at an average rate of 1.2%, 60 basis points above the 0.6% average interest rate accrued in 2017.
Our average balance of borrowings from other financial institutions and unsubordinated negotiable obligations in 2018, was Ps.37.0 billion, compared to Ps.24.9 billion in 2017. The average cost of borrowings from other financial institutions and unsubordinated negotiable obligations increased 330 basis points to 22.7% in 2018, from 19.4% in 2017.
Our average balance of subordinated loans and subordinated negotiable obligations in both 2018 and 2017 was Ps.2.1 billion and Ps.3.7 billion respectively. The average rate of subordinated negotiable obligations (denominated in U.S. dollars or U.S. dollar linked) was 6.4% in 2018, compared to 8.9% in 2017.
192
2020.
The following table sets forth our interest bearing deposits by denomination:
Grupo Supervielle S.A. | |||||||||||||||||||||||||||
As of December 31, | |||||||||||||||||||||||||||
2019 | 2018 | 2017 | |||||||||||||||||||||||||
Average Balance | Interest Paid | Average Nominal Rate | Average Balance | Interest Paid | Average Nominal Rate | Average Balance | Interest Paid | Average Nominal Rate | |||||||||||||||||||
Savings accounts | |||||||||||||||||||||||||||
Pesos | 16,677,758 | 60,885 | 0.4% | 21,970,349 | 58,885 | 0.3% | 25,006,000 | 6,461 | 0.0% | ||||||||||||||||||
Dollars | 15,507,591 | 4,459 | 0.0% | 17,556,785 | 4,653 | 0.0% | 10,702,329 | 2,810 | 0.0% | ||||||||||||||||||
Total | 32,185,349 | 65,344 | 0.2% | 39,527,134 | 63,538 | 0.2% | 35,708,329 | 9,271 | 0.0% | ||||||||||||||||||
Special checking accounts | |||||||||||||||||||||||||||
Pesos | 14,892,493 | 5,973,650 | 40.1% | 25,989,349 | 7,795,154 | 30.0% | 11,512,318 | 1,546,597 | 13.4% | ||||||||||||||||||
Dollars | 10,275,955 | 36,763 | 0.4% | 8,044,523 | 31,760 | 0.4% | 2,504,392 | 8,744 | 0.3% | ||||||||||||||||||
Total | 25,168,448 | 6,010,413 | 40.1% | 34,033,872 | 7,826,914 | 30.0% | 14,016,710 | 1,555,341 | 13.4% | ||||||||||||||||||
Time deposits | |||||||||||||||||||||||||||
Pesos | 41,118,910 | 19,778,723 | 48.1% | 36,276,233 | 9,906,758 | 27.3% | 34,953,771 | 5,765,429 | 16.5% | ||||||||||||||||||
Dollars | 5,790,798 | 76,429 | 1.3% | 6,868,694 | 84,879 | 1.2% | 3,685,821 | 20,659 | 0.6% | ||||||||||||||||||
Total | 46,909,708 | 19,855,152 | 42.3% | 43,144,927 | 9,991,637 | 23.2% | 38,639,592 | 5,786,088 | 15.0% | ||||||||||||||||||
Total by currency | |||||||||||||||||||||||||||
Pesos | 72,689,161 | 25,813,258 | 35.5% | 84,235,931 | 17,760,797 | 21.1% | 71,472,089 | 7,318,487 | 10.2% | ||||||||||||||||||
Dollars | 31,574,344 | 117,651 | 0.4% | 32,470,002 | 121,292 | 0.4% | 16,892,542 | 32,213 | 0.2% | ||||||||||||||||||
Total Deposits | 104,263,505 | 25,930,909 | 24.9% | 116,705,933 | 17,882,089 | 15.3% | 88,364,631 | 7,350,700 | 8.3% |
denomination as of December 31, 2021 and 2020:
i)
| | | | | | | | | | | | | |
| | Grupo Supervielle S.A. | |||||||||||
| | As of December 31, | |||||||||||
| | 2021 | | 2020 |
| ||||||||
|
| Average Balance |
| Interest Paid |
| Average Nominal Rate |
| Average Balance |
| Interest Paid |
| Average Nominal Rate |
|
Savings accounts | | | | | | | | | | | | | |
Pesos |
| 39,137,600 |
| 96,700 |
| 0.2 | % | 42,040,759 |
| 58,037 |
| 0.1 | % |
Dollars |
| 15,387,391 |
| 4,064 |
| 0.0 | % | 17,559,714 |
| 4,723 |
| 0.0 | % |
Total |
| 54,524,991 |
| 100,764 |
| 0.2 | % | 59,600,473 |
| 62,760 |
| 0.1 | % |
Special checking accounts |
| |
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 69,760,546 |
| 21,099,066 |
| 30.2 | % | 47,698,436 |
| 9,511,495 |
| 19.9 | % |
Dollars |
| 13,103,925 |
| 40,646 |
| 0.3 | % | 12,930,567 |
| 35,749 |
| 0.3 | % |
Total |
| 82,864,471 |
| 21,139,712 |
| 25.5 | % | 60,629,003 |
| 9,547,244 |
| 15.7 | % |
Time deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 111,721,305 |
| 37,576,185 |
| 33.6 | % | 99,789,987 |
| 29,428,487 |
| 29.5 | % |
Dollars |
| 5,414,138 |
| 18,380 |
| 0.3 | % | 8,147,629 |
| 118,335 |
| 1.5 | % |
Total |
| 117,135,443 |
| 37,594,565 |
| 32.1 | % | 107,937,616 |
| 29,546,822 |
| 27.4 | % |
Total by currency |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 220,619,451 |
| 58,771,951 |
| 26.6 | % | 189,529,182 |
| 38,998,019 |
| 20.6 | % |
Dollars |
| 33,905,454 |
| 63,090 |
| 0.2 | % | 38,637,910 |
| 158,807 |
| 0.4 | % |
Total Deposits |
| 254,524,905 |
| 58,835,041 |
| 23.1 | % | 228,167,092 |
| 39,156,826 |
| 17.2 | % |
Net Income from financial instruments and Result from recognition of assets measured at amortized cost and Exchange rate differences
2019 Compared to 2018
Net income from financial instruments at fair value through profit or loss, result from derecognition of assets measured at amortized cost and exchange rate differences for 20192021 totaled Ps.20.6Ps.10.1 billion, a 80.4% increase from the Ps.11.4compared to Ps.7.6 billion recorded in 2018.2020. This increase was attributable to higher income from holdings of securities issued by the Central Bankmainly due to higher volumesholdings of thesegovernment securities and higher yield following themainly inflation linked government bonds, which resulted in an increase in the average interest rate of these securities. This was partially offset by a 45.5% decrease in the income from government and corporate securities reflecting mark to market accounting of short term Pesos and U.S. dollar treasury notes held by usrecorded in NIFFI.
The following the debt reprofiling announced by the Argentine government in August 2019.
2018 Compared to 2017
table sets forth our Net Incomeincome from financial instruments at fair value through profit or loss as of December 31, 2021 and Exchange rate differences for 2018 totaled Ps.11.4 billion, an 88.8% increase from the Ps.6.1 billion recorded in 2017. This increase was attributable to higher income from holdings of securities issued by the Central Bank due to higher volumes of these securities held for trading as well as the ones held as reserve requirements, the increase in the average interest rate of such securities and an increase in Income from financial instruments denominated in U.S. dollars.
Grupo Supervielle S.A. | |||||||||
As of December 31, | |||||||||
2019 | 2018 | 2017 | |||||||
Ps. | Ps. | Ps. | |||||||
Net income from financial instruments at fair value through profit or loss | |||||||||
Income from government and corporate securities | 1,532,374 | 2,812,312 | 1,253,840 | ||||||
Term operations | 713,616 | (2,605,689 | ) | (166,485 | ) | ||||
Income from securities issued by the Central Bank | 18,714,976 | 9,500,772 | 4,366,999 | ||||||
Total | 20,960,966 | 9,707,395 | 5,454,354 | ||||||
Exchange rate difference on gold and foreign currency | (324,070 | ) | 1,733,237 | 604,734 |
Grupo Supervielle S.A. | |||||||||
As of December 31. | |||||||||
2019 | 2018 | 2017 | |||||||
Ps. | Ps. | Ps. | |||||||
Financial income from U.S. dollar operations | (312,341 | ) | 261,864 | 901,839 | |||||
NIFFI | (437,083 | ) | (156,363 | ) | 901,839 | ||||
U.S. dollar Government Securities | (1,150,699 | ) | 2,449,326 | 1,068,324 | |||||
Term Operations | 713,616 | (2,605,689 | ) | (166,485 | ) | ||||
Interest Income | 124,742 | 418,227 | — | ||||||
U.S. dollar Government Securities | 124,742 | 418,227 | — | ||||||
Exchange rate differences on gold and foreign currency | (324,070 | ) | 1,733,237 | 604,734 | |||||
Total (Loss) Income from U.S. dollar operations | (636,411 | ) | 1,995,101 | 1,506,573 |
2020.
2019 Compared to 2018
| | | | |
| | Grupo Supervielle S.A. | ||
| | As of December 31, | ||
| | 2021 | | 2020 |
|
| Ps. |
| Ps. |
Net income from financial instruments at fair value through profit or loss | | | | |
Income from government and corporate securities |
| 6,955,178 |
| 4,528,233 |
Income from securities issued by the Central Bank |
| 349,543 |
| 204,513 |
Term operations |
| 1,584,749 |
| 271,848 |
Total |
| 8,889,470 |
| 5,004,594 |
Result from derecognition of assets measured at amortized cost |
| 254,187 |
| 991,715 |
Exchange rate difference on gold and foreign currency |
| 992,383 |
| 1,606,842 |
Total |
| 10,136,040 |
| 7,603,151 |
147
| | | | |
| | Grupo Supervielle S.A. | ||
| | As of December 31, | ||
| | 2021 | | 2020 |
|
| Ps. |
| Ps. |
Financial income from U.S. dollar operations |
| 3,038,192 |
| 1,939,872 |
NIFFI |
| 2,119,119 |
| 1,289,904 |
U.S. dollar Government Securities |
| 534,370 |
| 1,018,056 |
Term Operations |
| 1,584,749 |
| 271,848 |
Interest Income |
| 919,073 |
| 649,968 |
U.S. dollar Government Securities |
| 919,073 |
| 649,968 |
Exchange rate differences on gold and foreign currency |
| 992,383 |
| 1,606,842 |
Total Income from U.S. dollar operations |
| 4,030,575 |
| 3,546,714 |
Total income from U.S. dollar operations for 20192021 totaled Ps.636.4 million lossPs.4.0 billion, compared to Ps. 2.0 billion gain recordedPs.3.5 million in 2018.2020. This mainly reflects the mark to market accounting of short-term U.S. dollar local treasury notes held by us following the debt reprofiling announced by the Argentine government in August 2019. Between October and December 2019, these instruments partially recovered the initial decline in prices. Also, these were partially offset by higher foreign currency trading with retail and institutional customers.
2018 Compared to 2017
Total income from U.S. dollar operations for 2018 totaled Ps.2.0 billion, a 32.4% increase from the Ps.1.5 billion recorded in 2017,is mainly explained byby: (i) higher trading gainsresults from Fx transactions.term operations, and (ii) a higher net gain on U.S.$ and U.S.$-linked government securities. These securities are classified as available for sale, and therefore interest income is recognized as net interest margin in the income statement, while changes in fair value are recognized in other comprehensive income.
ii) Result from exposure to changes in the purchasing power of money
2019 Compared to 2018
Result from exposure to changes in the purchasing power of the currency for 20192021 totaled a Ps.5.4Ps.7.8 billion loss, from the Ps.9.3Ps.6.5 billion loss recorded in 2018.2020. This reflects the loss in the purchasing power of the currency to which our net monetary assets are exposed as a result of the 53.8%50.9% and 47.6%36.1% increase in consumer price index in 20192021 and 2018, respectively.
2018 Compared to 2017
Result from exposure to changes in the purchasing power2020, respectively, together with a slightly higher proportion of the currency for 2018 totaled a Ps.9.3 billion loss, from the Ps.4.0 billion loss recorded in 2017. This reflects the loss in the purchasing power of the currency to which our net monetary assets are exposed as a result of the 53.8%, 47.6%in 2021 than in 2020. The Group’s capital is hedged against inflation through different inflation linked instruments, including mortgage loans and 24.8% increase in consumer price index in 2019, 2018 and 2017 respectively.sovereign bonds.
Loan Loss Provisions
2019 Compared to 2018
Loan loss provisions totaled Ps.7.7Ps.8.9 billion in 2019,2021, a 2.9%31.3% decrease compared to Ps.8.0Ps.13.0 billion in 2018. This was due to lower levels2020, as loan loss provisions in 2020 included COVID 19 specific anticipatory provisions which reflected the economic outook and an updated top-down analysis on specific industries that could be highly impacted by the COVID 19 pandemic. In 2021 the level of provisioning required by IFRS 9 to commercial loans compared to those levels required to consumer loans. In 2019, due to the challenging macroeconomic environment, certain commercial loans became delinquent which was partially offset by the decline in NPL creation in the Consumer Finance segment. As a result. NPLs from the corporate business segment over the total non-performing loan portfolio represented higher percentage than Consumer Finance NPL but required lower provisioning.
The decrease in the Consumer Finance NPL creation reflects the measures taken by us sinceGroup’s IFRS9 expected loss models and the first quarternominal growth of 2018 to enhance asset quality following the peaks observed inloan portfolio. In 2021, the second quarterGroup revised and enhanced its expected loss models, included additional macroeconomic variables and added overlays for certain portfolio groups that are assumed of 2018. These measures included tightening of credit scoring standards. slower origination and changes inhigher risk than the collection process in the consumer finance segment.
194
one resulting from their historical behaviour.
Loan loss provisions include the expected losses for each portfolio and segment, based on past performance and current conditions as of the financial statements date. The increase in delinquency also requires expected losses to be measured for the whole life of each loan, instead of accounting for expected losses during a 12-month period. This increases significantly the probability of default for loans with a maturity of more than 1 year. For further information.information, see “Item 4.D –“Item 4.E. Selected Statistical Information—Amounts past due loans and other financing.”
2018 ComparedIn response to 2017
Loan loss provisions totaled Ps.8.0 billionthe COVID-19 pandemic and in 2018,order to mitigate the economic impact, the Argentine government has adopted social aid, monetary and fiscal measures since 2020, which were lifted during April and June 2021. Among these measures, the Central Bank established rules regarding the criteria for debtor classification and provisioning until December 31, 2020, then these rules were extended through Communication “A” 7181 until March 31, 2021. These rules provided an additional 60-day period of non-payment before a 28.4% increase comparedloan is required to Ps.6.2 billion in 2017, mainly duebe classified as non-performing and included all financings to an increase in delinquency ratios from 3.1% in 2017 to 4.1% in 2018commercial portfolio clients and cost of risk, which increased from 5.0% in 2017 to 5.4% in 2018, mainly inloans granted for consumption or housing purposes. At the consumer finance and corporate banking segments. Loan loss provisions includesame time, the expected losses for each portfolio and segment, based on past performance and current conditions asCentral Bank ruled the suspension of the financial statements date. The increasemandatory reclassification of debtors who were delinquent in delinquency also requires expected lossesother banks. At the same time, the Central Bank ruled several relief programs which allowed debtors to be measured forreschedule their loan payments originally maturing between April 2020 and March 2021, together with the whole lifeautomatic rescheduling of each loan, instead of accounting for expected losses during a 12 month period. This increases significantly the probability of default for loans with a maturity of more than 1 year. For further information, see “Item 4.D – Selected Statistical Information—Amounts pastunpaid credit card balances due loansApril and other financing.”
In the consumer finance segment higher delinquency rates experienced in the first monthsSeptember 2020. As of the year have been typically expected to improve throughoutdate of this annual report, the year as the beginning of the year salary bargaining agreements catch up with inflation improving consumers’ disposable income and their ability to pay their bills. This behavior has been changing since 2016 and improvement hasCentral Bank does not been as fast as in previous years, changing the pattern and seasonality observed in prior years. Salary adjustments resulting from collective bargaining agreements below the annual inflation rate which accelerated in 2018, along with additional increases in public services tariffs in 2018, further impacted the disposable income of the population in the consumer finance segment causing additional deterioration in asset quality. Taking a more conservative stance, during the first quarter of 2018, we tightened credit scoring standards and slowed origination in the consumer finance segment. Those measures, despite the increasingly challenging environment, started to show some signs of improvement, with a sharp decrease in non-performing loans (“NPL”) creation levels in third quarter of 2018 comparedenforce any related financial aid program related to the second quarterCOVID-19 pandemic.
As of 2018. However very high levels of inflation inDecember 31, 2021, the fourth quarter of 2018 caused NPL creationcoverage ratio decreased to increase above the third quarter of 2018 levels but remaining below the second quarter of 2018 peak.
The percentage of the delinquent loan portfolio in both 2018 and 2017 was 4.1% and 3.1%, respectively.
The consumer finance segment NPL ratio increased to 19.4% in December 2018145.0% from 14.7% in 2017 mainly as a result of an increase in the personal loans NPL ratio to 26.0%208.8% as of December 31, 2018 from 18.7%2020, mainly due to the end of certain Central Bank rules on debtor classification which were in place until June 2021. The total NPL ratio was 4.3% as of December 31, 2017.
Retail loans showed an NPL ratio of 3.3%2021, increasing 60 basis points from 3.7% as of December 31, 2018, increasing2020. In 2020, NPL benefitted from 2.8% as of December 31, 2017. This was mainly driventhe above-mentioned relief programs ruled by an increase in the personal loans NPL ratio to 3.5% in December 2018, from 2.9% in December 2017Central Bank amid the pandemic and an increase in the Central Bank regulatory easing on debtor classifications.
148
Since April 2020, the Argentine Central Bank established certain automatic loan deferral programs amid the COVID-19 pandemic, both for credit cards NPL ratio to 3.8%and for loans, as described below. These deferral programs had an impact on our asset quality although they are no longer in December 2018, from 3.4%place since March 31, 2021:
Corporate loans showed an NPL ratio of 1.1% as of December 31, 2018, increasing from 0.2% as of December 31, 2017, mainly due to deteriorated macroeconomic conditions which impacted negatively SME and middle-market companies’ profits and cash flows.Credit Cards:
a. | Through Communication “A” 6964 the Central Bank ruled that all unpaid balances of credit card statements due between April 13 and April 30, 2020, should be automatically rescheduled in nine equal consecutive monthly installments beginning after a 3-month grace period. Interest rates on such unpaid balances should not exceed an annual nominal rate of 43%. |
b. | Through Communication “A” 7095, the Central Bank determined that the unpaid balances of credit card financings due between September 1 and September 30, 2020 should be automatically rescheduled in nine equal consecutive monthly installments beginning after a 3-month grace period. Interest rates on such unpaid balances may not exceed an annual nominal rate of 40%. |
Loans:
The following tables show theSee changes in our loan loss provisions for the periods indicated:
ECL Allowance | ||||||||||||
Stage 1 | Stage 2 | Stage 3 | Total | |||||||||
Balance at the beginning of the year 2019 | 2,212,268 | 1,762,950 | 3,618,372 | 7,593,590 | ||||||||
Transfers | ||||||||||||
1 to 2 | (61,394 | ) | 311,209 | — | 249,815 | |||||||
1 to 3 | (92,597 | ) | — | 3,446,674 | 3,354,077 | |||||||
2 to 3 | — | (217,452 | ) | 747,949 | 530,497 | |||||||
2 to 1 | 54,696 | (336,834 | ) | — | (282,138 | ) | ||||||
3 to 2 | — | 9,708 | (31,725 | ) | (22,017 | ) | ||||||
3 to 1 | 15,515 | — | (112,975 | ) | (97,460 | ) | ||||||
Net changes of financial assets | (587,501 | ) | (715,925 | ) | 1,543,541 | 240,115 | ||||||
Write-Offs | — | — | (5,029,098 | ) | (5,029,098 | ) | ||||||
Exchange Differences and Others | 64,173 | 25,054 | 125,331 | 214,558 | ||||||||
Gross carrying amount at December 31, 2019 | 1,605,160 | 838,710 | 4,308,069 | 6,751,939 |
ECL Allowance | ||||||||||||
Stage 1 | Stage 2 | Stage 3 | Total | |||||||||
Balance at the beginning of the year 2018 | 2,601,836 | 1,542,565 | 2,971,288 | 7,115,689 | ||||||||
Transfers | ||||||||||||
1 to 2 | (111,310 | ) | 652,494 | — | 541,184 | |||||||
1 to 3 | (113,691 | ) | — | 1,608,825 | 1,495,134 | |||||||
2 to 3 | — | (234,756 | ) | 433,741 | 198,985 | |||||||
2 to 1 | 35,469 | (144,782 | ) | — | (109,313 | ) | ||||||
3 to 2 | — | 27,351 | (116,916 | ) | (89,565 | ) | ||||||
3 to 1 | 4,421 | — | (56,700 | ) | (52,279 | ) | ||||||
Net changes of financial assets | (214,161 | ) | (82,519 | ) | 2,787,456 | 2,490,776 | ||||||
Write-Offs | — | — | (4,017,832 | ) | (4,017,832 | ) | ||||||
Exchange Differences and Others | 9,704 | 2,597 | 8,510 | 20,811 | ||||||||
Gross carrying amount at December 31, 2018 | 2,212,268 | 1,762,950 | 3,618,372 | 7,593,590 |
ECL Allowance | ||||||||||||
Stage 1 | Stage 2 | Stage 3 | Total | |||||||||
Balance at the beginning of the year 2017 | 1,671,137 | 1,208,107 | 2,419,985 | 5,299,229 | ||||||||
Transfers | ||||||||||||
1 to 2 | (67,559 | ) | 528,247 | — | 460,688 | |||||||
1 to 3 | (56,315 | ) | — | 1,270,440 | 1,214,125 | |||||||
2 to 3 | — | (145,482 | ) | 404,024 | 258,542 | |||||||
2 to 1 | 34,017 | (151,973 | ) | — | (117,956 | ) | ||||||
3 to 2 | — | 27,633 | (104,852 | ) | (77,219 | ) | ||||||
3 to 1 | 6,106 | — | (96,698 | ) | (90,592 | ) | ||||||
Net changes of financial assets | 1,003,203 | 74,923 | 1,904,413 | 2,982,539 | ||||||||
Write-Offs | — | — | (2,827,349 | ) | (2,827,349 | ) | ||||||
Exchange Differences and Others | 11,247 | 1,111 | 1,324 | 13,682 | ||||||||
Gross carrying amount at December 30, 2017 | 2,601,836 | 1,542,566 | 2,971,287 | 7,115,689 |
in Note 26 or our audited financial statements. Loans and Other Financing of our audited consolidated financial statements.
Net Services Fee Income
Our net services fee income was comprised of:
As of December 31, | Change | ||||||||||||||
2019 | 2018 | 2017 | 2019/2018 | 2018/2017 | |||||||||||
(In thousands of Pesos, except percentages) | |||||||||||||||
Deposit Accounts | 3,509,557 | 3,398,652 | 3,591,081 | 3.3% | (5.4 | )% | |||||||||
Credit cards commissions | 2,897,583 | 3,361,286 | 3,598,831 | (13.8 | )% | (6.6 | )% | ||||||||
Loan Related | 294,820 | 601,763 | 543,388 | (51.0 | )% | 10.7% | |||||||||
Other commissions | 1,897,647 | 1,757,005 | 1,594,665 | 8.0% | 10.2% | ||||||||||
Total Services fee income | 8,599,607 | 9,118,706 | 9,327,965 | (5.7 | )% | (2.2 | )% | ||||||||
Exports and foreign currency transactions | 72,803 | 82,295 | 63,740 | (11.5 | )% | 29.1% | |||||||||
Services fee paid | 2,171,167 | 2,099,325 | 1,813,672 | 3.4% | 15.7% | ||||||||||
Total Services fee expenses | 2,243,970 | 2,181,620 | 1,877,412 | 2.9% | 16.2% | ||||||||||
Income from insurance activities | 1,393,356 | 1,305,522 | 1,383,709 | 6.7% | (5.7 | )% | |||||||||
NET SERVICES FEE INCOME | 7,748,993 | 8,242,608 | 8,834,262 | (6.0 | )% | (6.7 | )% |
| | | | | | | |
| | Grupo Supervielle S.A. | |||||
| | Year ended December 31, | |||||
|
| 2021 |
| 2020 |
| 2021/2020 |
|
|
| Ps. |
| Ps. |
| % |
|
Deposit Accounts | | 6,496,684 | | 6,984,705 | | (7.0) | % |
Credit cards commissions |
| 4,986,927 |
| 5,152,252 |
| (3.2) | % |
Loan Related |
| 158,346 |
| 248,830 |
| (36.4) | % |
Other commissions |
| 5,023,307 |
| 4,963,179 |
| 1.2 | % |
Total Services fee income |
| 16,665,264 |
| 17,348,966 |
| (3.9) | % |
Exports and foreign currency transactions |
| (122,477) |
| (118,372) |
| 3.5 | % |
Services fee paid |
| (4,958,004) |
| (5,237,443) |
| (5.3) | % |
Total Services fee expenses |
| (5,080,481) |
| (5,355,815) |
| (5.1) | % |
Income from insurance activities |
| 2,271,246 |
| 2,522,921 |
| (10.0) | % |
Net Service Fee Income |
| 13,856,029 |
| 14,516,072 |
| (4.5) | % |
2019 Compared to 2018Throughout 2020 and until February 2021, the Central Bank ruled certain restrictions on fee repricing.
On February 19, 2020, through Communication “A” 6912, the Central Bank stated that financial institutions should not announce fee increases for a period of 180 days. Since February 2021, the Group announced and implemented several fees repricing.
Net services fee income (excluding income from insurance activities) totaled Ps.6.4Ps.11.6 billion in 2019, a 8.4%2021, an 3.4% decrease compared to Ps.6.9Ps.12.0 billion in 2018.2020.
The decrease in our services fee income was driven mainly by (i) a decrease in fees from credit and debit cards, (ii) a decrease in loan related fees, whichby:
(i) | a decrease in deposit account commissions (comprised principally of maintenance and transaction fees on checking and savings accounts) impacted by the above-mentioned limitation to increase fees since February 2020. In 2021, the Group implemented certain fees increases but they were not able to follow inflation. |
(ii) | a decrease in fees from credit and debit cards impacted by the decline in the amount of transactions made with credit and debit cards, together with the reduction in credit cards and debit cards merchant discount rates (“MDR”) set for 2021. Pursuant to Communication “A” 6212, effective as of April 1, 2017, the Central Bank issued a program to |
149
gradually reduce MDR on an annual basis. The maximum MDR for credit cards in 2020 was 1.50%, while since January 1, 2021, it was reduced to 1.30%. The maximum debit card sales commissions for 2020 was 0.70% while since January 1, 2021, is 0.60%.; and |
(ii) | a decrease in loan related fees reflecting the weak credit demand and some regulatory restrictions on charging fees since the pandemic outbreak. |
This were partially offset by an increase in deposit account commissionsother operations related fees and an increase in other fees.
Service charges on deposit accounts are comprised principally of maintenancefees due to Asset Management and transaction fees on checking and savings accounts. These fees increased to Ps.3.5 billion in 2019 from Ps.3.4 billion in 2018.
Credit and debit card fees decreased to Ps.2.9 billion in 2019, from Ps.3.4 billion in 2018, reflecting lower average volumes of credit and debit cards as well as the reduction in credit card and debit card merchant discounted rates (“MDR”). MDR are commissions charged by the issuer of credit and debit cards on the amount of credit and debit card transactions. The maximum MDR for 2019 and 2018 was 1.65% and 1.85%, respectively, and the maximum debit card sales commissions for 2019 and 2018 was 0.8% and 0.9%, respectively.
Pursuant to Communication “A” 6212, effective as of April 1, 2017, the Central Bank issued a program to gradually reduce MDR on an annual basis. In this regard,. the maximum MDR for 2018 and 2019 were 1.85% and 1.65%, respectively, and are expected to drop to 1.50% and 1.30% in 2020 and 2021, respectively. The maximum debit card sales commissions for 2018 and 2019 were 0.90% and 0.80% respectively, and are expected to drop to 0.70% and 0.60% in 2020 and 2021, respectively.
Other commissions increased to Ps.1.9 billion in 2019 from Ps.1.8 billion in 2018, mainly from the sale of non-financial services and repricing of non-credit related insurance premiums.brokerage fees.
Services fee expense increased 2.9%expenses decreased 5.1%, to Ps.2.2Ps.5.1 billion in 2019 remaining stable from 2018,2021, compared to Ps.5.4 billion in 2020, primarily due to higherlower commissions paid, due to higher business volume, while fees paid on exports and foreign currency transactions decreased an 11.5%increased 3.5%, or Ps.9.5Ps.4.1 million.
2018 Compared to 2017
Net services fee income (excluding income from insurance activities) totaled Ps.6.9 billion in 2018, a 6.9% decrease compared to Ps.7.5 billion in 2017.
The decrease in our services fee income was driven mainly by (i) a decrease in deposit account commissions, (ii) a decrease in fees from credit and debit cards partially offset by an increase in other fees.
Service charges on deposit accounts are comprised principally of maintenance and transaction fees on checking and savings accounts. These fees decreased to Ps.3.4 billion in 2018 from Ps.3.6 billion in 2017.
Credit and debit card fees decreased to Ps.3.4 billion in 2018, from Ps.3.6 billion in 2017, reflecting lower average volumes of credit and debit cards as well as the reduction in MDR. The maximum MDR for 2018 and 2017 was 1.85% and 2.0%, respectively, and the maximum debit card sales commissions for 2018 and 2017 was 0.9% and 1.0%, respectively.
Pursuant to Communication “A” 6212, effective as of April 1, 2017, the Central Bank issued a program to gradually reduce MDR on an annual basis. In this regard, the maximum MDR for 2017 and 2018 was 2.0%, and 1.85%, respectively. The maximum debit card sales commissions for 2017 and 2018 was 1.0%, and 0.90%, respectively.
Other commissions increased to Ps.1.8 billion in 2018, from Ps.1.6 billion in 2017, mainly due to the sales of products and services of Espacio Cordial.
Services fee expense increased 16.2%, to Ps.2.2 billion in 2018 from Ps.1.9 billion in 2017, primarily due to (i) higher commissions paid due to higher business volume, (ii) a 29.1%, or Ps.18.6 million increase in exports and foreign currency transactions.
197
Income from insurance activities
2019 Compared to 2018
In 2019 incomeIncome from insurance activities amounted to Ps.1.4Ps.2.3 billion in 2019,2021, reflecting a 6.7% increase10.0% decrease from the Ps.1.3Ps.2.5 billion recorded in 2018 due to2020, reflecting very low levels of sales in branches amid the increase inpandemic restrictions. Gross written premiums were down 9.0% from 2020, with non-credit related policies that offset the decrease in credit related policies following Central Bank regulations.
2018 Compared to 2017
In 2018 Income from Insurance activitiesdecreasing Ps.57.1 million, or 13.3%. Claims paid amounted to Ps.1.3 billion in 2018, reflecting a 5.7% decrease from the Ps.1.4 billion recorded in 2017 duePs.124.4 million decreasing 27.3%., compared to the decrease in credit related policies following Central Bank regulations that offset the increase in noncredit related policies.2020.
Personnel and Administration Expenses
The following table sets forth the components of our administrative expenses:
As of December 31, | Change December 31, | ||||||||||||||
2019 | 2018 | 2017 | 2019/2018 | 2018/2017 | |||||||||||
(In thousands of Pesos, except percentages) | |||||||||||||||
Salaries and social charges | 12,415,668 | 10,009,697 | 10,258,005 | 24.0 | % | (2.4 | )% | ||||||||
Other personnel expenses | 1,748,621 | 3,494,603 | 3,181,160 | -50.0 | % | 9.9 | % | ||||||||
Total Personnel expenses | 14,164,289 | 13,504,300 | 13,439,165 | 4.9 | % | 0.5 | % | ||||||||
Directors’ and statutory auditors’ fees | 280,833 | 251,527 | 199,248 | 11.7 | % | 26.2 | % | ||||||||
Other professional fees | 1,017,618 | 2,541,276 | 1,690,134 | (60.0 | )% | 50.4 | % | ||||||||
Advertising and publicity | 542,054 | 633,316 | 673,128 | (14.4 | )% | -5.9 | % | ||||||||
Taxes | 1,469,457 | 1,648,448 | 1,672,778 | (10.9 | )% | -1.5 | % | ||||||||
Maintenance, security and services | 1,727,446 | 846,859 | 804,156 | 104.0 | % | 5.3 | % | ||||||||
Leases | 51,745 | 715,107 | 621,265 | (92.8 | )% | 15.1 | % | ||||||||
Other | 2,484,390 | 1,978,863 | 1,905,585 | 25.5 | % | 3.8 | % | ||||||||
Total Administration Expenses | 7,573,543 | 8,615,396 | 7,566,294 | (12.1 | )% | 13.9 | % | ||||||||
Total Personnel and Administration Expenses | 21,737,832 | 22,119,696 | 21,005,459 | (1.7 | )% | 5.3 | % |
| | | | | | | |
| | Grupo Supervielle S.A. | |||||
| | Year ended December 31, | |||||
|
| 2021 |
| 2020 |
| 2021/2020 |
|
|
| Ps. |
| Ps. |
| % |
|
Salaries and social charges |
| 23,707,177 |
| 25,181,467 |
| (5.9) | % |
Other personnel expenses |
| 1,884,144 |
| 2,254,991 |
| (16.4) | % |
Total Personnel expenses |
| 25,591,322 |
| 27,436,458 |
| (6.7) | % |
Directors’ and statutory auditors’ fees |
| 406,912 |
| 515,515 |
| (21.1) | % |
Other professional fees |
| 4,494,789 |
| 4,594,601 |
| (2.2) | % |
Advertising and publicity |
| 1,148,460 |
| 1,039,542 |
| 10.5 | % |
Taxes |
| 3,381,423 |
| 2,804,450 |
| 20.6 | % |
Maintenance, security and services |
| 4,116,826 |
| 4,261,597 |
| (3.4) | % |
Leases |
| 78,477 |
| 108,753 |
| (27.8) | % |
Other |
| 1,728,692 |
| 2,250,540 |
| (23.2) | % |
Total Administration Expenses |
| 15,355,579 |
| 15,574,998 |
| (1.4) | % |
Total Personnel and Administration Expenses |
| 40,946,901 |
| 43,011,456 |
| (4.8) | % |
2019 Compared to 2018
In 20192021 personnel expenses amounted to Ps.14.2Ps.25.6 billion, in 2019, reflecting a 4.9% increase6.7% decrease from the Ps.13.5Ps.27.4 billion recorded in 20182020 mainly explained by 4.2% reduction in the employee base resulting from the streamlining of operations implemented since 2019, while salary increases both at the Bank levelperformed in line with inflation levels.
Personnel expenses in 2021 and other subsidiaries and non-recurring2020 included severance payments and early retirement charges recorded in otherof Ps.2.9 billion and Ps.2.1 billion, respectively. Excluding non-recurring severance payments and early retirement charges, personnel expenses while the number of employeesin 2021 decreased 4.5% in 2019.
The number of our employees was 5,01910.3% compared to 5,253 as of December 31, 2018. See “Item 6. Directors,. Senior Management and Employees—Employees—Compensation.”2020.
Administration expenses totaled Ps.7.6Ps.15.4 billion a 12.1% decrease compared to Ps.8.6in 2021, decreasing 1.4% from the Ps.15.6 billion recorded in 2018.2020. This decreaseperformance was primarily due to (i) a Ps.521.8 million decrease in other expenses including leases, Stationery and office supplies, maintenance and electricity, among others, (ii) a 3.4% or Ps.144.8 million decrease in Security services and (iii) a 2.2% or Ps. 99.8 million decrease in other professional fees (including audit, legal and other professional fees) to Ps.1.0 billion in 2019 from Ps.2.5 billion in 2018, (ii) a 10.9% or Ps.179.0 million decrease in taxes which amounted Ps.1.5 billion in 2019, and (iii) a 14.4% or Ps.91.3 million decrease in advertising and publicity which amounted Ps.542.1 million in 2019.fees. These were partially offset by a 20.4%20.6% or Ps. 722.8Ps.577.0 milllion increase in Taxes, and a 10.5% or Ps.108.9 million increase in other expenses including leases, security service expenses, maintenance and electricity, among others.Advertising & Publicity.
In 2019,2021, the efficiency ratio was 62.7%74.7%, increasing 901,030 basis points from 2018.2020. This increase was primarily due toexplained by a 6.0%28.5% decrease in revenues which was partially offset by a 4.6% decrease inwhile total personnel, and administration expenses.
198 expenses decreased 3.2% from 2020.
150
2018 Compared to 2017
In 2018 personnel expenses amounted to Ps.13.5 billion in 2018, reflecting a 0.5% increase from the Ps.13.4 billion recorded in 2017 as the decrease in the number of employees in the consumer finance segment was offset by inorganic growth from acquisitions.
The number of our employees was 5,253 compared to 5,236 as of December 31, 2017. See “Item 6. Directors, Senior Management and Employees—Employees—Compensation.”
Administration expenses totaled Ps.8.6 billion, a 13.9% increase compared to Ps.7.6 billion recorded in 2017. This increase was primarily due to (i) an increase in other professional fees (including audit, legal and other professional fees) to Ps.2.5 billion in 2018 from Ps.1.7 billion in 2017, (ii) a 6.3%, or Ps.209.8 million increase in other expenses including leases, security service expenses, maintenance, insurance and electricity, among others, which amounted to Ps.3.5 billion in 2018. This increase was partially offset by (i) a 5.9% or Ps.39.8 million decrease in advertising and publicity which amounted Ps.633.3 million in 2018 and (ii) a 1.5% or Ps.24.3 million decrease in taxes which amounted Ps.1.6 billion in 2018.
Other Income/(Expenses), Net
2019 Compared to 2018
We had other expenses, net of Ps.3.6Ps.6.5 billion for 2019,2021, compared to Ps.2.8Ps.4.2 billion in 2018.2020. This was due to lower insurance fees, a decrease in fees from safety boxline item mainly includes turnover taxes and a 97.2% or Ps. 814.8 million increase in other expenses mainly due tothat in 2021 have been impacted by the elimination of a provision to execute several strategic initiatives in different business segmentstax exemption from the City of Buenos Aires on interest income received from LELIQs (short-term debt instruments issued by the Central Bank as part of its monetary policy), effective as of January and losses from investment properties.
2018 ComparedIn the fourth quarter of 2020, the City of Buenos Aires eliminated a tax exemption on interest income received from LELIQs , effective January 2021.
In January 2021, the Association of Banks and most of its members filed a legal action against the City of Buenos Aires to 2017declare Laws No. 6,382 and No. 6,383 unconstitutional, which seek to burden the returns derived from securities, bonds, bills, certificates of participation (equity) and other instruments issued or to be issued in the future by the Argentine Central Bank with turnover tax. Such legal action was filed under File No. CAF 18156/2020 (“ADEBA Asociación Civil de Bancos Argentinos y otros c/GCBA y otro s/Proceso de Conocimiento”). The Argentine Central Bank has filed a legal action for the same purpose.
We had other expenses, net of Ps.2.8In 2021, turnover tax increased Ps.2.2 billion, for 2018,or 36.5%, to Ps.8.1 billion compared to Ps.3.6Ps.6.0 billion in 2017. This was due to higher turnover taxes which were more than offset by higher commissions earned from guarantee lines and higher gains from investment properties.2020.
Other Comprehensive Income, net of tax
2019 Compared to 2018
Other comprehensive loss,income, net of tax totaled Ps.47.7a net loss of Ps.53.7 million in 2021 compared to a net gain of Ps.371.2 millionPs.1.2 billion in 2018.2020. This reflects mainly the difference between the amortized cost and the market value of financial instruments held for investments.
2018 Compared to 2017
Other comprehensive income, net of tax totaled Ps.371.2 million compared to Ps.72.1 million in 2017. This reflects mainly the revaluation of real estate properties together with the difference between the amortized cost and the market value of financial instruments held for investments.
Income Tax
As per theThe tax reform passed by Congress in December 2017 and the amendment to Income Tax Law No. 20,628 (the “Income Tax Law”) passed in December 2019, the corporate tax rate declined to 30% from 35% starting in fiscal year 2018, and will further decline to 25% in fiscal year 2022, while a withholding tax on dividends was created with a rate of 7% since 2018 and 13% commencing fiscal year 2022. In addition, through the adoption of IFRS effective January 1, 2018, the Company began to recognize deferred tax assets and liabilities.
199
Additionally, as income tax is paid by each subsidiary on an individual basis, tax losses in one legal entity cannot be offset by tax gains in another legal entity. Income from liquidity retained at the holding company, allowed Supervielle to more than offset financial expenses paid through this vehicle and use tax credits existing from previous years, which in turn explained until 2018, a lower effective tax rate.
The above mentioned tax reform allowed the deduction of losses arising from exposures to changes in the purchasing power of the currency, only if inflation as measured by the Consumer Price Index (CPI) issued by the INDEC would exceed the following thresholds applicable for each fiscal year: 55% in 2018, 30% in 2019 and 15% in 2020. For 2021 and subsequent periods, inflation mustshould exceed 100% in 3 years on a cumulative basis in order to deduct inflation losses. In 2018 the 55% threshold was not met, but in 2019 inflation widely exceeded 30%. Therefore, the income tax provision forsince 2019 considers the losses arising from exposures to changes in the purchasing power of the currency, which lower significantly lowered the income tax expense for the current year.compared to previous years.
ForIn June 2021, a tax law was passed establishing a new income tax return purposes, one sixth (1/6)rate structure with three segments in relation to the level of accumulated taxable net income. The new income tax rate structure is: (i) 25% for accumulated taxable income of up to Ps.5 million; (ii) 30% for accumulated taxable income greater than Ps.5 million and equal to or less than Ps.50 million; and (iii) 35% for accumulated taxable income greater than Ps.50 million. This modification is applicable for fiscal years beginning on or after January 1, 2021. It is estimated that this change in income tax rate, which will be recognized as of the inflationnext fiscal period, will have an impact on deferred assets and liabilities considering the effective rate that is estimated to be applicable to the probable date of their reversal.
Additionally, as income tax is paid by each subsidiary on an individual basis, tax losses arising in one legal entity cannot be offset by tax gains in another legal entity.
In 2021, the 2019 fiscal year will be deductible in 2019, while the remaining five sixths (5/6) will be deductible in each of the subsequent 5 years. Accordingly, one sixth (1/6) of the inflation losses reduce the currentGroup recorded an income tax provision while the other five sixths (5/6) create a deferred tax asset.
2019 Compared to 2018
The income tax charge in 2019 was Ps.168.7of Ps.187.5 million compared to Ps.1.6a Ps.1.0 billion chargedprovision in 2018.2020. The decrease was due to the deduction of losses arising from exposure to changes in the purchasing power of the currency, which lower significantly the income tax expense for the current year. As opposed to fiscal year 2019, in fiscal year 2018 these expenses were not deductible according to the Income Tax Law.
2018 Compared to 2017
The income tax charge in 2018 was Ps.1.6 billion compared to Ps.1.8 billion charged in 2017. The decrease was due to a lower2021 provision reflects an effective income tax rate in effect for 2018,on a consolidated basis, which is applied towell above the corporate tax rate. But the taxable income which among other adjustments does not includeof each company is calculated on a stand-alone basis excluding the loss from exposure to changes in the purchasing powerimpact of the currency.equity method results on their respective subsidiaries. In addition, permanent differences between inflation adjustment for tax purposes and according to IAS 29 may arise, which may increase or decrease the effective tax rate.
Results by Segments
Our results by segments for the years ended December 31, 2019, 20182021 and 20172020 are shown in Note 3 to our audited consolidated financial statements.
The table below sets forth information regarding the financial statements
151
Personal and the results of our personal and business banking (former retail banking segment), corporate banking, treasury, consumer finance, insurance and asset management and other services business segments for the years ended December 31, 2019, 2018 and 2017.
200
Grupo Supervielle S.A. | ||||||||||||||||||||||||
For the year ended December 31, 2019 | ||||||||||||||||||||||||
(in thousands of Pesos) | ||||||||||||||||||||||||
Retail Banking | Corporate Banking | Bank Treasury | Consumer Finance | Insurance | Asset Management and Other Services | Adjustments | Consolidated Total | |||||||||||||||||
Interest income | 19,943,285 | 16,620,870 | 4,504,500 | 5,020,100 | — | 223,067 | (1,517,227 | ) | 44,794,595 | |||||||||||||||
Interest expenses | (9,330,992 | ) | (2,914,797 | ) | (21,148,187 | ) | (3,140,068 | ) | — | (133,753 | ) | 1,754,346 | (34,913,451 | ) | ||||||||||
Distribution of Income (Expense) for Treasury Funds(1) | 4,735,940 | (6,707,314 | ) | 1,971,374 | — | — | — | — | — | |||||||||||||||
Net interest income | 15,348,233 | 6,998,759 | (14,672,313 | ) | 1,880,032 | — | 89,314 | 237,119 | 9,881,144 | |||||||||||||||
Net income from financial instruments (NIFFI) at fair value through profit or loss | 10,257 | — | 20,078,197 | 243,387 | 386,589 | 97,619 | 144,917 | 20,960,966 | ||||||||||||||||
Exchange rate difference on gold and foreign currency | 1,910,742 | 206,955 | (2,483,544 | ) | 8,202 | 1,233 | 21,725 | 10,617 | (324,070 | ) | ||||||||||||||
NIFFI and Exchange Rate Differences | 1,920,999 | 206,955 | 17,594,653 | 251,589 | 387,822 | 119,344 | 155,534 | 20,636,896 | ||||||||||||||||
Net Financial Income | 17,269,232 | 7,205,714 | 2,922,340 | 2,131,621 | 387,822 | 208,658 | 392,653 | 30,518,040 | ||||||||||||||||
Services fee income | 5,457,779 | 922,499 | 36,923 | 1,787,165 | — | 637,936 | (242,695 | ) | 8,599,607 | |||||||||||||||
Services fee expense | (1,453,790 | ) | (122,345 | ) | (48,859 | ) | (653,485 | ) | — | (30,416 | ) | 64,925 | (2,243,970 | ) | ||||||||||
Income from insurance activities | — | — | — | — | 1,195,580 | — | 197,776 | 1,393,356 | ||||||||||||||||
Net Service Fee Income | 4,003,989 | 800,154 | (11,936 | ) | 1,133,680 | 1,195,580 | 607,520 | 20,006 | 7,748,993 | |||||||||||||||
Subtotal | 21,273,221 | 8,005,868 | 2,910,404 | 3,265,301 | 1,583,402 | 816,178 | 412,659 | 38,267,033 | ||||||||||||||||
Result from exposure to changes in the purchasing power of money | (1,577,053 | ) | (1,863,177 | ) | (393,524 | ) | (838,689 | ) | (884,821 | ) | (349,376 | ) | 547,075 | (5,359,565 | ) | |||||||||
Other operating income | 1,119,911 | 735,451 | 343,425 | 417,651 | 7,485 | 155,955 | (24,611 | ) | 2,755,267 | |||||||||||||||
Loan loss provisions | (2,919,371 | ) | (3,586,981 | ) | 24,645 | (1,292,881 | ) | — | 37,720 | — | (7,736,868 | ) | ||||||||||||
Net Operating Income | 17,896,708 | 3,291,161 | 2,884,950 | 1,551,382 | 706,066 | 660,477 | 935,123 | 27,925,867 | ||||||||||||||||
Personnel expenses | (9,762,313 | ) | (1,826,316 | ) | (650,090 | ) | (1,278,332 | ) | (187,524 | ) | (304,708 | ) | (155,006 | ) | (14,164,289 | ) | ||||||||
Administration expenses | (4,902,930 | ) | (659,642 | ) | (310,553 | ) | (1,169,952 | ) | (263,978 | ) | (265,146 | ) | (1,342 | ) | (7,573,543 | ) | ||||||||
Depreciations and impairment of non-financial assets | (1,306,002 | ) | (265,234 | ) | (71,296 | ) | (100,299 | ) | (9,366 | ) | (6,621 | ) | (55,853 | ) | (1,814,671 | ) | ||||||||
Other operating expenses | (3,399,168 | ) | (1,698,769 | ) | (510,621 | ) | (635,888 | ) | (1,229 | ) | (99,533 | ) | (13,083 | ) | (6,358,291 | ) | ||||||||
Subtotal | (1,473,705 | ) | (1,158,800 | ) | 1,342,390 | (1,633,089 | ) | 243,969 | (15,531 | ) | 709,839 | (1,984,927 | ) | |||||||||||
Income for subsidiaries and joint ventures | — | — | — | 3,357 | — | — | (3,357 | ) | — | |||||||||||||||
Income/(loss) before taxes | (1,473,705 | ) | (1,158,800 | ) | 1,342,390 | (1,629,732 | ) | 243,969 | (15,531 | ) | 706,482 | (1,984,927 | ) | |||||||||||
Income tax | 10,427 | 1,523 | 17,516 | 541,324 | (221,592 | ) | (86,158 | ) | (431,735 | ) | (168,695 | ) | ||||||||||||
Net loss for the year | (1,463,278 | ) | (1,157,277 | ) | 1,359,906 | (1,088,408 | ) | 22,377 | (101,689 | ) | 274,747 | (2,153,622 | ) | |||||||||||
Net income (loss) for the year attributable to owners of the parent company | (1,463,278 | ) | (1,157,277 | ) | 1,359,906 | (1,088,408 | ) | 22,377 | (101,689 | ) | 276,769 | (2,151,600 | ) | |||||||||||
Net income (loss) for the year attributable to non-controlling interest | — | — | — | — | — | — | (2,022 | ) | (2,022 | ) | ||||||||||||||
Other Comprehensive Income | (37,056 | ) | (26,149 | ) | (65,995 | ) | — | 81,366 | — | 1 | (47,833 | ) | ||||||||||||
Other comprehensive income attributable to parent company | (37,056 | ) | (26,149 | ) | (65,995 | ) | — | 81,366 | — | 133 | (47,701 | ) | ||||||||||||
Other comprehensive income attributable to non-controlling interest | — | — | — | — | — | — | (132 | ) | (132 | ) | ||||||||||||||
Comprehensive Income (Loss) | (1,500,334 | ) | (1,183,426 | ) | 1,293,911 | (1,088,408 | ) | 103,743 | (101,689 | ) | 274,748 | (2,201,455 | ) | |||||||||||
Comprehensive income (loss) for the year attributable to owners of the parent company | (1,500,334 | ) | (1,183,426 | ) | 1,293,911 | (1,088,408 | ) | 103,743 | (101,689 | ) | 276,902 | (2,199,301 | ) |
201
Grupo Supervielle S.A. | ||||||||||||||||||||||||
For the year ended December 31, 2019 | ||||||||||||||||||||||||
(in thousands of Pesos) | ||||||||||||||||||||||||
Retail Banking | Corporate Banking | Bank Treasury | Consumer Finance | Insurance | Asset Management and Other Services | Adjustments | Consolidated Total | |||||||||||||||||
Comprehensive income (loss) for the year attributable to non-controlling interest | — | — | — | — | — | — | (2,154 | ) | (2,154 | ) | ||||||||||||||
Assets | ||||||||||||||||||||||||
Cash and due from banks | 7,691,602 | 1,022,915 | 16,870,526 | 321,145 | 3,385 | 2,420,972 | (1,927,446 | ) | 26,403,099 | |||||||||||||||
Debt Securities at fair value through profit or loss | — | — | 312,306 | 92,762 | — | 163,433 | — | 568,501 | ||||||||||||||||
Loans and other financing | 36,757,453 | 43,426,550 | 3,720,408 | 5,036,973 | 453,978 | 30,746 | (1,416,097 | ) | 88,010,011 | |||||||||||||||
Other assets | 2,525,566 | 1,335,130 | 17,533,288 | 2,975,202 | 1,091,343 | 538,602 | 7,703,949 | 33,703,080 | ||||||||||||||||
Total Assets | 46,974,621 | 45,784,595 | 38,436,528 | 8,426,082 | 1,548,706 | 3,153,753 | 4,360,406 | 148,684,691 | ||||||||||||||||
Liabilities | ||||||||||||||||||||||||
Deposits | 59,571,804 | 14,479,560 | 15,676,584 | 1,634,091 | — | — | (2,353,862 | ) | 89,008,177 | |||||||||||||||
Financing received from the Argentine Central Bank and other financial institutions | 12,605 | — | 8,998,732 | 949,764 | — | 46,020 | (989,524 | ) | 9,017,597 | |||||||||||||||
Unsubordinated negotiable Obligations | 108,506 | 76,568 | 5,885,843 | — | — | 15,558 | — | 6,086,475 | ||||||||||||||||
Other Liabilities | 4,469,288 | 1,660,750 | 4,344,219 | 3,194,412 | 757,986 | 2,583,709 | 4,126,683 | 21,137,047 | ||||||||||||||||
Total Liabilities | 64,162,203 | 16,216,878 | 34,905,378 | 5,778,267 | 757,986 | 2,645,287 | 783,297 | 125,249,296 |
Grupo Supervielle S.A. | ||||||||||||||||||||||||
For the year ended December 31, 2018 | ||||||||||||||||||||||||
(in thousands of Pesos) | ||||||||||||||||||||||||
Retail Banking | Corporate Banking | Bank Treasury | Consumer Finance | Insurance | Asset Management and Other Services | Adjustments | Consolidated Total | |||||||||||||||||
Interest income | 20,200,645 | 16,516,702 | 2,777,378 | 8,099,756 | 60,224 | 457,730 | (1,322,399 | ) | 46,790,036 | |||||||||||||||
Interest expenses | (5,994,400 | ) | (2,040,304 | ) | (16,754,056 | ) | (2,996,575 | ) | — | (348,189 | ) | 1,346,134 | (26,787,390 | ) | ||||||||||
Distribution of Income (Expense) for Treasury Funds(1) | 1,148,153 | (6,594,932 | ) | 5,446,779 | — | — | — | — | — | |||||||||||||||
Net interest income | 15,354,398 | 7,881,466 | (8,529,899 | ) | 5,103,181 | 60,224 | 109,541 | 23,735 | 20,002,646 | |||||||||||||||
Net income from financial instruments (NIFFI) at fair value through profit or loss | 70,152 | — | 8,625,394 | (899,758 | ) | 265,112 | 84,746 | 1,561,749 | 9,707,395 | |||||||||||||||
Exchange rate difference on gold and foreign currency | 1,270,863 | 123,169 | 330,812 | 6,847 | (8 | ) | 35,431 | (33,877 | ) | 1,733,237 | ||||||||||||||
NIFFI and Exchange Rate Differences | 1,341,015 | 123,169 | 8,956,206 | (892,911 | ) | 265,104 | 120,177 | 1,527,872 | 11,440,632 | |||||||||||||||
Net Financial Income | 16,695,413 | 8,004,635 | 426,307 | 4,210,270 | 325,328 | 229,718 | 1,551,607 | 31,443,278 | ||||||||||||||||
Services fee income | 5,418,126 | 831,023 | 40,506 | 2,215,442 | — | 677,975 | (64,366 | ) | 9,118,706 | |||||||||||||||
Services fee expense | (1,232,265 | ) | (103,137 | ) | (85,134 | ) | (758,049 | ) | — | (32,149 | ) | 29,114 | (2,181,620 | ) | ||||||||||
Income from insurance activities | — | — | — | — | 1,025,991 | — | 279,531 | 1,305,522 | ||||||||||||||||
Net Service Fee Income | 4,185,861 | 727,886 | (44,628 | ) | 1,457,393 | 1,025,991 | 645,826 | 244,279 | 8,242,608 | |||||||||||||||
Subtotal | 20,881,274 | 8,732,521 | 381,679 | 5,667,663 | 1,351,319 | 875,544 | 1,795,886 | 39,685,886 | ||||||||||||||||
Result from exposure to changes in the purchasing power of money | (1,835,081 | ) | (2,365,062 | ) | (1,562,400 | ) | (885,652 | ) | (399,486 | ) | (186,231 | ) | (2,019,109 | ) | (9,253,021 | ) | ||||||||
Other operating income | 1,486,750 | 1,415,572 | 117,166 | 812,447 | 6,636 | 141,375 | (174,812 | ) | 3,805,134 | |||||||||||||||
Loan loss provisions | (2,557,593 | ) | (1,332,146 | ) | (24,995 | ) | (3,934,373 | ) | — | (117,924 | ) | — | (7,967,031 | ) | ||||||||||
Net Operating Income | 17,975,350 | 6,450,885 | (1,088,550 | ) | 1,660,085 | 958,469 | 712,764 | (398,035 | ) | 26,270,968 | ||||||||||||||
Personnel expenses | (8,803,439 | ) | (1,574,602 | ) | (543,288 | ) | (1,791,966 | ) | (171,808 | ) | (294,857 | ) | (324,340 | ) | (13,504,300 | ) | ||||||||
Administration expenses | (5,652,992 | ) | (730,139 | ) | (283,864 | ) | (1,436,941 | ) | (233,661 | ) | (300,768 | ) | 22,969 | (8,615,396 | ) | |||||||||
Depreciations and impairment of non-financial assets | (398,291 | ) | (127,812 | ) | (28,250 | ) | (70,023 | ) | (7,522 | ) | (2,615 | ) | (30,641 | ) | (665,154 | ) | ||||||||
Other operating expenses | (3,557,128 | ) | (1,570,475 | ) | (439,465 | ) | (963,097 | ) | (1,021 | ) | (82,067 | ) | (19,908 | ) | (6,633,161 | ) | ||||||||
202
Grupo Supervielle S.A. | ||||||||||||||||||||||||
For the year ended December 31, 2018 | ||||||||||||||||||||||||
(in thousands of Pesos) | ||||||||||||||||||||||||
Retail Banking | Corporate Banking | Bank Treasury | Consumer Finance | Insurance | Asset Management and Other Services | Adjustments | Consolidated Total | |||||||||||||||||
Subtotal | (436,500 | ) | 2,447,857 | (2,383,417 | ) | (2,601,942 | ) | 544,457 | 32,457 | (749,955 | ) | (3,147,043 | ) | |||||||||||
Income for subsidiaries and joint ventures | — | — | — | (6,881 | ) | — | — | 6,881 | — | |||||||||||||||
Income/(loss) before taxes | (436,500 | ) | 2,447,857 | (2,383,417 | ) | (2,608,823 | ) | 544,457 | 32,457 | (743,074 | ) | (3,147,043 | ) | |||||||||||
Income tax | (337,442 | ) | (635,966 | ) | (138,783 | ) | 361,888 | (236,071 | ) | (58,690 | ) | (510,010 | ) | (1,555,074 | ) | |||||||||
Net Income (loss) for the year | (773,942 | ) | 1,811,891 | (2,522,200 | ) | (2,246,935 | ) | 308,386 | (26,233 | ) | (1,253,084 | ) | (4,702,117 | ) | ||||||||||
Net income (loss) for the year attributable to owners of the parent company | (733,224 | ) | 1,811,891 | (2,522,200 | ) | -2,246,935 | 308,386 | (26,233 | ) | (1,249,735 | ) | (4,658,050 | ) | |||||||||||
Net income (loss) for the year attributable to non-controlling interest | (40,718 | ) | — | — | — | — | — | (3,349 | ) | (44,067 | ) | |||||||||||||
Other Comprehensive Income | (24,855 | ) | 189,655 | 186,199 | 318 | (1,658 | ) | — | 21,958 | 371,617 | ||||||||||||||
Other comprehensive income attributable to parent company | (24,855 | ) | 189,655 | 186,199 | 318 | (1,658 | ) | — | 21,572 | 371,231 | ||||||||||||||
Other comprehensive income attributable to non-controlling interest | — | — | — | — | — | — | 386 | 386 | ||||||||||||||||
Comprehensive Income (Loss) | (798,797 | ) | 2,001,546 | (2,336,001 | ) | (2,246,617 | ) | 306,728 | (26,233 | ) | (1,231,126 | ) | (4,330,500 | ) | ||||||||||
Comprehensive income (loss) for the year attributable to owners of the parent company | (758,079 | ) | 2,001,546 | (2,336,001 | ) | (2,246,617 | ) | 306,728 | (26,233 | ) | (1,228,163 | ) | (4,286,819 | ) | ||||||||||
Comprehensive income (loss) for the year attributable to non-controlling interest | (40,718 | ) | — | — | — | — | — | (2,963 | ) | (43,681 | ) | |||||||||||||
Assets | ||||||||||||||||||||||||
Cash and due from banks | 7,239,531 | 500,337 | 43,851,308 | 94,475 | 4,823 | 895,461 | (763,563 | ) | 51,822,372 | |||||||||||||||
Debt Securities at fair value through profit or loss | — | — | 22,984,545 | — | 153,895 | 108,889 | — | 23,247,329 | ||||||||||||||||
Loans and other financing | 47,358,154 | 59,764,723 | 4,345,135 | 9,862,852 | 706,712 | 926,389 | (4,192,330 | ) | 118,771,635 | |||||||||||||||
Other assets | 1,755,720 | 123,346 | 8,711,917 | 2,669,278 | 573,006 | 970,498 | 9,387,709 | 24,191,474 | ||||||||||||||||
Total Assets | 56,353,405 | 60,388,406 | 79,892,905 | 12,626,605 | 1,438,436 | 2,901,237 | 4,431,816 | 218,032,810 | ||||||||||||||||
Liabilities | ||||||||||||||||||||||||
Deposits | 79,499,070 | 14,492,455 | 50,620,684 | 2,565,917 | — | — | (1,181,925 | ) | 145,996,201 | |||||||||||||||
Financing received from the Argentine Central Bank and other financial institutions | 16,657 | 11,095,730 | 1,209,680 | 3,911,307 | — | 283,892 | (4,160,160 | ) | 12,357,106 | |||||||||||||||
Unsubordinated negotiable Obligations | — | — | 11,412,744 | 2,005,981 | — | 78,633 | 820,087 | 14,317,445 | ||||||||||||||||
Other Liabilities | 4,910,579 | 1,554,733 | 2,981,986 | 2,654,830 | 595,742 | 1,735,797 | 4,825,996 | 19,259,663 | ||||||||||||||||
Total Liabilities | 84,426,306 | 27,142,918 | 66,225,094 | 11,138,035 | 595,742 | 2,098,322 | 303,998 | 191,930,415 |
203
Grupo Supervielle S.A. | ||||||||||||||||||||||||
For the year ended December 31, 2017 | ||||||||||||||||||||||||
(in thousands of Pesos) | ||||||||||||||||||||||||
Retail | Corporate | Bank | Consumer | Insurance | Asset Mgmt | Adjustments | Consolidated | |||||||||||||||||
Interest income | 15,485,230 | 9,193,774 | 2,150,111 | 8,389,548 | — | — | (968,139 | ) | 34,250,524 | |||||||||||||||
Interest expenses | (3,737,355 | ) | (451,503 | ) | (6,995,270 | ) | (2,648,088 | ) | — | (29 | ) | 1,049,288 | (12,782,957 | ) | ||||||||||
Distribution of Income (Expense) for Treasury Funds(1) | 2,662,554 | (5,253,561 | ) | 2,591,007 | — | — | — | — | — | |||||||||||||||
Net interest income | 14,410,429 | 3,488,710 | (2,254,152 | ) | 5,741,460 | — | (29 | ) | 81,149 | 21,467,567 | ||||||||||||||
Net income from financial instruments (NIFFI) at fair value through profit or loss | (28,907 | ) | — | 4,425,101 | (634,803 | ) | 235,516 | 64,910 | 1,392,537 | 5,454,354 | ||||||||||||||
Exchange rate difference on gold and foreign currency | 365,444 | (104,511 | ) | 325,848 | 8,356 | — | 1,831 | 7,766 | 604,734 | |||||||||||||||
NIFFI and Exchange Rate Differences | 336,537 | (104,511 | ) | 4,750,949 | (626,447 | ) | 235,516 | 66,741 | 1,400,303 | 6,059,088 | ||||||||||||||
Net Financial Income | 14,746,966 | 3,384,199 | 2,496,797 | 5,115,013 | 235,516 | 66,712 | 1,481,452 | 27,526,655 | ||||||||||||||||
Service fee income | 5,722,307 | 1,130,057 | 41,992 | 1,721,223 | — | 513,216 | 199,170 | 9,327,965 | ||||||||||||||||
Service fee expense | (1,250,037 | ) | (59,582 | ) | (44,019 | ) | (178,106 | ) | — | — | (345,668 | ) | (1,877,412 | ) | ||||||||||
Income from insurance activities | — | — | — | — | 983,795 | — | 399,914 | 1,383,709 | ||||||||||||||||
Net Service Fee Income | 4,472,270 | 1,070,475 | (2,027 | ) | 1,543,117 | 983,795 | 513,216 | 253,416 | 8,834,262 | |||||||||||||||
Subtotal | 19,219,236 | 4,454,674 | 2,494,770 | 6,658,130 | 1,219,311 | 579,928 | 1,734,868 | 36,360,917 | ||||||||||||||||
Result from exposure to changes in the purchasing power of money | (948,332 | ) | (1,153,660 | ) | (469,255 | ) | (264,439 | ) | (217,545 | ) | (40,496 | ) | (892,463 | ) | (3,986,190 | ) | ||||||||
Other operating income | 1,806,462 | 604,994 | 145,679 | 1,378,346 | 4,890 | (3,770 | ) | (1,109,125 | ) | 2,827,476 | ||||||||||||||
Loan loss provisions | (2,165,779 | ) | (445,109 | ) | (10,574 | ) | (3,576,034 | ) | — | — | (6,852 | ) | (6,204,348 | ) | ||||||||||
Net Operating Income | 17,911,587 | 3,460,899 | 2,160,620 | 4,196,003 | 1,006,656 | 535,662 | (273,572 | ) | 28,997,855 | |||||||||||||||
Personnel expenses | (8,925,324 | ) | (1,653,483 | ) | (610,812 | ) | (1,887,567 | ) | (169,025 | ) | (93,129 | ) | (99,825 | ) | (13,439,165 | ) | ||||||||
Administration expenses | (5,409,736 | ) | (684,388 | ) | (323,670 | ) | (1,717,251 | ) | (214,828 | ) | (24,521 | ) | 808,100 | (7,566,294 | ) | |||||||||
Depreciations and impairment of non-financial assets | (589,546 | ) | (130,233 | ) | (152,759 | ) | (76,898 | ) | (7,024 | ) | (266 | ) | (93 | ) | (956,819 | ) | ||||||||
Other operating expenses | (3,993,643 | ) | (1,028,888 | ) | (351,944 | ) | (964,378 | ) | (2,598 | ) | (20,783 | ) | (32,308 | ) | (6,394,542 | ) | ||||||||
Subtotal | (1,006,662 | ) | (36,093 | ) | 721,435 | (450,091 | ) | 613,181 | 396,963 | 402,302 | 641,035 | |||||||||||||
Income for subsidiaries and joint ventures | — | — | — | 10,411 | — | — | (10,411 | ) | — | |||||||||||||||
Income / (Loss) before Taxes | (1,006,662 | ) | (36,093 | ) | 721,435 | (439,680 | ) | 613,181 | 396,963 | 391,891 | 641,035 | |||||||||||||
Income tax | (184,935 | ) | (222,877 | ) | (583,091 | ) | (398,280 | ) | (244,960 | ) | (150,825 | ) | (17,901 | ) | (1,802,869 | ) | ||||||||
Net income (loss) for the year | (1,191,597 | ) | (258,970 | ) | 138,344 | (837,960 | ) | 368,221 | 246,138 | 373,990 | (1,161,834 | ) | ||||||||||||
Net income (loss) for the year attributable to owners of the parent company | (1,192,896 | ) | (258,970 | ) | 138,344 | (837,960 | ) | 368,221 | 246,138 | 376,658 | (1,160,465 | ) | ||||||||||||
Net loss for the year attributable to non-controlling interest | 1,299 | — | — | — | — | — | (2,668 | ) | (1,369 | ) | ||||||||||||||
Other Comprehensive Income | 6,998 | 7,879 | 2,889 | (111 | ) | 57,915 | — | (3,450 | ) | 72,120 | ||||||||||||||
Other comprehensive income attributable to the parent company | 6,998 | 7,879 | 2,889 | (111 | ) | 57,915 | — | (3,470 | ) | 72,100 | ||||||||||||||
Other comprehensive income attributable to non-controlling interest | — | — | — | — | — | — | 20 | 20 | ||||||||||||||||
Comprehensive Income (Loss) | (1,184,599 | ) | (251,091 | ) | 141,233 | (838,071 | ) | 426,136 | 246,138 | 370,540 | (1,089,714 | ) | ||||||||||||
Comprehensive income (loss) for the year attributable to owners of the parent company | (1,185,898 | ) | (251,091 | ) | 141,233 | (838,071 | ) | 426,136 | 246,138 | 373,188 | (1,088,365 | ) | ||||||||||||
Comprehensive income (loss) for the year attributable to non-controlling interest | 1,299 | — | — | — | — | — | (2,648 | ) | (1,349 | ) |
Grupo Supervielle S.A. | ||||||||||||||||||||||||
As of December 31, 2018 | ||||||||||||||||||||||||
(in thousands of Pesos) | ||||||||||||||||||||||||
Retail | Corporate | Bank | Consumer | Insurance | Asset Mgmt | Adjustments | Consolidated | |||||||||||||||||
Assets | ||||||||||||||||||||||||
Cash and due from banks | 6,357,430 | 590,773 | 18,104,666 | 165,664 | 6,841 | 541 | -20,593 | 25,205,322 | ||||||||||||||||
Debt Securities at fair value through profit or loss | — | — | 25,052,554 | 172,260 | — | — | 677,370 | 25,902,184 | ||||||||||||||||
Loans and other financing | 48,927,312 | 68,919,197 | 5,133,358 | 15,113,729 | 216,831 | 39,326 | -4,348,394 | 134,001,359 | ||||||||||||||||
Other assets | 958,922 | 27,501 | 11,909,500 | 3,251,455 | 1,155,018 | 435,670 | 5,180,857 | 22,918,923 | ||||||||||||||||
Total Assets | 56,243,664 | 69,537,471 | 60,200,078 | 18,703,108 | 1,378,690 | 475,537 | 1,489,240 | 208,027,788 | ||||||||||||||||
Liabilities | ||||||||||||||||||||||||
Deposits | 80,026,461 | 10,482,457 | 36,399,868 | 1,600,834 | — | — | -390,330 | 128,119,290 | ||||||||||||||||
Financing received from the Argentine Central Bank and other financial institutions | 14,796 | 6,253,027 | 1,398,610 | 439,402 | — | — | -97,680 | 8,008,155 | ||||||||||||||||
Unsubordinated negotiable Obligations | — | — | 14,612,858 | 4,341,420 | — | — | 553,573 | 19,507,851 | ||||||||||||||||
Other Liabilities | 7,773,656 | 1,948,346 | 11,403,533 | 9,535,194 | 554,777 | 203,894 | -10,242,222 | 21,177,178 | ||||||||||||||||
Total Liabilities | 87,814,913 | 18,683,830 | 63,814,869 | 15,916,850 | 554,777 | 203,894 | -10,176,659 | 176,812,474 |
(1) These amounts are calculated based on tunds segments use or provide and net zero in the consolidation process.
Below is a discussion of our results of operations by segments for the years ended December 31, 2018 and 2017.
RetailBusiness Banking
2019 Compared to 2018
Attributable comprehensive income in 20192021 recorded a Ps.1.5Ps.7.0 billion loss, compared to a Ps.758.1 millionPs.5.4 billion loss in 2018.
2020. The main factors explaining the decreaseperformance were: (i) a Ps.361.8 million increase in loan loss provisions to Ps.2.9 billion from Ps.2.6 billion in 2018, (ii) a Ps.208.8 million increase in personnel and administration expenses to Ps.14.7 billion, (iii) a Ps.907.7 million increase in depreciation and amortization to Ps.1.3 billion, (iv) a Ps.181.9 million decrease in net services fee income to Ps.4.0 billion from Ps.4.2 billion, and (v) a Ps.208.9 million increase in other expenses, net, to Ps.2.3 billion from Ps.2.1 billion.
(i) | a Ps.6.7 billion or 25.1% decrease in net financial income mainly due to weak credit demand and the increase in interest expenses mainly due to minimum interest rates on time deposits as required by the Central Bank; and |
(ii) | a Ps.479.7 million or 6.3% decrease in net service fee income. During 2020 and until February 2021, the Central Bank set forth certain restrictions on fee repricing. On February 19, 2020, by means of Communication “A” 6912, the Central Bank stated that financial institutions should not communicate fee increases on ATM usage until March 2021, as well as further repricing of fees on certain products related to savings accounts and credit cards until February 2021. Since February 2021, the Group announced and implemented several fees repricing |
These were partially offset by by:
(i) | a Ps.3.0 billion gain in the result from exposure to changes in the purchasing power of the currency compared to Ps. 2.2 billion en 2020; |
(ii) | a 37.0% or Ps.2.4 billion decrease in loan loss provisions. Loan loss provisions include the expected losses for each portfolio and segment, based on past performance and current conditions as of the financial statements date. Delinquency requires expected losses to be measured for the whole life of each loan, instead of accounting for expected losses during a 12-month period. This increases significantly the probability of default for loans with a maturity of more than one year. In 2020, loan loss provisions included COVID-19 specific anticipatory provisions which reflected the economic outook and an updated its top-down analysis on specific industries that could be highly impacted by the COVID 19 pandemic; |
(iii) | a tax gain of Ps.3.7 billion in 2021; and |
(iv) | a 4.6% or Ps.1.6 billion decrease in Personnel, Administrative and D&A expenses. |
In 2021, the Personal & Business Banking segment’s loan and financing portfolio totaled approximately Ps.76.3 billion compared to Ps.79.2 billion in 2020. In 2021, the Personal & Business Banking segment’s deposits amounted to Ps.138.7 billion, a 14.1%2.1% decrease or Ps. 258.0from the Ps.141.6 billion in 2020.
Corporate Banking
Attributable comprehensive income in 2021 recorded a Ps.990.9 million decrease in the loss from exposure to changes in the purchasing power to Ps. 1.6 billion, (ii) 3.4% or Ps. 573.8 million increase in net financial income to Ps. 17.3 billion from Ps. 16.7 billion, and (ii) a Ps.10.4 million gain, recognized in income tax compared to a Ps.337.4Ps.458.0 million chargegain in 2018.
Result from exposure to changes in the purchasing power of money for 2019 totaled a Ps.1.6 billion loss, from the Ps.1.8 billion loss recorded in 2018. This reflects the loss in the purchasing power of the currency to which our net monetary assets are exposed as a result of the 53.8% increase in consumer price index in 2019, compared2020, mainly due to a 47.6% increase83.8% or Ps.4.3 billion decrease in 2018.
Loanloan loss provisions totaled Ps.2.9 billion in 2019 compared to Ps.2.6 billion in 2018.provisions. Loan loss provisions include the expected losses for each portfolio and segment, based on past performance and current conditions as of the financial statements date. The increase in delinquency also requiresIn 2020, the Group updated and enhanced its expected lossesloss models to be measuredadjust for the whole lifeeconomic outlook impacted by the COVID-19 pandemic, included additional macroeconomic variables and updated its top-down analysis on specific industries that could have been highly impacted by the COVID-19 pandemic. As of each loan, insteadDecember 31, 2021, 78% of accounting for expected losses during a 12-month period. This increases significantly the probability of default forcommercial non-performing loans with a maturity of more than one year.
Retail loans showed an NPL ratio of 4.1%portfolio was collateralized compared to 80% as of December 31, 2019, increasing from 3.3% as of December 31, 2018.2020. This was mainly drivenpartially offset by: (i) ana Ps.1.1 billion or 12.9% decrease in Net Financial Income mainly due to weak credit demand and lower interest earned on loans and due to the impact of minimum interest rates on time deposits implemented by the Central Bank, (ii) a Ps.792.6 million in other expenses mainly due to the revaluation of fixed assets as inflation surpassed FX depreciation along the year and also due to higher turnover taxes, (iii) a 35.6% or Ps.487.0 million increase in the personal loans NPL ratioloss in the purchasing power of the currency to 4.2% in December 2019, from 3.5% in December 2018, and (ii) anwhich our net monetary assets are exposed, (iv) a 4.5% or Ps.129.9 million increase in the mortgage loans NPL ratio to 1.3% from 0.2%Personnel, Administrative expenses and D&A, (v) a Ps.26.2 million or 3.6% decrease in December 2018. Credit cards NPL ratio remained unchanged at 3.8%net service fee income reflecting lower credit origination, and (vi) a Ps.507.8 million charge in December 2019 from December 2018.income tax.
205
In 2019 net financial income totaled Ps.17.3 billion, a 3.4% increase from Ps.16.7 billion in 2018. This increase was mainly due to a Ps.580.0 million or 43.2% increase in 2019 in net income from financial instruments at fair value through profit or loss and exchange rate differences mainly due to higher income on foreign currency trading with retail customers, while net interest income remained unchanged from 2018.
In 2019, interest income decreased due to lower average volumes of personal loans and credit cards, while interest expenses increased following2021, the increase in market interest rates.
Net services fee income totaled Ps.4.0 billion in 2019, a 4.3% decrease compared to Ps.4.2 billion in 2018. This reflects lower average volumes of credit and debit cards as well as the reduction in MDR. The maximum MDR for 2019 and 2018 was 1.65% and 1.85%, respectively, and the maximum debit card sales commissions for 2019 and 2018 was 0.8% and 0.9%, respectively.
In 2019, the Retail Bankingcorporate banking segment’s loan and financing portfolio totaled approximately Ps.47.0Ps.62.2 billion compared to Ps.56.4Ps.63.8 billion in 2018. 2020 reflecting weak credit demand.
In 2019, retail2021, corporate deposits amounted to Ps.59.6Ps.31.1 billion, compared to Ps.24.4 billion in 2020.
152
Treasury
Attributable comprehensive income in 2021 recorded a Ps.6.9 billion gain, compared to a Ps.10.1 billion gain in 2020.
This performance is explained by (i) a 34.5% or Ps.1.6 billion loss increase from exposure to changes in the purchasing power to Ps.6.4 billion, (ii) a Ps.520.2 million decrease in net financial income, (iii) a Ps 334.0 million increase in other expenses net to Ps.1.1 billion mainly due to higher turnover taxes charged on securities from the Central Bank, and (iv) a Ps.108.3 million decrease in Net Service Fee Income. These were partially offset by a 7.6% or Ps. 172.2 million decrease in Personnel, Administrative Expenses and D&A.
In 2021, net financial income totaled Ps.20.0 billion, a 25.1% decrease of Ps.520.2 million from the Ps.79.5Ps.20.5 billion in 2018.2020. This decrease was mainly due to a lower interest earned on higher volume of government securities in Ps. and U.S.$, while interest earned on higher holdings of securities issued by the Central Bank and Repo Transactions remained stable.
2018 Compared to 2017Consumer Finance
Attributable Comprehensive Incomecomprehensive income in 20182021 recorded a Ps.758.1 millionPs.3.1 billion loss compared to a Ps.1.2 billionPs.871.7 million loss in 2017.
2020. The main factors explaining this performance were:
(i) | a Ps.2.6 billion increase in loan loss provisions to Ps.4.3 billion from Ps.1.3 billion in 2020. This reflects the deterioration in NPLs that impacted this customer segment once the automatic rescheduling programs were lifted. Loan loss provisions include the expected losses for each portfolio and segment, based on past performance and current conditions as of the financial statements date. The increase in delinquency also requires expected losses to be measured for the whole life of each loan, instead of accounting for expected losses during a 12-month period. This increases significantly the probability of default for loans with a maturity of more than one year; |
(ii) | a 25.0% or Ps.518.3 million decrease in Net Fee Income; and |
(iii) | a Ps.426.1 million decrease in net financial income to Ps.4.5 billion, compared to Ps.4.9 billion in 2020. This decrease was mainly due to a 11.5% decrease to Ps.4.1 billion in net interest income as a result of the increase in the cost of funds, while net income from financial instruments and exchange rate differences recorded a Ps.380.7 million gain in 2021, compared to a Ps.273.6 million gain in 2020. |
These were partially offset by a Ps.639.7 million decrease were: (i) Ps.1.8 billionin the loss from exposure to changes in the purchasing power of money to Ps.699.4 million compared to a Ps.948.3 millionPs.1.3 billion loss in 2017, (ii) a Ps.391.8 million increase in loan loss provisions to Ps.2.6 billion from Ps.2.2 billion in 2017, (iii) a Ps.286.4 million decrease in net services fee income, to Ps.4.2 billion from Ps.4.5 billion, (iv) a Ps.152.5 million increase in income tax, to Ps.337.4 million from Ps.184.9 million and (v) a Ps.24.9 million loss recorded in Other Comprehensive Income from Ps.7.0 million gain in 2017 mainly due to the revaluation of real estate properties. These factors were partially offset by: (i) a Ps.1.9 billion increase in Net Financial Income to Ps.16.7 billion from Ps.14.7 billion, (ii) a Ps.121.4 million decrease in Personnel and Administration expenses, to Ps.14.5 billion, and (iii) a Ps.116.8 million decrease in Other Expenses, net, to Ps.2.1 billion from Ps.2.2 billion
Result from exposure to changes in the purchasing power of money for 2018 totaled a Ps.1.8 billion loss, from the Ps.948.3 million loss recorded in 2017.2020. This reflects the loss in the purchasing power of the currency to which our net monetary assets are exposed, asand a result of the 47.6%8.3% or Ps.416.0 million decrease in personnel, administrative and 53.8% increase in consumer price index in 2018 and 2019 respectively, comparedD&A expenses to a 24.8% increase in 2017.
Loan loss provisions totals Ps.2.6Ps.4.6 billion from Ps.2.2 billion in 2017. Loan loss provisions include the expected losses for each portfolio and segment, based on past performance and current conditions as of the financial statements date. The increase in delinquency also requires expected losses to be measured for the whole life of each loan, instead of accounting for expected losses during a 12 month period. This increases significantly the probability of default for loans with a maturity of more than 1 year.
Retail loans showed an NPL ratio of 3.3% as of December 31, 2018, increasing from 2.8% as of December 31, 2017. This was mainly driven by an increase in the personal loans NPL ratio to 3.5% in December 2018, from 2.9% in December 2017 and an increase in the credit cards NPL ratio to 3.8% in December 2018, from 3.4%Ps.5.0 billion.
In 2018 Net Financial Income totaled Ps.16.7 billion, a 13.2% increase from Ps.14.7 billion in 2017. This increase was mainly due to (i) a 6.6% increase to Ps.15.3 billion in Net Interest Income, as a result of higher volumes and interest rates of Mortgages (ii) a Ps.70.2 million in Net Income from financial instruments at fair value through profit or loss compared to Ps.28.9 million loss in 2017 and (ii) a 247.8% increase to Ps.1.3 billion in Exchange rate differences.
Net services fee income totaled Ps.4.2 billion in 2018, a 6.4% decrease compared to Ps.4.5 billion in 2017. This reflects lower average volumes of credit and debit cards as well as2021, the reduction in credit card and debit card merchant discounted rates (“MDR”). MDR are commissions charged by the issuer of credit and debit cards on the amount of credit and debit card transactions. The maximum MDR for 2018 and 2017 was 1.85% and 2.0% respectively and the maximum debit card sales commissions for 2018 and 2017 was 1.0% and 0.9% respectively.
206
Pursuant to Communication “A” 6212, effective as of April 1, 2017, the Central Bank issued a program to gradually reduce MDR on an annual basis. In this regard, the maximum MDR for 2017 and 2018 was 2.0%, and 1.85% since January 1, 2018 respectively and dropping to 1.65%, 1.50% and 1.30% in 2019, 2020 and 2021 and after, respectively. The maximum debit card sales commissions for 2017 and 2018 was 1.0%, and 0.90% since January 1, 2018 respectively and declining to 0.80%, 0.70% and 0.60%, in 2019, 2020 and 2021 and after, respectively.
In 2018, the Retail Bankingconsumer finance segment’s loan and financing portfolio totaled approximately Ps.47.4Ps.10.8 billion compared to Ps.48.9Ps.10.3 billion in 2017. In 2018, retail deposits amounted to Ps.79.5 billion, a 0.7% decrease from the Ps.80.0 billion in 2017.
Corporate Banking
2019 Compared to 2018
Attributable comprehensive loss in 2019 was Ps.1.2 billion, compared to a Ps.2.0 billion gain in 2018.
The main factors explaining the loss were: (i) a Ps.2.3 billion increase in loan loss provisions to Ps.3.6 billion from Ps.1.3 billion in 2018, (ii) a Ps.808.0 million increase in other expenses, net, to Ps.963.3 million from Ps. 154.9 million, (iii) a Ps.181.2 million increase in personnel and administration expenses, to Ps.2.5 billion, (iv) a Ps.137.4 million increase in depreciation and amortization to Ps.265.3 million and (v) Ps.26.2 million loss in other comprehensive loss from a Ps.189.7 million gain in 2018. These were partially offset by (i) a Ps.798.9 million decrease in net financial income to Ps.7.2 billion from Ps.8.0 billion, (ii) a 21.2% decrease or Ps. 501.9 million in the loss from exposure to changes in the purchasing power to Ps. 1.9 billion, (iii) a Ps.72.3 million increase in net services fee income, to Ps.800.2 million from Ps.727.9 million, and (iv) Ps.1.5 million gain in income tax compared to Ps.636.0 million charge.
In 2018, net financial income totaled Ps.7.2 billion, a 10.0% decrease from Ps.8.0 billion in 2018. This decrease was mainly due to a 11.2% decrease to Ps.7.0 billion in net interest income, partially offset by a Ps. 83.8 million increase in exchange rate differences to Ps.123.2 million in 2019.
Result from exposure to changes in the purchasing power of money for 2019 totaled a Ps.1.9 billion loss, compared to the Ps.2.4 billion loss recorded in 2018. This reflects the loss in the purchasing power of money to which our net monetary assets are exposed as a result of the 47.6% and 53.8% increase in consumer price index in 2018 and 2019 respectively.
Loan loss provisions totaled Ps.3.6 billion in 2019 compared to Ps.1.3 billion in 2018. This is explained as a result of an increase in delinquency ratios. The delinquency ratio increase is mainly explained by economic downturn in Argentina, with GDP contracting and inflation reaching 53.8% which also led to a high interest rate environment with average BADLAR increasing 1,450 basis points in 2019 to 48.9% compared to 34.3% in 2018. This environment led some companies to restraints in their cash flow and impairing their ability to repay their loans. As of December 31, 2019, collateralized non-performing commercial loans were 58% of our total.
Loan loss provisions include the expected losses for each portfolio and segment, based on past performance and current conditions as of the financial statements date. The increase in delinquency also requires expected losses to be measured for the whole life of each loan, instead of accounting for expected losses during a 12-month period. This increases significantly the probability of default for loans with a maturity of more than one year.
Corporate loans showed an NPL ratio of 8.7% as of December 31. 2019, increasing from 1.1% as of December 31, 2018, mainly due to deteriorated macroeconomic conditions which impacted negatively in SME and middle-market companies’ profits and cash flows.
207
In 2019 the corporate banking segment’s loan and financing portfolio totaled Ps.43.4 billion compared to Ps.59.8 billion in 20182020 reflecting lowerweak credit demand, following the recession recorded in 2019.
In 2019and a tightening on origination standards and corporate deposits amounted to Ps.14.5 billion remaining unchanged from 2018.
2018 Compared to 2017
Attributable Comprehensive Income in 2018 was Ps.2.0Ps.6.7 billion, compared to a Ps.251.1 million loss in 2017.
The main factors explaining the increase were: (i) a Ps.4.6 billion increase in Net Financial Income to Ps.8.0 billion from Ps.3.4 billion, (ii) a Ps.33.1 million decrease in Personnel and Administration expenses, to Ps.2.3 billion, (iii) a Ps.269.0 million decrease in Other Expenses, net, to Ps.154.9 million from Ps. 423.9 million, and (iv) a Ps.181.8 million in Other Comprehensive Income from Ps.7.9 million in 2017 mainly due to the revaluation of real estate properties. These factors were partially offset by (i) a Ps.2.4 billion loss from exposure to changes in the purchasing power of money compared to Ps.1.2 million loss in 2017, (ii) a Ps.887.0 million increase in loan loss provisions to Ps.1.3 billion from Ps.445.1 million in 2017, (iii) a Ps.342.6 million decrease in net services fee income, to Ps.727.9 million from Ps.1.1 billion, and (iv) a Ps.413.1 million increase in income tax, to Ps.636.0 million from Ps.222.9 million.
In 2018 Net Financial Income totaled Ps.8.0 billion, a 136.5% increase from Ps.3.4Ps.5.4 billion in 2017. This increase was mainly due to (i) a 125.9% increase to Ps.7.9 billion in Net Interest Income, (ii) an Ps.123.2 million gain in in Exchange rate differences compared to a loss of Ps.104.5 million in 2017.
Result from exposure to changes in the purchasing power of money for 2018 totaled a Ps.2.4 billion loss, from the Ps.1.2 billion loss recorded in 2017. This reflects the loss in the purchasing power of money to which our net monetary assets are exposed as a result of the 47.6% and 53.8% increase in consumer price index in 2018 and 2019 respectively, compared to a 24.8% increase in 2017.
Loan loss provisions totals Ps.1.3 billion from Ps.445.1 million in 2017. This is explained as a result of an increase in delinquency ratios. The delinquency ratio increase is mainly explained by economic downturn in Argentina, with GDP contracting 2.5%, and inflation reaching 46.7% which also led to a high interest rate environment with average BADLAR increasing 1,370 basis points in 2018 to 34.3% compared to 20.6% in 2017 and reaching and average of 50.2% in the fourth quarter. The corporate segment has had a historically low NPL ratio, being 0.2% as of December 31, 2017. However, as macroeconomic conditions worsened and interest rates rose throughout the year, the NPL ratio increased to 1.1% as of December 31, 2018 leading some companies to restraints in their cash flow and impairing their ability to repay their loans. Loan loss provisions include the expected losses for each portfolio and segment, based on past performance and current conditions as of the financial statements date. The increase in delinquency also requires expected losses to be measured for the whole life of each loan, instead of accounting for expected losses during a 12 month period. This increases significantly the probability of default for loans with a maturity of more than 1 year.
Corporate loans showed an NPL ratio of 1.1% as of December 31, 2018, increasing from 0.2% as of December 31, 2017, mainly due to deteriorated macroeconomic conditions which impacted negatively SME and middle-market companies’ profits and cash flows.
In 2018, the corporate banking segment’s loan and financing portfolio totaled Ps.59.8 billion compared to Ps.68.9 billion in 2017 reflecting lower credit demand following the recession recorded in 2018.
In 2018, corporate deposits amounted to Ps.14.5 billion, a 38.3% increase from the Ps.10.5 billion in 2017.
Treasury
2019 Compared to 2018
Attributable comprehensive income in 2019 recorded a Ps.1.3 billion loss, compared to Ps.2.3 billion loss in 2018.
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This performance is explained by (i) a Ps.2.5 billion increase in net financial income, (ii) 74.8% decrease or Ps.1.2 billion loss from exposure to changes in the purchasing power to Ps. 393.5 million, (iii). Ps. 17.5 million gain in income tax compared to Ps. 138.8 million charge in 2018, and (iv) a Ps.155.1 million decrease in other expenses net to Ps. 167.2 million. These were partially offset by: (i) a Ps.133.5 million increase in personnel and administration expenses to Ps.960.6 million in 2019 compared to Ps.827.2 million in 2018.
In 2019 net financial income totaled Ps.2.9 billion, an increase of Ps. 2.5 billion from Ps.426.3 million in 2018. This increase was mainly due to higher income from holdings of securities issued by the Central Bank due to higher volumes of these securities and higher yield following the increase in the average interest rate of such securities. This was partially offset by a decrease in the income from government and corporate securities reflecting mark to market accounting of short term Pesos and U.S. dollars treasury notes held by us following the debt reprofiling announced by the Argentine government in August 2019.
The balance of short-term securities issued by the Central Bank were classified as “held for trading” and accordingly valued at market price recording profits in NIFFI while the cost of the higher balance of interest-bearing liabilities raised to fund those investments were recorded as interest expenses within net interest income.
2018 Compared to 2017
Attributable Comprehensive Income in 2018 recorded a Ps.2.3 billion loss, compared to Ps.141.2 million gain in 2017. The Ps.2.5 billion decline in attributable comprehensive income in 2018 is explained by (i) a 82.9% or Ps.2.1 billion decrease in net financial income, (ii) a Ps.1.6 billion loss from exposure to changes in the purchasing power of money, and (iii) a Ps.44.6 million loss in Net Fee Income. These factors were partially offset by: (i) a Ps.107.3 million decrease in Personnel and Administration expenses to Ps.827.2 million in 2018 compared to Ps.934.5 million in 2017, (ii) a Ps.444.3 million decrease in income tax to Ps.138.8 million from Ps.583.1 million in 2017.
In 2018 Net Financial Income totaled Ps.426.3 million, an 82.9% decrease from Ps.2.5 billion in 2017. This decrease was mainly due to (i) a Ps.8.5 billion loss in Net Interest Income compared to Ps.2.3 billion loss in 2017. This was partially offset by a 94.9% or Ps.4.2 billion increase to Ps.8.6 billion in Net Income from financial instruments at fair value through profit or loss.
The treasury segment’s securities at fair value through profit or loss amounted to Ps.23.0 billion in 2018, a 8.3% decrease from Ps.25.1 billion recorded in 2017 reflecting higher holdings of securities issued by the Central Bank. The treasury segment’s cash and due from banks amounted to Ps.43.9 billion in 2018, a 142.2% increase from Ps.18.1 billion recorded in 2018 reflecting the increase in minimum cash reserve requirements.
Consumer Financing
2019 Compared to 2018
Attributable comprehensive income in 2019 recorded a Ps.1.1 billion loss compared to a Ps.2.2 billion loss in 2018.
The main factors explaining this performance were: (i) a Ps.2.6 billion decrease in loan loss provisions to Ps.1.3 billion from Ps.3.9 billion in 2018, (ii) a 24.2% or Ps. 780.6 million decrease in personnel and administration expenses to Ps. 2.4 billion from Ps. 3.2 billion, (iii) a Ps. 541.3 million gain in income tax, compared to Ps.361.9 million in 2018, and (iv) a Ps. 47.0 million decrease in loss from exposure to changes in the purchasing power of money to Ps.838.7 million compared to Ps.885.7 million loss in 2018. These were partially offset by (i) a Ps.2.1 billion decrease in net financial income to Ps.2.1 billion compared to Ps.4.2 billion in 2018, (ii) a Ps.67.6 million increase in other expenses, net, to Ps. 218.2 million compared to Ps.150.7 million in 2018.
In 2019 net financial income totaled Ps.2.1 billion, a 49.4 % decrease compared to Ps.4.2 billion in 2018. This decrease was mainly due to a 63.2% decrease to Ps.1.9 billion in net interest income as a result of the decrease in average volumes reflecting the tightening of credit scoring metrics in the segment and the increase in the cost of fund as a result of the increase in market interest rates, while net income from financial instrument and exchange rate differences recorded a Ps.251.6 milllion gain, compared to Ps. 892.9 million loss in 2018.
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Result from exposure to changes in the purchasing power of money for 2019 totaled a Ps.838.7 million loss from the Ps.885.7 million loss recorded in 2018. This reflects the loss in the purchasing power of the currency to which our net monetary assets are exposed as a result of the 53.8% increase in consumer price index in 2019 respectively.
Loan loss provisions totaled Ps.1.3 billion compared to Ps.3.9 billion in 2018. This reflects the measures taken by us since the first quarter of 2018 to enhance asset quality following the peaks observed in the second quarter of 2018.
Loan loss provisions include the expected losses for each portfolio and segment, based on past performance and current conditions as of the financial statements date. The increase in delinquency also requires expected losses to be measured for the whole life of each loan, instead of accounting for expected losses during a 12-month period. This increases significantly the probability of default for loans with a maturity of more than one year.
The Consumer Finance NPL ratio was 17.2% as of December 31, 2019, declining from 19.4% as of December 31, 2018. NPL creation improved throughout the year despite the challenging environment, reflecting the measures taken by us since the first quarter of 2018 to enhance asset quality following the peaks observed in the second quarter of 2018. These measures included tightening of credit scoring standards, slower origination and changes in the collection process in the consumer finance segment.
2018 Compared to 2017
Attributable Comprehensive Income in 2018 recorded a Ps.2.2 billion loss, compared to a Ps.838.1 million loss in 2017.
The main factors explaining the decrease were: (i) a Ps.904.7 million decrease in Net Financial Income to Ps.4.2 billion compared to Ps.5.1 billion in 2017, (ii) a Ps.885.7 million loss from exposure to changes in the purchasing power of money compared to Ps.264.4 million loss in 2017, (iii) a Ps.358.3 million increase in loan loss provisions to Ps.3.9 billion from Ps.3.6 billion in 2017, (iv) a Ps.85.7 million decrease in net services fee income, to Ps.1.5 billion, and (v) a Ps.150.7 million loss in Other Expenses, net, compared to Ps.414.0 million gain in 2017. These factors were partially offset by: (i) a Ps.375.9 million decrease in Personnel and Administration expenses, to Ps.3.2 billion from Ps.3.6 billion mainly due to the decrease in the number of employees in the segment, and (ii) a Ps.361.9 million tax income recorded in 2018 compared to a tax loss of Ps.398.3 million in 2017.
In 2018 Net Financial Income totaled Ps.4.2 billion, a 17.7% decrease from Ps.5.1 billion in 2017. This decrease was mainly due to (i) a 11.1% decrease to Ps.5.1 billion in Net Interest Income as a result of the decrease in average volumes reflecting the tightening of credit scoring metrics in the segment and the increase in the cost of fund as a result of the increase in market interest rates, and (ii) a Ps.899.8 million losses from financial instruments at fair value through profit or loss compared to Ps.634.8 million loss in 2017.
Result from exposure to changes in the purchasing power of money for 2018 totaled a Ps.885.7 million loss, from the Ps.264.4 million loss recorded in 2017. This reflects the loss in the purchasing power of the currency to which our net monetary assets are exposed as a result of the 47.6% and 53.8% increase in consumer price index in 2018 and 2019 respectively.
Loan loss provisions totaled Ps.3.9 billion from Ps.3.6 billion in 2017. This is explained mainly due to an increase in delinquency ratios. Salary adjustments resulting from collective bargaining agreements below the annual inflation rate which even accelerated in 2018, along with additional increases in public services tariffs in 2018, further impacted the disposable income of the population in the Consumer Finance Segment causing additional deterioration in asset quality, which was also affected by an increase in unemployment (rising from 7.2% at the beginning of the year to 9.1% as of year-end). Loan loss provisions include the expected losses for each portfolio and segment, based on past performance and current conditions as of the Financial Statements date. The increase in delinquency also requires expected losses to be measured for the whole life of each loan, instead of accounting for expected losses during a 12 month period. This increases significantly the probability of default for loans with a maturity of more than 1 year.
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The consumer finance segment NPL ratio increased to 19.4% in December 2018 from 14.7% in 2017 mainly as a result of an increase in the personal loans NPL ratio to 26.0% as of December 31, 2018 from 18.7% as of December 31, 2017.
In the Consumer Finance Segment higher delinquency rates experienced in the first months of the year have been typically expected to improve throughout the year as the beginning of the year salary bargaining agreements catch up with inflation improving consumers’ disposable income and their ability to pay their bills. This behavior has been changing since 2016 and improvement has not been as fast as in previous years, changing the pattern and seasonality observed in prior years. Salary adjustments resulting from collective bargaining agreements below the annual inflation rate which accelerated in 2018, along with additional increases in public services tariffs in 2018, further impacted the disposable income of the population in the Consumer Finance Segment causing additional deterioration in asset quality. Taking a more conservative stance, during the first quarter of 2018, we tightened credit scoring standards and slowed origination in the consumer finance segment. Those measures, despite the increasingly challenging environment, started to show some signs of improvement, with a sharp decrease in NPL creation levels in 3Q18 compared to 2Q18. However very high levels of inflation in 4Q18 caused NPL creation to increase above the 3Q18 levels but remaining below the 2Q18 peak.
The consumer financing segment’s loan and other financings portfolio totaled approximately Ps.9.9 billion at December 31, 2018 decreasing 34.7% from 2017. This reflects the tightening of credit scoring metrics in the segment following the sudden changes in key macroeconomic variables together with lower consumer credit demand due to high interest rates and lower consumer sentiment.2020.
Insurance
2019 Compared to 2018
Attributable comprehensive income totaled Ps.103.7Ps.538.7 million in 20192021 compared to Ps.306.7Ps.812.1 million in 2018.2020. This was due toto: (i) thea 10.0% or Ps.219.1 million decrease in credit related policies following Central Bank regulations that offsetNet Service Fee income in 2021, reflects low levels of sales in bank branches amid the increase in non-credit related policies.pandemic restrictions, a higher accident rate since relaxation of the lockdown and also due to higher claims paid, (ii) a 11.4%21.6% or Ps.196.2 million increase to Ps.451.5 million in personnel and administrative expenses, and (iii) a Ps.140.5 million increase in the net loss from exposure to changes in the purchasing power of the currency of Ps.884.8 million compared to a net loss of Ps.399.5 million in 2018. This wascurrency. These were partially offset by a 19.2% increase to Ps.387.8Ps.254.7 million in net financial income due to investments in financial instruments.
Following the Central Bank regulation issued in 2016, since September 1, 2016 both Banco Supervielle and CCF are self-insuring against credit related risks and Banco Supervielle is only contracting new credit related insurances for mortgages loans and some bigger loans which may exceed certain amount. We expect to continue expanding this business and launching new insurance products previously offered to its customers by other insurance companies. As part of this strategy. Supervielle Seguros launched new products including: Home Insurance, Technology Insurance and ATMs insurance and an Integral Insurance product for Entrepreneurs and SMEs.
2018 Compared to 2017
Attributable comprehensive income totaled Ps.306.7 million in 2018 compared to Ps.426.1 million in 2017. This was due to (i) the decrease in credit related policies following Central Bank regulations that offset the increase in non-credit related policies, (ii) a 5.6% increase to Ps.405.5 million in personnel and administrative expenses and (iii) a Net loss from exposure to changes in the purchasing power of the currency of Ps.399.5 million compared to a net loss of Ps.217.5 million in 2017. This was partially offset by a 38.1% increase to Ps.325.3 million in net financial income due to investments in financial instruments.tax charge.
Asset Management and Other Services
2019 Compared to 2018
Attributable Comprehensive Income recorded a Ps.101.7Ps.428.8 million lossgain in 20192021 compared to Ps.26.2Ps.605.3 million lossgain in 2018.
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2020. The decrease in 20192021 was mainly driven byby: (i) a Ps.349.418.6% or Ps.284.4 million increase in personnel, administrative and D&A expenses, and (ii) a Ps.452.5 million loss from exposure to changes in the purchasing power of the currency compared to Ps.186.2 million loss in 2018, (ii) Ps.5.9% or Ps.38.3 million decrease in net service fee income to Ps.607.5Ps.382.4 million in 2019, (iii) a Ps.21.1 million decrease in net financial income to Ps.208.7 million from Ps.229.7 million in 2018. 2020.
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These were partially offset by the 4.3% or Ps.25.8 million decrease in personnel and administration expenses and the Ps.56.4 million gain in other operating income, net, compared to Ps. 59.3 million gain in 2018.
2018 Compared to 2017
Attributable comprehensive income recorded a Ps.26.2 million loss in 2018 compared to Ps.246.1 million gain in 2017.
The decrease in 2018 was mainly driven by (i) the 406.2% or Ps.478.0 million increase personnel and administration expenses due to the higher employee base as a result of the acquisition of MILA and InvertirOnline in 2018, See “Item 4.B Business Overview.”, (ii) a Ps.186.2 million loss from exposure to changes in the purchasing power of the currency compared to Ps.40.5 million loss in 2017 and (iii) a Ps.119.7 million recorded in loan loss provision as a result of the residual portfolio of Mila held at the moment of the acquisition. These were partially offset byby: (i) a Ps.163.0 million increase in net financial income to Ps.229.7 million from Ps.66.7 million in 2017 (ii) Ps.59.3 million gain recorded in other operating Income, net, compared to a net loss of Ps.24.6 million in 2017 and (iii) Ps.25.8% or Ps.132.6Ps. 229.3 million increase in net service fee income to Ps.645.8Ps.2.5 billion in 2021, and (ii) a 35.9% or Ps.136.3 million increase in 2018.Net Financial Income.
Adjustments
Financial expenses and other resultsResults incurred by Grupo Supervielle at the holding level, and transactions between segments, are not allocated to any particular segment for internal reporting purposes and are disclosed under “Adjustments” to reconcile the total of each line item with the amounts appearing in our statement of income.
2019 Compared to 2018
Inter-segment transactions offset each other and do not impact total direct earnings on a consolidated basis. Other results not allocated to segments totaled an attributable comprehensive income recordedof Ps.549.2 million loss in 2021 compared to a Ps 274.4Ps.810.0 million gain in 2019 compared to Ps.1.2 billion loss in 2018.2020.
2018 Compared to 2017
Inter-segment transactions offset each other and do not impact total direct earnings on a consolidated basis. Other results not allocated to segments totaled an attributable comprehensive income recorded a Ps.1.2 billion loss in 2018, and Ps.370.5 million gain in 2017.
Consolidated Assets
The structure and main components of our consolidated assets as of the dates indicated were as follows:
As of December 31, | ||||||||||||||||||
2019 | 2018 | 2017 | ||||||||||||||||
Amount | % | Amount | % | Amount | % | |||||||||||||
(in thousands of Pesos, except percentages) | ||||||||||||||||||
Cash and due from banks | 26,403,099 | 17.8% | 51,822,372 | 23.8% | 25,205,322 | 12.1% | ||||||||||||
Debt Securities at fair value through profit or loss | 568,501 | 0.4% | 23,247,329 | 10.7% | 25,902,184 | 12.5% | ||||||||||||
Loans and other financing | 88,010,011 | 59.2% | 118,771,635 | 54.5% | 134,001,359 | 64.4% | ||||||||||||
Other assets(1) | 33,703,080 | 22.7% | 24,191,474 | 11.1% | 22,918,923 | 11.0% | ||||||||||||
Total | .148,684,691 | 100.0% | 218,032,810 | 100.0% | 208,027,788 | 100.0% |
| | | | | | | | | |
|
| As of December 31, |
| ||||||
| | 2021 | | 2020 |
| ||||
|
| Amount |
| % |
| Amount |
| % | |
|
| (in thousands of Pesos, except percentages) | | ||||||
Cash and due from banks |
| 32,574,118 |
| 8.3 | % | 55,357,647 |
| 14.7 | % |
Debt Securities at fair value through profit or loss |
| 19,757,685 |
| 5.1 | % | 14,900,812 |
| 4.0 | % |
Loans and financing portfolio |
| 155,474,329 |
| 39.8 | % | 159,085,216 |
| 42.3 | % |
Other debt securities |
| 78,930,240 |
| 20.2 | % | 61,674,714 |
| 16.4 | % |
Other assets(1) |
| 103,666,670 |
| 26.6 | % | 85,174,873 |
| 22.6 | % |
Total |
| 390,403,042 |
| 100.0 | % | 376,193,262 |
| 100.0 | % |
(1) | Includes mainly other receivables from financial transactions, equity investments, miscellaneous receivables, bank premises and equipment, miscellaneous assets, and intangible assets. |
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2019 Compared to 2018
Of our Ps.148.7Ps.390.2 billion total assets as of December 31, 2019, Ps.141.92021, Ps.376.0 billion, equivalent to 95.4%96.4% of the total, corresponded to the Bank and CCF.IUDÚ. As of December 31, 2019,2021, our total direct exposure to the non-financial public sector amounted to Ps.11.0 billion. Our exposure to the non-financial public sectorPs.141.0 billion which is primarily composed of our holdings of securities issued by the Central Bank and Repo Transactions with the Central Bank and government securities, which as of December 31, 2019 amounted to Ps.10.9 billion.securities.
2018 Compared to 2017
Item 5.BLiquidity and Capital Resources
Of our Ps.218.0 billion total assets as of December 31, 2018, Ps.214.9 billion, equivalent to 98.6%Asset and Liability Management
The purpose of the total, correspondedasset and liability management is to structure our consolidated statement of financial position in light of interest rates, liquidity and foreign exchange risks, as well as market risk, public sector risk and our capital structure. Our Asset and Liability Committee (“ALCO”) establishes specific limits with respect to risk exposure, sets forth our policy with respect to pricing and approves commercial policies which may have a financial impact on our balance sheet. It is also responsible for the follow-up of monetary aggregates and financial variables, our liquidity position, regulations from the Central Bank and CCF. As of December 31, 2018, our total direct exposure tomonitoring the non-financial public sector amounted to Ps.29.8 billion. Our exposure to the non-financial public sector is primarily composed of our holdings of government securities, which as of December 31, 2018 amounted to Ps.29.7 billion.competitive environment in assets, liabilities and interest rates.
Our main source of liquidity is the Bank’s deposit base. The BankIUDÚ also takes deposits and CCF also securitizesecuritizes portions of theirits loan portfolios to generate liquidity for theirits operations. CCFThe Bank and IUDÚ also receivesreceive deposits and interbank calls and issuesissue short-term debt securities in the Argentine capital markets for financing. Additionally, long-term financing and capital contributions enable us to cover most of our liquidity requirements.
154
Consolidated Cash Flows
The table below summarizes the information from our consolidated statements of cash flows for the three years ended December 31, 2019, 20182021, 2020 and 2017,2019, which is also discussed in more detail below:
Grupo Supervielle S.A. | |||||||||
As of December 31. | |||||||||
2019 | 2018 | 2017 | |||||||
Net loss for the year before tax | (1,984,927 | ) | (3,147,043 | ) | 641,035 | ||||
Adjustments to obtain flows from operating activities: | |||||||||
Depreciations and impairment of assests | 1,814,671 | 665,154 | 956,819 | ||||||
Loan loss provisions | 7,736,868 | 7,967,031 | 6,204,348 | ||||||
Exchange rate difference on gold and foreign currency | 324,070 | (1,733,237 | ) | (604,734 | ) | ||||
Interest income | (44,794,595 | ) | (46,790,036 | ) | (34,250,524 | ) | |||
Interest expenses | 34,913,451 | 26,787,390 | 12,782,957 | ||||||
Net income from financial instruments at fair value through profit or loss | (20,960,966 | ) | (9,707,395 | ) | (5,454,354 | ) | |||
Fair value of Investment property | 127,130 | (221,408 | ) | 27,653 | |||||
Result from exposure to changes in the purchasing power of the currency | 30,290,502 | (14,349,403 | ) | (17,600,790 | ) | ||||
Interest over Leases liabilities | 212,492 | — | — | ||||||
Loans recovered and allowances reversed | (498,599 | ) | (488,878 | ) | (466,741 | ) | |||
(Increases) / decreases from operating assets: | |||||||||
Debt securities at fair value through profit or loss | 24,776,311 | 9,814,368 | (3,498,887 | ) | |||||
Derivatives | (233,091 | ) | 36,637 | 19,094 | |||||
Repo transactions | — | 7,608,341 | (7,608,341 | ) | |||||
Loans and other financing | |||||||||
To the non-financial public sector | 21,588 | 23,600 | (61,854 | ) | |||||
To the other financial entities | 548,579 | 288,908 | 191,429 | ||||||
To the non-financial sector and foreign residents | 64,196,460 | 54,229,100 | 2,059,859 | ||||||
Other debt securities | (3,826,695 | ) | (5,816,717 | ) | 5,034,713 | ||||
Financial assets in guarantee | (2,245,954 | ) | (132,293 | ) | 1,197,082 | ||||
Investments in equity instruments | 1,426 | 89,956 | (96,428 | ) | |||||
Other assets | 2,241,114 | (7,151,464 | ) | 1,001,504 |
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| | | | | | |
|
| Grupo Supervielle S.A. | ||||
| | As of December 31, | ||||
|
| 2021 |
| 2020 |
| 2019 |
Net (loss) /income for the year | | (1,736,358) | | 5,284,125 | | (4,425,539) |
Adjustments to obtain flows from operating activities: |
|
|
|
|
|
|
Income tax |
| 279,907 |
| 1,013,886 |
| 346,657 |
Depreciations and impairment of assets |
| 4,225,142 |
| 3,633,207 |
| 3,729,019 |
Loan loss provisions |
| 8,929,921 |
| 13,003,712 |
| 15,898,709 |
Exchange rate difference on gold and foreign currency |
| — |
| — |
| — |
Interest income |
| (992,383) |
| (1,606,842) |
| 665,941 |
Interest expenses |
| (103,431,881) |
| (97,659,056) |
| (92,049,680) |
Net income from financial instruments at fair value through profit or loss |
| 60,499,508 |
| 43,136,686 |
| 71,744,637 |
Fair value of Investment property |
| (8,889,470) |
| (5,004,594) |
| (43,073,281) |
Result from exposure to changes in the purchasing power of the currency |
| 441,020 |
| 139,556 |
| 261,244 |
Interest over Leases liabilities |
| 7,807,754 |
| 6,475,891 |
| 11,013,521 |
Asset retirements measured at amortized cost |
| 268,813 |
| 312,502 |
| 436,656 |
Loans recovered and allowances reversed |
| (1,713,707) |
| (864,111) |
| (1,024,586) |
Loans recovered and allowances reversed |
| (254,187) |
| (991,715) |
| — |
(Increases) / decreases from operating assets: |
| |
|
|
|
|
Debt securities at fair value through profit or loss |
| 11,995,299 |
| (5,591,631) |
| 50,913,541 |
Derivatives |
| (4,587) |
| 312,051 |
| (478,985) |
Repo transactions |
| (9,106,976) |
| (33,742,602) |
| — |
Loans and other financing |
| | | | | |
To the non-financial public sector |
| 12,779 |
| 23,814 |
| 44,362 |
To the other financial entities |
| (58,625) |
| 114,382 |
| 1,127,291 |
To the non-financial sector and foreign residents |
| 99,872,400 |
| 105,451,208 |
| 131,919,121 |
Other debt securities |
| (17,255,526) |
| (40,183,131) |
| (7,863,584) |
Financial assets in guarantee |
| (1,136,345) |
| 3,556,790 |
| (4,615,274) |
Investments in equity instruments |
| — |
| (73,835) |
| 2,930 |
Other assets |
| (8,185,383) |
| (873,451) |
| 4,605,326 |
Increases / (decreases) from operating liabilities: |
|
|
|
|
|
|
Deposits |
|
|
|
|
|
|
Non-financial public sector |
| (466,361) |
| 700,556 |
| (23,865,208) |
Financial sector |
| (47,566) |
| 28,925 |
| (22,034) |
Private non-financial sector and foreign residents |
| (41,172,025) |
| 43,025,686 |
| (170,782,744) |
Derivatives |
| (3,011) |
| 2,632,339 |
| (297,850) |
Repo operations |
| — |
| 3,011 |
| 657,201 |
Liabilities at fair value with changes in results |
| (968,643) |
| (657,201) |
| (457,939) |
Other liabilities |
| 11,195,031 |
| (5,729,796) |
| 1,076,876 |
Income Tax paid |
| (1,620,346) |
| (1,921,306) |
| (1,664,438) |
155
Grupo Supervielle S.A. | |||||||||||||||
As of December 31. | |||||||||||||||
2019 | 2018 | 2017 | |||||||||||||
Increases / (decreases) from operating liabilities: | |||||||||||||||
Deposits | |||||||||||||||
Non-financial public sector | (11,613,645 | ) | 3,066,329 | 6,684,075 | |||||||||||
Financial sector | (10,723 | ) | 3,158 | 3,509 | |||||||||||
Private non-financial sector and foreign residents | (83,108,859 | ) | (11,979,964 | ) | 7,002,897 | ||||||||||
Derivatives | (144,944 | ) | 144,944 | (1,674,846 | ) | ||||||||||
Repo operations | 319,817 | — | — | ||||||||||||
Liabilities at fair value with changes in results | (222,849 | ) | 412,403 | — | |||||||||||
Other liabilities | 524,046 | 731,334 | 1,715,045 | ||||||||||||
Income Tax paid | (809,974 | ) | (2,154,355 | ) | (2,020,426 | ) | |||||||||
| | | | | | | |||||||||
|
| Grupo Supervielle S.A. | |||||||||||||
| | As of December 31, | |||||||||||||
|
| 2021 |
| 2020 |
| 2019 | |||||||||
NET CASH PROVIDED BY / (USED IN) OPERATING ACTIVITIES (A) | (2,407,296 | ) | 8,196,460 | (27,815,906 | ) |
| 8,484,194 |
| 33,949,059 |
| (56,178,109) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
| |||||||||
Net payments related to: |
|
|
|
|
|
| |||||||||
Purchase of PPE, intangible assets and other assets | (1,113,875 | ) | (4,391,549 | ) | (1,506,579 | ) |
| (5,023,007) |
| (7,130,594) |
| (2,288,933) | |||
Purchase of liabilities and equity instruments issued by other entities | — | (276,375 | ) | (167,803 | ) |
| (88,693) |
| (71,794) |
| — | ||||
Purchase of investments in subsidiaries | (197,954 | ) | (2,827,563 | ) | — |
| — |
| (11,007) |
| (406,782) | ||||
Collections: |
|
|
|
|
|
| |||||||||
Disposals related to PPE, intangible assets and other assets | 8,021 | 667,263 | 1,061,324 |
| 417,038 |
| 642,869 |
| 16,483 | ||||||
NET CASH USED IN INVESTING ACTIVITIES (B) | (1,303,808 | ) | (6,828,224 | ) | (613,058 | ) |
| (4,694,662) |
| (6,570,526) |
| (2,679,232) | |||
CASH FLOW OF FINANCING ACTIVITIES |
|
|
|
|
|
| |||||||||
Payments: |
|
|
|
|
|
| |||||||||
Changes in investments in subsidiaries that do not result in control loss | 567 | (919 | ) | — |
| — |
| — |
| 1,165 | |||||
Operating Leases | (1,251,601 | ) | — | — |
| (2,426,914) |
| (2,062,110) |
| (2,571,950) | |||||
Unsubordinated negotiable obligations | (17,365,599 | ) | (11,619,542 | ) | (2,663,582 | ) |
| (7,572,780) |
| (10,242,448) |
| (234,068,388) | |||
Financing received from Argentine Financial Institutions | (113,905,868 | ) | (105,180,217 | ) | (98,253,226 | ) |
| (34,931,992) |
| (32,147,123) |
| (35,685,061) | |||
Subordinated negotiable obligations | (842,966 | ) | (19,976 | ) | (2,350,208 | ) |
| (1,721,443) |
| (2,678,103) |
| (1,732,235) | |||
Dividends | (466,112 | ) | (505,129 | ) | (170,382 | ) |
| (514,711) |
| (800,089) |
| (957,827) | |||
Collections: | |||||||||||||||
Unsubordinated negotiable obligations | 8,412,283 | 6,429,136 | 16,363,453 | ||||||||||||
Financing received from Argentine Financial Institutions | 110,569,136 | 109,529,169 | 101,398,236 | ||||||||||||
Contributions from shareholders | — | — | 14,103,738 | ||||||||||||
NET CASH (USED IN)/ PROVIDED BY FINANCING ACTIVITIES (C) | (14,850,160 | ) | (1,367,478 | ) | 28,428,029 | ||||||||||
EFFECTS OF EXCHANGE RATE CHANGES AND EXPOSURE TO CHANGES IN THE PURCHASING POWER OF MONEY ON CASH AND CASH EQUIVALENTS (D) | (25,767,419 | ) | 23,602,424 | 21,586,977 | |||||||||||
NET INCREASE IN CASH AND CASH EQUIVALENTS (A+B+C+D) | (44,328,683 | ) | 23,603,182 | 21,586,042 | |||||||||||
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR | 72,265,167 | 48,661,985 | 27,075,943 | ||||||||||||
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR | 27,936,484 | 72,265,167 | 48,661,985 |
156
| | | | | | |
|
| Grupo Supervielle S.A. | ||||
| | As of December 31, | ||||
|
| 2021 |
| 2020 |
| 2019 |
Collections: | | | | | | |
Changes in the subsidiaries’ participation without change of control |
| — |
| — |
| — |
Unsubordinated negotiable obligations |
| 2,252,098 |
| 4,005,697 |
| 17,286,639 |
Financing received from Argentine Financial Institutions |
| 32,350,995 |
| 22,450,153 |
| 227,211,644 |
Subordinated obligations |
| — |
| — | | — |
Contributions from shareholders |
| — |
| — | | — |
NET CASH (USED IN)/ PROVIDED BY FINANCING ACTIVITIES (C) |
| (12,564,747) |
| (21,474,024) |
| (30,516,013) |
EFFECTS OF EXCHANGE RATE CHANGES AND EXPOSURE TO CHANGES IN THE PURCHASING POWER OF MONEY ON CASH AND CASH EQUIVALENTS (D) |
| 11,048,920 |
| 15,660,806 |
| 49,512,377 |
NET INCREASE IN CASH AND CASH EQUIVALENTS (A+B+C+D) |
| 2,273,705 |
| 21,565,315 |
| (39,860,978) |
RESULT FROM EXPOSURE TO CHANGES IN THE PURCHASING POWER OF THE CURRENCY OF CASH AND EQUIVALENTS |
| (17,116,658) |
| (19,401,366) |
| (51,231,287) |
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR |
| 59,571,418 |
| 57,407,470 |
| 148,499,735 |
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR |
| 44,728,465 |
| 59,571,419 |
| 57,407,470 |
Management believes that cash flows from operations and available cash and cash equivalent balances will be sufficient to fund our financial commitments and capital expenditures for 2020.2022.
214
Cash Flows from Operating Activities
2019 Compared to 2018
In 2019,2021, operating activities provided Ps.2.4used Ps.8.5 billion of net cash, compared to Ps.8.2Ps.34.0 billion of net cash provided in 2018.2020. Net decrease in loans amounted to Ps.64.8 billion in 2019, compared to a decrease of Ps.54.4 billion in 2018. Net operating income from debt securitiesPrivate non-financial sector and derivatives increased to Ps.24.4 billion in 2019 from Ps.10.0 billion in 2018. Net increase inforeign residents deposits amounted to Ps.94.7Ps.41.2 billion in 2019,2021, compared to a net increase of Ps.8.9Ps.43.0 billion in 2018.
2018 Compared to 2017
In 2018,2020. Net operating activities provided Ps.8.2used Ps.14.4 billion of net cash,in 2021 from debt securities, derivatives and repo transactions compared to Ps.27.8Ps.79.2 billion of net cash used in 2017.2020. Net decreaseoperating activities provide Ps.99.9 billion from the non-financial sector and foreign residents in loans amounted to Ps.54.4 billion in 2018,2021, compared to a decrease of Ps.2.2Ps.105.4 billion in 2017. Net operating income from debt securities and derivatives decreased to Ps.10.0 billion in 2018 from an increase of Ps.5.2 billion in 2017. Net increase in deposits amounted to Ps.8.9 billion in 2018, compared to a net decrease of Ps.13.7 billion in 2017.2020.
Cash Flows from Investing Activities
2019 Compared to 2018
In 2019,2021, we used Ps.1.3Ps.4.7 billion of net cash in our investing activities, compared to Ps.6.8Ps.6.6 billion of net cash used in 2018.2020. In 2019,2021, funds used mainly in investing activities for the acquisition of property, plant and equipment, intangible assets and others were Ps. 1.1Ps.5.0 billion.
2018 Compared to 2017
In 2018, we used Ps.6.8 billion of net cash in our investing activities, compared to Ps.613.1 million of net cash used in 2017. In 2018, funds used in investing activities for purchase of investments in subsidiaries were Ps.2.8 billion.
Cash Flows from Financing Activities
2019 Compared to 2018
In 2019,2021, net cash used in financing activities was Ps.14.9Ps.12.6 billion, compared to Ps.1.4Ps.21.5 billion in 2018.2020.
In 2019,2021, net funds used to make payments of unsubordinated negotiable obligations was Ps.8.9Ps.5.3 billion, compared to Ps.5.2Ps.6.2 billion used in 2018.2020. Net funds used to make payments of subordinated negotiable obligations was Ps.843.0 millionPs.1.7 billion in 2019,2021, compared to Ps.20.0 million providedPs.2.7 billion used in 2018.2020. Net payments fromto Argentine financial institutions was Ps.3.3Ps.2.6 billion in 2019,2021, compared to Ps.4.3Ps.9.7 billion providednet payments in 2018.2020. In 20192021 and 2018,2020, net cash used in dividends payments was Ps.466.1Ps.514.7 million and Ps.505.1Ps.800.0 million, respectively.
2018 Compared to 2017
In 2018, net cash used in financing activities was Ps.1.4 billion, compared to Ps.28.4 billion in 2017.
In 2018, funds used to make payments of unsubordinated negotiable obligations was Ps.5.2 billion, compared to Ps.13.7 million provided for financing activities in 2017. Funds provided by subordinated negotiable obligations was Ps.20.0 million in 2018, compared to Ps.2.4 billion used for financing activities in 2017. Funds borrowed from Argentine financial institutions to increase our financing was Ps.4.3 billion in 2018, compared to Ps.3.1 billion provided for financing activities in 2017. In 2018 and 2017, net cash used in dividends payments was Ps.505.1 million and Ps.170.4 million, respectively. In 2017 we received contributions from shareholders for Ps.14.1 billion.
215 157
Funding
Funding
Deposits
Our major source of funding is the Bank’s significant deposit base comprised of checking and savings accounts and time deposits. The following table presents the composition of our consolidated deposits as of December 31, 2019, 20182021 and 2017, and January 1, 2017:
As of December 31, | |||||||||
2019 | 2018 | 2017 | |||||||
(in thousands of Pesos, except percentages) | |||||||||
From the non-financial public sector | 5,470,177 | 17,083,822 | 14,017,494 | ||||||
% of deposits | 6.1% | 11.7% | 10.9% | ||||||
From the financial sector | 28,098 | 38,821 | 35,663 | ||||||
% of deposits | 0.0% | 0.0% | 0.0% | ||||||
From the non-financial private sector and foreign residents | |||||||||
Checking accounts | 12,119,616 | 10,287,013 | 12,900,357 | ||||||
% of deposits | 13.6% | 7.0% | 10.1% | ||||||
Savings accounts | 29,388,264 | 38,645,275 | 42,359,322 | ||||||
% of deposits | 33.0% | 26.5% | 33.1% | ||||||
Special checking accounts | 9,342,706 | 33,440,034 | 24,822,488 | ||||||
% of deposits | 10.5% | 22.9% | 19.4% | ||||||
Time deposits | 23,860,288 | 39,679,991 | 29,560,289 | ||||||
% of deposits | 26.8% | 27.2% | 23.1% | ||||||
Investment accounts | 4,134,400 | 2,138,270 | 579,173 | ||||||
% of deposits | 4.6% | 1.5% | 0.5% | ||||||
Others | 2,976,811 | 3,372,862 | 2,840,282 | ||||||
% of deposits | 3.3% | 2.3% | 2.2% | ||||||
Interest and differences in exchange rates payable | 1,687,817 | 1,310,113 | 1,004,222 | ||||||
% of deposits | 1.9% | 0.9% | 0.8% | ||||||
Total | 89,008,177 | 145,996,201 | 128,119,290 |
2020:
2019 Compared
| | | | | |
|
| As of December 31, |
| ||
|
| 2021 |
| 2020 |
|
|
| (in thousands of Pesos, except percentages) | | ||
From the non-financial public sector |
| 11,475,017 |
| 11,941,378 | |
% of deposits |
| 4.0 | % | 4.4 | % |
From the financial sector |
| 39,099 |
| 86,665 | |
% of deposits |
| 0.0 | % | 0.0 | % |
From the non-financial private sector and foreign residents | | | | | |
Checking accounts |
| 31,586,573 |
| 25,495,556 | |
% of deposits |
| 11.0 | % | 9.5 | % |
Savings accounts |
| 61,672,901 |
| 65,529,977 | |
% of deposits |
| 21.4 | % | 24.3 | % |
Special checking accounts |
| 95,137,239 |
| 89,706,648 | |
% of deposits |
| 33.0 | % | 33.3 | % |
Time deposits |
| 78,143,754 |
| 69,603,800 | |
% of deposits |
| 27.1 | % | 25.8 | % |
Investment accounts |
| 3,796,581 |
| 342,926 | |
% of deposits |
| 1.3 | % | 0.1 | % |
Others |
| 4,399,684 |
| 5,218,656 | |
% of deposits |
| 1.5 | % | 1.9 | % |
Interest and differences in exchange rates payable |
| 2,207,249 |
| 1,718,935 | |
% of deposits |
| 0.8 | % | 0.6 | % |
Total |
| 288,458,097 |
| 269,644,541 | |
As of December 31, 2021, total deposits amounted to 2018
Total deposits decreased 39.0% in 2019. TotalPs.288.5 billion, representing an increase of 7.0% compared to 2020, total deposits from the non-financial private sector increased 35.2%amounted to represent 94%Ps.276.9 billion, representing an increase of our7.5% compared to 2020, and total deposits as of December 31, 2019. Total deposits from the non-financial public sector decreased 68.0%amounted to represent 6%Ps.11.5 billion, representing a decrease of our total deposits as3.9% compared to 2020.
As of December 31, 2019.
Private2021, private sector savingchecking accounts, deposits, time deposits and special checking accounts increased 23.9%, 12.3%, and 6.1%, compared to 2020, respectively. In addition, saving account deposits decreased 24.0%5.9%, 39.9% and 72.1%, respectively, in 2019. Checking accounts increased 17.8% in 2019.compared to 2020.
Retail plus Senior CitizensAs of December 31, 2021, retail customer deposits in Pesos represented 55%33% of total deposits, as of December 31, 2019. Wholesaleand wholesale and institutional deposits in Pesos declined to 15%represented 45.3% of total deposits in Pesos from 32% as of September 30, 2019, reflecting our decision to deleverage our balance sheet in the fourth quarter of 2019.Pesos.
2018 Compared to 2017Financings
Total deposits increased 14.0% in 2018. Total deposits from the non-financial private sector increased 13.0% to represent 88% of our total deposits as of December 31, 2018. Total deposits from the non-financial public sector increased 21.9% to represent 12% of our total deposits as of December 31, 2018.
Private sector deposits in saving accounts and checking accounts decreased 8.8% and 20.3%, respectively. Time deposits and special checking accounts increased 34.2% and 34.7%, respectively, in 2018.
Retail branch deposits plus senior citizens deposits represented 44% of total deposits as of December 2018, compared with 54% as of December 31, 2017, mainly reflecting the increase in wholesale and institutional deposits to fund investments in Central Bank seven-day LELIQS.
Financings
Banco Supervielle S.A.
Global Program for the Issuance of Medium-Term Notes for up to U.S.$2.3 billion
● | Global Program for the Issuance of Medium-Term Notes for up to U.S.$2.3 billion |
On September 22, 2016, the shareholders’ meeting No. 117, resolved to approve the creation of a Global Program for the Issuance of Negotiable Obligations for up to a maximum outstanding amount of US$U.S.$800,000,000. The Program was authorized by the CNV through Resolution No. 18,376 dated November 24, 2016.
On MayMarch 6, 2018, the shareholders’ meeting resolved to approve the increaseextension of the Program for up to a maximum outstanding amount of US$U.S.$2,300,000,000. The Program was authorized by the CNV through Resolution No. 19,470 dated April 16, 2018.
158
● | Frequent issuer regime registration CNV |
On December 21,August 6, 2018, the Board of Directors of the Bank resolved to request the CNV to register the Bank as a frequent issuer of negotiable obligations. Said request was authorized by the CNV through Resolution No. 19,958 dated December 27, 2018. The Bank is registered with the CNV as a frequent issuer of Negotiable Obligations under No. 03. At the board meeting of the company on March 7, 2019, it was resolved to approve the Bank’s ratification in the Frequent Issuer Regime and at the Board meeting on December 2, 2019 it was resolved to allocate the maximum amount of U.S.$300,000,000 corresponding to the Global Issuance Program of Negotiable Obligations for up to U.S.$2,300,000,000, with the bank in the process of reducing the maximum amount of said Program. The CNV approved said ratification through Resolution DI-2020-11-APN-GE #CNV dated February 11, 2020.
On June 12, 2020, the Board of Directors of the Bank approved the issuance of notes under the aforementioned Programits Class G Non-Subordinated Negotiable Obligation for an amount that will not exceed in its N/V U.S.$30,000,000 set within the Global Program of Negotiable Obligations. It was also approved to modify the terms of said issuance, so that the Issue Amount is up to Ps.3 billion. HereU.S.$50,000,000 and without prejudice to the fact that the Negotiable Obligations are denominated in U.S. dollars, they may be integrated and payments under them can be made in pesos. The bidding period ended on June 25, 2020.
As of December 31, 2021 and 2020, the mainamounts outstanding and the terms and conditionscorresponding to outstanding unsubordinated negotiable obligations were as follows (with figures expressed in thousands of the issue:Pesos):
Series: F
| | | | | | | | | | |
Class |
| Issue Date |
| Maturity Date |
| Annual Interest Rate |
| 12/31/2021 |
| 12/31/2020 |
Banco Supervielle Class A |
| 02/09/2017 |
| 08/09/2020 |
| Badlar + Spread 4.5 | % | — |
| — |
Banco Supervielle Class C |
| 22/12/2017 |
| 12/22/2021 |
| Badlar + Spread 4.25 | % | — |
| 670,674 |
Banco Supervielle Class E |
| 02/14/2018 |
| 02/14/2023 |
| Badlar + Spread 4.05 | % | 1,059,240 |
| 2,384,218 |
Banco Supervielle Class G |
| 06/30/2020 |
| 06/30/2021 |
| 2% Annual Nominal |
| — |
| 3,325,030 |
Total |
| |
| |
|
|
| 1,059,240 |
| 6,379,922 |
Amount: Ps.3,000,000,000
Due date: November 4, 2019
Interest rate: Floating Badlar of Private Banks + 4.85%
Interest payment date: Interest accrued by the notes will be paid on a three-month basis making the first payment on May 4, 2019.
Amortization: bullet.
Applicable law and jurisdiction: Argentina.
Program for the issuance of notes for up to nominal value Ps.750 million (increased to Ps.2 billion)
● | Program for the issuance of notes for up to nominal value Ps.750 million (increased to Ps.2 billion) |
As of March 25, 2013, the Bank’s extraordinary generalExtraordinary General shareholders’ meeting, approved the creation of a Global Program for the issuance of Negotiable Obligations for up to a maximum outstanding amount of Ps.750,000,000.U.S.$750,000,000. On April 15, 2016, the ordinary and extraordinary shareholders’ meeting approved theto increase of the maximum outstanding amount of the Program to Ps.2,000,000,000$2,000,000,000 or its equivalent in foreign currency, passed by Resolution N° 18,224 from the CNV on September 22, 2016.
159
The following chart provides the main terms and conditions of issuances underway as of December 31, 2019, 20182021 and 2017 (in millions2020 (figures expressed in thousands of Dollars)pesos):
Issuance | Maturity | Book Value | ||||||||||||||||||||||||||||||||||||||
date | Currency | Denomination | Amount | Amortization | Term | date | Rate | 12/31/2019 | 12/31/2018 | 12/31/2017 | ||||||||||||||||||||||||||||||
08/20/2013 | U.S.$ | III | 22.5 | 100% at maturity | 84 Months | 08/20/2020 | 7% | 1,308.2 | 1,340.8 | 980.5 | ||||||||||||||||||||||||||||||
11/18/2014 | U.S.$ | IV | 13.4 | 100% at maturity | 84 Months | 11/18/2021 | 7% | 811.7 | 788.0 | 577.3 | ||||||||||||||||||||||||||||||
Total | 2,119.9 | 2,128.8 | 1,557.8 |
| | | | | | | | | | | | | | | | | | |
|
| |
| |
| |
| |
| |
| |
| |
| Book Value | ||
Issuance date | | Currency | | Class | | Amount | | Amortization | | Term | | Maturity date | | Rate | | 12/31/2021 | | 12/31/2020 |
11/18/2014 | | US$ |
| IV |
| 13,441 |
| 100% at mat, |
| 84 Months |
| 11/18/21 | | 7 | % | — |
| 1,721,443 |
Total |
| |
| |
|
|
|
|
| |
|
|
|
|
| — |
| 1,721,443 |
223
On August 6, 2018 the Shareholders’ meeting resolved to request the Bank’s registration as Frequent Issuer of Negotiable Obligations before the CNV. The request was authorized by the CNV through Resolution No. 19,958 dated December 27, 2018.
CordialIUDÚ Compañíaia Financiera S.A.
Global Program for the Issuance of Negotiable Obligations for up to USD 500.000.000
● | Global Program for the Issuance of Negotiable Obligations for up to U.S.$500,000,000 |
On March 22, 2017, the shareholders’ meeting No.45 of CCFIUDÚ resolved to approve the creation of a Global Program for the Issuance of Negotiable Obligations for up to a maximum outstanding amount of US$U.S.$500,000,000. The Program was authorized by the CNV Board through Resolution No. 18,650 dated May 10, 2017.
As of December 31, 2021 and 2020, IUDÚ had no negotiable obligations outstanding.
MicroLending S.A.U.
On June 22, 2017, the shareholders’ meeting of MicroLending S.A.U. resolved to approve the issuance of Negotiable Obligations for up to a maximum outstanding amount of Ps.35,000,000. The issuance was authorized by the CNV Board through Resolution RESFC-2017-18946-APN dated September 20, 2017.
As of December 31, 2019, 2018, 2017, the amounts outstandings2021 and the terms corresponding to outstanding unsubordinated2020, MicroLending S.A.U. had no negotiable obligations were as follows (in millions of Ps.):
Class | Issue Date | Maturity Date | Annual Interest Rate | 12/31/2019 | 12/31/2018 | 12/31/2017 | |||||||||
Grupo Supervielle Series XIII | 01/31/2014 | 01/31/2019 | Badlar + Spread 6,25% | — | 43.1 | 58.1 | |||||||||
Banco Supervielle Series VI | 10/12/2016 | 10/12/2016 | Badlar + Spread 3,5% | — | — | 1,012.2 | |||||||||
Banco Supervielle Series A | 02/09/2017 | 08/09/2020 | Badlar + Spread 4,5% | 3,804.3 | 6,461.9 | 11,163.0 | |||||||||
Banco Supervielle Series B | 12/22/17 | 12/22/2019 | Floating TM20 + Spread 3,25% | — | 923.2 | 1,431.6 | |||||||||
Banco Supervielle Series C | 12/22/17 | 12/22/2021 | Badlar + Spread 4,25% | 667.2 | 1,026.4 | 1,501.5 | |||||||||
Banco Supervielle Series D | 02/14/18 | 08/14/2019 | Badlar + Spread 3,5% | — | 1,182.8 | — | |||||||||
Banco Supervielle Series E | 02/14/18 | 02/14/2023 | Badlar + Spread 4,05% | 1,599.4 | 2,595.4 | — | |||||||||
Cordial Compañía Financiera Series XI | 10/25/2016 | 04/24/2018 | Badlar + Spread 3,57% | — | — | 476.5 | |||||||||
Cordial Compañía Financiera Series XIII | 12/23/2016 | 06/23/2018 | Badlar + Spread 4% | — | — | 346.3 | |||||||||
Cordial Compañía Financiera Series XIV | 05/11/2017 | 05/11/2019 | Badlar + Spread 3,5% | — | 611.6 | 1,308.6 | |||||||||
Cordial Compañía Financiera Series XV | 08/24/2017 | 02/23/2019 | Badlar + Spread 3,75% | — | 562.1 | 961.8 | |||||||||
Cordial Compañía Financiera Series XVI | 11/22/2017 | 11/21/2019 | Floating TM20 + Spread 4,25% | — | 832.3 | 1,248.3 | |||||||||
Micro Lending Series II | 08/16/2016 | 08/16/2019 | Badlar + Spread 5% | — | 30.8 | — | |||||||||
Micro Lending Series III | 10/04/2017 | 10/05/2020 | Badlar + Spread 7% | 15.6 | 47.9 | — | |||||||||
Total | 6,086.5 | 14,317.4 | 19,507.9 |
outstanding.
During 2019 the Bank and CCF have not made partial repurchases of their outstanding negotiable obligations. During 2018, the Bank and CCF made partial repurchases of their outstanding negotiable obligations. On October 18, 2018 and January 24, 2019 the Banks reduced Ps.618.0 million and Ps.254.9 million respectively of the total amount outstanding of the negotiable obligations Class A, BADLAR Private Banks + 4.50% with maturity on 2020.
224
Consolidated Capital
The table below shows information on our shareholders’ equity as of the dates indicated.
Grupo Supervielle S.A. | |||||||||
As of December 31, | |||||||||
2019 | 2018 | 2017 | |||||||
(in thousands of Pesos, except percentages) | |||||||||
Shareholders’ equity attributable to owner of the parent company | 23,415,797 | 26,080,725 | 30,873,343 | ||||||
Average shareholders’ equity(1) | 23,352,105 | 28,693,558 | 24,943,213 | ||||||
Shareholders’ equity attributable to owner of the parent company as a percentage of total assets | 15.7% | 12.0% | 14.8% | ||||||
Average shareholders’ equity as a percentage of average total assets | 11.7% | 12.0% | 12.8% | ||||||
Total liabilities as a multiple of total shareholders’ equity | 5.3 | x | 7.4 | x | 5.7 | x | |||
Tangible shareholders’ equity(2) as a percentage of Total Tangible Assets | 13.2% | 10.3% | 14.7% |
| | | | | | | |
| | Grupo Supervielle S.A. |
| ||||
|
| As of December 31, |
| ||||
| | 2021 | | 2020 | | 2019 | |
|
| (in thousands of Pesos, except percentages) | | ||||
Shareholders’ equity at the end of the period attributable to owners of the parent company |
| 51,509,505 |
| 53,812,414 |
| 48,117,782 |
|
Average shareholders’ equity(1) |
| 53,223,155 |
| 51,925,191 |
| 47,986,902 |
|
Shareholders’ equity attributable to owner of the parent company as a percentage of total assets |
| 13.2 | % | 17.6 | % | 16.2 | % |
Average shareholders’ equity as a percentage of average total assets |
| 13.3 | % | 12.6 | % | 14.7 | % |
Total liabilities as a multiple of total shareholders’ equity |
| 6.6 |
| 5.3 |
| 7.4 |
|
Tangible shareholders’ equity(2) as a percentage of Total Tangible Assets |
| 10.6 | % | 13.2 | % | 10.3 | % |
(1) | Calculated on a daily basis. |
(2) | Tangible shareholders’ equity represents shareholders’ equity minus intangible assets. |
160
The table below shows information on the Bank and CCF’sIUDÚ’s consolidated computable regulatory capital, and minimum capital requirements as of the dates indicated.
Grupo Supervielle S.A. | |||||||||
As of December 31,(1) | |||||||||
2019 | 2018 | 2017 | |||||||
Total Capital | |||||||||
Tier 1 Capital | |||||||||
Paid in share capital common stock | 829,564 | 771,965 | 744,386 | ||||||
Share premiums | 6,898,635 | 5,481,234 | 4,647,818 | ||||||
Disclosed reserves and retained earnings | 5,351,399 | 4,602,483 | 3,173,755 | ||||||
Non-controlling interests | 125,955 | 63,044 | 78,582 | ||||||
IFRS Adjustments | 1,001,756 | (472,796 | ) | — | |||||
100% of results | 2,247,147 | 1,133,354 | 1,088,388 | ||||||
50% of positive results | 536,635 | 268,581 | 170,170 | ||||||
Sub-Total: Gross Tier I Capital | 16,991,091 | 11,847,865 | 9,903,099 | ||||||
Tier 2 Capital | |||||||||
General provisions/general loan-loss reserves 50% | 871,395 | 784,727 | 588,073 | ||||||
Subordinated term debt | 162,339 | 379,212 | 325,183 | ||||||
Sub-Total: Tier 2 Capital | 1,033,734 | 1,163,939 | 913,256 | ||||||
Deduct: | |||||||||
All Intangibles | 754,238 | 406,460 | 312,589 | ||||||
Pending items | 25,611 | 96,480 | 40,798 | ||||||
Other deductions | 2,219,867 | 364,858 | 32,805 | ||||||
Total Deductions | 2,999,716 | 867,798 | 386,192 | ||||||
Total Capital | 15,025,109 | 12,144,006 | 10,430,163 | ||||||
Credit Risk weighted assets(2) | 96,585,712 | 79,580,781 | 60,939,300 | ||||||
Risk weighted assets(3) | 129,638,218 | 101,933,777 | 75,301,392 | ||||||
Tier 1 Capital / Credit risk weighted assets | 14.5% | 13.8% | 15.6% | ||||||
Tier 1 Capital / Risk weighted assets | 10.8% | 10.8% | 12.6% | ||||||
Regulatory Capital / Credit risk weighted assets | 15.6% | 15.3% | 17.1% | ||||||
Regulatory Capital / Risk weighted assets | 11.6% | 11.9% | 13.9% |
| | | | | | | |
|
| Grupo Supervielle S.A. |
| ||||
| | As of December 31, (1) |
| ||||
|
| 2021 |
| 2020 |
| 2019 |
|
Total Capital |
|
|
|
|
|
| |
Tier 1 Capital |
|
|
|
|
|
| |
Paid in share capital common stock |
| 829,564 |
| 829,564 |
| 829,564 |
|
Share premiums |
| 6,898,635 |
| 6,898,635 |
| 6,898,635 |
|
Disclosed reserves and retained earnings |
| (311,314) |
| (4,786,695) |
| 5,351,399 |
|
Non-controlling interests |
| 76,340 |
| 346,732 |
| 125,955 |
|
IFRS Adjustments |
| 967,879 |
| 366,192 |
| 1,001,756 |
|
Capital Adjustments |
| 34,271,663 |
| 22,680,725 |
| — |
|
Expected Credit Losses |
| 1,362,584 |
| 2,210,136 |
| — |
|
100% of results |
| (267,662) |
| 1,585,872 |
| 2,247,147 |
|
50% of positive results |
| (809,041) |
| 312,738 |
| 536,635 |
|
Sub-Total: Gross Tier I Capital |
| 43,018,648 |
| 30,443,899 |
| 16,991,091 |
|
Tier 2 Capital |
|
|
|
|
|
|
|
General provisions/general loan-loss reserves 50% | | 1,552,919 |
| 1,090,865 |
| 871,395 |
|
Subordinated term debt |
| — |
| — |
| 162,339 |
|
Sub-Total: Tier 2 Capital |
| 1,552,919 |
| 1,090,865 |
| 1,033,734 |
|
Deduct: |
|
|
|
|
|
|
|
All Intangibles |
| 5,156,121 |
| 2,548,881 |
| 754,238 |
|
Pending items |
| 38,452 |
| 90,951 |
| 25,611 |
|
Other deductions |
| 6,963,809 |
| 4,566,118 |
| 2,219,867 |
|
Total Deductions |
| 12,158,382 |
| 7,205,950 |
| 2,999,716 |
|
Total Capital |
| 32,413,185 |
| 24,328,814 |
| 15,025,109 |
|
Risk weighted assets(2) |
| 255,610,319 |
| 174,954,402 |
| 129,638,218 |
|
Tier 1 Capital / Risk weighted assets |
| 12.1 | % | 13.3 | % | 10.8 | % |
Regulatory Capital / Risk weighted assets |
| 12.7 | % | 13.9 | % | 11.6 | % |
(1) |
Capital Expenditures In the course of our business, our capital expenditures are mainly related to infrastructure and organizational and IT system development. In general terms, our capital expenditures are not significant when compared to our total assets. We expect that capital expenditures in Item 5.CResearch and Development, patents and licenses, etc. Other than our technology program, we do not have any significant policies or projects relating to research and development, and we own no patents or licenses. Item 5.DTrend Information We believe that the macroeconomic environment and the following material trends 161 Argentina and the corresponding growth of the market for long-term private sector lending and access to financial products and services by a larger segment of the population.
Material Trends Related to Argentina
Before the COVID-19 pandemic, the Argentine economy was contracting and 2020 was the third consecutive year of economic crisis in Argentina. According to data published by the INDEC, the Argentina’s GDP increased by 10.3% in 2021, mainly as a result of the implementation of vaccination programs, which enabled the lifting of certain mobility restrictions that had been enforced in Argentina until the end of 2020, and to the increase in commodity prices, which resulted in an increase in U.S. dollar exports. As a result, the Argentine economy recovered in 2021 after its significant contraction of 9.9% in 2020. However, Argentina’s real GDP for the fourth quarter of 2021 real GDP was still 3.7% below Argentina’s real GDP for the fourth quarter of 2017. In 2022, the Argentine economy may be affected by the dynamics of macroeconomic variables within the framework of the IMF Agreement. The Argentine Congress approved the IMF Agreement on March 11, 2022 for an extended financing for a term of two and a half years and with Certain other global trends may also affect the Argentine economy in 2022, including (i) an increase in world trade, which is estimated to be 6.1% in 2022, (ii) the estimated increase in agricultural commodity prices by 3.1% in 2022, (iii) the estimated limited growth in the GDP of Brazil, the main trading partner of Argentina, in 2022, (iv) the existence of new variants of the COVID-19, which could adversely affect the performance of the economies, and (v) the escalation in the conflict between Russia and Ukraine. In addition, the actions expected According to the estimates of the Central Bank (Relevamiento de Expectativas de Mercado) as of March 2022, the Argentine GDP is expected to grow by 0.6% during the first quarter of 2022 and by 3.2% during 2022, although it is expected to decrease by 0.4% during the second quarter
49.9% as compared to 2021. We cannot predict 162 Material Trends Related to the Argentine Financial System
The levels of high solvency and liquidity are expected to prevail in 2022, as credit growth related to GDP is not expected to occur. The first months of the Nevertheless, since 2020, a relevant portion of assets and liabilities of the
In 2020 and 2021, asset quality had been impacted by Central Bank’s regulations, including (i) the easing on debtor classifications (adding a 60 days grace period before the loan is classified as non-performing) which was introduced in March 2020 and was extended until March 31, 2021, and (ii) the relief programs ruled allowing debtors to Material Trends Related to During 2021, we made significant strides across the Group toward achieving our strategic goals. With the aim of improving our return on equity and driving value creation, our strategic initiatives are centered on six key pillars: enhance the customer experience, attract new customers, advance on digital transformation, drive efficiency gains, improve funding, and maintain healthy asset quality. Looking ahead, the financial services industry in Argentina continues to face significant macro and regulatory challenges, including high fiscal deficit, high tax levels and high inflation, along with a weakening currency, which go beyond 2021. We intend to maintain prudent financial risk management policies and to continue improving our operating The COVID 19 pandemic and the measures adopted by the Argentine government and other regulators to contain the spread of the virus have accelerated the digitalization of a traditionally cash-oriented sector. This digitalization advanced during 2020 and 2021 and, as a result, we continue to accelerate our digital transformation strategies and to introduce new functionalities and digital products across our business segments, while keeping high cybersecurity standards. We 163 In terms of our asset quality, we expect that it remains stable during 2022, while provisions could slightly grow above the levels existing in 2021 in line with loan growth, while cost We will continue executing our transformation strategy Item 5.ECritical Accounting Estimates The
Allowances for loan losses The Group recognizes the allowance for loan losses under the expected credit loss method included in IFRS 9. The most significant judgements of the model relate to defining what is considered to be a significant increase in credit risk and in making assumptions and estimates to incorporate relevant information about past events, current conditions and forecasts of economic conditions. The impact of the forecasts of economic conditions are determined based on the weighted average of three internally developed macroeconomic scenarios that take into consideration the Group’s economic outlook as derived through forecast macroeconomic variables, which include inflation rate, monthly economic activity estimator and private sector wage.A high degree of uncertainty is involved in making estimations using assumptions that are highly subjective and very sensitive to the risk factors. Note 1.11 of our consolidated financial statements provides more detail of how the expected credit loss allowance is measured. Impairment of Non-Financial Assets Intangible assets with definite useful life and property, plant and equipment are amortized or depreciated on a straight-line basis during their estimated useful life. The Group monitors the conditions associated with these assets to determine whether the events and circumstances require a review of the remaining amortization or depreciation term and whether there are factors or circumstances indicating impairment in the value of the assets which might not be recoverable. We have The evaluation process for
164 future cash flows of the cash-generating unit. Its cash flow forecasts are based on assumptions that account for the best use of its cash-generating unit.
We decided that it would not be necessary to recognize an impairment loss in indefinite useful life intangible assets under
A significant judgment is required to determine liabilities and assets from current and deferred taxes. Current tax is measured at the amount expected to be paid to the taxation authority using the tax rates that have been enacted or substantially enacted by the end of the reporting period. The deferred tax is measured over temporary differences between tax basis of assets and liabilities and book values at the tax rates that are Assets from deferred tax are recognized upon the possibility of relying on future taxable earnings against which temporary differences can
Likely future tax earnings and the number of tax benefits are based on a medium term business plan prepared by management. Such plan is based on reasonable expectations.
Item 6.Directors, Senior Management and Employees Board of Directors According to our bylaws, our Board of Directors may be composed of a minimum of three and a maximum of nine directors, and shareholders may also appoint an equal or lesser number of alternate directors. As of the date of this annual report, our Board of Directors is composed of
Directors and their alternates, if any, are appointed for a maximum term of two years by our shareholders during the annual ordinary shareholders’ meeting. Directors may be reelected. Alternate directors replace directors in the order in which they were elected. Directors are elected annually in staggered elections.Despite their two-year appointment, pursuant to section 257 of the The latest election relating to our Board of Directors took place at the ordinary and extraordinary shareholders’ meeting held on April During the first meeting after directors have been appointed, they must appoint a chairman and vice-chairman of the board, or, if considered appropriate, a first vice-chairman and a second vice-chairman. The vice-chairman or, if applicable, the first vice-chairman, would automatically replace the chairman in the event that the chairman is absent, resigns, dies or faces any other impediment to serve as chairman, and the second vice-chairman, if applicable, would replace the first vice-chairman. In the absence of any of these directors,
The following table sets forth the composition of our Board of Directors as of April 165
There are no family relationships between the abovementioned current members of our Board of Directors, except for Julio Patricio Supervielle and Hugo Enrique Santiago Basso (uncle and The following are academic and professional backgrounds of the members of the board. Julio Patricio Supervielle
E. Alejandro Stengel is the CEO of Banco Supervielle,First Vice-Chairman of Grupo Supervielle and serves on the boards of Cordial Compañía Financiera, Supervielle Seguros, InvertirOnline, Supervielle Agente de Negociación, Bolsillo Digital, and Vice Chairman of IOL Holding subsidiaries of Grupo Supervielle. Prior to his current position Mr. Stengel was Banco Supervielle’s COO, with operational responsibilities for Personal & Business Banking, Corporate Banking, 166 and Organizational Transformation, developed in regional and International business settings. His participation in Boards and successful Capital raising efforts including an initial public offering (“IPO”) add Corporate Governance and Investor Relations to his contributions. Atilio Dell´Oro Maini serves as Second Vice-Chairman of Grupo Supervielle,
financial sectors with extensive expertise in mergers and acquisitions, international capital market transactions and strategic financial issues. Mr. Dell’Oro Maini offers the company valuable perspective and guidance in corporate governance, regulatory framework and Board effectiveness. He also has significant knowledge and direct involvement in issues related to CSR/ESG initiatives. Eduardo Pablo Braun is an Industrial Engineer graduated from Universidad de Buenos Aires, where he won the Bunge & Born scholarship for his academic excellence and holds an MBA with an emphasis in Finance and Marketing from The Wharton School, University of Pennsylvania, 1990. He is an international lecturer in Leadership and Innovation, a business consultant and the author of ‘People First: Chief Emotions Officers’. He taught in programs at UC Berkeley, as a special guest at prestigious institutions such as IMD, Babson College, Yale School of Management and lectures in various academic and business forums in Singapore, Dubai, Germany, the United States and other countries. He was a professor at Universidad Católica Argentina and is an expert in leadership at Universidad de San Andrés.
167 brokerage through acting during more than 30 years in several international organizations as CFO, CEO, Director and shareholder. He brings also background in organizational leadership and culture. Laurence Nicole Mengin de Hugo Enrique Santiago Basso is an Industrial Engineer graduated from Instituto Tecnológico de Buenos Aires (ITBA) and holds an MBA from The Wharton School of Business, University of Pennsylvania. He began his career at Banco Banex in 2004, where he successfully managed the merger project with Société Générale Argentina. In 2007 he led the startup of the ‘Cordial Negocios’ unit, with a focus on microfinancing. Then, he continued his career in the consultancy area working for Mars & Co., with responsibilities in competitive strategy for CPG multinationals. For the last five years, he has been residing in California, United States of America, having developed a successful career in the financial area for the wine industry in high-end brands. After working for Treasury Wine Estates, he joined E&J Gallo, currently overseeing a portfolio of ten luxury wineries. He is Director of Grupo Supervielle S.A.,
Duties and Liabilities of Directors Directors have the obligation to perform their duties with the loyalty and the diligence of a prudent business person. Under Section 274 of the In general, a director will not be held liable for a decision of the Board of Directors, even if that director participated in the decision or had knowledge of the decision, if (i) there is written evidence of the director’s opposition to the decision and (ii) the director notifies the Supervisory Committee of that opposition. However, both conditions must be satisfied before the liability of the director is claimed before the Board of Directors, the Supervisory Committee or the shareholders or relevant authority or the commercial courts. Section 271 of the The acts or agreements that a company enters into with a related party involving a relevant amount shall fulfill the requirements set forth in Section 72 and 73 of the Argentine Capital Markets Law. Under Section 72, the directors and syndics (as well as their ascendants, descendants, spouses, brothers or sisters and the companies in which any of such persons may have a direct or indirect 168 ownership interest) are deemed to be a related party. A relevant amount is considered to be an amount which exceeds 1% of the net worth of the company as per the latest balance sheet. The Board of Directors or any of its members shall require from the audit committee a report stating if the terms of the transaction may be reasonably considered adequate in relation to normal market conditions. The company may resolve regarding the compliance of Causes of action may be initiated against directors if so decided at a meeting of the shareholders. If a cause of action has not been initiated within three months of a shareholders’ resolution approving its initiation, any shareholder may start the action on behalf and on the company’s account. A cause of action against the directors may be also initiated by shareholders who object to the approval of the performance of such directors if such shareholders represent, individually or in the aggregate, at least 5% of the company’s capital stock.
Except in the event of a mandatory liquidation or bankruptcy, shareholder approval of a director’s performance, or express waiver or settlement approved by the shareholders’ meeting, terminates any liability of a director vis-à-vis the company, provided that shareholders representing at least 5% of the company’s capital stock do not object and provided further that such liability does not result from a breach of law or the company’s bylaws. Under Argentine law, the Board of Directors is in charge of the company’s management and administration and, therefore, makes any and all decisions in connection therewith, as well as those decisions expressly provided for in the Meetings, Quorum, Majorities Our Board of Directors must hold a minimum of one regularly scheduled meeting every three months. Meetings must also be convened when called by any member of Incentive-based Retirement Plan for Senior Management and Directors In December 2016, Grupo Supervielle approved an incentive-based retirement plan, which replaced certain existing compensation mechanisms. Members of our senior management and Board of Directors were entitled to receive cash payments over time under the plan if certain performance targets were met. 50% of the funds contributed by us to the plan were released to individual plan accounts once the performance targets were met, subject to compliance with waiting periods mandated by Argentine legislation. The remaining 50% was vested after an additional twelve-month waiting period. We initially agreed to monitor the eligibility and participation as the plan would develop and expected to contribute approximately U.S.$3.6 million per year to the program. The plan was approved for a one-year period. However, In March 2022, IOL Holding S.A., IOL Agente de Valores S.A.U. and Invertironline S.A.U. approved a long-term incentive program for their senior management and employees who are responsible for the success in the management and operation of their respective businesses. This program offers incentives based on the increase in the companies’ equity value. 169 Independence Criteria of Directors In accordance with the provisions of Section 4, Chapter I, Title XII “Transparencia en el Ámbito de la Oferta Pública” and Section 11, Chapter III, Title II “Órganos de Administración y Fiscalización, Auditoría Externa” of the CNV Rules, we are required to report to the shareholders’ meeting, prior to vote the appointment of any director, the status of such director as either “independent” or “non-independent.” The members of the Board of Directors and the Supervisory Committee of companies admitted to the public offering regime in Argentina must inform the CNV within ten (10) business days from the date of their appointment whether such members of the Board of Directors or the Supervisory Committee are “independent” pursuant to CNV standards. Pursuant to the CNV Rules, a director is not considered independent in certain situations, including where a director:
Pursuant to the CNV Rules, a director who, after his or her appointment, falls into any of the circumstances indicted above, must immediately report to the issuer, which must inform the CNV and the authorized markets where it lists its negotiable securities 170 immediately upon the occurrence of the event or upon the instance becoming known. In all cases, the references made to “significant participation” set forth in the aforementioned independence criteria will be considered as referring to those individuals who hold shares representing at least 5% of the capital stock and or the vote, or a smaller amount when they have the right to elect one or more directors by share class or have other shareholders agreements relating to the government and administration of the company or of its parent company; while those relating to the “economic group” correspond to the definition contained in section e) subsection 3, chapter V, Title II of the CNV Rules. The Argentine independence standards under the CNV Rules differ in many ways from U.S. federal securities law and NYSE standards. Additionally, the Buenos Aires Professional Council of Economic Sciences (Consejo Profesional de Ciencias Económicas de la Ciudad de Buenos Aires or “CPCECABA”) also established certain requirements regarding the independence of public accountants which act as members of the Supervisory Committee. Pursuant to regulations issued by the CPCECABA and the CNV, syndics must be independent from the company they are auditing. A syndic will not be independent if he/she:
Currently, Julio Patricio Supervielle, Corporate Governance We have adopted a Corporate Governance Code to put into effect corporate governance best practices, which are based on strict standards regarding transparency, efficiency, ethics, investor protection and equal treatment of investors. The Corporate Governance Code follows the guidelines established by the CNV and the Central Bank. We have also adopted a Code of Ethics and an Internal Conduct Code, each designed to establish guidelines with respect to professional conduct, morals and employee performance. Officers Our management is comprised of our Chief Executive Officer (“CEO”), Our Chief Risk Officer (“CRO”), Javier Conigliaro, the Head of Internal Audit, Sergio Gustavo Vázquez, our Head of Anti Money Laundering, Juan Cuccia, and our Compliance Officer, Moira Almar, 171 Chief Executive Officer
Senior Management that reports to the CEO
(1) We expect that the new Chief of Human Resources will be appointed after the filing of this annual report with the SEC. As of the date of this annual report, Fernando Valdez, Head of Human Resources Business Partnering, is holding the position of Chief of Human Resources on a temporary basis until the next Chief of Human Resources is appointed. Senior Management that report to the Board of Directors
The CEO has five main responsibilities: (i) creating value for shareholders by monitoring the business units, (ii) bringing innovation to the provision of financial services, (iii) making sure that we deliver high quality and cost competitive services, (iv) leveraging key resources to provide support for the business units and (v) planning and executing acquisitions and alliances that fit into the corporate strategy. The Bank’s The CFO directs and oversees the The Chief of Legal Affairs and AML is in charge of ensuring that each of our businesses complies with internal policies and procedures within the legal framework established by regulatory authorities (including anti-money laundering laws and regulations) and with the applicable contractual requirements. In addition, the Chief of Legal Affairs and AML provides legal advice to Grupo Supervielle and each of its subsidiaries regarding business development, the prevention of legal risk and conflict resolution. The Chief
172 strategies are: consolidating our talent pool, developing a sustainable organization focused on clients and with competitive remuneration packages, spreading the Supervielle culture, which breeds innovation, work ethic, empowerment and merit recognition and maintaining high morale among employees. The Chief Technology Officer is responsible for leading the The The CRO is responsible for The Head of Internal Audit is responsible, across all business units, for the audit process, evaluating and advising on internal control, corporate governance and risk management, in order to ensure compliance with laws, regulations and internal policies, contributing to the availability of reliable financial information, and the effectiveness and efficiency of operations, within the framework of the strategic objectives. His scope. The Compliance Officer effectiveness. The following are academic and professional backgrounds of our management members. Mariano Biglia Sergio Mazzitello is Chief Technology Officer of Grupo Supervielle. He joined Supervielle in December 2019. Previously he served since 2014 as Chief Information Officer in Naranja, from Grupo Galicia. He also held several executive level positions leading cross-functional international teams, in the areas of Business, Operations, and IT. He holds a degree in Sergio Gabai has been Chief of Legal Affairs and AML of Grupo Supervielle since May 2012. He joined Banco Supervielle in 2016 as Head of the Legal Department. He also serves as Vice President of the Board of MILA, as Director of Sofital, Tarjeta, Espacio Cordial de Servicios and IOL.Com, and as alternate syndic of Easy Cambio S.A. From 2000 through 2007 he was in charge of BBVA Banco Francés Legal Services for the Banking Business Department. Prior to this role, he was the Legal Affairs Assistant Manager at Bank Boston. A graduate of the Universidad de Buenos Aires as an Attorney-at-Law, he also holds a
Javier Conigliaro has been Chief Risk Officer of Grupo Supervielle since July 2016. 173 Buenos Aires, he attended the Executive Education Program in Risk Management at Kellogg School of Management & PRMIA and the Management Development Program at Universidad Austral – IAE Sergio Gustavo Vázquez has been Head of Internal Audit since March 2019. Prior to his appointment he was Audit Director at Banco Itaú and its subsidiaries in Argentina, from June 2013 to March 2018, and he added responsibilities as Head of Audit Northern Hemisphere Subsidiaries since 2017. He also held several positions within the Audit area in Itaú from 1998 to 2013 where he served as Latam Audit System Supervisor in Itaú Latam Subsidiaries, among others. He developed an extensive career with a scope of Risk, Finance, Analytics and IT. He holds degrees in Business Administration and Public Accountant from the University of Buenos Aires and an MBA from the IAE. He also obtained international certifications as Internal Auditor “CIA” from the Institute of Internal Auditors in 2001 and as Information System Auditor “CISA” from ISACA in 2006. Moira Almar has been Compliance Officer since October 2017. She previously served as the Head of Compliance at Banco Santander Ana Bartesaghiis Grupo Supervielle’s Treasurer and IRO since September 2011. She also serves as Director of Supervielle Seguros and Sofital. She was previously Head of Capital Markets at Banco Supervielle from 2004 to 2011 and she held prior positions at Citibank, Banco CMF, and Société Générale. She is a Certified Public Accountant from the University of Montevideo in Uruguay, and a post graduate degree in Economics from University of CEMA in Buenos Aires. She has 29 years of Juan Cucciahas been Head of AML of Grupo Supervielle since September 2006. He also serves as the Secretary of the AML Committee of Grupo Supervielle. He is a Certified Public Accountant with a degree from the Universidad Argentina de la Empresa. He also holds a degree in For the
Supervisory Committee We have a monitoring body called the supervisory committee (“Supervisory Committee”). Our Supervisory Committee consists of three syndics and three alternate syndics appointed by the shareholders at our annual ordinary shareholders’ meeting. The syndics and their alternates are elected for a period of one year, and any compensation paid to our syndics must have been previously approved at an ordinary shareholders’ meeting. The term of office of the members of the Supervisory Committee expires on the annual ordinary shareholders’ meeting to consider our financial statements as of December 31, Pursuant to the The primary responsibilities of the Supervisory Committee are to monitor compliance with the The following chart shows the members of our Supervisory Committee appointed by the annual ordinary shareholders’ meeting held on April 174 members of ourSupervisory Committee were appointed for the term of one year, until the annual shareholders’ meeting that considers the financial statements corresponding to the fiscal year ended December 31,
The following are academic and professional backgrounds of the Supervisory Committee members: Enrique José Barreiro holds a degree in Accountancy graduated from Universidad Nacional de Lomas de Zamora. From 1969 until May 2000, he worked at Banco Tornquist/Credit Lyonnais, where he held the position of Assistant Accountant. From June 2000 until June 2007, he held the position of Assistant Accountant and General Accountant at Banco San Luis/Banco Banex S.A. He currently serves as a Syndic of Grupo Supervielle S.A., Banco Supervielle S.A., Tarjeta, Carlos Alfredo Ojeda holds a degree in Accountancy graduated from Universidad de Buenos Aires. He was an Internal Audit Manager of the International Division of Gillette Company until 1977, and worked in Argentina, Brazil, Chile and Perú. He was a partner of a major local audit firm until 1995. He is a consultant on audit and corporate issues and has an active participation in management and control aspects of corporations in various industries. He has lectured at Universidad de Buenos Aires, including courses on Financial Planning and Budget Control and Audit and Management Control. He was also a speaker at various seminars and courses in his areas of specialty. He is a
Valeria Del Bono Lonardi is a Lawyer graduated from Universidad de Buenos Aires and attended other professional specialization courses, including the International Criminal Update Program at Universidad Austral (2009). She joined Salvi Law Firm in 1995 and since then has been dedicated to the counseling and practice of criminal law. Her professional specialization is mainly based on the dogmatic of criminal offenses, with permanent assistance to insurance companies and independent professionals; the elaboration of strategies and proposals of technical defenses in the framework of oral and public trials and the advice on the prevention of corporate fraud, particularly to banking and financial entities. She is a member of the Bar Association of Buenos Aires and of the Bar Association of San Isidro. She currently serves as a Syndic of Grupo Supervielle S.A. and as an Alternate Syndic of Banco Supervielle S.A. Carlos Enrique Loseholds a degree in Accountancy graduated from the Universidad de Buenos Aires. He worked for several years in the Audit Department of an important audit firm, and later dedicated to providing business advice. He was a lecturer at the Universidad de Buenos Aires’ School of Economics and has lectured courses at both public and private professional institutions. He is a founding partner of Bermúdez, Lose & Asociados. He has published different Works with specialized journals and is a co-author of the book Normas de Presentación de Estados Contables de Sociedades por Acciones. He currently serves as an Alternate Syndic of Grupo Supervielle Roberto Aníbal Boggiano holds a degree in Accountancy graduated from Universidad de Buenos Aires. He attended post graduate seminars on planning and corporate taxation. He has worked at several companies, including Celulosa Jujuy S.A., where he was as an analyst accountant assistant, general accountant and chief of planning from 1978 to 1994; Sert S.A., where he served as the administrative manager from 1994 to 1995; and Estudio Carlos Asato y Asociados, where he was in charge of corporate taxation and advising from 1995 to 2011. He currently serves as an Alternate Syndic of Grupo Supervielle S.A. and as Syndic of Banco Supervielle S.A. Jorge Antonio Bermúdezholds a degree in Accountancy from Universidad de Buenos Aires. After working in the Audit Department of a major firm, he specialized in the Consulting and Finance fields, where he held senior management positions at important 175 service companies. Later on he became a full time advisor in these fields. He was also a professor at the School of Economics of Universidad de Buenos Aires and lectured courses in private entities in addition to those arranged by his own firm. At present, he is an alternate syndic of Grupo Supervielle S.A., Banco Supervielle S.A., According to the provisions of Section 79 of the Argentine Capital Markets Law, listed companies which have an audit committee are allowed not to have a Supervisory Committee. Such decision may only be adopted by an extraordinary shareholders meeting with a special quorum and supermajority of 75% of the voting Compensation of Directors, Management and Supervisory Committee Our shareholders fix our directors’ compensation, including their salaries and any additional wages arising from the directors’ permanent performance of any administrative or technical activity. Compensation of our directors is regulated by the
We have not entered into employment contracts with the members of our Board of The aggregate compensation paid to our directors, senior management and members of our Supervisory Committee in Audit Committee Pursuant to the Argentine Capital Markets Law and its implementing regulations, we are required to have an audit committee consisting of at least three members of our Board of Directors with experience in business, finance, accounting, banking and audit matters. Under CNV regulations, at least a majority of the members of the audit committee must be independent directors. As a foreign private issuer listed in the United States, our audit committee is composed of independent members designated by our Board of Directors, who are independent under Rule 10A-3 under the Exchange Act. All three members of our audit committee are financially literate and Laurence Nicole Mengin de Loyer We will take the necessary measures to ensure that independent alternate members are available in order to fill possible vacancies. A quorum for a decision by the audit committee will require the presence of a majority of its members and matters will be decided by the vote of a majority of those present at the meeting. A The Audit Commitee has a written charter that establishes its duties and responsibilities. The current charter was approved by our Board of Directors in 2020. Our audit committee performs the following 176
Additionally, the audit committee is required to prepare an annual working plan and present it to the Board of Directors and the Supervisory Committee. Members of the board, members of the Supervisory Committee and external independent accountants are required to attend the meetings of the audit committee if the audit committee so requests it, and are required to grant the audit committee full cooperation and information. The audit committee is entitled to hire experts and counsel to assist it in its tasks and has full access to all of our information and documentation that it may deem necessary. The following chart shows the current membership of our Audit Committee:
177
Sergio Vazquez, our Head of Internal Audit, is the Secretary of the audit committee. Anti-Money Laundering and Anti-Terrorist Finance Committee We have an anti-money laundering and anti-terrorist finance committee consisting of three members of our Board of Directors. Decisions of the
Among its duties, the anti-money laundering and anti-terrorist finance committee must:
The following table sets forth the members of the anti-money laundering and anti-terrorist finance committee.
Risk Management Committee The risk management committee is composed of at least two directors and of members of our management team, and of management of our main subsidiaries. Our risk management committee performs the following functions:
178
·ensures that our subsidiaries’ management compensation plans incentivize a prudent level of each risk;
The following table sets forth the members of the risk management committee.
Ethics, Compliance and Corporate Governance Committee The ethics, compliance and corporate governance committee is tasked with assisting the Board of Directors in adopting the best practices of good corporate governance aimed at maximizing the growth capacity of Grupo Supervielle and its related companies and prevent the destruction of value. It also assists the Board of Directors in overseeing its Ethics and Compliance Program. Our ethics, compliance and corporate governance committee performs the following functions:
·proposes to the Board of Directors the agenda related to ethics and compliance; ·defines policies and procedures related to ethics and compliance;
·takes knowledge of all applicable regulations and their impact within the Group’s practices; 179
·submits to the Board of Directors an Annual Report of Compliance with the Code of Corporate Governance;
·revises from time to time the terms of the Code of Ethics and of the Code of Corporate Governance; and ·carries out any other acts within its competence, as may be requested by the Board of Directors. The following table sets forth the members of the ethics, compliance and corporate governance committee.
Nomination and Remuneration Committee The The Nomination and
180 schemes, fixed and variable
The following table sets forth the members of the Nominations and Remuneration
The Chief Human Resources Officer is the Secretary of the Nomination and Remuneration Committee. Disclosure Committee The disclosure committee is responsible for the following tasks:
181
The following table sets forth the members of the disclosure committee.
Committee for the Analysis of Operations with Related Parties The committee for the analysis of operations with related parties has advisory and supervision powers to evaluate the operations to be performed between by Grupo Supervielle’s related parties as established in the Policy of Approval of Operations with related parties, connected counterparties and related persons in order to ensure that such operations are granted under the conditions required by the applicable regulations and in a transparent manner. The following table sets forth the members of the committee for the analysis of operations with related parties.
Cybersecurity Committee The main objectives of the Cybersecurity Committee are to evaluate and implement the policies that are proposed with regards to cybersecurity within the field of the Information Security, including the definitions of risk appetite and the risk map of information security. In addition, it must ensure compliance with these policies, including the contingency plans for cybersecurity events. The following table sets forth the members of the cybersecurity committee.
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Fintech Committee The main objectives of the Fintech Committee are to analyze and approve the Group’s interest in fintech ventures, products and related projects; to propose and approve budgets and investments for each undertaking, and to monitor the evolution of undertakings and projects. The following table sets forth the members of the fintech committee.
Banco Supervielle S.A.’s Board of Directors Our main subsidiary, the Bank, is managed by its own Board of Directors, which is currently comprised of five members. As of the date of this annual report, the shareholders present at any annual ordinary meeting may determine the size of the Board of Directors, provided that there shall be no less than three and no more than nine directors, and appoint an equal or lesser number of alternate directors. Any director so appointed will serve for two years. The elections of the Bank’s Board of Directors are staggered. As of the date of this annual report, one half of the members of the Bank’s Board of Directors are elected each year. While directors generally serve two-year terms, in the event of an increase or decrease in the number of directors serving on the Bank’s board, the shareholders’ are authorized to appoint directors for a period of less than two years. Directors may be reelected and will remain on their duties until their replacements take their positions. The Bank’s corporate governance model contains most of the recommendations made by the Central Bank and CNV regarding corporate governance. Such model provides guidelines regarding decision-making by
183 The following table sets forth
regulations. In accordance with Section 11, Chapter III, Title II of the CNV Rules, all directors have the status of non-independent directors. Mr. Richard Guy Gluzman has the status of independent director pursuant to the Central Bank rules. Set forth below Alejandra Naughton was appointed Director of Banco Supervielle on July 13, 2020. Before being appointed Director, she was Chief Financial Officer of Grupo Supervielle since 2011 and Chief Financial Officer of Banco Supervielle since 2012. She holds a degree in Economics from the Universidad de Buenos Aires and a post-graduate degree in Project Management from Universidad de Belgrano. She attended the CFO Executive Program at the University of Chicago Booth School of Business. She has taken courses at the Bank of England in London, where she obtained the “Expert in Finance and Management Accounting” and “Expert in Corporate Governance” degrees, at the Federal Reserve Bank of New York, where she obtained the “Expert in Management and Operations” degree, and at the IMF, where she obtained the “Expert in Safeguards Assessment” degree. From 1994 to 2007, she served on the Central Bank’s staff in several senior positions, including Deputy General Manager from 2003 to 2007 and Argentine Representative to the Governance Network at the Bank for International Settlements in Switzerland. During 2007 and 2008, she worked as a consultant at the IMF. Ms. Naughton brings to the Board valuable expertise on banking regulations and monetary matters given her deep knowledge of the banking sector based on her extensive experience at the Central Bank. Her involvement acting as CFO since our IPO in 2016 allows her to take on a stewardship role as the Group pursues its reporting responsibilities with the market and financial authorities. She also provides permanent support to our IR Program. Ms. Naughton currently serves as Director, Second Vice Chairperson of Banco Supervielle S.A., Director of IUDÚ, Director of Supervielle Seguros, Director of Micro Lending, Director of InvertirOnline S.A.U., Director of Supervielle Productores Asesores de Seguros, Director of Bolsillo Digital, Director of Supervielle Agente de Negociación, Chairperson of Easy Cambio S.A., Director of IOL Holding S.A. and Vice Chairperson of IOL Agente de Valores S.A. Richard Guy Gluzman has a Law degree from Nanterre University in Paris and a master’s degree in Business Administration from the ESSEC University in Paris. From 1978 to 1995, he worked in France holding various managerial positions in several technological companies (Burroughs S.A., Digital Equipment Corporation, Wang S.A. and JBA S.A.). His career in Argentina started in 1995, when he joined Coming S.A. (France Telecom & Perez Companc Group) as General Manager until 1997. From 1997 through 1999, he served as a member of Globalstar S.A.’s Board of Directors. From 1998 through 2000, he was at the helm of Diveo Broadband Networks S.A. as General Manager and then, from 2000 to 2006, he was a Director of Pegasus Capital, a private equity fund. In recent years he served as Director of the boards of directors of Grupo Supervielle S.A., Banco Supervielle S.A., 184 Banco Supervielle S.A.’s Senior Management The Bank’s senior management is in charge of the implementation and execution of its overall strategic objectives and reports to the CEO. The following tables set forth certain relevant information on the Bank’s current executive officers and its senior
management. Senior management that reports to the
Senior management that reports to the
(1) We expect that the new Chief of Human Resources will be appointed after the filing of this annual report with the SEC. As of the date of this annual report, Fernando Valdez, Head of Human Resources Business Partnering, is holding the position of Chief of Human Resources on a temporary basis until the next Chief of Human Resources is appointed. Set forth below are brief biographical descriptions of the members of the Bank’s senior management. Silvio Margaria
Roberto García Guevarajoined Banco Supervielle in April 2018 as Head of Capital Markets. He is a public accountant graduated from Universidad de Buenos Aires. From 1992 to 1995 he worked at Baring Securities Argentina as a sales trader. From 185 July 1995 to June 1998 he served as Head of Argentine Research at Caspian Securities Sociedad de Bolsa. Between July 1998 and November 2002, he worked at Merril Lynch S.A. Sociedad de Bolsa serving as Senior Country Analyst - First Vice President, covering Argentina and Chile, and he also served as Vice President of the Board. From 2003 to August 2007 Roberto was Head of Research of Raymond James Argentina. From September 2007 until 2009 he worked at UBS Pactual as Head of Southern Cone and Andean Equity Strategy & Research. Roberto returned to Raymond James Argentina in 2010, where he was Head of Research until 2012. During his career in Research, he was ranked 10 times by the annual survey of “Institutional Investor” as a top three analyst for Argentine Equity Research (he was ranked number one five times). In 2012 he moved to the Corporate Finance effort within Raymond James Argentina (then AR Partners) and was Head of Corporate Finance between 2015 and March 2018. Esteban Nicolás D´Agostino has been Chief of Operations and Central Services of Banco Supervielle since April 2020. He is a Public Accountant from University of Buenos Aires and attended the Executive Development Program at Universidad Austral Business School. Prior to this appointment, he served as General Manager at RECSA, a company dedicated to collection management. He has more than 26 years of experience in
For the biography of Mr. For the biographies of Committees Reporting to Banco Supervielle S.A.’s Board of Directors In accordance with Central Bank regulations, the Bank has several Board committees: the Audit Committee (Communication “A”
Banco Supervielle S.A.’s Audit Committee The audit committee is formed by at least two members of the Bank’s Board of Directors and its internal audit manager. The Board of Directors appoints the members of the audit committee for a term of two or three years. The CEO is invited to attend the meetings. The audit committee is responsible for assisting the Board of Directors in the supervision of the consolidated financial statements, controlling compliance with policies, processes, procedures and rules set forth for each of the Bank’s business areas and for evaluating and approving the corrective measures proposed by the internal audit area. The following table sets forth the members of the audit committee:
Banco Supervielle S.A.’s Information Technology Committee The The 186 such plan and the level of compliance with it; (vi) reviewing audit reports related to The following table sets forth the members of the Information Technology Committee.
Banco Supervielle S.A.’s Committee on the Control and Prevention of Money Laundering and Financing of Terrorism The committee on the control and prevention of money laundering and financing of terrorism is formed by at least two directors (one of whom will chair the committee and will act as Corporate Compliance Officer with the Financial Intelligence Unit and another that will act as Alternate Compliance Officer with the Financial Intelligence Unit) and the Head of AML, who will act as Secretary. The Board of Directors appoints the members of the control and prevention of money laundering and financing of terrorism committee for a minimum term of two years and a maximum of three years. The committee on the control and prevention of money laundering and financing of terrorism has to: (i) consider the Bank’s general strategies and policies in the area of money laundering prevention designed by the Senior Management and submit them for Board of Directors’ approval; (ii) approve the internal procedures necessary to ensure effectiveness and compliance with the regulations and policies in force, promote their implementation and control their performance; (iii) take knowledge of the amendment to applicable regulations and ensure that the updates of internal policies and procedures manuals are timely carried out; (iv) ensure the adoption of a formal and permanent and up-to-date training program for the personnel; (v) have an understanding in the consideration and survey of the best market practices related to the prevention of money laundering and financing of terrorism and promote their application in the Bank; (vi) analyze the reports of unusual operations raised by the AML Department or any other Bank officer and, subject to legal advise, arrange for their report with the relevant authorities; (vii) take knowledge of and promote compliance with the corrective measures that have arisen as a result of the external and internal audit reports related to the prevention of money laundering and terrorism financing; (viii) appoint the Head of Prevention of Money Laundering and Terrorism Financing with the concurrence of the Board of Directors; (ix) inform the control authorities about the removal or resignation of the Corporate Compliance Officer before the FIU within 15 business days of the occurrence, stating the relevant causes of such removal or resignation; (x) coordinate with Internal Audit for the periodic implementation of external audits carried out by recognized firms specialized in the field; (xi) ensure due compliance with the reporting duties to the competent authorities; and (xii) carry out all those functions as may be established by the Central Bank and the FIU from time to The following table sets forth the members of the committee on control and prevention of money laundering and financing of terrorism:
187 Banco Supervielle S.A.’s Risk Management Committee The Risk Management Committee sets forth policies and limits to financial risks (including market risk, credit risk, liquidity risk, interest rate risk, exchange risk and other risks) and submits to the Board of Directors the appropriate proposals. Furthermore, this committee supervises the degree of correlation between the risks assumed and the risk profile set forth by the Board of Directors, and analyzes and approves investment and funding policies.
The following table sets forth the members of the Risk Management Committee:
Banco Supervielle S.A.’s Senior Credit Committee The Bank’s credit committee is formed by Banco Supervielle S.A.’s other management committees The Bank has other management committees, such as the Assets and Liabilities Committee and the Operational and Reputational Risk Committee. Management of Our Other Subsidiaries The senior management of our other subsidiaries is in charge of the implementation and execution of those subsidiaries’ overall short-term and strategic objectives and reports to the respective The CEO of Set forth below are brief biographical descriptions of the CEOs of our other subsidiaries. Juan Martin Monteverdi has been responsible of the consumer finance units of Grupo Supervielle since August 2018. He also serves as Director of Bolsillo Digital He has been Chief Executive Officer Cordial Servicios since April 2014 and Chief Executive Officer of Guillermo Guichandut has served as CEO of SAM since 2005. He also serves as Chairman of the Board of Directors of SAM. He received a degree in public accounting from Universidad Nacional de la Plata, and has completed a masters in Banking Management at the Universidad del CEMA. He is currently an Adjunct Professor of financial mathematics in the Economics department of the Universidad Nacional de la Plata. He is a member of the Executive Committee of the Argentine Chamber of Mutual Funds and President of its Communication Commission. Mr. Guichandut has vast experience in the financial sector, having worked at Bank of Boston and Banco Société Générale Argentina until his appointment as 188 Diego Squartini has been Chief Executive Officer of Supervielle Seguros since 2013. He obtained a degree in Economics and a Master’s degree in Business Management from Universidad Nacional de Cuyo. He also attended the Leadership Program at Universidad Austral. From 2010 to 2013, he served as Regional Manager at Banco Supervielle. From 2004 to 2010 he was the Financial Manager at Banco Regional de Cuyo. From 2000 to 2004, he worked as Corporate Business Manager and from 1995 to 2000 as Branch Manager, also at Banco Regional de Cuyo.
Christel Sasse
Employees We had At the holding company we had Banking Business employees: As of December 31, All management positions in the Bank are held by non-union employees. As of December 31, The Bank currently does not maintain any pension or retirement program for its employees. In order to incentivize the performance of its employees, the Bank implemented several incentive payment plans for its employees linked to performance and results.
189
Insurance Segment had 154 employees
InvertirOnline S.A.U. and Invertironline.com Argentina S.A.U. had
Supervielle Asset Management employees
Supervielle Agente de
Compensation Labor relations in Argentina are governed by specific legislation, such as labor Law No. 20,744 and Collective Bargaining Law No. 14,250, which, among other things, dictate how salary and other labor negotiations are to be conducted. Every industrial or commercial activity is regulated by a specific collective bargaining agreement that groups together companies according to industry sectors and by trade unions. While the process of negotiation is standardized, each chamber of industrial or commercial activity negotiates the increases of salaries and labor benefits with the relevant trade union of such commercial or industrial activity. In the banking sector, salaries are established on an annual basis through negotiations between the chambers that represent the banks and the banking employees’ trade union. The National Labor Ministry mediates between the parties and ultimately approves the annual salary increase to be applied in the banking activity. Parties are bound by the final decision once it is approved by the labor authority and must observe the established salary increases for all employees that are represented by the banking union and to whom the collective bargaining agreement applies. For the past ten years, negotiations have taken place during the first half of the year. In addition, each company is entitled, regardless of union-negotiated mandatory salary increases, to give its employees additional merit increases or variable compensation schemes. Item 7.Shareholders and Related Party Transactions 190 Item 7.AMajor Shareholders As of April 28, The table below sets forth information concerning the ownership of our Class A and Class B shares as of April 28,
As of April Share Ownership of Banco Supervielle S.A. As of April 28, The following table sets forth information regarding the ownership of the Bank’s Class A and Class B shares as of April 28,
Item 7.BRelated Party Transactions Other than as set forth below, we are not a party to any material transactions with, and have not made any loans to any (i) enterprises that directly or indirectly through one or more intermediaries, control or are controlled by us; (ii) associates (i.e., an unconsolidated enterprise in which we have a significant influence or which has significant influence over us); (iii) individuals owning, directly or indirectly, an interest in our voting power that gives them significant influence over us, as applicable, and close members of any such individual’s family (i.e., those family members that may be expected to influence, or be influenced by, that person in their dealings with us, as applicable); (iv) key management personnel (i.e., persons that have authority and responsibility for planning, directing and controlling our activities, including directors and senior management of companies and close members of such individual’s family); or (v) enterprises in which a substantial interest is owned, directly or indirectly, by any person described in (iii) or (iv) over which such a person is able to exercise significant influence nor are there any proposed transactions with such persons. For purposes of 191 this paragraph, this includes enterprises owned by our directors or major shareholders that have a member of key management in common with us, as applicable. In addition, “significant influence” means the power to participate in the financial and operating policy decisions of the enterprise, but means less than control. Shareholders beneficially owning a 10% interest in our voting power are presumed to have a significant influence on us. Management Services To the extent that there are no conflicts of interest, we lend management services to our subsidiaries, the Bank, Tarjeta, SAM, Sofital,
The following table sets forth information regarding fees received from our subsidiaries and related parties for our management services for the years ended December 31,
Capital Contribution On March 4, 2021, Grupo Supervielle made a contribution of Ps.6,832,612 to the capital of Modo, as a result of which Grupo Supervielle subscribed 5,641,254 book-entry ordinary shares of Modo, which have a par value of Ps.1 per share and confer the right to one vote per share. On March 4, 2021, Grupo Supervielle made a contribution of Ps.29,000,000 to Bolsillo Digital as a result of which Grupo Supervielle subscribed 29,000,000 book-entry ordinary shares of Bolsillo Digital, which have a par value of Ps.1 per share and confer the right to one vote per share. On April 30, 2021, Grupo Supervielle and Sofital made a joint capital contribution of Ps.30,000,000 to Supervielle Productores Asesores de Seguros, as a result of which Grupo Supervielle and Sofital subscribed 30,000,000 book-entry ordinary shares of Supervielle Productores Asesores de Seguros, respectively, which have a par value of Ps.1 per share and confer the right to one vote per share. On November 24, 2021, Grupo Supervielle and the Bank made capital contributions of Ps.25,000,000 and Ps.475,000,000, respectively, to IUDÚ, as a result of which Grupo Supervielle and the Bank subscribed 1,605,985 and 30,513,709 book-entry ordinary shares of Supervielle Productores Asesores de Seguros, respectively, which have a par value of Ps.1 per share and confer the right to one vote per share. On November 29, 2021, Grupo Supervielle made a capital contribution of U.S.$500,000 to IOL Holding S.A. to be applied to working capital and investments. On January 28, 2022, Grupo Supervielle and the Bank made capital contributions of Ps.25,000,000 and Ps. 475,000,000, respectively, to IUDÚ, as a result of which Grupo Supervielle and the Bank subscribed 1,762,666 and 33,490,657 book-entry ordinary 192 shares of Supervielle Productores Asesores de Seguros, respectively, which have a par value of Ps.1 per share and confer the right to one vote per share. On February 25, 2022, Grupo Supervielle and the Bank made capital contributions of Ps.12,500,000 and Ps.237,500,000, respectively, to IUDÚ, as a result of which Grupo Supervielle and the Bank subscribed and 18,347,111 book-entry ordinary shares of Supervielle Productores Asesores de Seguros, respectively, which have a par value of Ps.1 per share and confer the right to one vote per share. On March 30, 2022, Grupo Supervielle and Banco Supervielle S.A. approved capital contributions of Ps.62,500,000 and Ps.1,187,500,000, respectively, to IUDÚ to be allocated to working capital. On the same date, IUDÚ approved a capital contribution of Ps.150,000,000 to Tarjeta to be allocated to working capital. Transfer of shares On June 30, 2021, Grupo Supervielle transferred its 41,747,121 common shares of Modo to its subsidiary Banco Supervielle S.A. These shares have a par value of Ps.1 and Banco Supervielle S.A. is entitled to 1 vote for each share. On March 4, 2021 Grupo Supervielle made an irrevocable capital contribution to Modo in the amount of Ps.6,832,612. On August 5, 2021, Grupo Supervielle transferred its shares of Bolsillo Digital, which amount to Ps.112,886,316.43 to its subsidiary Banco Supervielle S.A. as part of Grupo Supervielle’s commercial strategy for its payment services business. Operator Services Agreement with the Bank In March 2016, we entered into an agreement with the Bank pursuant to which the Bank will provide accounting, administrative, legal and treasury services to us. Trademark Licenses In 2013, we signed agreements with Espacio Cordial and Financial Loans Some of our directors and the directors of the Bank have been involved in certain credit transactions with the Bank as permitted by Argentine law. The The Bank is required by the Central Bank to present to its Board of Directors, on a monthly basis, the outstanding amounts of financial assistance granted to directors, controlling shareholders, officers and other related entities, which are transcribed in the minute books of the Board of Directors. The Central Bank establishes that the financial assistance to directors, controlling shareholders, officers and other related entities must be granted on an equal basis with respect to rates, tenor and guarantees as loans granted to the general public.
The financial assistance granted to our directors, officers and related parties by the Bank was granted in the ordinary course of business, on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable 193 transactions with other non-related parties, and did not involve more than the normal risk of collectability or present other unfavorable features. The following table presents the aggregate amounts of total consolidated financial exposure of the Bank to related parties, the number of recipients, the average amounts and the single largest exposures as of the end of the periods indicated.
Item 7.CInterests of Experts and Counsel Not applicable. Item 8.Financial Information Item 8.AConsolidated Statements and Other Financial Information. See Item Legal Proceedings As of the date of this annual report, we are not a party to any legal or administrative proceedings The Bank and
organizations. The class action lawsuits involving the Bank and In 2021, an additional class action was brought against InvertirOnline S.A.U. in relation to an alleged use by InvertirOnline S.A.U. of liquid funds of its clients without requesting their prior consent or making yields resulting from such operations available to such clients. Our other subsidiaries are not parties to any legal proceedings Dividends In accordance with the 194 Declaration and payment of dividends to all holders of each class of our shares (Class A, Class B shares and preferred shares (to the extent any such shares are outstanding)), to the extent funds are legally available, is determined by all of our shareholders with voting rights (i.e., our Class A and Class B shareholders) at the annual ordinary shareholders’ meeting. At such annual ordinary shareholders’ meeting, our Class A shares will be entitled to five votes each and our Class B shares will be entitled to one vote each. It is the responsibility of our Board of Directors to make a recommendation to our shareholders with respect to the amount of dividends to be distributed. The Board of Directors’ recommendation will depend on a number of factors, including but not limited to, our operating results, cash flow, financial condition, capital position, legal requirements, contractual and regulatory requirements, and investment and acquisition opportunities. As a general rule, the Board of Directors will favor efficient use of capital in its recommendation-making process. Thus, the Board will recommend reinvesting earnings when there are investment opportunities, or it will recommend distributing dividends when there is excess capital. However, shareholders are ultimately entitled to overrule the recommendation of the Board of Directors through the affirmative vote of the absolute majority of the present votes at an ordinary shareholders’ meeting. The Board of Directors may also decide and pay anticipated dividends. In such instance, each individual director and member of the Supervisory Committee will be jointly and severally liable for the payment of such dividends if our retained earnings for the year for which such dividends were paid is insufficient to cover the payment of such dividends. Dividends are distributed on a pro rata basis according to the number of In accordance with Argentine law, our bylaws and CNV regulations, we are required to allocate to our legal reserve 5% of our yearly income, plus or minus the results of prior years, until our legal reserve equals 20% of our adjusted capital stock. Under the Holders of ADSs will be entitled to receive any dividends payable in respect of our underlying Class B shares. Exchange controls currently in place impair the conversion of dividends, distributions, or the proceeds from any sale of Class B shares, as the case may be, from Pesos into U.S. dollars and the remittance of the U.S. dollars abroad, therefore restricting the ability of foreign shareholders holders of ADSs to receive dividends in U.S. dollars abroad. In particular, with respect to the proceeds of any sale of Class B shares underlying the ADSs, as of the date of this annual report, the conversion from Pesos into U.S. dollars and the remittance of such U.S. dollars abroad is subject to prior Central Bank approval (as described below), although access to the MLC to pay dividends to non-resident shareholders may be granted, subject to certain conditions.See
195
We are a holding company, and in addition to certain management fees we collect from some of our subsidiaries, our main source of cash to pay dividends are the dividends we receive from our subsidiaries. We therefore depend on the results of operations, cash flow and distributable income of our operating subsidiaries, principally the Bank. We and our subsidiaries are subject to contractual, legal and regulatory requirements affecting our ability to pay dividends. On January 31, 2020, the Central Bank issued Communication “A” 6886, pursuant to which financial entities must obtain prior approval of the Central Bank in order to distribute dividends. See Although distribution of dividends by the Bank has been authorized by the Central Bank at times, no assurance can be given that in the future the Central Bank will not limit the Bank’s ability to distribute dividends approved by its shareholders at the annual ordinary shareholders’ meeting or that such authorization will be for the full amount of dividends that the Bank may distribute pursuant to applicable regulation. We are required to pay personal assets tax corresponding to Argentine and foreign individuals and foreign entities for the holding of our shares at December 31 of each year. We pay this tax on behalf of our shareholders, whenever applicable, and are entitled, pursuant to the Personal Assets Tax Law, to seek reimbursement of such paid tax from the applicable shareholders in various ways, including by withholding dividends. See In As described in Note 25 to our audited consolidated financial statements we may pay dividends to the extent that we have distributable retained earnings and distributable reserves calculated in accordance with the rules of the Argentine Central Bank. Therefore, retained earnings included in our audited consolidated financial statements may not be wholly distributable. 196 Grupo Supervielle paid dividends to its shareholders for
Item 8.BSignificant Changes In addition to the information set forth in this section, additional information on significant changes can be found in “Item Item 9.The
The information set forth in Exhibit 2(d), “Description of Securities Registered under Section 12(b) of the Exchange Act” is incorporated herein by reference. Item 9.BPlan of Distribution Not applicable. Item 9.CMarkets On May 18, 2016, we completed our IPO. Since May 19, 2016, our ADSs representing Class B shares have been trading on the NYSE under the symbol ‘SUPV.’ Our Class B shares are currently traded on the ByMA (formerly MERVAL and, ByMA since April 2017) and MAE (since May 2016) under the symbol ‘SUPV.’ On December 29, 2016, the CNV approved the constitution of ByMA as a new stock market, as a spin-off of certain assets of the MERVAL relating to its stock market operations and capital contributions by the Buenos Aires Stock Exchange. Following such authorization, and effective April 17, 2017, all securities listed on MERVAL have been automatically transferred to ByMA, as successor of MERVAL’s activities. Additionally, the delegation of powers granted by MERVAL to the Buenos Aires Stock Exchange will apply to ByMA, thus, the Buenos Aires Stock Exchange will continue to carry out the activities referred to in paragraphs b), f) and g) of Article 32 of the Argentine Capital Markets Law on behalf of ByMA, including the authorization, suspension and cancelling of the listing or trading of securities and acting as arbitration court of such market for all matters concerning listed companies’ relationship with shareholders and investors.
Item 9.DSelling Shareholders Not applicable. 197 Item 9.EDilution Not applicable. Item 9.FExpenses of the Issue Not applicable. Item 10.Additional Information Item 10.AShare Capital Not applicable. Item 10.BMemorandum and Articles of Association The information set forth in Exhibit 2(d), “Description of Securities Registered under Section 12(b) of the Exchange Act” is incorporated herein by reference. Item 10.CMaterial Contracts No material contracts outside the ordinary course of business have been entered into during the last 2 years.
On September 1, 2019, after the market disruptions caused by the results of the PASO elections, with the purpose of strengthening the normal functioning of the economy, fostering a prudent administration of the exchange market, reducing the volatility of financial variables and containing the impact of the variations of financial flows on the real economy, the Argentine government issued Decree No. 609/2019 whereby foreign exchange controls were temporarily reinstated. The decree: (i) reinstated, originally until December 31, 2019, the exporters’ obligation to repatriate the proceeds from exports of goods and services in the terms and conditions set forth by the Central Bank’s implementing regulations and settle for Pesos through the MLC; and (ii) authorized the Central Bank to (a) regulate access to the At present, foreign exchange regulations have been consolidated in a single regulation, Communication “A” 6844, as subsequently amended and supplemented from time to time by Central Bank’s communications Specific provisions for inward remittances Repatriation and settlement of the proceeds of exports of In accordance with section 7.1 of the FX Regulations, exporters must repatriate, and settle in Pesos through the MLC, the proceeds Although the FX Regulations maintain the obligation to repatriate export proceeds to Argentina through the MLC, in accordance with 198 prepayment of foreign currency-denominated loans with local banks, the new indebtedness must have a longer average life than the local indebtedness, and (e) the mechanism is tax-neutral.
Amounts collected in foreign currency for insurance claims related to the exported goods must also be repatriated and settled in Pesos in the MLC, up to the amount of the insured exported goods. Moreover, through section 8 of the FX Regulations, the Central Bank reinstated the export proceeds monitoring system, setting forth rules governing such monitoring process and exceptions thereof. Exporters will need to appoint a financial entity in charge of monitoring compliance with the aforementioned obligations. Decree No. 661/2019 clarified that the collection of the export benefits set forth under the Argentine Customs Code shall be subject to the exporter complying with the repatriation and peso settlement obligations imposed by the new FX Regulations. Finally, the FX Regulations authorize the application of export proceeds to the repayment of: (i) pre-export financings and export financings granted or guaranteed by local financial entities; (ii) foreign pre-export financings and export advances settled in the MLC, provided that the relevant transactions were entered into through public deeds or public registries; (v) financings granted by local financial entities to foreign importers; and (vi) financial indebtedness under contracts executed prior to August 31, 2019 providing for cancellation thereof through the application abroad of export proceeds. The application of export proceeds to the repayment of other indebtedness shall be subject to Central Bank approval. Obligation to repatriate and settle in Pesos the proceeds from exports of services
Sale of non-financial non-produced assets Pursuant to External financial indebtedness
In addition, effective until June 30, 2022, the Central Bank must approve the access to the MLC
at least 2 years.
Duly registered securities that are denominated and payable in foreign currency in Argentina In accordance with 199 deposited in a local foreign currency-denominated bank accounts within the period established for the settlement of the proceeds, and the proceeds are simultaneously applied to transactions having access to the MLC, and the mechanism is tax neutral, among others).
Pursuant to Specific Provisions Regarding Access to the Exchange Market Residents are authorized to access the MLC for the payment of import of goods in accordance with Pursuant to the FX Regulations, the local importer must appoint a local financial entity to act as a monitoring bank, which will be responsible for verifying compliance with the applicable regulations, including, among others, the liquidation of import financing and the entry of imported goods.
Payment of services provided by non-residents Pursuant to As of January 3, 2022 if new financial indebtedness is settled through the MLC and such indebtedness is entered into with a third party for an average maturity of not less than 2 years and has no principal maturities until at least 3 months from settlement, access to the MLC is granted to repay intercompany services upon maturity. In these cases, access to the MLC can only be granted for an amount up to U.S.$10 million. Access to the MLC for the prepayment of debts for services requires prior authorization by the Central Bank. Repayment of principal and interest of imports of goods and services Access to the Access to the MLC for the prepayment of debts for imports of goods and services shall require prior authorization by the Central Bank. Payments of principal and interest of foreign financial indebtedness Pursuant to Section 2.4 of the FX Regulations, in order for resident debtors to have access to the MLC to repay foreign financial indebtedness disbursed as of September 1, 2019, the loan proceeds must have been settled through the MLC and the operation must have been authorized under the Foreign Assets and Liabilities Reporting Regime. As a result, although settlement of the loan proceeds is not mandatory (i.e., the loan proceeds may be kept and applied directly abroad), failure to settle them shall preclude future access to the MLC for repayment purposes. Access to the MLC to make such payments more than three days prior to the due date (e.g., due to voluntary or mandatory prepayment provisions) is, as a rule, subject to prior approval of the Central Bank. Prepayments done with funds from new, duly settled, foreign loans or in connection with debt refinancing or liability management processes may be exempted from such approval to the extent they comply with the requirements set forth in section 3.5 of the FX Regulations. 200 Effective until June 30, 2022, the Central Bank must approve the access to the MLC by local residents in order to make principal payments under cross-border financial indebtedness with related parties, unless the loan proceeds were settled through the MLC after October 1, 2020 and the loan has an average life of at least 2 years. Section 3.17 of the FX Regulations establishes that debtors with scheduled principal payments maturing between October 15, 2020 and June 30, 2022 relating to (i) foreign financial indebtedness of the non-financial private sector with a creditor who is not a counterparty related to the debtor; (ii) foreign financial indebtedness on account of transactions of the debtor and/or (iii) issuances of debt securities publicly registered in Argentina, denominated in foreign currency, of private sector customers or of the financial entities themselves, had to submit a refinancing plan to the Central Bank in line with the following criteria (the “Refinancing Plan”):
Further, in addition to the refinancing granted by the original creditor, proceeds from new foreign financial indebtedness with other creditors shall also be computed, provided that the proceeds obtained therefrom be transferred and settled through the MLC. In the case of issuances of debt securities publicly registered in Argentina and denominated in foreign currency, new issuances shall also be computed provided that certain conditions are met. The abovementioned provisions shall not apply to: (i) indebtedness with international organizations or associated agencies thereof or secured by them; (ii) indebtedness granted to the debtor by official credit agencies or secured by them; (iii) when the amount for which access to the MLC is requested for repayment of principal under such indebtedness does not exceed the equivalent of U.S.$2,000,000 (two million U.S. dollars) per calendar month; (iv) indebtedness originated from January 1, 2020, as long as the funds have been deposited and settled in the MLC; (v) indebtedness originated on or after January 1, 2020, as long as such indebtedness constitutes a refinancing of principal maturities subsequent to such date; and (vi) the remaining portion of maturities already refinanced to the extent that the refinancing has made it possible to reach the parameters set forth in said item. Foreign financial indebtedness principal and services prepayment:
201 Refinancing Plan, the foreign currency settlement requirement was considered fulfilled for the purposes of being allowed access to the MC for the service of principal and interest thereon, and (c) the debtor has a certificate of increase of exports issued pursuant to section 3.18 of the FX Regulations. In line with the Central Bank, the CNV issued General Resolution No. 861 to facilitate the refinancing of debt through the capital markets. In this regard, the CNV provided that whenever the issuer intends to refinance debt through an exchange offer or new issues of debt securities, in both cases in exchange for or to be paid with debt securities previously issued by the company and placed privately and/or with preexisting credits against such company, the requirement of placement through public offering will be regarded as met if the new issue is underwritten in this way by the creditors of the company whose debt securities without public offering and/or preexisting credits represent a percentage that does not exceed thirty percent (30%) of the aggregate amount actually placed, and the remaining percentage is underwritten and paid in cash or in kind by tendering debt securities originally placed through public offering, or other debt securities publicly offered and listed and/or traded on markets authorized by the CNV, issued by the same company, by persons who are domiciled in Argentina or in countries that are not included in the list of non-cooperative jurisdictions for tax purposes, listed in section 24 of the Annex to Decree No. 862/2019 or anyone that may replace it in the future. Additionally, General Resolution No. 861 provided for mandatory compliance with certain conditions to consider that the public offering requirement has been met. Prepayment of financing denominated in foreign currency granted by local financial institutions The Central Bank’s prior approval shall be required to access the MLC to prepay foreign currency financing granted by local financial institutions, unless they relate to payments of credit card purchases made in foreign currency. Payment of dividends and corporate profits In accordance with
Access to the MLC by other residents -excluding entities- for the formation of external assets and for derivatives transactions
Derivatives transactions
2019. Likewise, access to the MLC is granted for the payment of premiums, constitution of guarantees and 202 Foreign Assets and Liabilities Reporting Regime, An entity authorized to operate in the MLC must be designated by the debtor to track the operation and an affidavit must be provided in which the debtor undertakes to repatriate and settle the funds that are in favor of the local client as a result of such operation, or as a result of the release of the funds of the constituted as collateral, in Pesos within the following five (5) business days. Additional Requirements Regarding Access to the Exchange Market On May 28, 2020, the Central Bank issued Communication “A” 7030 , as amended by Communications “A” 7042, 7052, 7068, 7079, 7094, 7151 and 7193, which established additional requirements on outflows made through the MLC. On December 16, 2021, Communication “A” 7030 was issued and was subsequently amended by Communication “A” 7490. Below is a brief description of such measures: Additional requirements on outflows through the MLC In the case of certain outflows made through the MLC (i.e., payments of imports and other purchases of goods abroad; payment of services rendered by non-residents; remittances of profits and dividends; payment of principal of and interest on external indebtedness; payments of interest on debts for the import of goods and services; payments of indebtedness in foreign currency owed by residents made through trusts organized in Argentina to secure the provision of services; payments under foreign currency-denominated debt securities publicly registered in Argentina and liabilities in foreign currency owed by residents; purchases of foreign currency by resident individuals for the purpose of forming external assets, providing family assistance and entering into derivative transactions (other than those made by individuals on account of the formation of external assets), purchase of foreign currency by individuals to be simultaneously used to purchase real estate in Argentina with a mortgage loan; purchase of foreign currency by other residents (excluding financial institutions) to form external assets and in connection with derivative transactions; other purchases of foreign currency by residents for specific uses and under interest rate hedge agreements in connection with liabilities incurred by residents that have been reported and validated under the External Assets and Liabilities Reporting Regime), the financial institution shall obtain the Central Bank’s prior approval before processing the transaction, unless it has obtained an affidavit executed by the legal entity or individual stating that, at the moment of accessing the local exchange market:
Communication 7490 provides a merely illustrative list of liquid external assets including, among others, holdings of foreign currency bills and coins, holdings of coined gold or gold bars for good delivery, demand deposits with financial institutions abroad and other investments that allow for immediate availability of foreign currency including, for example, investments in external government securities, funds held in investment accounts with investment managers abroad, crypto-currency, funds in payment service providers’ accounts, etc. Available liquid external assets are not understood to include those funds deposited abroad that may not be used by the legal entity or individual as they are reserve or security funds set up in compliance with the requirements under borrowing agreements abroad or funds set up as collateral under derivative transactions consummated abroad. If the legal entity or individual had liquid external assets available in an amount higher than the sum specified in the first paragraph, the financial institution may also accept an affidavit provided it is satisfied that such amount shall not be exceeded on the grounds that, either partially or totally, such assets:
203
The affidavit filed by legal entities or individuals shall expressly indicate the value of their liquid external assets available as of the beginning of the day as well as the amounts allocated to each of the situations described in paragraphs i) through iv), as applicable.
The filing of affidavits shall not be required for outflows through the MLC in the following cases: (1) the exchange institution’s own transactions, acting as customer; (2) payment of financing in foreign currency granted by local financial institutions in connection with purchases in foreign currency using credit or shopping cards; and (3) payments abroad by credit card companies that are not financial institution in connection with the use of credit, shopping, debit or pre-paid cards issued in Argentina. Additionally, Communication “A” 7490 of the Central Bank established that, prior to allowing any outflow of funds abroad, financial institutions are required to check the online system implemented by the Central Bank to verify if the customer that intends to access the MLC is included in the list of CUITs (Tax Identification Numbers) showing inconsistent foreign exchange transactions. Payment of imports of goods by accessing the MLC until March 31, 2021. In addition to complying with the filing requirement as set forth in paragraph (i) above, item 10.11 of Communication 7490 sets forth that, for the purposes of accessing the MLC to pay imports of goods or the principal amount of debts arising from the import of goods, legal entities and individuals shall obtain the Central Bank’s prior approval until December 31, 2022, unless any of the following situations occurs:
204
Prior to authorizing payments for imports of goods, the intervening financial entity must, in addition to requesting the client’s affidavit, verify that such statement is compatible with the existing data in the Central Bank from the online system implemented for this purpose. The amount by which importers can access the MLC under the conditions established within the framework of item 10.12 of Communication “A” 7490 will be increased by the equivalent of 50% of the amounts that, the importer settles through the MLC as export advances or pre-financing of exports from abroad with a minimum term of 180 days, as of October 2, 2020. In the case of operations settled as of April 1, 2021, access to the MLC will also be admitted for the remaining 50% to the extent that the additional part corresponds to advanced payments of capital goods, and that the financial entity has the documents justify the products paid correspond to tariff positions classified as BK (Capital Goods). Access to the MLC for payment of imports of goods while submission of import clearance is pending. Pursuant to item 10.4.2.8 of the Communication “A” 7490, to access the MLC for the payment of imports of goods pending customs clearance, importers are required (in addition to the other requirements in force under the FX Regulations) to file a declaration through the Integral Import Monitoring System (Sistema Integral de Monitoreo de Importaciones or SIMI) showing the “SALIDA” status in connection with the imported goods to the extent that such declaration is required for the registration of the application for import of goods for consumption. Access to the MLC for prepayment of imports Communication “A” 7272 clarified that, effective as of November 2, 2020, payments for imports of goods pending customs clearance made between September 2, 2019 and October 31, 2019 will be considered in default if they (A) relate to (i) payments on demand upon presentation of shipping documents; (ii) payments of commercial debts abroad; and (iii) payment of commercial guarantees for imports of goods granted by local institutions, and (B) are not regularized, that is, the customer failed to furnish evidence to the institution in charge of monitoring such payment (up to the amount paid) of the existence of (i) import clearance in its name or in the name of a third party; (ii) the settlement on the MLC of currency associated with the return of the payment made; (iii) other forms of regularization permitted under the FX Regulations; and/or (iv) the Central Bank’s acceptance of the total or partial regularization of the transaction. Importers will not be allowed access to the MLC to make new prepayments of imported goods until such defaulted transactions are not regularized. Payments of principal under debts with related counterparties until June 30, 2022 The Central Bank’s prior approval is required to access the MLC to make payments abroad of principal of financial debts when the creditor is a counterparty related to the debtor. This requirement is applicable until June 30, 2022, pursuant to Section 3.5.7 of the FX Regulations. Such requirement shall not apply to the local financial institutions’ own transactions. Section 3.5.4 of the FX Regulations establishes that, for as long as the requirement to obtain prior approval to access the MLC to pay, at maturity, principal of foreign financial indebtedness of the non-financial private sector when the creditor is a counterparty related to the debtor continues to be in place, such requirement will not be applicable if the funds have been entered and settle through the MLC as of October 2, 2020 and the average life of the indebtedness is not less than 2 (two) years. 205 Extension of the term for outflows through the MLC in connection with the sale of securities to be settled in foreign currency or transfers to foreign depositaries. In the case of outflows through the MLC, including by means of swap or arbitrage transactions, in addition to the requirements that apply to each particular case, financial institutions shall request the filing of an affidavit certifying that:
The filing of the affidavit shall not be required in case of outflows through the MLC in the following circumstances: 1) the financial institution’s own transactions, acting as customer; 2) payment of financing in foreign currency granted by local financial institutions, including payments for purchases made in foreign currency using credit or shopping cards; and 3) remittances abroad in the name of individuals who are the recipients of retirement and/or pension benefits paid by ANSES. Communication “A” 7193 Through Communication “A” 7193, the Central Bank modified Section 2 of Communication “A” 7030 as amended, that regulated the requirements to access the MLC for the payment of imports, in accordance with what is already reflected in “—Payment of imports with access to the exchange market until March 31, 2021.” Likewise, Communication “A” 7193 established that financial entities will be required to obtain the prior consent of the Central Bank to provide their clients with access to the MLC for payments, with regards to payment operations included in Sections 3.1. to 3.11. and 4.4.2. of FX Regulations (including those that are specified through exchanges or arbitrations), to individuals or entities included by the AFIP in the database of “false” invoices or equivalent documents established by such Agency. This requirement will not be applicable to access the MLC for the payment of financing in foreign currency granted by local financial entities, including payments in foreign currency made through credit or purchase cards. Other Specific Provisions Access to the MLC for savings or investments purposes of individuals Pursuant to Effective as of September 16, 2020, the Central Bank ordered under Communication “A” 7106 that purchases in pesos made abroad with a debit card and amounts in foreign currency acquired by individuals in the MLC as of September 1, 2020, for the payment of obligations between residents under section 3.6 of the FX Regulations, including payments for credit card purchases in foreign currency, will be deducted, as from the subsequent calendar month, from the U.S.$200 monthly quota. If the amount of such purchases exceeds the quota available for the following month or such quota has been already absorbed by other purchases made since September 1, 2020, such deduction will be made from the quotas of the following months until completing the amount of those purchases. In The relevant institution shall check the online system implemented by the Central Bank to verify whether the person 206 beneficiary of In addition, Access to the local exchange market is also allowed for the payment of premiums, creation of guarantees and payment of interest rate hedge agreements under obligations by residents vis-à-vis foreign creditors that are reported and validated, as applicable, under the External Assets and Liabilities Reporting Regime, provided that it does not cover risks higher than the external liabilities actually incurred by the Moreover, any persons who received loans denominated in pesos directed to SMEs listed in items 2 and 3 of Communication “A” 7006 of the The Central Bank has also established that individuals benefitting from the provisions of item 4 of Communication “A” 6949, as supplemented, and section 2 of Decree No. 319/20 may not, until repaying in full the financed amount or while the benefit regarding the adjustment of the value of the installment continues, as applicable, (i) access the MLC for the purpose of forming external assets, providing family assistance and entering into derivative transactions; and (ii) arrange for the sale in Argentina of securities with settlement in foreign currency or transfer them to Sale of
In accordance with
Financial institutions may carry out currency swap and arbitrage
207
If the
In addition, any person who has outstanding facilities in pesos under the scope of Communications “A” 6937, “A” 6993, “A” 7006, “A” 7082 of the Central Bank, as supplemented (i.e., credit facilities at subsidized interest rates) will be prevented from selling securities to be settled in foreign Use of export proceeds for the payment of new issuances of debt securities Pursuant to Communication “A” 7196, as of January 7, 2021, proceeds in foreign currency from exports of goods and services may be used for the payment of principal and interest under new duly registered issuances of debt securities, to the extent that:
Use of export proceeds for the payment of debts denominated in foreign currency Communication “A” 7138 provides for cases in which proceeds in foreign currency from exports of goods and services may be used for the payment of certain debts denominated in foreign currency, indicating that, if the conditions set forth in item 1 of Communication “A” 7123 (relating to use of proceeds, the timing of entry and settlement of funds on the MLC and the monitoring of the transaction by a local financial institution) are met, proceeds in foreign currency from exports of goods and services may be used for:
208 In addition, Communication “A” 7138 provided for new transactions that may be paid out of foreign currency export proceeds:
Export proceeds to guarantee new indebtedness Communication “A” 7196 allows for proceeds from exports of goods and services held in local or foreign financial institutions to guarantee payment of new indebtedness entered into pursuant to Communication “A” 7123 and has complied with the mandatory repatriation and settlement obligation, as from January 7, 2021. Funds in these accounts shall not exceed at any time 125% of the principal and interest to be paid in the current month and the following six calendar months, in accordance with the scheduled of payments as agreed upon with the creditors. Funds exceeding such amount must be repatriated and settled through the MLC subject to the applicable foreign exchange rules. In the event the financial agreement entered into requires the funds to be deposited for a period exceeding that which has been established for its mandatory settlement, the exporter may request this latter period be extended up until five business day after the former. Access to the MLC for the constitution of guarantees Residents may access the MLC for the constitution of guarantees in connection to new indebtedness entered into as of January 7, 2021, pursuant to the Communication “A” 7123 refinancing scheme, or in connection to local trusts created to guarantee principal and interest payments of such new indebtedness. Such guarantees are to be held in local financial institutions or, in the event of foreign indebtedness, in foreign financial institutions, in an amount equal to that established in the agreement, pursuant to the following conditions:
Funds which are not applied to the payment of principal and interest or the conservation guarantee detailed herein must be settled through the MLC within five business days from its maturity date. Access to the MLC for the payment of new issuances of debt securities New duly registered issuances of foreign-denominated debt securities, issued as of January 7, 2021, intended to refinance pre-existing debt, when seeking access to the MLC for the payment of principal and interest under such new indebtedness, shall be considered to have complied with the obligation to mandatory settle through foreign currency for an amount equivalent to the refinanced principal, the interest accrued up to the date the refinancing was settled and, to the extent that the new debt securities do not schedule principal maturities before 2023, the interest that would accrue until December 31, 2022 by the indebtedness which is refinanced in advance and/or by the deferment of the refinanced principal and/or by the interest which would accrue on the amounts so refinanced. 209 Special regime for financings under Plan Gas IV On November 19, 2020, the Central Bank issued Communication “A” 7168 which provided for specific regulations applicable to transactions entered and settled through the MLC as of November 16, 2020 intended for the financing of projects falling within the scope of the Plan Gas IV. In particular, Communication “A” 7168 provides that:
In all cases, the Local collections for exports of on-board supplies to foreign flagged means of transport (regimen de ranchos) On February 5, 2020, the Central Bank issued Communication “A” 7217, establishing that, regarding local collections for exports of on-board (regimen de ranchos) supplies to foreign flagged means of transport, it shall be considered that the follow-up of the shipment permit is totally or partially complied with, for an amount equivalent to the amount paid locally in Pesos and/or in foreign currency to the exporter by a local agent that owns the foreign flagged means of transport, as long as the following conditions are met:
210
The entity which states the precedent shall previously verify compliance with all the other requirements stablished in Section 3.2.2. of the FX Regulations except for provisions of Section 3.13. and the local agent of the company that owns the foreign flagged means of transport shall have filed an affidavit stating that it has not transferred or will transfer funds abroad for the proportional amount of the operations included in the certification.
The local agent of the company that owns the foreign flagged means of transport shall not have used this mechanism for an amount greater than U.S.$250,000 in the calendar month. Central Bank’s Reporting Systems Advance information on foreign exchange transactions The institutions authorized to deal in foreign exchange shall provide the Central Bank, at the end of each business day and two business days in advance, with information on transactions relative to outflows through the MLC in daily amounts equal to or higher than the equivalent of U.S.$50,000. Customers of licensed institutions shall provide such institutions with information sufficiently in advance so that they may comply with the requirements under this reporting regime and, accordingly, to the extent any further requirements set forth in the exchange regulations are simultaneously satisfied, they may process the exchange transactions. Other foreign exchange regulations Pursuant to General Resolution No. 836/20, the CNV provided that mutual investment funds in pesos shall invest at least 75% of their assets in financial instruments and marketable securities issued in Argentina exclusively in local currency. General Resolution No. 838/20 clarified that such requirement is not applicable to investments in assets issued or denominated in foreign currency that are made and paid in pesos and the interest and principal amounts whereof are exclusively paid in pesos. Under Interpretation Criterion No. 17 (referring to General Resolution No. 836/2020), the CNV established that new investments in assets issued in foreign currency may be made only if the aggregate of the assets listed in section 78, Article XV, Chapter III, Title XVIII of the CNV Rules plus the rest of the assets issued in a currency other than pesos does not exceed 25% of the assets of the relevant mutual investment fund. Pursuant to General Resolution No. 871/2020, sales transactions of securities to be settled in foreign currency and in a foreign jurisdiction will be carried out provided that a minimum holding period of three business days is observed to be counted as from the date such securities are credited with the relevant depositary. As regards to sales of securities to be settled in foreign currency and in a local jurisdiction, the minimum holding period will be two business days to be counted as from the date such securities are credited with the relevant depositary. These minimum holding periods shall not be
As regards incoming transfers, General Resolution No. 871/2020 provided that securities transferred by foreign depositaries and credited with a 211 settlement of transactions in foreign currency and in local jurisdiction, the minimum holding period will be two business In addition, in the price-time priority order matching segment, transactions for the purchase and sale of fixed-income securities denominated and payable in U.S. dollars issued by Argentina under local laws by sub-accounts subject to section 6 of the FX Regulations and that are also regarded as qualified investors, the following requirements must be observed:
Foreign Exchange Criminal Regime Any operation that does not comply with the provisions of the FX Regulations is subject to Law No. 19,359 of Foreign Exchange Criminal Regime. Notwithstanding the above mentioned measures adopted by the current administration, the Central Bank and the Item 10.ETaxation The following discussion contains a description of the principal Argentine and United States federal income tax consequences of the acquisition, ownership and disposition of our Class B shares or ADSs. It does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase our Class B shares or ADSs, it is not applicable to all categories of investors, some of which may be subject to special rules, and it does not specifically address all of the Argentine and Material Argentine Tax Considerations The following discussion is a summary of the material Argentine tax considerations relating to the purchase, ownership and disposition of our Class B shares or ADSs. The following summary is based upon tax laws of Argentina as in effect on the date of this document and is subject to any change in Argentine law that may come into effect after such On On December 23, 2019, Law No. 27,541 was published in the Official Gazette, which 212 No. 99/2019 (published in the Official Gazette on December 28, 2019), General Resolution (AFIP) No.4659/2020 (published in the Official Gazette on January 7, 2020) Additionally, on June 16, 2021 and on August 4, 2021, Laws No. 27,630 and 27,638 were published in the Official Gazette, respectively, which also introduce modifications to the Income Tax Law. General Resolution (AFIP) No. 5060 (published in the Official Gazette on August 30, 2021) regulated, inter alia, the income tax withholding rates applicable to dividends and profits pursuant to the modifications introduced by Law No. 27,630 to the Income Tax Law. In addition, Decree No. 621/2021 (published in the Official Gazette on September 23, 2021) regulates the modifications introduced by Law No. 27,638 to the Income Tax Law and Personal Assets Tax Law. General Resolution (CNV) No. 917 (published in the Official Gazette on January 3, 2021) regulates the application of Law No. 27,638 and Decree No. 621, 2021, establishing, among other issues, a list of instruments issued in national currency that are within the scope of the tax exemptions foreseen in Law No. 27,638. In relation to the Personal Assets Tax Law, Law No. 27,667 (published in the Official Gazette on December 31, 2021) introduces modifications to said law, which are regulated by Decree No. 912/2021 (published in the Official Gazette on December 31, 2021).
This summary includes the modifications under the mentioned regulations, nevertheless, please note it does not include all of the tax considerations that may be relevant to you or your situation, particularly if you are subject to special tax rules. This summary does not purport to be a comprehensive description of all the Argentine tax considerations that may be relevant to a holder of our Class B shares or ADSs. No assurance can be given that the courts or tax authorities responsible for the administration of the laws and regulations described in this Income Tax Taxation on According to the amendments introduced to the Income Tax Law by virtue of the
Argentine individuals and undivided estates located in Argentina are not allowed to offset income arising from the distribution of dividends on Argentine shares with other losses arisen in other type of operations.
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The equalization tax (the “Equalization Tax”) is applicable when the dividends distributed are higher than the “net accumulated taxable income” of the immediate previous fiscal period from when the distribution is made. In order to assess the “net accumulated taxable income” from the income calculated by the Income Tax Law, the income tax paid in the same fiscal period should be subtracted and the local dividends received in the previous fiscal period should be added to such income. The Equalization Tax would be imposed as a 35% withholding tax on the shareholder receiving the dividend. Dividend distributions made in property (other than cash) would be subject to the same tax rules as cash dividends. Stock dividends on fully paid shares For Argentine individuals and undivided estates not registered before the Argentine tax authorities as taxpayers for income tax purposes as well as for non-Argentine residents, the Dividend Tax withholding will be considered a final payment. Argentine individuals and undivided estates are not allowed to offset income arising from the distribution of dividends on Argentine shares with losses from other types of operations. The Income Tax Law provides a first in-first out rule pursuant to which distributed dividends correspond to the former accumulated profits of the distributing company. Holders are encouraged to consult a tax advisor as to the particular Argentine income tax consequences derived from profit distributions made on Class B shares and ADSs. Capital gains tax According to Capital gains obtained by Argentine corporate entities (in general, entities organized or incorporated under Argentine law, certain traders and intermediaries, local branches of non-Argentine entities, sole proprietorships and individuals carrying on certain commercial activities in Argentina, among others) derived from the sale, exchange or other disposition of shares in Argentine entities are subject to income tax on the net income at the rate of 30% for fiscal years initiated after January 1, 2018 and up to December 31,
The amounts stated in the Losses arising from the sale of shares can only be offset against income derived from the same type and source of operations, for a five-year carryover period. Starting in 2018, income obtained by Argentine resident individuals and undivided estates located in Argentina from the sale of shares and other securities are exempt from capital gains tax in the following cases: (i) when the shares are placed through a public offering authorized by the 214 of Section 26 subsection u) of the Income Tax Law, Argentine resident individuals and undivided estates located in Argentina are exempt from capital gains tax derived from their sale, exchange, or disposal to the extent said securities are listed on stock exchanges or securities markets authorized by the CNV, without being applicable the provisions of Section 109 of the Income Tax
If Argentine resident individuals and undivided estates located in Argentina perform a conversion procedure of securities representing shares, that do not meet the exemption requirements stated in the conditions mentioned in points (i), (ii) and (iii) of the paragraph above, to hold instead the underlying shares that do comply with said requirements, such conversion would be considered a taxable transfer of the securities representing shares for which the fair market value by the time the conversion takes place should be considered. The same tax treatment will apply if the conversion process involves shares that do not meet the exemption requirements stated above that are converted into securities representing shares to which the exemption is applicable. Once the underlying shares or securities representing shares are converted, the results obtained from the sale, exchange, swap or any other disposition thereof would be exempt from income tax provided that the conditions mentioned in points (i), (ii) and (iii) of the paragraph above are met. Pursuant to In addition, the In case Foreign Beneficiaries conduct a conversion process of shares that do not meet the exemption requirements, into securities representing shares that are exempt from income tax pursuant to the conditions stated above, such conversion would be considered a taxable transfer for which the fair market value by the time the conversion takes place should be considered. In case the exemption is not applicable and the For Foreign Beneficiaries resident in or whose funds come from jurisdictions considered as non-cooperative for purposes of fiscal transparency, the tax rate applicable to the sales of shares and/or ADSs is assessed at 35%. Pursuant to General Resolution AFIP No. 4227/2018, the presumed net basis on which the 35% rate should apply in the case of sale or disposition of securities is assessed at 90% (the effective rate being 31.5% on the gross sale price). Such General Resolution 215 As a result of the Holders are encouraged to consult a tax advisor as to the particular Argentine income tax consequences derived from holding and disposing of Class B shares and ADSs and whether any different treatment under a treaty to avoid double taxation could apply.
Tax treaties Argentina has signed tax treaties for the avoidance of double taxation with Australia, Belgium, Bolivia, Brazil, Canada, Chile, Denmark, Finland, France, Germany, Italy, Mexico, the Netherlands, Norway, Qatar, Russia, Spain, Sweden, Switzerland, Personal assets tax
Holders are encouraged to consult a tax advisor as to the particular Argentine personal assets tax consequences derived from the holding of Class B shares and ADSs. Value added tax The sale, exchange or other disposition of our Class B shares or ADSs and the distribution of dividends are exempted from the value added tax. Tax on debits and credits on Argentine bank accounts All credits and debits originated in bank accounts held at Argentine financial institutions, as well as certain cash payments, are subject to this tax, which is assessed at a general rate of 0.6%. There are also increased rates of 1.2% and reduced rates of 0.075%. According to Section 45 of Law 216 TDC has certain exemptions. Debits and credits in special checking accounts (created under Communication “A” 3250 of the Argentine Central Bank) are exempted from this tax if the accounts are held by foreign legal entities and if they are exclusively used for financial investments in Argentina. For certain exemptions and/or tax rate reductions to apply, bank accounts must be registered with the Tax Authority (AFIP-DGI) in accordance with Pursuant to Law No. 27,432 (published in the Official Gazette on December 29, 2017), the TDC shall apply until December 31, 2022, inclusive. Whenever financial institutions governed by Law No. 21,526 make payments acting in their own name and behalf, the application of this tax is restricted to certain specific transactions. Such specific transactions include, among others, dividends or profits distributions.
It is noted that according to Decree No. 796/2021, the TDC exemptions foreseen in Decree No. 380/2001 and other regulations of the same nature shall not be applicable in those cases where cash payments are related to the purchase, sale, exchange, intermediation and/or any other type of operation on crypto assets, cryptocurrencies, digital currencies or similar instruments, in the terms defined by the applicable rules. Tax on minimum presumed income Pursuant to Law No. 27,260, passed by the Argentine Congress on June 29, 2016, the tax on minimum presumed income was eliminated for tax periods beginning as of January 1, 2019. PAIS Tax (“Impuesto para una Argentina inclusiva y solidaria”) Law Investors should consider the provisions that apply to them according to their specific case. In addition, General Resolution (AFIP) N° 4815/2020 established on the operations subject to PAIS Tax and for the taxpayers defined in Article 36 of Law No. 27,541 that qualify as Argentine residents, in the terms of Article 116 and subsequent of the Income Tax Law, the application of a thirty-five percent (35%) income tax collection on the amounts in Ps. that, for each case, are detailed in Article 39 of the Law No. 27,541. Said collection will have the character of payment on account and will be computable in the annual income tax return or, where appropriate, the annual personal assets tax return, corresponding to the fiscal period in which they were incurred. Additionally, this general resolution establishes a refund regime for those persons or entities to whom the established collection has been applied and who are not taxpayers of income tax or, where appropriate, personal assets tax. Gross turnover tax This tax is a In addition, gross turnover tax could be applicable on the transfer of Class B shares or ADSs and on the perception of dividends to the extent such activity is conducted on a regular basis within an Argentine province or within the City of Buenos Aires. However, under the Tax Code of the City of Buenos Aires, any transaction with shares as well as the perception of dividends are exempt from gross turnover tax. In accordance with the stipulations of the Fiscal Consensus entered into by and amongst the Argentine Executive Branch, the representatives of the Provinces and the City of Buenos Aires on November 16, 2017 and approved by the Argentine Congress on December 21, 2017 (the so-called “Fiscal Consensus” and/or the “Consensus”), local jurisdictions took on certain commitments in connection with certain taxes that are within their 217 that have their legislative branches approve the Consensus and such effectiveness shall not commence if such approval has not been granted. When it comes to the impact of the Consensus on gross turnover tax, the Argentine provinces and the City of Buenos Aires agreed to grant exemptions and impose maximum tax rates on certain businesses and for certain periods. However, it is important to point out that
Regimes for the Collection of Provincial Tax Revenues on the Amounts Credited to Bank Accounts Different tax authorities (i.e., City of Buenos Aires, Corrientes, Córdoba, Tucumán, Province of Buenos Aires and Salta, among others) have established collection regimes for gross turnover tax purposes applicable to those credits verified in accounts opened at financial entities, of any type and/or nature and including all branch offices, irrespective of territorial location. These regimes apply to those taxpayers included in the lists provided monthly by the tax authorities of each jurisdiction. The applicable rates may vary depending on the jurisdiction involved. Collections made under these regimes shall be considered as a payment on account of the gross turnover tax. Note that certain jurisdictions have excluded the application of these regimes on certain financial transactions. By means of Fiscal Consensus 2021, the parties assumed the commitment to take the necessary measures according to the procedures established in each jurisdiction with the aim to apply any turnover tax automatic refund or compensation mechanism for those taxpayers (either local or subject to the Multilateral Convention rules) that have outstanding balances in their favor generated by withholdings, collections and/or similar actions, to the extent certain specific requirements are met in each case. Holders of Class B shares and ADSs shall corroborate the existence of any exclusions to these regimes in accordance with the jurisdiction involved.
Stamp tax Stamp tax is a provincial tax, which is also levied in the City of Buenos Aires, applicable to the execution of onerous transactions within an Argentine provincial jurisdiction or the City of Buenos Aires or outside an Argentine provincial jurisdiction or the City of Buenos Aires but with effects in such jurisdiction. In the City of Buenos Aires, acts or instruments related to the negotiation of shares and other securities duly authorized for its public offering by the CNV are exempt from stamp Regarding the Fiscal Consensus, almost all the provinces in Argentina and the City of Buenos Aires have committed to establish for the stamp tax a maximum tax rate of 0.75% as from January 1, 2019, 0.5% as from January 1, 2020, 0.25% as from January 1, 2021 and abrogate the stamp tax starting from January 1, 2022. However, such commitment was delayed by one calendar year pursuant to Law 218 of the previous Fiscal Consensus 2017, 2018, 2019 and 2020, maintaining only the enforcement of those commitments that have been complied with at the date of signing of the Fiscal Consensus 2021. These agreements shall be effective only in connection with the jurisdictions that have their legislative branches approve them and such effectiveness shall not commence if such approval has not been granted. Holders of Class B shares and ADSs are encouraged to consult a tax advisor as to the particular stamp tax consequences arising in the involved jurisdictions. Prospective investors should consider the tax consequences in force in the above mentioned jurisdictions at the time the concerned document is executed and/or becomes effective. Other taxes There are no federal inheritance or succession taxes applicable to the ownership, transfer or disposition of our Class B shares or ADSs. However, it is noted that pursuant to the Fiscal Consensus 2021 signed between the Argentine Executive Branch and the representatives of the Provinces, except for the City of Buenos Aires, the parties assumed the commitment to legislate during 2022 a tax applicable on any increase in wealth obtained as a result of any free transmission or act of such nature, which includes assets located in their territory and/or acts that benefit individuals or legal entities domiciled in such jurisdictions. Increasing marginal rates would be applicable as the amount transferred increases in order to grant progressiveness to the tax, reaching all transmissions that imply a patrimonial enrichment for free, including, but not limited to, inheritances, donations, legacies and inheritance advances. At the provincial level, the province of Buenos Aires imposes a tax on free transmission of assets, including inheritance, legacies, donations, etc. For tax period Court tax In the event that it becomes necessary to institute enforcement proceedings in relation to our Class B shares and ADSs in the federal courts of Argentina or the courts sitting in the City of Buenos Aires, a court tax (currently at a rate of 3.0%) will be imposed on the amount of any claim brought before such courts. Certain court and other taxes could be imposed on the amount of any claim brought before the Province courts. Incoming Funds Arising from Non-Cooperative or Low or Nil Tax Jurisdictions According to Section 82 of the As defined under Section 19 of the Argentine Income Tax Law, non-cooperative jurisdictions are those countries or jurisdictions that do not have an agreement in force with the Argentine government for the exchange of information on tax matters or a treaty to avoid international double taxation with a broad clause for the exchange of information. Likewise, those countries that, having an agreement of this type in force, do not effectively comply with the exchange of information will also be considered as non-cooperative. The aforementioned treaties and agreements must comply with international standards of transparency and exchange of information on fiscal matters to which the Argentine Republic has committed. The Executive Branch Bosnia and Herzegovina; Brecqhou; Burkina Faso; State of
219 Republic of Angola; Republic of Belarus; Republic of Botswana; Republic of Burundi; Republic of Cape Verde; Republic of Ivory Coast; Republic of Cuba; Republic of the Philippines; Republic of Fiji; Republic of the Gambia; Republic of Guinea; Republic of Equatorial Guinea; Republic of Guinea- Bissau; Republic of Haiti; Republic of Honduras; Republic of Iraq; Republic of Kenya; Republic of Kiribati; Republic of the Union of Myanmar; Republic of Liberia; Republic of Madagascar; Republic of Malawi; Republic of Maldives; Republic of Mali; Republic of Mozambique; Republic of Namibia; Republic of Nicaragua; Republic of Palau; Republic of Rwanda; Republic of Sierra Leone; Republic of South Sudan; Republic of Suriname; Republic of Tajikistan; Republic of Trinidad and Tobago; Republic of Uzbekistan; Republic of Yemen; Republic of Djibouti; Republic of Zambia; Republic of Zimbabwe; Republic of Chad; Republic of the Niger; Republic of Paraguay; Republic of the Sudan; Democratic Republic of Sao Tome and Principe; Democratic Republic of East Timor; Republic of the Congo; Democratic Republic of the Congo; Federal Democratic Republic of Ethiopia; Lao People’s Democratic Republic; Socialist Democratic Republic of Sri Lanka; Federal Republic of Somalia; Federal Democratic Republic of Nepal ; Gabonese Republic; Islamic Republic of Afghanistan; Islamic Republic of Iran; Islamic Republic of Mauritania; People’s Republic of Bangladesh; People’s Republic of Benin; Democratic People’s Republic of Korea; Socialist Republic of Vietnam ; Togolese Republic; United Republic of Tanzania; Sultanate of Oman; British Overseas Territory Pitcairn, Henderson, Ducie and Oeno Islands; Tristan da Cunha; Tuvalu; and Union of the Comoros. In turn, low or nil tax jurisdictions are defined as those countries, domains, jurisdictions, territories, associated states or special tax regimes According to the legal presumption under Section 18.2 of Law No. 11,683, as amended, incoming funds from non-cooperative or low or nil jurisdictions could be deemed unjustified net worth increases for the Argentine party, no matter the nature of the operation involved. Unjustified net worth increases are subject to the following taxes:
Although the concept of “incoming funds” is not clear, it should be construed as any transfer of funds:
The Argentine party may rebut such legal presumption by duly evidencing before the Argentine tax authority that the funds arise from activities effectively performed by the Argentine party or by a third party in such jurisdiction, or that such funds have been previously declared. THE ABOVE SUMMARY IS NOT INTENDED TO BE A COMPLETE ANALYSIS OF ALL TAX CONSEQUENCES RELATING TO THE OWNERSHIP OR DISPOSITION OF CLASS B SHARES OR ADSs. HOLDERS ARE ENCOURAGED TO CONSULT THEIR TAX ADVISORS CONCERNING THE TAX CONSEQUENCES ARISING IN EACH PARTICULAR CASE. United States Federal Income Tax Considerations This discussion describes certain U.S. federal income tax consequences for a U.S. holder (as defined below) of acquiring, owning and disposing of the Class B shares and ADSs (and to the extent provided under “Information Reporting and Backup Withholding” and “FATCA” below, investors other than U.S. holders). This discussion does not contain a detailed description of all potential U.S. federal income tax consequences and does not address the Medicare tax on net investment income, U.S. federal estate and gift taxes or the effects of any state, local or non-U.S. tax laws. In addition, this discussion does not apply to certain classes of holders, such as persons that own or are deemed to own 10% or more of the voting power or 10% or more of the total value of all classes of our stock, dealers in securities or currencies, regulated investment companies, real estate investment trusts, traders that elect mark-to-market 220 accounting for securities holdings, banks or other financial institutions, insurance companies, tax-exempt organizations, entities treated as partnerships for U.S. federal income tax purposes (or a partner therein), persons who are liable for the alternative minimum tax, persons who acquired the Class B shares or ADSs pursuant to the exercise of an employee stock option or otherwise as compensation, persons holding the Class B shares or ADSs in connection with a trade or business conducted outside of the United States, persons holding the Class B shares or ADSs as a position in a “straddle” or conversion transaction, or as part of a “synthetic security” or other integrated financial transaction, persons required to accelerate the recognition of any item of gross income with respect to
This discussion is based on the provisions of the Internal Revenue Code of 1986, as amended (“the Code”), Treasury regulations, administrative rulings and judicial authority, all as in effect as of this date. All of these laws and authorities are subject to change, possibly on a retroactive basis. You should consult your own tax advisors concerning the U.S. federal, state, local and non-U.S. tax consequences of purchasing, owning and disposing of the Class B shares and ADSs in light of your particular circumstances. For purposes of this summary, you are a U.S. holder if you are a beneficial owner of Class B shares or ADSs and you are, for U.S. federal income tax purposes, In general, if you are the beneficial owner of ADSs, you will be treated as the beneficial owner of the Class B shares represented by those ADSs for U.S. federal income tax purposes, and no gain or loss will be recognized if you exchange an ADS for the Class B shares represented by that ADS. Dividends Subject to the discussion under “—Passive Foreign Investment Company” below, the gross amount of distributions paid with respect to the Class B shares or ADSs (including the amount of any Argentine taxes withheld) will be treated as dividends to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Because we do not maintain calculations of earnings and profits under U.S. federal income tax principles, it is expected that distributions generally will be reported to you as dividends. Any dividends you receive (including any withheld taxes) will be Dividends received by certain non-corporate U.S. holders will generally be subject to taxation at reduced rates if the dividends are “qualified dividends.” Subject to applicable limitations (including a minimum holding period requirement), dividends paid on the ADSs will be treated as qualified dividends if (i) the ADSs are readily tradable on an established securities market in the United States and (ii) Because the Class B shares are not themselves listed on a U.S. exchange, dividends received with respect to the Class B shares that are not represented by ADSs generally will not be treated as qualified dividends. U.S. holders of Class B shares or ADSs should consult their own tax advisors regarding the availability of the reduced dividend tax rate in the light of their own particular circumstances. Dividends received by U.S. holders will generally constitute 221 Material Argentine Tax Considerations”) will not be a foreign income tax eligible for credit against a U.S. holder’s U.S. federal income tax liability. The rules with respect to foreign tax credits are complex and U.S. holders are urged to consult their independent tax advisors regarding the availability of the foreign tax credit under their particular circumstances.
Passive Foreign Investment Company Based on the past and projected composition of our income and assets, and the valuation of our assets, In general, we will be a PFIC for any taxable year in which:
For this purpose, passive income generally includes dividends, interest, royalties and rents (other than royalties and rents derived in the active conduct of a trade or business and not derived from a related person). If we own at least 25% (by value) of the stock of another corporation, for purposes of determining whether we are a PFIC, we will be treated as owning our proportionate share of the other corporation’s assets and receiving our proportionate share of the other corporation’s income. Our determination with respect to our PFIC status is based in part upon certain proposed U.S. Treasury regulations that are not yet in effect and which are subject to change in the future. Those regulations and other administrative pronouncements from the The determination of whether we are a PFIC is made annually. If we are a PFIC for any taxable year during which you hold our Class B shares or ADSs and you do not make a timely mark-to-market election, as described below, you will be subject to special tax rules with respect to any “excess distribution” received and any gain realized from a sale or other disposition, including a pledge, of such Class B shares or ADSs. Distributions received in a taxable year will be treated as excess distributions to the extent that they are greater than 125% of the average annual distributions received during the shorter of the three preceding taxable years or your holding period for the Class B shares or ADSs. Under these special tax rules:
Although the determination of whether we are a PFIC is made annually, if we are a PFIC for any taxable year in which you hold our Class B shares or ADSs, you will generally be subject to the special tax rules described above for that year and for each subsequent year in which you hold Class B shares or ADSs (even if we do not qualify as a PFIC in such subsequent years). However, if you own Class B shares or ADSs and we cease to be a PFIC, you may be able to avoid the continuing impact of the PFIC rules by 222 making a special election to recognize gain as if your Class B shares or ADSs had been sold on the last day of the last taxable year during which we were a PFIC. You are urged to consult your own tax advisor about this election. In lieu of being subject to the special tax rules discussed above, you may make a mark-to-market election with respect to your Class B shares or ADSs provided such Class B shares or ADSs are treated as “marketable stock.” Class B shares or ADSs generally will be treated as marketable stock if the Class B shares or ADSs shares are regularly traded on a “qualified exchange or other market” (within the meaning of the applicable Treasury regulations). Under current law, the mark-to-market election may be available to holders of ADSs for as long as the ADSs are traded on the NYSE, which constitutes a qualified exchange, although there can be no assurance that the ADSs will be “regularly traded” for purposes of the mark-to-market election. The Class B shares are traded on the ByMA, which must meet certain trading, listing, financial disclosure and other requirements to be treated as a qualified exchange for these purposes, and no assurance can be given that the Class B shares will be “regularly traded” for purposes of the mark-to-market election. If you make an effective mark-to-market election, for each taxable year that we are a PFIC you will include as ordinary income the excess of the fair market value of your Class B shares or ADSs at the end of the year over your adjusted tax basis in the Class B shares or ADSs. You will be entitled to deduct as an ordinary loss in each such year the excess of your adjusted tax basis in the Class B shares or ADSs over their fair market value at the end of the year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. Your adjusted tax basis in the Class B shares or ADSs will be increased by the amount of any income inclusion and decreased by the amount of any deductions under the mark-to-market rules. In addition, upon the sale or other disposition of your Class B shares or ADSs in a year that we are a PFIC, (i) any gain will be treated as ordinary income and (ii) any loss will be treated as ordinary loss, but only to the extent of the net amount of previously included income as a result of the mark-to-market election. If you make a mark-to-market election, it will be effective for the taxable year for which the election is made and all subsequent taxable years unless the Class B shares or ADSs are no longer regularly traded on a qualified exchange or other market, or the IRS consents to the revocation of the election. You are urged to consult your tax advisor about the availability of the mark-to-market election, and whether making the election would be advisable in your particular circumstances. Alternatively, holders of shares in a PFIC can sometimes avoid the special tax rules described above by electing to treat the PFIC as a “qualified electing fund” under Section 1295 of the Code. However, this option is not available to you because we do not intend to comply with the requirements necessary to permit you to make this election. If we are a PFIC for any taxable year during which you hold our Class B shares or ADSs and any of our non-U.S. subsidiaries is also a PFIC, you will be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC for purposes of the application of the PFIC rules. You will not be eligible to make the mark-to-market election described above in respect of any lower- tier PFIC. You are urged to consult your tax advisors about the application of the PFIC rules to any of our subsidiaries. You will generally be required to file IRS Form 8621 if you hold our Class B shares or ADSs in any year in which we are classified as a PFIC. You are urged to consult your tax advisors concerning the U.S. federal income tax consequences of holding our Class B shares or ADSs if we are considered a PFIC in any taxable year.
Sale or Other Disposition Upon a sale or other disposition of the Class B shares or ADSs, U.S. holders will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference between the U.S. dollar value of the amount realized on the disposition and the U.S. holder’s tax basis, determined in U.S. dollars, in the Class B shares or ADSs. Subject to the discussion under “—Passive Foreign Investment Company” above, such gain or loss will generally be capital gain or loss, and will be long-term capital gain or loss if the Class B shares or ADSs were held for more than one year. A U.S. holder’s ability to offset capital losses against ordinary income is limited. Long-term capital gain recognized by 223 Foreign Financial Asset Reporting Certain U.S. holders that own “specified foreign financial assets” with an aggregate value in excess of U.S.$50,000 on the last day of the taxable year or U.S.$75,000 at any time during the taxable year are generally required to file an information statement along with their tax returns, currently on Form 8938, with respect to such assets. “Specified foreign financial assets” include any financial accounts held at a non-U.S. financial institution, as well as securities issued by a non-U.S. issuer (which would include the Class B shares and ADSs) that are not held in accounts maintained by financial institutions. Higher reporting thresholds apply to certain individuals living abroad and to certain married individuals. Regulations extend this reporting requirement to certain entities that are treated as formed or availed of to hold direct or indirect interests in specified foreign financial assets based on certain objective criteria. U.S. holders that fail to report the required information could be subject to substantial penalties. In addition, the statute of limitations for assessment of tax would be suspended, in whole or part. Prospective investors should consult their own tax advisors concerning the application of these rules to their investment in the Class B shares and ADSs, including the application of the rules to their particular circumstances. Information Reporting and Backup Withholding Dividends paid on and proceeds from the sale or other disposition of the Class B shares or ADSs that are A holder that is a non-resident alien individual, a foreign corporation or a FATCA We have entered into an agreement with the IRS effective April 24, 2014, pursuant to which we have agreed to comply with certain due diligence, information reporting and withholding obligations pursuant to
In addition, it is possible that under future guidance, payments on the Class B shares and ADSs may be subject to a withholding tax of up to 30% under rules applicable to foreign “passthru payments.” Regulations implementing this rule have not yet been adopted or proposed and the IRS has indicated that any such regulations would not be effective prior to the date that is two years after the date on which final regulations on this issue are published. FATCA is particularly complex and its application to Argentine financial institutions is uncertain at this time. Although we have registered with the IRS and believe that we are compliant with obligations imposed on us under FATCA, it is unclear to what extent we may be able to comply with FATCA in the future. Each holder of Class B shares or ADSs should consult its own tax advisor to obtain a more detailed explanation of FATCA and to learn how FATCA might affect each holder in its particular circumstances. Item 10.F Dividends and Paying Agents Not applicable. Item 10.G Statement by Experts Not applicable. 224 Item 10.H Documents on Display We file reports, including annual reports on Form 20-F, and other information with the SEC pursuant to the rules and regulations of the SEC that apply to foreign private issuers. Foreign private issuers, like us, are required to make filings with the SEC by electronic means. Any filings we make electronically are available to the public over the Internet at the SEC’s web site at http://www.sec.gov/. Item 10.I Subsidiary Information Not applicable. Item 11. Quantitative and Qualitative Disclosures about Market Risk Market Risk Market risk is the risk of loss arising from fluctuations in financial markets variables, such as interest rates, foreign exchange rates and other rates or prices. This risk is a consequence of lending, trading and investments businesses and mainly consists of interest rate risk and foreign exchange risk. Our market risk arises mainly from our capacity as a financial intermediary. The Risk Management Committee is responsible for approving and amending our market risk policies. The Risk Management Committee uses a risk map to explain, in detail, the trades that the trading desk at Banco Supervielle S.A. is authorized to close. The risk map also describes the maximum amounts for the position in certain products, the maximum amount of losses accepted (“stop loss”) and the maximum expected loss (given a confidence interval) over a specific time period if the portfolio were held unchanged over that period (VaR limit). It is structured in a manner that establishes different investment amounts tied to our organizational chart, where the Treasury Manager has the highest authorized amount. Alongside with the risk of Banco Supervielle S.A., there is a set of additional metrics that establish the market risk of Grupo Supervielle on a consolidated basis with its subsidiaries. Complementarily, the In the course of its monthly meetings, our Board of Directors is advised of the full range of resolutions adopted by the Assets and Liabilities Committee, including: liquidity risk, market risk, foreign currency risk and interest rate risk management.
We evaluate, upgrade and improve market risk measurements and controls on a daily basis. In order to measure significant market risks on the trading portfolio, we use the value at risk methodology, or All VaR models, while forward looking, are based on past events and are dependent upon the quality of available market data. The quality of our VaR models is therefore continuously monitored. As calculated, for the trading book VaR is an estimate of the expected maximum loss in the market value of a given portfolio over a ten-day time horizon at a one tailed 99% confidence interval. We assume a ten-day holding period and adverse market movements of 2.32 standard deviations as the standard for risk measurement and comparison. Additional information on our risk management is set forth in Note 27 to our audited consolidated financial statements. The following table shows the Basel Standardized Approach for market risk capital requirement for our combined trading portfolios in
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In order to take advantage of good trading opportunities, we have sometimes increased risk; however, during periods of uncertainty, we have also reduced it. Interest Rate Risk Central Bank Communication “A” 6397 amended the way in which the Central Bank evaluates capital needs related to interest rate risk exposure, by the way adapting its methodology to international best practices. Even though Interest Rate Risk is not part of Tier I capital requirements in a direct way, this could be the case whenever the bank reaches the status of “outlier We define interest rate risk as the risk relating to changes in the entity’s financial income and economic value as a result of fluctuations in the market’s interest rates. The following are known factors that contribute to this risk:
The Bank and Interest Rate Risk Management Model – Standardized Framework The Bank and Every financial statements and off-financial statements line-item is classified according to its maturity. For asset/liability management accounts without maturity, an internal method of analysis is used to determine possible maturity and sensitivity. The Asset and Liability Management Committee monitors interest rate risk management and each financial management team is in charge of executing it. The Risk Management team and Financial Planning team are in charge of monitoring compliance, enforcing risk management strategies and issuing periodic reports. 226 Interest Rate Risk Capital Requirement The Bank evaluates its minimum capital requirements relating to interest rate risk through the use of a MVE-VaR internal model, using a holding period of three months and a 99% confidence interval. This quantitative model factors in the economic capital required for our securitization risk. The results are then compared with those obtained from the application of the Standardized Framework, being the resulting capital need the higher of those figures. In the case of
The Bank and The following tables show the Bank and
The table below shows the Bank’s consolidated exposure to an interest rate gap in foreign currency:
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Foreign Currency Risk The Risk Management Committee is responsible for deciding the net position in foreign currency to be maintained at all times according to market conditions and monitoring it regularly. Policies regarding foreign currency risk are applied at the level of our subsidiaries. Our foreign currency risk arises mainly from our operations in our capacity as a financial intermediary. Since May 2003, the fluctuation of the U.S. dollar has been included as a risk factor for the calculation of the market risk requirement, considering all assets and liabilities in U.S. dollars. As of December 31, Liquidity Risk Policies regarding liquidity risk are applied at the level of our subsidiaries. Our liquidity risk arises mainly from the operations of the Bank and The Bank and
To manage liquidity risk, the Bank and The Bank and The Risk Management Committee coordinates and supervises the identification, measuring and monitoring of liquidity risk. The Assets and Liabilities Committee develops the strategies that allow for adequate liquidity risk management. The Assets and 228 Liabilities Committee relies on several different departments within the Bank to develop and enforce these strategies, from issuing reports and risk management proposals to monitoring compliance with the established limits. Operational Risk We define operational risk as the risk of loss resulting from inadequate or failed internal processes due to personnel, systems or external events. The definition includes legal risk but excludes strategic and reputational risk. Legal risk can result from internal or external events and includes exposure to sanctions, penalties or other economic consequences that arise out of non-compliance with contractual or regulatory obligations. We believe that we are pioneers in the design of operational risk management frameworks in Argentina, placing emphasis on risk identification, risk management policies and our organizational model. We have tailored our framework to the requirements established by the Central Bank, the Basel accords and international best practices. The Bank’s operational risk management processes are overseen by a Operational Risk Measuring Models The risk management process is based on complying with several stages designed to evaluate the Bank’s vulnerability to operational risk events, minimizing operational risk. This method allows the Bank to achieve a better understanding of its operational risk profile and adopt the necessary measures to address any vulnerability. The stages are divided into:
The Bank and
229 Item 12. Description of Securities Other Than Equity Securities Item 12.A Debt Securities Not applicable. Item 12.B Warrants and Rights Not applicable. Item 12.C Other Securities Not applicable.
Item 12.D American Depositary Shares Fees and Expenses Holders of our
The 230 charging the book-entry system accounts of participants acting for them. The From time to time, the The
Item 13. Defaults, Dividend Arrearages and Delinquencies None. Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds None.
(a)Disclosure Controls and We maintain disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, as amended. We performed an evaluation of the effectiveness of our disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file with or submit to the SEC under the Exchange Act, as amended, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and is communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding the required disclosure. Our CEO and CFO concluded that, as of the end of the period covered by this annual report, our disclosure controls and procedures were effective to provide reasonable assurance of their reliability. Notwithstanding the effectiveness of our disclosure controls and procedures, these disclosure controls and procedures cannot provide absolute assurance of achieving their objectives because of their inherent limitations. Disclosure controls and procedures are processes that involve human diligence and compliance and are subject to error in judgment. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by our disclosure controls and procedures. (b)Management’s Annual Report on Internal Control over Financial
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(c)Attestation Report of the Registered Public Accounting Price Waterhouse & Co. S.R.L., an independent registered public accounting firm, has audited the effectiveness of our internal control over financial reporting as of December 31,
(d)Changes in Internal Control over Financial Reporting During the Year Ended December 31, During the period covered by this annual report, there have not been any changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting. Item 16. [Reserved] Item 16.A Audit committee financial expert Our Board of Directors has determined that Mrs. Laurence Nicole Mengin de Loyer is Item 16.B Code of Ethics We have adopted a code of ethics that is applicableto all our employees, which is posted on our website at: https:// We have also adopted the following policies: (i) investor communication, confidentiality and insider trading information, (ii) conflict of interest, (iii) related Information contained or accessible through our website is not incorporated by reference in and should not be considered part of this annual report. 232 Item 16.C Principal Accountant Fees and Services The following table sets forth the total amount billed to us and our subsidiaries by our independent registered public accounting firm, Price Waterhouse & Co. S.R.L., during the fiscal years ended December 31,
Audit feesare fees for professional services performed by Price Waterhouse & Co. S.R.L for the audit and limited review of Grupo Supervielle’s consolidated annual and quarterly financial statements under IFRS requirements and services that are normally provided in connection with statutory and regulatory filings. Audit-related feesconsist of fees for professional services performed by Price Waterhouse & Co S.R.L. related to attestation, review and verification services with respect to our financial information and the provision of services in connection with special reports. Tax feesare fees billed with respect to tax compliance and advisory services related to tax liabilities. All other fees include fees paid for professional services other than the services reported above under “audit Audit Committee Pre-approval Policy and Procedures
The Audit Committee has delegated to its chairperson the authority to grant pre-approvals to auditor services. The decision of the chairperson to pre-approve The Group’s CFO, or any such other person on which the CFO delegates its responsibilies, is responsible for requesting pre-approval by the Audit Committee of the services of the external auditor. The request for approval must be accompanied by the auditor’s engagement proposal describing the services to be provided and the estimated fees. In the case of services not related to auditing or taxes, the department that requires such services must substantiate the reasons for which the auditor should provide such services and must obtain the auditor’s engagement proposal describing the service, the estimated fees and, if necessary, the precautions to be taken by The external auditor’s fees for non-audit and The general annual shareholders' meeting designates the external auditor. Item 16.D Exemptions from the Listing Standards for Audit Committees Not applicable. 233 Item 16.E Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 16.F Change in Registrant’s Certifying Accountant None.
NYSE Corporate Governance Rules Under NYSE rules, foreign private issuers are subject to more limited corporate governance requirements than U.S. domestic issuers. As a foreign private issuer, we must comply with four principal NYSE corporate governance rules: (1) we must have an audit committee meeting the independence requirements of Rule 10A-3, subject to specified exceptions; (2) our CEO must promptly notify the NYSE in writing after any executive officer becomes aware of any non-compliance with the applicable NYSE corporate governance rules; (3) we must provide the NYSE with annual and interim written affirmations as required under the NYSE corporate governance rules; and (4) we must provide a brief description of any significant differences between our corporate governance practices and those followed by U.S. companies under NYSE listing standards. The table below briefly describes the significant differences between our corporate governance practice and the NYSE corporate governance rules, applicable to U.S. domestic companies.
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