Good morning, everyone, and welcome to the Grupo Supervielle First Quarter 2022 Earnings Call. This is Ana Bartesaghi, Treasurer and IRO. A slide presentation will accompany today's webinar, which is available in the Investors section of Grupo Supervielle's Investor Relations website. Today's conference is being recorded. [Operator Instructions] Speaking during today's call will be Patricio Supervielle, our Chairman and CEO; and Mariano Biglia, our Chief Financial Officer. Also joining us are Alejandro Stengel, First Vice-Chairman of the Board and Bank CEO; and Sergio Mazzitello, our Chief Technology Officer. Alejandra Naughton, Board member of several of Grupo Supervielle's subsidiaries will also be joining us for today's call. All will be available for the Q&A session. As a reminder, today's call will contain forward-looking statements, which are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties, and I refer you to the forward-looking statements section of our earnings release and recent filings with the SEC. We have still no obligation to update or revise any forward-looking statements to reflect new or changed events or [indiscernible] Patricio Supervielle, our Chairman and CEO, will start the call discussing our key fights for the quarter. Afterwards, Mariano Biglia, our CFO, will take a different look at our performance and near-term perspective. Sergio Mazzitello, our Chief Technology Officer, will then provide an overview of our digital transformation update. Patricio, please go ahead.

Thank you, Ana. Good morning, everyone. Thank you for joining us today. Now please turn to Slide 4 of our earnings presentation. While we saw continued growth in economic activity driven by a statistics carryover following the rebound last year, market conditions remain challenging with accelerated inflation industry loans at historical lows, while Central Bank regulations continue to weigh on net interest margins. At the same time, the government recent agreement with the IMF was a positive development that requires a political consensus to implement it. Our bottom line remained negatively impacted by severance and personnel charges in connection with headcount reductions to capture operating efficiencies at the bank and at IUDU. Excluding these charges, we would have reported a net gain of ARS 446 million and an adjusted return on average equity of 2.9% compared to breakeven profitability in the fourth quarter. Other factors putting pressure on profitability includes seasonally low credit demand, which is at historic lows as well as regulatory flows on interest rates, on time deposits. And while the banking business reported positive return on average equity results at IUDU were affected by high inflation and loan loss provisions together with a deep personal reduction. Mariano will discuss this in more detail shortly. On the expense front, the efficiency ratio improved 200 basis points sequentially, although it remains highly impacted by a low revenue base. We also maintained an adequate capital base with a Tier 1 ratio of 13.8% at quarter-end, up 110 basis points sequentially, while liquidity remains strong, allowing us to navigate the current environment and implement our strategic transformation, supporting long-term sustainability. As a reminder, our capital base remains hedged against inflation through real estate investments, mortgages and sovereign bonds. The digital and operational transformation that we have been undertaking is core to…

Thank you, Patricio. Please turn to Slide 5. Several other facts impacted our loan growth this quarter, resulting in a sequential contraction of nearly 11%. Demand, we saw seasonally weak loan demand in factoring, where we have a higher market share and a drop in loans in SMEs that subsidized rate. Accelerated inflation also eroded consumers purchasing power while corporate clients have strong cash positions. At IUDU, we tightened credit standards in a more challenging environment, resulting in a sharp reduction in loan origination. Now moving on to funding on Slide 6. Total Argentine peso deposits increased nearly 3% sequentially as we exercise liquidity management, increasing institutional funding as well as the balance of Central Bank securities at quarter end, benefiting from higher spreads. Total liquidity levels were strong, both in pesos and dollars with a loan-to-deposit ratio at 49%. In turn, corporate deposits posted a 4% seasonal decline, but increased over 8% year-on-year. Turning to Slide 7. Total net interest margin increased 90 basis points sequentially to just over 19% in the quarter. A couple of factors contributed to this improved equation performance. First, the yield of peso loan increased 230 basis points as we repriced our loan book and lower subsidized loan volume. Second, the increase in the spread of Central Bank securities reflecting monetary policy rate hikes in the quarter. And lastly, higher inflation also drove higher peso need. These were partially offset by a 70 basis point increase in better cost of fund, reflecting prices in new interest rates rose by the Central Bank. Moving on to [others] quality on Slide 8. Our total NPA ratio remained stable at 4.3% sequentially with coverage at 107%. Bank's NPL ratio remained steady at 2.6%, in line with pre-pandemic and prerecession levels with cost of risk at 3.1% and…

Thank you, Mariano. Please, let's go to Slide #12. As you may know, at the bank, we continue with our full agile at scale transformation process. It means a customer-centric focus and also a technology as an enable of our business. So that's why we think, in many cases, in technology with purpose. This transformation is complex and includes much more than what we can see on the sales base. Mainly it's the cultural transformation, a new way of doing things that involves processes, managing risks, people, technology, data, innovation, et cetera. Today, I want to field this on the technology advantage we are following, we see and the result we got and how this strategy leverages the agile of the skills business to the creation of value for our clients. Please go to Slide #13. We have taken many IT decisions based on the objective of accelerating our time to market or time to buy. That's why we reorganized. And today, we have more than 50 [spots] working in multi-disciplinary teams' group in 11 tribes and also including 6 centers of excellence. But to accelerate, it's a key success factor is the empowerment and the autonomy that we have given to the teams, all the Supervielle teams. Our strategy of micro services, building APIs, continuous integrations or continuous delivery and the cloud migration out of the enabler for this operating model. Currently, we have more than 340 APIs that were developed in the last 1.5 years. And I would say that better than that, we have the teams and the talent to continue with this strategy. The data lake that allows us to become a data-driven organization, under the 360-degree customer view and support by advanced analytics and artificial intelligence models applied to the business and to the strategy.…

Thank you, Sergio. Now we can move to the Q&A session. Our first question come Ernesto Gabilondo from Bank from America.

My question is on the political outlook. Can you share with us what are the latest political events or any potential regulation that could be impacting positively or negatively the banking sector? And also related to this, I know that it's still soon, but I would appreciate your thoughts on whom are you seeing as a potential presidential candidates. And then just a second question on IUDU and the Consumer Finance segment, considering the higher rates and the high inflation, when do you think IUDU could start to show positive numbers?

Okay. I will try to answer the first question and maybe I'll then ask Alejandro to complement. But after the agreement with letter of intention of the IMF with the government, which is a positive step, we -- it's becoming more clear that in the government, there are 2 factions. And so this is giving, I think, some concern in terms of the whole swift and how drastic implementation, how -- yes, the swift implementation of the IMF agreement will take place and particularly, for instance, when you have a scenario of higher inflation. So this is training a little bit in the --this is training the policy implementation. Medium term, I think, personally, this is my personal view, I think, it's positive to have or, let's say, for next election, a clear division of the -- of views, whereby you have on one side, a view of, let's continue dragging the fleet, dragging the structural reforms and not implementing structural reforms, which is unfortunately something that has happened in the last decades in Argentina or in the other side, another view, which is, let's tackle the inflation, let's reduce the size of the government, let's reduce the taxes. I think this is going to become more clear. And the tensions in the government, in my opinion, will help this clear division of use next year for the electorate. So I don't know if you want to complement.

This is Alejandro. I think Patricio sort of summarize this tension we see, but the general trend is that we think that there will be an effort from the current administration, and we see it in the backing of the President's backing to the Finance Minister, Mr. Guzmán, in trying to be as close as possible to the IMF targets. Your second question was about potential presidential candidates. And basically, the opposition basically is talking about several candidacies, and we think it's still a bit early to determine which of these will actually make it to the finishing line. We've seen declarations by Patricio Ulrich, and to some degree, Mr. Horacio RodrÃguez Larreta; and within the opposition condition, Governor Morales. On the size of the official party of the incumbent, we've seen declarations from the current President, Mr. Fernandes and also some insinuation on Cristina Fernandez de Kirchner as well as some ideas around the governor of [indiscernible] and other alternatives. Frankly, it's very early to say to be able to determine which of these will be presidential candidates. And as you know, elections will take place on October 2023. And we hope that by that time -- before that time, the political candidates will be more clear. The third question was on IUDU.

The third question -- yes, concerning IUDU, we are going through a higher inflation scenario. And that -- and this is reflected in the expected inflation -- consensus expected inflation in -- from different sectors, and this is a negative for the industry and particularly negative for the consumer finance because it affects the capacity of individuals to take loans affecting their disposable income and also tenors are not high because of nominal rates. So this is in combination with higher underwriting standards, stricter underwriting standards that we implemented in 2021 and continue to implement in 2022. This makes more challenging to find customers taking, let's say, new customers taking credit cards in the IUDU business. And this is one side. The other thing is that we have in 2022 implemented in the first quarter, a very deep reduction in personnel, around 25% of all personnel has been -- basically, there was a severance of 25 -- about 25% of personnel. And we will continue this capture efficiencies during the rest of the year. And in this sense, in order to make -- to have a much, much more efficient franchise. So looking forward, the scenario is challenging, and we are trying to make sure that this franchise turns profitable. So in one way or the other, we will take measures in order to make it profitable by 2023.

The next questions comes from Carlos Gomez-Lopez from HSBC.

First of all, thank you, as always, for the quality of your financial presentation and the detail in your numbers. I noticed that you have included even all the retail requirements and all the obligations to lend to the particular sectors. That's very detailed and very useful. My question is again about profitability. Obviously, higher -- as you mentioned, higher inflation makes it more difficult to run the business. We have seen that the result has been worse with a higher inflation this quarter. But from what you're describing and what the market expects, we could see higher inflation going into the rest of the year. Should we, therefore, expect that because of the inflation adjustment, your reported number will continue to be negative and perhaps large negative than it is today? And my question is in the future, if the situation continues for another couple of years, are the shareholders of Supervielle willing to, if necessarily, recapitalize the bank, if it needed capital to maintain where we wait to maintain the capital until we wait for better times?

Okay. I will ask Mariano to answer the question. But first, give me my view. First of all, yes, it's true we don't have -- we're not happy with the profitability, but since we decided in 2020, and this was implemented already in 2021 to take a hit on short-term profits because we -- of the implementation of this transformation of the franchise and also the transformation of the network and the capturing of efficiencies in 2021. All this is continuing in 2022, and we expect that the results will take place. We will obtain all the rewards of all these efforts in terms of short-term profits in 2023. You might say that it's possible that in 2023, loans will start to grow. So there will be also a consumption of capital in 2023. So we believe that combined -- the 2 things combined, in 2023, we might have a reduction of Tier 1 capital to 12%. And that will allow us still to continue competing and growing with this Tier 1 capital. So we believe that all of the measures we take in, in order to execute a much more efficient franchise in the next 2 years. This is what you see. Mariano, do you want to compliment on 2022 on your views?

Yes, sure. Yes, as you said, inflation is never good for the business as it reduces purchasing power of individuals and the disposal of income. So it's a headwind both for loan growth and -- but also on the cost side, particularly personnel costs increased with inflation. So how are we tackling this, well, first it's important to highlight that we are hedged against inflation. So the loss that we have on the net monetary position, first it's offset through different means by the adjustment of inflation of nonmonetary assets, mainly real estate, but also the bonds and mortgages that are adjusted by inflation through UVAs. So also as interest rates are increased by the Central Bank, we are taking profits of higher margin and higher spreads as for liquidity management. And then as Patricio said, we are also -- we showed negative results this quarter. But if we did that, the nonrecurring cost, it will be positive. So it's nonrequiring costs referred to efficiencies we are making in our head count where we reduced 7% at the bank level and almost 9% for the whole growth headcount, that's including IUDU where we made a major efficiency of 25% reduction in the last 12 months. So that will allow us to work with a lighter structure going forward. And also, we're incurring costs and acquiring customers. In this context, when you acquire customers, you not only have the typical acquisition cost of latent benefits or cash backs already in [indiscernible] places but you also typically start a relationship through credit card [indiscernible] the growth, particularly in this environment with high inflation and capital on interest rates in these products, in particular. So as we work on this front, we acquire more clients and start to cross-sell them and start having also deposits that will allow us to increase our margins and have positive results through higher NIM and the lighter structure.

Our next questions come from Yuri Fernandes at JPMorgan.

I have one here regarding the margin. It's actually a follow-up, I guess you were already discussing. What is the outlook for rates you see? Everybody knows like really this been increasing every month, almost. So where do you see the leak? And how that benefits your business? What should we expect? Because I see loan growth being somewhat like luster. And I guess it makes sense, right, decreasing in real terms while your deposits are growing. And most of the bank's liquidity has been allocated to government-secured. So my question is, what is the level for the leak? And how the leak help your margins for this year? And also on margins, the second question here is regarding the products. I recall there were several mandatory lending rate caps, and we start to see some flexibilization and you discussed this in the release, how that can help you to improve this profitability in the second half in 2023?

Mariano?

Yes, Yuri. Well, regarding the leaks, as inflation increased during the first quarter, the Central Bank started to increase rates as they have been flat for almost all 2021. The Central Bank has started to increase rates and the last increase -- last week or very recently, so they are going to catch up with inflation. So that at some point, that can benefit us because we also have an increasing cost of funding, so that will benefit on the liability management side. Also right now, there's a difference between the interest rate at [indiscernible] at 30 days. So that allows us to increase the spreads. And at some point, offset, as you said, the decrease in the loan growth in the first quarter, first is there's some seasonality where the far higher growth volume that decreased in the first quarter of the following year. But also, we decreased the loans at subsidized rates. So that's why decreasing volumes but increasing net interest margin. We believe, although we now estimate a higher inflation that originally expected, we expect now inflation around 65%. And although that's very high, we expect inflation -- monthly inflation starts slowing down. So in that context, probably the Central Bank will have this last interest rate hike to be the last of the year. If that's the scenario, of course, we cannot assure that. But it has the scenario, although we might not see interest rate decreases, we will see also increases. So in a more stable interest rate environment, we should be able to increase our loan portfolio also with decreasing inflation.

Let me complement what Mariano said with a couple of things. First, one of our strong pillars is the cost of funding. And we have -- we are focusing with all the technological transformation we have expanded and providing cash management services to corporations. And with a lot of impact in terms of the transactionality companies have in the bank, and with this, we see -- we saw -- we started to see last year a huge impact in terms of collections and payments made by cooperation, our clients in our bank. And so we start to see and we are focusing on our share of checking accounts at our franchise, which we saw that in the last quarter of 2021, we've already started to increase our share. And the focus in 2022 will continue on this focus, and we believe that it's going to help us to achieve a better cost of funding and therefore, help in our financial margins. The other thing is concerning the senior citizens. Senior citizens are our largest individuals in terms of segments and this, we are -- with these individuals, with senior citizens, they are typically depositors of savings accounts and term deposits. Term deposits, they have a floor because of regulation. And this is very punitive for our franchise because this term deposit's for us, they don't allow us to -- basically to reduce the cost of funding. When you have a scenario when there is no loan demand, typically the bank would pay less, particularly for very minor and automized term deposits, which is what we typically would do, and we've been doing in prior years. So as long as this continues, this will affect -- of course, continue to affect the cost of funding for this particular franchise. But we believe that at a certain point in time, this regulation will disappear and it will make it more sustainable for us and provide more scope for a wider financial margins. Someone, do you want to complement?

No, [indiscernible]

Just a follow-up, loan growth, what is the -- I guess, that Mariano's message was that margins should slightly improve, right, like keep this slightly improving the margins. I guess that was the message. So just checking loan growth, so we can assume like maybe NII growing slightly above volumes or something like that, right? I guess that would be a base case.

Yes, correct. Yes, inflation, as I said, is a headwind for loan growth, that's why we expected -- in prior quarter we expected to grow above inflation. Now we have seen a growth of the peso portfolio in line with inflation because at 65% inflation, the loan demand will be -- we believe will be definitely weaker. So we expect as the demand starts to recover at -- very, very slightly with this inflation level to recover the downturn we had in the first quarter, but it will probably will be in line with inflation, not growing in real terms.

Our next questions come from Rodrigo Nistor from AR Partners.

So you're undergoing a restructuring process, reshaping your consumer finance business and investing in technology assuming to be ready for a brighter future. So what kind of Argentina do you have in mind when you invest? What should Argentina look like so your current strategy is successful? And then a follow-up related to my previous question. So how do you maximize profitability or maybe reduce the overall negative impact of this nonrecurrent expenses where your transformation matures?

Rodrigo, I love your question. Let's start from the current situation of Argentina. I'm sure you're aware that the level of loans to GDP is very small. It's around 9%, when you would typically find many of our neighbors at, at least 50% and in the case of Chile, even beyond that, up to close to 90%. So the starting point is from a very low level of loans to GDP, which gives you an idea of the huge potential we have. Historically, we've been closer to levels in recent history, up to 25% of loans to GDP. I'm always referring to loans to the private sector. So the first thing you consider when you look at the Argentine financial system is that it's extremely transactional and very, very small. And it has a huge potential to grow and to be a great dynamic force in the growth of the Argentine economy. So with this in mind, and with this perspective in mind, is that we've been undergoing significant investments, as you've mentioned, and we've tried to focus on a couple of key dimensions. The first is to improve the customer experience and make sure that our customers, both on individuals and SMEs, have the best possible experience in our digital transformation. The second is that we've increased our capability of customer acquisition with all our onboarding initiatives, digital onboarding initiatives. And this is allowing us to scale quickly on what we call our digital plans and also increasing significantly the potential of serving them in areas where we don't have a physical network. And through innovation, also, as Sergio pointed out earlier, reducing our time to market, while at the same time, we made considerable investments in our network to increase the possibility of self-service and cross-selling. And all this is leading to increasing efficiencies, which when times get better, will allow us to capture all these in very positive long-term value creation.

Our next questions come from Juan Recalde at Scotiabank.

I have 2 questions. One is a follow-up on loan growth. So I see that you are expecting loan growth around 65%, so in line with inflation for 2022. And that would imply an acceleration in loan growth. So my question is, what segments do you expect to lead this loan growth acceleration? Is it going to be corporate loans you do or the retail portfolio at the bank? So that's the first one in terms of loan growth per segment. And the second one is related to the FX or the exchange rate. So in terms of the blue chip, how do you -- I know this is hard to forecast. Yes, I know it's hard. If it was easy, it will be a different story. But how do you see the blue chip evolving in the next -- over the next year or even up to -- yes, over the next 12 months or even before into 2023 before the elections? Do you think that the government can do something to keep the blue chip effects at close to ARS 200?

To go ahead, Mariano.

Yes. Yes, Juan, thank you for your questions. Regarding loan growth, we expect to see loan growth both in the commercial portfolio and the retail portfolio of the bank. In the commercial portfolio a decline-- we saw first weak growth last year. So we expect that to start gradually recovering. Then we also -- as I mentioned earlier, we have some seasonality, particularly in the factoring portfolio on the short-term financing, where we typically grow more in the last quarter of the year. Then in the retail segment, also the retail segment of the bank showed a decline in real terms in the last 2 years. So we also expect that to gradually recover. And then you mentioned IUDU, at IUDU, we are being cautious on the loan growth because we want to grow healthier instead of just growing volumes with the higher risk in this particular segment, inflation and reduced significantly the disposable income of [residual]. So we are having tighter REBITDA standards. So loan growth on that side will be lower than what we could expect last year. Then regarding the blue chip rate, my view, as you said, that's very difficult to forecast. First, let me tell you about the official exchange rate because at the end of the day, you have the evaluation of the efficient exchange rates and the gap with the blue chip rate. The official exchange rate, we think that it will be lower than inflation. So we will see the valuation of the peso and although at a higher rate than last year, we are seeing now the valuation of around 4% monthly. But for the year, that will be lower than inflation. And on top of that, you have the gap with the blue chip rate. That is hard to forecast. I believe the main component of that gap is the confidence in the government and the domestic currency. So based on the confidence we saw some moments of very, very low confidence where the gap went to 100%. It was reduced 70%. So we are seeing inflation devaluation, but the blue chip rate being steady. Whether it will keep shortening or widening that will depend on the confidence in the government and what will come forward in 2023.

Let me complement on that, a couple of things. Of course, if the noises in the government concerning the implementation of the IMF is being solved and then you see an implementation of the measures that were agreed with the IMF, this will improve confidence. On the other side, there are also what -- there is also what is happening today in world markets in terms of inflation and commodity prices. We've seen increase in commodity prices last year and that continued this year. And the terms of exchange, that is the difference of price of exports, price of inputs for Argentina's economy have improved. And according to recent implication by the World Bank in terms of exchange, we have -- you have to go back to the second World War to see the same terms of exchange than today. This is -- with this focus of the World Bank, the Argentina this year should increase its foreign exchange reserves around [10 billion] by the end of the year. So they will be able to achieve one of the commitments they had with the IMF. So I think this will help reduce a little bit, let's say, the tension in the market and maybe help with the blue chip trial. But of course, we cannot make any predictions.

That's helpful. And one follow-up, if I may. In terms of the bank branch rationalization, I see that the number of branches has been stable, but my understanding is that you intended to close some branches. So are there any updates related to the Central Bank authorization for -- in terms of branches' closures?

Alejandro, if you want to answer that and also talking about the plans we have?

Yes. What we are doing actually is a consolidation of brands. As you know, we started a process where the 2 networks that we had, one focused on senior citizens and the other one, the typical traditional brand, we brought these 2 branches together, and in that process, identified a series of branches that were relatively close within the relevant market area of each other. This led to the first stage of consolidation. And as you pointed out, we have a request to the Central Bank to consolidate 16 of our branches, which is standing for already some time. Moving forward, we see similar opportunities in the second stage during this year, where we continue to observe that there are several branches that we could consolidate basically also leveraging a hub and spoke model that we think would be useful. This will be rolled out during this year and is always pending Central Bank approval.

In addition to that, there are also, as you know, because of the transfer of the business in San Luis, that we basically announced in this call, I mean, this transform business to Banco Nacion that has been basically requested by the government of San Luis. This is giving us also an opportunity to -- in that particular province, to maintain all our private business franchise with clients, which is very strong, but all the, let's say, the franchise, the small branches in the provinces that were linked to -- basically to maintaining the financial agent's contract will probably indicate the negotiations to go forward and succeed with Banco Nacion, we will transfer those. So in other words, you will see, we expect that 2023 will be a very -- we have a much different franchise in terms of network of Grupo Supervielle and more efficient one.

Thank you, Juan. Ladies and gentlemen, we have reached the end of today's Q&A session. Thank you for joining us today. Thank you for your questions. We appreciate your interest in our company. We look forward to meeting more of you over the coming months and providing financial and business updates next quarter. In the interim, we remain available to answer any questions that you may have. Bye-bye, and have a good day.