Good morning, everyone, and welcome to the Grupo Supervielle Third Quarter 2023 earnings call. This is Ana Bartesaghi, Treasurer, and IRO. A slide presentation will accompany today's webinar, which is available in the Investor section of Grupo Supervielle's investor relations website. Today's conference call is being recorded. [Operator Instructions]. Speaking during today's call will be Patricio Supervielle, our Chairman & CEO; and Mariano Biglia, our Chief Financial Officer. Also joining us is Alejandro Stengel, First Vice-Chairman of the Board and CEO at Banco Supervielle. All will be available for the Q&A session. As a reminder, today's call will contain forward-looking statements based on management's current expectations and beliefs and subject to several risks and uncertainties. I refer you to the forward-looking statement section of our earnings release and recent filings with the SEC. We assume no obligation to update or revise any forward- looking statements to reflect new or changed events or circumstances. Patricio Supervielle, our Chairman and CEO will start the call discussing the key highlights for the quarter and progress achieved to-date on our strategic priorities for the year, as well as an update on macro views. Afterwards, Mariano Biglia, our CFO, will take a deeper look at our performance and near-term perspectives. This will be followed by a Q&A session. Patricio, please go ahead.

Thank you, Ana. Good morning, everyone. Thank you for joining us today. I will begin my presentation with Slide 3. The momentum gained in the first half of the year carried on through the third quarter allowing us to deliver ROE of 18% in real terms. This good performance was supported by our effective asset and liability management, which contributed to a high NIM, significant growth in fee income across our business and a prudent approach to lending leading to record low NPLs. Our efforts to streamline operations over the past years have also yielded improved efficiency, contributing to higher profitability. For the first nine months, our ROE increased to 13% from negative low single digits during the same period last year, reflecting the successful execution of our strategic plan amidst an increasingly challenging macro and political environment with very weak loan demand. Now let me quickly recap on the progress achieved across our different strategic initiatives. Starting with Retail customers, our enhanced digital capabilities and optimized branch network have allowed us to meet our goal of originating 50% of our personal loans digitally and remain focused on further advancing on this front. We successfully innovated with a quick investment function in our app that allows our customers to invest in our money market funds 24/7 to safeguard their transactional funds from inflation. The number of retail clients investing through this platform increased by 10 times year-on-year, reaching 100,000 in October. In turn, Assets Under Management also grew significantly up 6 times in nominal terms. As we continued to prioritize growth in the corporate segment, we added new digital functions and completed our offering of working capital financing product suite. New corporate clients increased 6% year- on-year while we gained market share in foreign trade finance and sight deposit balances.…

Thank you, Patricio, and good day, everyone. Please refer to Slide 6 for an overview of our performance for the nine-month period ended September 2023. Importantly, throughout the year, we did not lose focus on executing the strategy we have discussed in the past. We are pleased that in line with our timing expectations, our ROE for the nine months swung to a positive when compared with the same period of the prior year. More specifically, net income increased to ARS 19 billion with ROE at nearly 13%, improving from a net loss of ARS 7 billion and negative ROE of almost 5% in the same period last year. A mix of strong revenue growth and lower costs and provisions drove this year-on-year improvement in profitability. On the revenue front, net financial income increased 16%, or over ARS 27 billion, mainly reflecting higher spreads and volume on our investment portfolio. This good trend in margin continued into October and November. Net fees were up 9%, or over ARS 3 billion, mainly on the back of solid performance at IOL and our asset management business. In terms of costs, the rightsizing and operating efficiency initiatives implemented in 2022 resulted in an 8% decline in personnel expenses equivalent to ARS 6.5 billion in savings. Moreover, lower costs from streamlining operations, including selective branches closings and lower customer acquisition promotions contributed to a 6% reduction in administrative expenses and D&A equivalent to savings of ARS 3.5 billion. In turn, the planned mix-shift away from consumer finance coupled with growth in corporate loans and tight credit scoring contributed to a 21% decline in loan loss provisions equivalent to ARS 3.5 billion. Other income and losses declined 6%, or ARS 1.6 billion, reflecting lower credit card promotions, together with a reduction in turnover taxes paid…

Thank you, Mariano. At this time, we will be conducting the question-and-answer session. [Operator Instructions] Our first questions come from Ernesto Gabilondo from Bank of America. Please, Ernesto, you can go ahead. Ernesto María Gabilondo Márquez: Thank you, Ana. Patricio, Mariano, Ana, my first question will be on the political outlook for Argentina. You have shown a couple of slides on this. But what do you think would be the key execution rates for the new administration? How do you see the possibility to implement structural reforms with divided Congress as neither the officialism or all the right parties combined will have the majority? And also, I think it will be interesting to hear your view if Milei starts to cut jobs in the current government administration if you see if there could be a risk for social unrest? Then my second question is on your Leliq's exposure. When looking to your balance sheet, it seems that half of the securities are Leliq's and is roughly 26% of your total assets. So I wanted to hear your view on what are you expecting to do with Leliqs. Yesterday, we heard Banco Macro is trying to get rid of the Leliqs by year-end. So wanted to hear from you, is that something that you are also targeting or that will be more gradual? And for my last question is on your ROE. So for this year, you have been guiding 10% to 12%. As you pointed out, it will be lower than the first 9 months, considering that in December, we can have higher FX depreciation and higher inflation, but just thinking on what should we think about next year? We think this ROE could be relatively stable, a little bit higher, lower? Some hint on that will be also very helpful. Thank you.

Thank you, Ernesto. I will start by your first question, which is the execution risk of Milei program. First of all, we can see that Milei has shown to be a pragmatist. And this is interesting because in the way he's handling the organization of the different working teams to implement his reform, I know it's quite fluid, but he's pragmatic. And also in the way he's dealing with potential international relations. In terms of the reform agenda, I think that the first step will be to get the approval of the national budget. And we have discussed this in our team, and we believe that it will be swift, and this has happened in the past. I mean, with new governments, he has a clear mandate, and we don't see reasons for not approving the national budget. Then President-Elect Milei has shown a -- has said that he wants to give to the Congress at [indiscernible], including probably with [indiscernible] that probably will include an agenda of the regulation and how to tackle the financial deficit. So this -- probably this would be in the first part of the year. I mean this the super law. And probably there will be second generation laws concerning privatizations that will happen in the second half of the year of 2024. Another thing which is quite important also is that the people that are economic advisors at this stage have told us that -- economic advisors of Milei have told us that they want to implement a fiscal financial equilibrium or fiscal financial balance from day 1, which implies reducing 5% of GDP. And this eventually they can do without the need of Congress approval. Of course, there are various ways and it's not easy, but we have discussed that to achieve…

Leliq exposure -- Leliqs exposure.

Okay. All right. Yes, the Leliqs exposure is -- we have been -- we had a substantial exposure at the end of the third Q, and this has been reduced significantly over this quarter at this moment. So, and not only Leliqs, but also Repos. We believe that, I mean, having heard what was conveyed by the economic advisors that they want to go for a market-friendly solution, that there will be no surprises, that there will be no harm to the banks net worth. I think we all went more at ease, but having said that, we have decided to, as I said before, to significantly reduce our exposure, and we will see what the measures they want to take in the future. But simply let me point out that the reason we had these Leliqs in the past was completely linked to the fact that the government imposed a regulation to floor in time deposits -- in the rates of time deposits that the only way to compensate that was investing in Leliqs. But we believe that this will be removed, I mean, these punitive regulations will be removed and swiftly and there will be also free rates, both for liabilities and assets, in the next year. So I don't know if you want to add something on Leliqs.

I can only add to your comments, Ernesto -- and thank you for your question, I only add that, as Patricio said, we have significantly reduced the exposure to Leliqs during October and November. We only have the Leliqs we use for minimum cash requirements. Remember that part, about 5% of the new cash reserves, we can integrate with Leliqs. So the opportunity cost to be in cash instead of Leliqs is very high there, but that is only a minor amount. As of today, it's only ARS $50 billion, which is significantly lower than what we had on September 30. But also, we reduced the overall exposure to the Central Bank, not only going from Leliqs to Repos which is a first step because Repos are only one day, so that's very short-term, but we are also reducing by half. We are now half the exposure to the Central Bank instruments as compared to September 30. So, that's also a major reduction. We are reducing basically deposits from institutional investors, institutional depositors, as mutual funds or money markets funds. So, we have this lower balance, which is something we can manage adjusting the short term. And then, regarding ROE, I think your third question was regarding ROE in 2024. But of course, it's still very hard to predict because we don't know all the measures that the government will take starting December 10. But what we can imagine, as Patricio said, is that the regulations, punitive regulations will be removed from day one. So, that's positive for ROE. But on the other hand, we want to be at least in the first months of the government, where we see that it's going to be a period of very high inflation and volatility, we want to be also more conservative, as we mentioned, we are reducing the exposure to Central Bank. We might increase something in treasury bonds as the perspectives can be better if the fiscal deficit problem is addressed, but with a more conservative stance, our ROE can be in the range of 5% to 10%. Again, it's very early to predict, we may adjust this when we report the full year results, but that's our current estimate. Ernesto María Gabilondo Márquez: Thank you very much for all your answers in very detail.

Thank you, Ernesto. There is a question from Carlos Gomez at HSBC. Hello, Carlos?

First, actually congratulations on the result because the last quarter has been quite different from before. Now, the question is, this seems to be related to your position in government -- sorry, in securities and the fact that you are reducing your position, is there going to be a correlation there? Do you expect -- I mean, from what I understand, I think the answer is yes. Do you expect that your profitability will be at a different level if you reduce the position significantly into next year? And second, you seem to have taken a more proactive approach to lending. At the same time, you expect a contraction or a difficult period in the beginning of next year. Will you continue to be lending, I would say, more aggressively, gaining market share versus your peers into the next year or you'll wait until the economic situation is a bit clearer? Emérico Alejandro Stengel: Carlos, and thank you for your question. In terms of our exposure and to government securities and the fact that we would see less profitability going forward, it's difficult to establish correlations with the levels of uncertainty we see going forward. And with lack of information, as to exactly what the package that will be sent to Congress contains. We think that what will happen is, as Mariano pointed out earlier, there will be significant deregulation in the financial sector. And that actually is an opportunity and generally will allow us to, for example, go away or move away from something that was very exceptional in terms of policy, like having floor rates, which being deregulated will allow us to price deposits to market levels and therefore, we believe in that context as the program moves forward have a more deregulated environment and allow us to maintain profitability. But quite frankly, it's very difficult to at this point be certain of what this will be. In terms of lending, we will continue to be proactive, because we will be focusing in the sectors that we consider are winners of this significant change in macroeconomic policy. Basically, export oriented companies that are in agrobusiness in different sectors throughout the country and also in energy. And these sectors will experience significant growth. And we also see, for example, certain sections of construction like private residential construction picking up significantly. So, if you look at the specific opportunities within the average, you will be able to pick a couple of sectors with the growth potential and we will be going after those and we will continue to be proactive in lending to them.

Carlos, let me add something to what Alejandro said concerning the loans. If you look back to our history, we had always high NIMs due to good share in personal loans and that was mainly due to a segment of senior citizens. However, in the last few years, there was a program from the government, which is called [indiscernible], that provided very much subsidized loans to retirees. This will be removed, and this will help us regain much more, I mean, much better NIMs for personal loans in the future in an important business segment that we have also. So, I wanted to add this, I think it's quite important.

Okay. That's an important consideration. And would you -- I mean would you have a target as to how much of that you can do in the segment?

Well, we have around, at this stage, around between 600,000 and 700,000 clients in this sector, and the demand is very low because the demand was -- as I said before, it was the government, the social security that was providing these loans. But with the fiscal therapy that will be implemented, these type of loans do not make sense. So it will -- we expect that it will grow.

We have another question coming from Brian Flores at Citibank.

Can you hear me well?

Yes.

Perfect .And as Carlos did congratulations on the results, I think they were very, very strong. I think maybe the sector has played defense extraordinarily given the context, and now we perhaps we might be moving to offense, right? And I have a question that is related to what Carlos asked, which is, there might be a, probably in the first half of next year where inflation is high, maybe credit demand is still starting to come, but still not there. I'm just wondering, if you're budgeting, maybe for slight chances that you see or seen low-single-digit ROEs in the first half, and then maybe a strong expansion in the second half or how are you thinking about that, right? Because I think mid-term is constructive, and I think I agree with all the visions you've shared, but maybe in the first part of the next year we might see some difficulties still. Do you think this is correct or do you think I am being a bit more pessimistic? Should I be a bit more optimistic? Anything is appreciated.

First of all, I would like to state that we have been preparing the last three years for this change of profound structural changes that are occurring in the country. And we have an aggressive growth plan, particularly in corporates, that we started already in the third quarter. And we have gained, we have a model, which is a product-oriented model and we have achieved significant operational efficiencies, simply to state, and this is related to your question, because the bank has -- over the last three years, we have 800 employees less. At the group level we have 2,000 employees less, we have closed 50 branches, we have terminated a Consumer Finance business that was a loss making business, and we are positioned, as Alejandro mentioned earlier, that we are positioned to provide loans in companies that belong to value chains of expert-led industries. However, as you well said, with high inflation, demand is very low at this stage, and but consistent with what we believe will be the economic plan to tackle the Leliqs. There will be deregulation of rates. That means that we will be able to fix, there will be market rates for liabilities and market rates for assets. And that means that we will be able to start providing loans with positive margins for corporations in the first months because individuals probably, with high inflation, they will not be taking loans. But we believe that, yes, for a certain period of time, it will be more difficult to give loans, as you said. But after the stabilizing, after the, let's say, the change in relative prices and implementation of the initial steps of the program, we expect that after a period of high inflation, there will be -- the people will have an expectation of…

Thank you, Brian. I think we have a follow-up from Carlos Gomez. I don't know, Carlos, if this is correct or only that you forget to withdraw your hand.

No, no, it's actually correct. So, my question is about your hedging strategy. As you mentioned, you have 100% of the capital hedged. Can you remind us, is this purely through the securities portfolio, the dual bonds? Or do you use real estate more actively now? Or are there any other elements in your hedging strategy that are not those 2.

Okay. Thank you. This is an interesting question because I think it differentiates us from the rest of the banks. We have a substantial position in mortgages, which we built during the Macri period and which represent today around 22% of our ne worth. And this is quite interesting because it's more -- its bigger than other banks. And so it's on the private sector. Then the rest is -- yes, the rest is buildings and real estate and the treasury bonds, I don't know if you want to expand on that, Mariano?

Yes, those are the main, the 3 different asset classes, real estate, mortgages and treasury bonds, while we have dual bonds, which, as you know, they adjust by inflation or devaluation the higher or CER bonds, which adjust by inflation. So, that's basically our hedge of net equity and we also have a long position in dual bonds, so that also can be a source of shorter gains going to the fourth quarter and the first quarter.

Yes, actually, that was my follow-up. So the hedge is versus inflation, right? And then the U.S. dollar position, I believe that your maximum is 5% of net worth or as a financial group, you can perhaps go a bit further on that?

Yes, our spot position can only be balanced or short, but the spot position we are balanced. And then, we can go up to 5% of Tier 1 with derivatives as [indiscernible] and then extend to 30% with dollar-linked bonds, but dual bonds do not account in that position, so we actually have no limits on dual bonds. So, that's where we have a longer position for the higher of devaluation or inflation.

Could you give us an idea about the current level of your loan position in U.S. dollars?

Now we are approximately 125% of our for equity. So we have 100% inflation plus 25% in dual bonds.

Thank you, Carlos. I think we have reached the end of the Q&A session. So thank you for joining us today. We appreciate your interest in our company. We look forward to meeting more of you over the coming weeks or months and providing financial and business updates next quarter. In the interim, we remain available to answer any questions that you might have. Thank you, and have a good day.