2Q24 Net Income at AR$17.1 billion with ROAE at 10.4%

6M24 Net Income reached AR$72.2 billion and ROAE 22.1%

Grupo Supervielle S.A. (NYSE:SUPV, BYMA: SUPV))), ("Supervielle" or the "Company") a universal financial services group headquartered in Argentina with a nationwide presence, today reported results for the three and sixth-month period ended June 30, 2024.

Starting 1Q20, the Company began reporting results applying Hyperinflation Accounting, in accordance with IFRS rule IAS 29 ("IAS 29") as established by the Central Bank.

Management Commentary

Commenting on second quarter 2024 results, Patricio Supervielle, Grupo Supervielle's Chairman & CEO, noted: "We reported a solid performance in 2Q24. Our total loan portfolio expanded an impressive 36% sequentially and 13% year-on-year in real terms resulting in ROAE of 10% for the quarter and 22% for the first half as credit demand picks up. Noteworthy, NIM was at a high of 36% amidst the policy rate decline that significantly reduced our funding costs and drove a decrease in asset yields. Equally contributing to the good performance was the growth in fee income across our banking, asset management, and online broker operations. Furthermore, a sequential decline in expenses, indicative of our enhanced operational efficiencies and the impact of lower inflation rates, also contributed to our good results.

Supervielle deployed an early mover strategy that resulted in significant share of market and loan volume growth. This strategic move resulted in a 30 basis points (bps) market share gain in loans in the quarter and 70 bps year-to-date. Notably, we gained market share across all key products, including corporate loans, personal loans, credit cards, and car loans, where we have become the second-largest bank in auto loan origination. Also encouraging is the good performance of our recently launched mortgage product. Additionally, we reported a sequential increase in the market share of US dollar-denominated deposits, while total deposits remained relatively stable.

Asset quality remains strong, with the NPL ratio declining further to a historic low of 0.8% in the quarter benefiting from loan growth and stable risk. Cost of Risk declined to 3.8% with our sustained focus on the middle-market, corporate, payroll, and asset-backed loans as we navigate this economic slowdown.

We are committed to attracting new clients and increasing market share among SMEs and Corporates. We closed the quarter with higher balances of low-cost deposits among corporate clients, leading to increased transactional volumes as we move to become their primary bank. Additionally, we strive to provide the best customer experience and consistently look to solve customer pain points. To that end, we are pleased to report continuously improving NPS across all segments as we introduce new products and features that enhance customers' digital journey.

Our Digital Retail client base expanded to 65% of total Retail customers, with 56% of transactions completed through our App, up from 51% in the prior quarter and just 42% a year ago. This reflects our continued effort to enhance the customer experience while lowering the cost to serve.

Adoption at IOL, the leading online retail brokerage platform in the country continues to resonate with customers, with the number of active clients exceeding 500,000, further solidifying our leading position. All key metrics posted a robust performance, with transactions and assets under management doubling year-on-year. Notably, assets under management increased 23% in real terms sequentially, achieving the US$1 billion milestone while maintaining a good level of transaction activity.

Looking ahead, the government's focus on controlling inflation and maintaining a fiscal surplus, as well as ongoing deregulation across multiple sectors, is expected to boost economic activity in various industries, underscored by the recent approval of President Milei's flagship reform bill "Ley Bases". Continuing on this path is essential for sustainable growth for both the country and our company.

At Supervielle, we have a clear purpose: to serve the specific needs of our target clients with top service and the best technology. To do so, we are deploying a nimble operating model, aligning our portfolio strategy with evolving economic indicators while safeguarding asset quality and leveraging operational efficiencies. We are confident that our strategic initiatives, combined with our exposure to high-potential export-oriented industries, including mining, agribusiness, and oil and gas, position us well to drive significant growth for Supervielle as the economy recovers. This is further supported by a strong CET1 ratio above 21% concluded Mr. Supervielle.

Second quarter 2024 Highlights

PROFITABILITY

Attributable Net Income of AR$17.1 billion in 2Q24, compared to net gains of AR$23.3 billion in 2Q23 and AR$55.1 billion in 1Q24. Net Income was AR$72.2 billion in 1H24, compared to AR$25.8 billion in the same period of 2023.

ROAE of 10.4% in 2Q24 compared to 17.6% in 2Q23 and 33.8% in 1Q24. This was achieved despite a sharp decline in the monetary policy rate, which led to lower funding costs and reduced asset yields impacting net financial income. The sequential increase in fee income together with the decline in personnel & administrative expenses also contributed to this result. 1H24 ROAE reached 22.1% compared to 9.9% in 1H23. This performance was supported by increased net financial income, improvements in structural cost efficiencies, and a reduction in provisions.

ROAA was 2.3% in 2Q24 compared to 2.7% in 2Q23 and 7.4% in 1Q24. 1H24 ROAA was 4.8% compared to 1.4% in 1H23.

Profit before income tax of AR$30.9 billion in 2Q24 compared to AR$33.5 billion in 2Q23 and AR$85.8 billion in 1Q24. Profit before income tax reached AR$116.7 billion in 1H24 compared to AR$41.3 billion in 1H23.

Net Financial Income reached AR$203.3 billion in 2Q24, reflecting a 13.0% YoY increase but a 42.7% QoQ decline. The QoQ performance is attributed to the declines in inflation and yields on AR$ government securities and loans, in an environment of lower interest rates. Average loan balances increased by 26.5% but could not offset the impact of the decline in interest rates. This was partially offset by a sharp decrease in the cost of funds, benefiting from both lower market rates and decreased volumes of interest-bearing liabilities. During 2Q24, following the new monetary policy implemented by the government, which led to a gradual transition from Central Bank remunerated instruments to Government securities, average balances of Central Bank securities decreased by 56.8%, while yields on these instruments declined from 95.7% to 59.2% following monetary policy rates. Additionally, the yield of government securities declined from the levels registered in 1Q24 when yields on higher volumes of inflation-linked government securities captured the peak inflation rates of December 2023 and January 2024. Adjusted Net Financial Income (calculated as Net Financial Income + Result from exposure to inflation) was AR$144.3 billion in 2Q24, decreasing 5.1% YoY and 36.9% QoQ.

1H24 Net Financial Income of AR$ 557.9 billion, up 69.3% from AR$ 329.5 billion in 1H23. Adjusted Net Financial Income was AR$373.0 billion in 1H24, up 34.5% YoY.

Net Interest Margin (NIM) of 36.3% in a context of a lower policy rate that significantly reduced the funding costs and drove a decrease in asset yields. This compares to NIM of 26.6% in 2Q23 and 61.9% in 1Q24.

The total NPL ratio was 0.8% in 2Q24, improving by 170 and 30 basis points from 2.5% in 2Q23 and 1.1% in 1Q24, respectively.

Loan loss provisions (LLPs) totaled AR$11.7 billion in 2Q24, decreasing 11.3% YoY but increasing 23.6% QoQ.

The Coverage Ratio increased to 302.9% as of June 30, 2024, from 147.9% as of June 30, 2023, and 263.7% as of March 31, 2024.

Efficiency ratio was 50.9% in 2Q24, improving from 62.5% in 2Q23 and increasing from 34.0% in 1Q24. 1H24 Efficiency ratio was 40.5% compared to 66.7% in 1H23.

Loans to Deposits Ratio was 59.5% as of June 30, 2024, compared to 37.0% as of June 30, 2023, and 43.6% as of March 31, 2024. The AR$ loans to AR$ deposits ratio was 62.6% as of June 30, 2024, compared to 38.1% as of June 30, 2023, and 47.0% as of March 31, 2024.

Total Deposits amounted to AR$2,096.4 billion and increased 160.1% YoY and 18.1% QoQ in nominal terms. Total deposits from the private sector amounted to AR$ 1,978.4 billion, increasing 177.6% YoY and 17.5% QoQ in nominal terms compared to industry growth of 168.9% YoY and 22.2% QoQ. In real terms, total deposits decreased 30.0% YoY and 0.4% QoQ. Total private sector deposits decreased 0.9% QoQ and 25.3% YoY in real terms. Foreign currency deposits (measured in US$) amounted to US$ 375.6 million, increasing 45.3% YoY and 22.9% QoQ, while industry FX deposits increased 15.8% YoY and 5.6% QoQ.

Total Assets increased 9.5% QoQ but declined 13.0% YoY, to AR$ 3,340.0 billion as of June 30, 2024. Average AR$ Assets decreased 1.5% QoQ and 17.0% YoY. The diversification of the asset portfolio, with a gradual shift towards a larger share of private-sector loans and a reduction in the Company's investment portfolio, is expected to continue throughout the remainder of 2024.

Loans expanded 318.6% YoY and 61.1% QoQ in nominal terms to AR$1,248.2 billion. In real terms, gross loans increased 12.7% YoY and 35.9% QoQ gaining 30 bps in market share in the quarter (based on monthly daily average system loan balances), and 70 bps year-to-date.

Common Equity Tier 1 Ratio (CET1) as of June 30, 2024, was 21.3% increasing 570 bps YoY and decreasing 340 bps when compared to the reported CET1 as of March 31, 2024. CET1 QoQ performance reflects the expansion in Risk weighted assets following the loan portfolio growth, the AR$19.6 billion dividend payment made in April and the partial execution of the share buyback program for up to AR$8 billion. These were partially offset by the Company's organic capital creation in 2Q24 together with inflation adjustment of capital.

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Grupo Supervielle Reports 2Q24 and 1H24 Results