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, 2017
2019
Commission file number 001-37777
GRUPO SUPERVIELLE S.A.
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(Exact name of Registrant as specified in its charter) SUPERVIELLE GROUP S.A. REPUBLIC OF ARGENTINA Bartolomé Mitre 434, 5th Floor Alejandra Naughton |
Securities registered or to be registered pursuant to Section 12(b) of the Act:Act.
Title of each | Trading | Name of each |
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, 20172019 was:
Title of class | Number of shares outstanding | |
Class B ordinary shares, nominal value Ps.1.00 per share |
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Class A ordinary shares, nominal value Ps.1.00 per share |
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
x Yes ☐ No o☒ No
If this report is an annual or transitionaltransition report, indicate by check mark if the registrant is not required to file reports pursuant to sectionSection 13 or 15(d) of the Securities Exchange Act of 1934.
o Yes ☐ No x☒ No
Indicate by check mark whether the registrantregistrant: (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:
xdays. Yes ☒ No o☐ No
Indicate by check mark whether the registrant has submitted electronically, and posted on its Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Not applicable.
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. (Check one):
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†standards† provided pursuant to Section 13(a) of the Exchange Act. ☐o
†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
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 by the International Accounting Standards Board |
| 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:
ofollow. Item 17 ☐x Item 18☐
If this is an Annual Report,annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
o Yes ☐ No x No☒
Page
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Table of ContentsINTRODUCTION
CERTAIN DEFINED TERMS AND CONVENTIONSCertain 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 “Cordial Microfinanzas” mean Cordial Microfinanzas S.A. References to “SAM” mean Supervielle Asset Management S.A. References to “Adval” mean Adval S.A. References to “Sofital” mean Sofital S.A.F.e I.I. References to “CCF” mean Cordial Compañía Financiera S.A. References to “Supervielle Seguros” mean Supervielle Seguros S.A. References to “Espacio Cordial” or “Cordial Servicios” mean Espacio Cordial Servicios S.A. References to “Viñas del Monte”“InvertirOnline” mean Viñas del MonteInvertirOnline S.A.U. and InvertirOnline.com Argentina S.A.U. 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.
References to “Class A shares” refer to shares of our Class A common stock, with a par value of Ps.1.00 per share, references to “Class B shares” refer to shares of our Class B common stock, all 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, except where the context requires otherwise.shares.
The term “Argentina” refers to the Republic of Argentina. The terms “Argentine government” or the “government” refers to the federal government of Argentina, the term “Central Bank” refers to theBanco Central de la República Argentina, or the Argentine Central Bank, and the term “CNV” refers to the ArgentineComisión Nacional de Valores, or the Argentine securities and capital markets regulator. “U.S. GAAP”The term “ByMA” refers to generally accepted accounting principles in the United States of America (“United States” or “U.S.”),exchange Bolsas y Mercados Argentinos S.A. The term “MAE” refers to the exchange Mercado Abierto Electrónico S.A. 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” 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.
“Argentine GAAP” refers to generally accepted accounting principles in Argentina and “Argentine Banking GAAP” refers to the accounting rules of the Central Bank. “IFRS” refers to the International Financial Reporting Standards, as issued by the International Accounting Standards Board (“IASB”).
The term “GDP” refers to gross domestic product and all references in this annual report to GDP growth are to real GDP growth, 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 activity in the previous 90 days.
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 government or any Argentine provincial, municipality or city government. The term “private domestically-owned banks” refers to private banks that are controlled by Argentine shareholders.
For information up 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 amdand the term “large corporates” refers to companies with annual sales over Ps.2.0 billion. TheFor information since January 1, 2019, the term “ROAE”“small businesses” refers to return on average shareholders’ equity. ROAE is frequently used by financial institutions as a benchmarkindividuals and businesses with annual sales up to measure profitability comparedPs.100 million, the term “SMEs” refers to peers but not as a benchmarkindividuals and businesses with annual sales over Ps.100 million and below Ps.700 million, the term “middle-market companies” refers to determine returns for investors, which is affected by multiple factors that ROAE does not consider.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.
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PRESENTATION of FINANCIAL and Other Information
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
Financial Statements
We maintainThis annual report contains our financial books and records in Pesos and prepare our consolidated financial statements in Argentina in conformity with Argentine Banking GAAP, as these are the rules and regulations applied by the Bank, our main subsidiary. Argentine Banking GAAP differs in certain significant respects from U.S. GAAP and from Argentine GAAP. Ouraudited consolidated financial statements as of December, 31, 20172019 and 2016 and for each of the three years ended December 31, 2017, 2016 and 2015 have been audited, as stated in the report appearing herein, and are included in this annual report and referred to as our “audited consolidated financial statements.” Note 35 to our audited consolidated financial statements provides a description of the principal differences between Argentine
Banking GAAP and U.S. GAAP, as they relate to us, and a reconciliation to U.S. GAAP of net income and shareholders’ equity as of December 31, 2017 and 2016,2018, and for the years ended December 31, 2019, 2018 and 2017 2016(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.
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 or exceed 100%. As of July 1, 2018, Argentina reported a cumulative three-year inflation rate higher than 100% and 2015. therefore financial information published as from that date should be adjusted for inflation in accordance with IAS 29. Therefore, 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. Our audited consolidatedGAAP 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 December 31, 2017 havethe 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 approvedcalculated considering the indexes based on the price indexes published by our ordinarythe National Institute of Statistics and extraordinaryCensus (Instituto Nacional de Estadística y Censos or “INDEC”, per its initials in Spanish).
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 1.1(b) to our consolidated financial statements contained in this annual report. |
· | 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’ meeting heldequity, calculated based on April 24, 2018.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, 20172019 was Ps.18.7742Ps.59.895 to U.S.$1.00, which was the reference exchange rate reported by the Central Bank for U.S. dollars as of December 29, 2017.30, 2019. 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. See “Exchange Rates” for more detailed information regardingThe reference exchange rate reported by the translationCentral Bank was Ps.66.635 per U.S.$1.00 as of Pesos into U.S. dollars.
April 28, 2020.
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 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 Instituto Nacional de Estadísticas y Censos (the National Statistics and Census Institute, or “INDEC”),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. As of the date of this annual report, the Argentine government has not renewed the state of administrative emergency declared by means of the Decree No. 55/2016.
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Forward-Looking Statements
FORWARD-LOOKING STATEMENTS
This annual report contains estimates and forward-looking statements, principally in “Item 3.D Risk Factors”, “Item 5.A Operating Results”, and “Item 4.B Business overviewOverview.” 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 COVID-19 pandemic and government measures to contain the virus, which are disrupting economic activity globally and in Argentina; |
(ii) | changes in general economic, financial, business, political, legal, social or other conditions in Argentina, including the performance of the newFernández administration, or elsewhere in Latin America or changes in either developed or emerging markets; |
(iii) | the effects of the Argentine government’s ongoing restructuring of the country’s sovereign debt; |
(iv) | fluctuations in the exchange rate of the Peso and inflation; |
(v) | changes in interest rates and the cost of deposits, which may, among other things, affect margins; |
(vi) | 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; |
(vii) | 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; |
(viii) | changes in government regulation, including tax and banking regulations; |
(ix) | adverse legal or regulatory disputes or proceedings; |
(x) | credit and other risks of lending, such as increases in defaults by borrowers; |
(xi) | exposure to Argentine government liabilities and fluctuations and declines in the value of Argentine public debt; |
(xii) | increased competition in the banking, financial services, credit card services, asset management and related industries; |
(xiii) | a loss of market share by any of our main businesses; |
(xiv) | increase in the allowances for loan losses; |
(xv) | technological changes or an inability to implement new technologies, changes in consumer spending and saving habits; |
(xvi) | ability to implement our business strategy; and |
(xvii) | other factors discussed under “Item 3.D Risk Factors” in this annual report. |
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(i) changes in general economic, financial, business, political, legal, social or other conditions in Argentina or elsewhere in Latin America or changes in either developed or emerging markets;
(ii) 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 turbulence or volatility in domestic and international financial markets;
(iii) changes in regional, national and international business and economic conditions, including inflation;
(iv) changes in interest rates and the cost of deposits, which may, among other things, affect margins;
(v) 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;
(vi) changes in government regulation, including tax and banking regulations;
(vii) adverse legal or regulatory disputes or proceedings;
(viii) the interpretation by judicial courts of the new Argentine Civil and Commercial Code;
(ix) credit and other risks of lending, such as increases in defaults by borrowers;
(x) fluctuations and declines in the value of Argentine public debt;
(xi) increased competition in the banking, financial services, credit card services, asset management and related industries;
(xii) a loss of market share by any of our main businesses;
(xiii) increase in the allowances for loan losses;
(xiv) technological changes or an inability to implement new technologies, changes in consumer spending and saving habits;
(xv) ability to implement our business strategy;
(xvi) fluctuations in the exchange rate of the Peso; and
(xvii) other factors discussed under “Item 3.D Risk Factors” in this annual report.
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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Part I
PART I
Item 1.Identity of Directors, Senior Management and Advisors
Item 1 | Identity of Directors, Senior Management and Advisors |
Not applicable.
Item 2.Offer Statistics and Expected Timetable
Item 2 | Offer Statistics and Expected Timetable |
Not applicable.
Item 3.A.Selected Financial Data
Item 3 | Key Information |
Item 3.A | Selected Financial Data |
The following tables present selected consolidated financial data for us for each of the periods indicated. You should be read this information in conjunction with our audited consolidated financial statements and related notes beginning on page F-1, the “Presentation of Financial and Other Information” section and the information under “discussion in Item 5 “Item 5.A Operating Results”Results” included elsewhere in this annual report.
Our audited consolidated financial statements do not include any effect of inflation other than the adjustments to non-monetary assets through February 28, 2003.
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, 20172019 and 2016 and for the three years in the period ended December 31, 2017 has2018 have been derived from our audited consolidated financial statements included in this annual report.report which have been audited by Price Waterhouse & Co., member firm of PricewaterhouseCoopers an independent registered public accounting firm. The selected consolidated statement of financial position data as of December 31, 2015, 2014 and 2013 and for the years ended December 31, 2014 and 2013 has2017 have been derived from our audited consolidated financial statements which are notthat arenot included in this annual report.
Our audited consolidated financial statements as of December 31, 2017were prepared and 2016 andpresented in accordance with IFRS. We applied IFRS for the three years ended December 31, 2017 have been audited by Price Waterhouse & Co. S.R.L., member firm of the PricewaterhouseCoopers network, independent accountants, whose audit report is included elsewhere in this annual report.
We maintain our financial books and records in Pesos and prepare and publish our audited consolidated financial statements in Argentina in conformity with Argentine Banking GAAP as these are the rules and regulations applied by the Bank, our main subsidiary, which differ in certain significant respects from U.S. GAAP, and from Argentine GAAP. Note 35 to our audited consolidated financial statements provides a description of the principal differences between Argentine Banking GAAP and U.S. GAAP, as they relate to us, and a reconciliation to U.S. GAAP of net income and shareholders’ equity as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015.
On February 12, 2014, the Central Bank, through Communication “A” 5541, established the general guidelines towards conversion to International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) for preparing financial statements of the entities under its supervision with the temporary exception of paragraph 5.5 “Impairment” of IFRS 9 “Financial Instruments” (IFRS as issued by the IASB as adopted by the Central Bank). Note 33 to our audited consolidated financial statements provides a description of the principal differences between Argentine Banking GAAP and IFRS, as they relate to us, and a reconciliation to IFRS of shareholders’ equity as of December 31, 2017 and January 1, 2017 and of net incomefirst 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, 2017 have been translated2019 into U.S. dollars. The rate used to translate such amounts as of December 31, 2017 was Ps.18.7742 to U.S.$1.00, which wasdollars at the reference exchange rate reported by the Central Bank for U.S. dollars as of December 29, 2017.31, 2019 which was Ps.59.895 to U.S.$1.00. U.S. dollar equivalent information should not be construed to imply that the Peso amounts represent, or could have been or could be converted into, U.S. dollars at such rates or any other rate.
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Consolidated Income Statement Data |
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Argentine Banking GAAP: |
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Financial income(1) |
| U.S.$ | 825,317 |
| Ps. | 15,494,671 |
| Ps. | 10,794,579 |
| Ps. | 6,741,744 |
| Ps. | 4,751,352 |
| Ps. | 3,045,380 |
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Financial expenses(2) |
| (329,936 | ) | (6,194,288 | ) | (4,866,525 | ) | (3,386,050 | ) | (2,464,526 | ) | (1,303,916 | ) | ||||||
Gross financial margin |
| 495,381 |
| 9,300,383 |
| 5,928,054 |
| 3,355,694 |
| 2,286,826 |
| 1,741,464 |
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Loan loss provisions |
| (96,951 | ) | (1,820,169 | ) | (1,057,637 | ) | (543,844 | ) | (356,509 | ) | (350,535 | ) | ||||||
Services fee income |
| 264,899 |
| 4,973,272 |
| 3,527,516 |
| 2,835,708 |
| 2,162,820 |
| 1,765,659 |
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Services fee expenses |
| (79,676 | ) | (1,495,848 | ) | (1,080,660 | ) | (778,492 | ) | (610,341 | ) | (421,587 | ) | ||||||
Income from insurance activities |
| 25,517 |
| 479,061 |
| 606,143 |
| 175,947 |
| 8,513 |
| — |
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Administrative expenses |
| (446,923 | ) | (8,390,622 | ) | (6,060,281 | ) | (4,261,402 | ) | (3,013,842 | ) | (2,287,201 | ) | ||||||
Income from financial transactions |
| 162,248 |
| 3,046,077 |
| 1,863,135 |
| 783,611 |
| 477,467 |
| 447,800 |
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Miscellaneous income |
| 29,074 |
| 545,842 |
| 429,884 |
| 367,165 |
| 190,005 |
| 129,245 |
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Miscellaneous losses |
| (20,053 | ) | (376,480 | ) | (458,946 | ) | (213,427 | ) | (91,761 | ) | (95,734 | ) | ||||||
Non-controlling interests result |
| (314 | ) | (5,897 | ) | (22,166 | ) | (16,079 | ) | (13,707 | ) | (10,556 | ) | ||||||
Income before income tax |
| 170,955 |
| 3,209,542 |
| 1,811,907 |
| 921,270 |
| 562,004 |
| 470,755 |
| ||||||
Income tax |
| (41,146 | ) | (772,483 | ) | (500,603 | ) | (247,161 | ) | (199,084 | ) | (97,765 | ) | ||||||
Net income for the fiscal period |
| 129,809 |
| 2,437,059 |
| 1,311,304 |
| 674,109 |
| 362,920 |
| 372,990 |
| ||||||
U.S. GAAP: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net income |
| 88,812 |
| 1,697,481 |
| 1,025,868 |
| 676,076 |
| 301,514 |
| 398,815 |
| ||||||
|
| Grupo Supervielle S.A. |
| ||||||||||||||||
|
| As of December 31, |
| ||||||||||||||||
|
| 2017 |
| 2017 |
| 2016 |
| 2015 |
| 2014 |
| 2013 |
| ||||||
|
| (in thousands of Pesos or U.S. dollars, as indicated) |
| ||||||||||||||||
Consolidated Balance Sheet Data |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Argentine Banking GAAP: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash and due from banks |
| U.S.$ | 592,807 |
| Ps. | 11,129,475 |
| Ps. | 8,166,132 |
| Ps. | 6,808,591 |
| Ps. | 3,649,084 |
| Ps. | 2,662,592 |
|
Government and corporate securities |
| 817,400 |
| 15,346,036 |
| 2,360,044 |
| 931,881 |
| 1,008,080 |
| 483,990 |
| ||||||
Loans: |
| 2,927,122 |
| 54,954,373 |
| 34,896,509 |
| 20,148,261 |
| 14,596,580 |
| 11,292,289 |
| ||||||
to the non-financial public sector |
| 1,737 |
| 32,607 |
| 4,306 |
| 8,778 |
| 12,666 |
| 15,699 |
| ||||||
to the financial sector |
| 22,337 |
| 419,366 |
| 473,414 |
| 181,734 |
| 3,514 |
| 36,029 |
| ||||||
To the non-financial private sector and foreign residents: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Overdrafts |
| 192,650 |
| 3,616,843 |
| 3,110,097 |
| 1,634,870 |
| 993,284 |
| 679,085 |
| ||||||
Promissory Notes(3) |
| 825,316 |
| 15,494,647 |
| 9,426,568 |
| 5,984,777 |
| 5,583,705 |
| 4,472,631 |
| ||||||
Mortgage loans |
| 82,548 |
| 1,549,765 |
| 78,057 |
| 50,032 |
| 69,554 |
| 83,660 |
| ||||||
Automobile and other secured loans |
| 16,710 |
| 313,724 |
| 65,076 |
| 104,469 |
| 168,603 |
| 225,901 |
| ||||||
Personal loans |
| 789,283 |
| 14,818,163 |
| 9,916,776 |
| 6,018,601 |
| 3,631,840 |
| 2,970,622 |
| ||||||
Credit card loans |
| 424,308 |
| 7,966,037 |
| 6,678,578 |
| 5,677,922 |
| 3,688,328 |
| 2,410,111 |
| ||||||
Other |
| 623,635 |
| 11,708,248 |
| 5,595,356 |
| 953,574 |
| 793,192 |
| 684,219 |
| ||||||
Accrued Interest, adjustments and exchange rate differences receivable |
| 74,450 |
| 1,397,740 |
| 773,961 |
| 428,600 |
| 357,844 |
| 257,689 |
| ||||||
Documented interest |
| (44,161 | ) | (829,086 | ) | (324,795 | ) | (277,488 | ) | (287,605 | ) | (200,345 | ) | ||||||
Other unapplied charges |
| (4 | ) | (83 | ) | (1,738 | ) | (295 | ) | (1,322 | ) | (1,012 | ) | ||||||
Allowances |
| (81,686 | ) | (1,533,598 | ) | (899,147 | ) | (617,313 | ) | (417,023 | ) | (342,000 | ) | ||||||
Other receivables from financial transactions |
| 349,490 |
| 6,561,396 |
| 3,772,736 |
| 2,461,813 |
| 2,263,612 |
| 1,742,721 |
| ||||||
|
| Grupo Supervielle S.A. |
| ||||||||||||||||
|
| As of December 31, |
| ||||||||||||||||
|
| 2017 |
| 2017 |
| 2016 |
| 2015 |
| 2014 |
| 2013 |
| ||||||
|
| (in thousands of Pesos or U.S. dollars, as indicated) |
| ||||||||||||||||
Receivables from financial leases |
| 134,184 |
| 2,519,201 |
| 1,527,855 |
| 1,074,977 |
| 583,846 |
| 511,880 |
| ||||||
Other assets |
| 184,338 |
| 3,460,797 |
| 2,482,766 |
| 1,620,294 |
| 1,139,992 |
| 724,659 |
| ||||||
Total assets |
| 5,005,341 |
| 93,971,278 |
| 53,206,042 |
| 33,045,817 |
| 23,241,194 |
| 17,418,131 |
| ||||||
Average Assets(4) |
| 3,707,170 |
| 69,599,142 |
| 41,467,412 |
| 26,961,165 |
| 20,066,019 |
| 14,645,841 |
| ||||||
Liabilities and shareholders’ equity |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Deposits: |
| U.S.$ | 3,008,758 |
| Ps. | 56,487,027 |
| Ps. | 35,897,864 |
| Ps. | 23,716,577 |
| Ps. | 16,892,730 |
| Ps. | 12,819,178 |
|
Non-financial public sector |
| 328,731 |
| 6,171,661 |
| 2,587,253 |
| 1,182,559 |
| 1,441,506 |
| 1,018,547 |
| ||||||
Financial sector |
| 836 |
| 15,702 |
| 9,326 |
| 250,981 |
| 150,817 |
| 100,973 |
| ||||||
Non-financial private sector and foreign residents |
| 2,679,191 |
| 50,299,664 |
| 33,301,285 |
| 22,283,037 |
| 15,300,407 |
| 11,699,658 |
| ||||||
Checking accounts |
| 302,532 |
| 5,679,805 |
| 4,361,405 |
| 3,042,376 |
| 2,622,055 |
| 2,034,593 |
| ||||||
Savings accounts |
| 1,575,513 |
| 29,578,994 |
| 13,205,937 |
| 7,753,696 |
| 5,352,593 |
| 3,640,102 |
| ||||||
Time deposits |
| 693,233 |
| 13,014,886 |
| 11,677,322 |
| 10,034,025 |
| 6,651,006 |
| 5,426,409 |
| ||||||
Investment accounts |
| 13,582 |
| 255,000 |
| 375,000 |
| 664,900 |
| 75,750 |
| 144,100 |
| ||||||
Other |
| 94,330 |
| 1,770,979 |
| 3,681,621 |
| 788,040 |
| 599,003 |
| 454,454 |
| ||||||
Other liabilities from financial transactions and other miscellaneous liabilities |
| 1,189,289 |
| 22,327,956 |
| 10,273,230 |
| 6,884,700 |
| 4,586,728 |
| 3,204,585 |
| ||||||
Non-controlling interests |
| 612 |
| 11,497 |
| 103,397 |
| 70,830 |
| 54,750 |
| 41,960 |
| ||||||
Total liabilities |
| 4,198,660 |
| 78,826,480 |
| 46,274,491 |
| 30,672,107 |
| 21,534,208 |
| 16,065,723 |
| ||||||
Average Liabilities(4) |
| 3,196,853 |
| 60,018,357 |
| 36,480,913 |
| 24,866,415 |
| 18,464,430 |
| 14,433,187 |
| ||||||
Shareholders’ equity |
| 806,681 |
| 15,144,798 |
| 6,931,551 |
| 2,373,710 |
| 1,706,986 |
| 1,352,408 |
| ||||||
Total liabilities and shareholders’ equity |
| 5,005,341 |
| 93,971,278 |
| 53,206,042 |
| 33,045,817 |
| 23,241,194 |
| 17,418,131 |
| ||||||
Average shareholders’ equity(4) |
| 510,317 |
| 9,580,785 |
| 4,986,499 |
| 2,094,750 |
| 1,601,589 |
| 1,212,654 |
| ||||||
U.S. GAAP: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total assets |
| 5,086,829 |
| 95,501,145 |
| 54,513,168 |
| 35,122,426 |
| 26,166,663 |
| 19,531,312 |
| ||||||
Total liabilities |
| 4,346,180 |
| 81,596,047 |
| 48,014,492 |
| 32,858,882 |
| 24,626,175 |
| 18,247,809 |
| ||||||
Total shareholders’ equity |
| 740,649 |
| 13,905,098 |
| 6,498,676 |
| 2,263,544 |
| 1,540,488 |
| 1,283,503 |
| ||||||
(1) Includes gains related to non-deliverable forward (“NDF”) hedging transactions, which totaled Ps.0 million, Ps.0 million, Ps.228.2 million, Ps.0, and Ps.86.9 million,Our consolidated financial statements contained in this annual report differ in certain material respects from our financial statements as of December 31, 2017, 2016, 2015, 20142019 and 2013, respectively.
(2) Includes expenses related to NDF hedging transactions, which totaled Ps.71.3 million, Ps. 39.0 million, Ps.0, Ps.96.2 million,2018 and Ps.0, as of December 31, 2017, 2016, 2015, 2014 and 2013, respectively.
(3) Consists of unsecured checks and accounts receivable deriving from factoring transactions, and unsecured corporate loans which totaled Ps.5,238.4 million, Ps.3,102.8 million, Ps.2,399.3 million, Ps.1,547.5 million and Ps.979.9 million as of December 31, 2017, 2016, 2015, 2014 and 2013, respectively.
(4) Calculated on a daily basis.
|
| Grupo Supervielle S.A. |
| ||||||||
|
| Year ended December 31, |
| ||||||||
|
| 2017 |
| 2016 |
| 2015 |
| 2014 |
| 2013 |
|
Selected Consolidated Ratios: |
|
|
|
|
|
|
|
|
|
|
|
Argentine Banking GAAP: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin(1) |
| 19.1 | % | 20.6 | % | 18.1 | % | 17.4 | % | 16.4 | % |
Net financial margin(2) |
| 17.8 | % | 19.2 | % | 16.4 | % | 15.1 | % | 15.8 | % |
Net fee income ratio(3) |
| 29.8 | % | 34.0 | % | 40.0 | % | 40.6 | % | 43.6 | % |
Efficiency ratio(4) |
| 63.3 | % | 67.5 | % | 76.2 | % | 78.3 | % | 74.1 | % |
Fee income as a percentage of administrative expense |
| 47.2 | % | 50.4 | % | 52.4 | % | 51.8 | % | 58.8 | % |
Return on average equity(5) |
| 25.4 | % | 26.3 | % | 32.2 | % | 22.7 | % | 30.8 | % |
Return on average assets(6) |
| 3.5 | % | 3.2 | % | 2.5 | % | 1.8 | % | 2.5 | % |
Cost/Assets |
| 12.1 | % | 14.6 | % | 15.8 | % | 15.0 | % | 15.6 | % |
Basic earnings per share (in Pesos)(7) |
| 6.20 |
| 4.10 |
| 4.42 |
| 2.92 |
| 3.00 |
|
Diluted earnings per share (in Pesos) |
| 6.20 |
| 4.10 |
| 4.42 |
| 2.92 |
| 3.00 |
|
Basic earnings per share (in U.S.$) |
| 0.33 |
| 0.26 |
| 0.34 |
| 0.34 |
| 0.46 |
|
Diluted earnings per share (in U.S.$) |
| 0.33 |
| 0.26 |
| 0.34 |
| 0.34 |
| 0.46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidity |
|
|
|
|
|
|
|
|
|
|
|
Loans as a percentage of total deposits(8) |
| 104.5 | % | 104.0 | % | 92.2 | % | 92.4 | % | 94.8 | % |
Loans as a percentage of total assets(8) |
| 62.8 | % | 70.2 | % | 66.1 | % | 67.1 | % | 69.8 | % |
Liquid assets as a percentage of total deposits(9) |
| 45.9 | % | 27.0 | % | 32.6 | % | 26.5 | % | 24.5 | % |
LCR Pro forma(14) |
| 113.9 | % | 128.0 | % | 113.1 | % | 71.0 | % | N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital |
|
|
|
|
|
|
|
|
|
|
|
Total equity as a percentage of total assets |
| 16.1 | % | 13.0 | % | 7.2 | % | 7.3 | % | 7.8 | % |
Average equity as a percentage of average assets |
| 13.8 | % | 12.0 | % | 7.8 | % | 8.0 | % | 8.3 | % |
Total liabilities as a multiple of total shareholders’ equity |
| 5.2 |
| 6.7 |
| 12.9 |
| 12.6 |
| 11.9 |
|
Tangible equity ratio(10) |
| 15.8 | % | 12.6 | % | 6.5 | % | 6.5 | % | 6.7 | % |
Regulatory capital/ Risk weighted assets(11) |
| 13.9 | % | 12.5 | % | 8.7 | % | 8.9 | % | 9.0 | % |
Regulatory capital/ Risk weighted assets Pro forma |
| 19.6 | % | 13.8 | % | 8.7 | % | 8.9 | % | 9.0 | % |
Risk weighted assets/total assets |
| 80.1 | % | 92.4 | % | 103.8 | % | 113.3 | % | 113.3 | % |
Tier 1 Capital / Risk weighted assets(12) |
| 12.6 | % | 10.9 | % | 6.7 | % | 6.9 | % | 6.7 | % |
Tier 1 Pro forma(13) |
| 18.4 | % | 12.3 | % | 6.7 | % | 6.9 | % | 6.7 | % |
|
|
|
|
|
|
|
|
|
|
|
|
Asset Quality |
|
|
|
|
|
|
|
|
|
|
|
Non-performing loans as a percentage of total loans(15) |
| 2.8 | % | 2.8 | % | 3.2 | % | 3.0 | % | 3.0 | % |
Allowances as a percentage of total loans |
| 2.6 | % | 2.4 | % | 2.9 | % | 2.7 | % | 2.9 | % |
Cost of risk(16) |
| 4.2 | % | 4.0 | % | 3.1 | % | 2.9 | % | 3.8 | % |
Allowances as a percentage of non-performing loans(15) |
| 91.8 | % | 87.1 | % | 89.7 | % | 88.9 | % | 94.0 | % |
|
|
|
|
|
|
|
|
|
|
|
|
Other Data |
|
|
|
|
|
|
|
|
|
|
|
Dividends paid to the common shares (Ps. million)(17) |
| 243.7 |
| 65.5 |
| 19.2 |
| 2.7 |
| 4.5 |
|
Dividends paid to the preferred shares (Ps. million) |
| — |
| — |
| 6.0 |
| 4.7 |
| 3.9 |
|
Dividends per common share (Ps.) |
| 0.5 |
| 0.2 |
| 0.1 |
| 0.0 |
| 0.0 |
|
Dividends per preferred share (Ps.)(18) |
| — |
| — |
| 1.9 |
| 2.9 |
| 2.4 |
|
Employees |
| 5,320 |
| 4,982 |
| 4,843 |
| 4,579 |
| 4,570 |
|
Branches and sales points(19) |
| 326 |
| 320 |
| 325 |
| 322 |
| 353 |
|
ATMs and self-service terminals(19) |
| 704 |
| 661 |
| 649 |
| 632 |
| 588 |
|
(1) Net interest income divided by average interest-earning assets.
(2) Gross financial margin divided by average interest-earning assets.
(3) Net services fee income divided by the sum of gross financial margin and net services fee income.
(4) Administrative expenses divided by the sum of gross financial margin, services fee income and expenses and income from insurance activities.
(5) Net income divided by average shareholders’ equity, calculated on a daily basis and measured in local currency.
(6) Net income divided by average assets, calculated on a daily basis and measured in local currency.
(7) Basic earnings per share (in Pesos) are based upon the weighted average of Grupo Supervielle’s outstanding shares, which were Ps.392.8 million for the yearyears ended December 31, 2017, Ps.319.8 million for the year ended December 31, 2016, Ps.151.8 million for the year ended
December 31, 2015, Ps.122.9 million for the year ended December 31, 2014 and Ps.122.9 million for the year ended December 31, 2013. In January 2016, the stock of preferred shares was converted to Class B shares.
(8) Loans include loans and receivables from financial leases.
(9) Liquid assets include cash, securities issued by the Central Bank (Las Letras del Banco Central (LEBAC) and NOBACs) and other government securities.
(10) (Total equity - Intangible assets)/(Total assets - Intangible assets). Intangible assets as of December 31, 2017, 2016, 2015, 2014 and 2013 amounted to Ps.324.5 million, Ps.285.5 million, Ps.252.0 million, Ps.216.0 million and Ps.197.0 million, respectively.
(11) Regulatory capital divided by risk weighted assets taking into account operational and market risk since 2013. This ratio applies only to the Bank and CCF on a consolidated basis and does not include the liquidity held at the holding company level.
(12) Tier 1 capital divided by risk weighted assets taking into account credit risk, operational and market risk since 2013.
(13) As of December 31, 2017 and December 31, 2016, Tier 1 Pro Forma includes Ps.4.3 billion and Ps.805.0 million, respectively, from the IPO proceeds retained at the Grupo Supervielle level, which are available for further capital injections in its subsidiaries.
(14) LCR ratio includes the net liquidity held at the holding company level.
(15) Non-performing loans include all principal amounts of loans to borrowers classified as “3-with problems/medium risk”, “4-high risk of insolvency/high risk”, “5-uncollectible”, and “6-uncollectible, classified as such under regulatory requirements” under the Central Bank loan classification system. See “ Item 4.D Property, plants and equipment—Selected Statistical Information—Loans and Financings—Portfolio Classification.”
(16) Loan Loss Provisions divided by Average Loans.
(17) Dividend in relation with the result of each year, declared and paid in the following year.
(18) In January 2016, all shares of preferred stock were converted to Class B shares. No dividends on the preferred shares were paid in 2017 or 2016.
(19) As of the date of this annual report, we have 340 branches and aales points and 714 ATMs and self-service terminals.
Exchange Rates
From April 1, 1991 until the end of 2001, Law No. 23,928 (the “Convertibility Law”) established a regime under which the Central Bank was obliged to sell U.S. dollars at a fixed rate of one Peso per U.S. dollar. On January 6, 2002, the Argentine Congress enacted Law No. 25,561 (as amended and supplemented, the “Public Emergency Law”), formally ending the regime of the Convertibility Law, abandoning over ten years of U.S. dollar-Peso parity and eliminating the requirement that the Central Bank’s reserves in gold, foreign currency and foreign currency denominated debt be at all times equivalent to 100% of the monetary base.
The Public Emergency Law, which ceased to be in effect on December 31, 2017, granted the Argentine government the power to set the exchange rate between the Peso and foreign currencies and to issue regulations related to the foreign exchange market. The state of emergency on social matters was further extended until December 31, 2019. Following a brief period during which the Argentine government established a temporary dual exchange rate system, pursuant to the Public Emergency Law, the Peso has been allowed to float freely against other currencies since February 2002, although the Central Bank has the power to intervene by buying and selling foreign currency for its own account, a practice in which it engages on a regular basis.
From 2011 to 2015, the Argentine government increased controls on exchange rates and the transfer of funds into and out of Argentina. With the tightening of exchange controls beginning in late 2011, in particular with the introduction of measures that allowed limited access to foreign currency by private companies and individuals (such as requiring an authorization of AFIP to access the foreign currency exchange market), the implied exchange rate, as reflected in the quotations for Argentine securities that trade in foreign markets, compared to the corresponding quotations in the local market, increased significantly over the official exchange rate. Most foreign exchange restrictions were lifted in December 2015, May 2016 and August 2016, reestablishing Argentine residents’ rights to purchase and remit outside of Argentina foreign currency with no maximum amount and without specific allocation or the need to obtain prior approval. As a result, since December 2015 the substantial spread between the official exchange rate and the implicit exchange rate derived from securities transactions has substantially decreased.
After several years of moderate variations in the nominal exchange rate, in 2012 the Peso lost approximately 14.0% of its value with respect to the U.S. dollar. This was followed in 2013 and 2014 by a devaluation of the Peso with respect to the U.S. dollar that exceeded 30.0%, including a loss of approximately 24.0% in January 2014. In 2015, the Peso lost approximately 52.0% of its value with respect to the U.S. dollar, including a 10.0% devaluation from January 1, 2015 to September 30, 2015 and a 38.0% devaluation during the last quarter of the year 2015, mainly concentrated after December 16, 2015. In 20162019, 2018 and 2017 the Peso lost approximately 21.9%prepared in accordance with Argentine Banking GAAP and 18.4% of its value against the U.S. dollar, respectively. In the first two months of 2018, the Peso lost approximately 7.1% of its value against the U.S. dollar.filed with theCNV.
The following table sets forth the annual high, low, average and period-end exchange rates for the periods indicated, expressed in Pesos per U.S. dollar and not adjusted for inflation. There can be no assurance that the Peso will not depreciate or appreciate again in the future. The Federal Reserve Bank of New York does not report a noon buying rate for Pesos.
|
| Exchange Rates |
| ||||||
|
| High(1) |
| Low(1) |
| Average(1)(2) |
| Period-end(1)(3) |
|
2013 |
| 6.5180 |
| 4.9228 |
| 5.4789 |
| 6.5180 |
|
2014 |
| 8.5555 |
| 6.5430 |
| 8.1188 |
| 8.5520 |
|
2015 |
| 13.7633 |
| 8.5537 |
| 9.2689 |
| 13.0050 |
|
2016 |
| 16.0392 |
| 13.0692 |
| 14.7794 |
| 15.8502 |
|
2017 |
| 18.8300 |
| 15.1742 |
| 16.5665 |
| 18.7742 |
|
October 2017 |
| 17.6775 |
| 17.3217 |
| 17.4528 |
| 17.6713 |
|
November 2017 |
| 17.6700 |
| 17.3307 |
| 17.4925 |
| 17.3845 |
|
December 2017 |
| 18.8300 |
| 17.2600 |
| 17.7001 |
| 18.7742 |
|
2018 |
|
|
|
|
|
|
|
|
|
January 2018 |
| 19.6500 |
| 18.4100 |
| 19.0200 |
| 19.6500 |
|
February 2018 |
| 20.1600 |
| 19.4700 |
| 19.8409 |
| 20.1150 |
|
March 2018 |
| 20.3875 |
| 20.1433 |
| 20.2378 |
| 20.1433 |
|
April 2018 (through April 25, 2018) |
| 20.2595 |
| 20.1450 |
| 20.1955 |
| 20.2595 |
|
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 |
(1) Reference exchange rate published by the Central Bank.
(2) Based on daily averages.
(3) The exchange rate used in our audited consolidated financial statements.
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 |
(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 + 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 + 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 + 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 Ps.456.7 million for the year ended December 31, 2019 and 2018 and 392.8 million for the year ended December 31, 2017. |
Item 3.BCapitalization and indebtedness
(8) | Peso amounts have been translated 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. |
(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. |
Item 3.B | Capitalization and indebtedness |
Not applicable.
Item 3.CReasons for the offer and use of proceeds
Item 3.C | Reasons for the offer and use of proceeds |
Not applicable.
Item 3.D | Risk Factors |
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
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 pandemic and government measures to contain the virus are adversely affecting our business and results of operations, and, as 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.
5 |
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 adopted 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 banks 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 rate 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 negative 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 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. 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.
6
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 recent decades, characterized by periods of low or negative growth, high levels of inflation and currency devaluation. As a consequence, our business and operations have been, and could in the future be, affected from time to time to varying degrees by economic and political developments and other material events affecting the Argentine economy, such as: inflation; price controls; foreign exchange controls; fluctuations 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 investment in us.
During 2001 and 2002, Argentina went through a period of severe political, economic and social crisis. Among other consequences, the crisis resulted in Argentina defaulting on its foreign debt obligations, introducing emergency measures and numerous changes in economic policies that affected utilities, financial institutions, and many other sectors of 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. After recovering significantly fromIn the 2001-2002 crisis, the pace of growth of Argentina’s economy diminished, suggesting uncertainty as to whether the growth experienced between 2003 and 2011 was sustainable. Economic growth was initially fueled by a significant devaluation of the Peso, the availability of excess production capacity resulting from a long period of deep recession and high commodity prices. In spite of the growth following the 2001-2002 crisis, the economy has suffered a sustained erosion of direct investment and capital investment. The global economic crisis of 2008 led to a sudden economic decline in Argentina during 2009, accompanied by inflationary pressures, devaluation of the Peso and a drop in consumer and investor confidence. Real GDP growth recovered in 2010 and 2011, with GDP increasing to 9.5% and 8.4%, respectively. However, GDP growth slowed to 0.8% in 2012 and then grew by 2.3% in 2013. According to the revised calculation of the 2004 GDP published by INDEC on June 24, 2016, GDP increased 8.9% in 2005, 8.0% in 2006, 9.0% in 2007, 4.1% in 2008 and decreased 5.9% in 2009. In 2010 and 2011,past three years, GDP grew 10.1% and 6.0%, respectively and decreased 1.0%2.7% in 2012. GDP grew 2.4% in 2013,2017, but it contracted 2.5% in 2014, grew 2.6% in 20152018 and decreased 2.2% in 2016. However, during 2017, Argentina’s real GDP increased by 2.9% compared to 2016, according to the information published by INDEC on March 21, 2018.
Economic conditions in Argentina from 2012 to 2015 included increased inflation, continued demand for wage increases, a rising fiscal deficit and limitations on Argentina’s ability to service its restructured debt in accordance with its terms due to its ongoing litigation with holdout creditors. In addition, beginning in the second half of 2011, an increase in local demand for foreign currency caused the Argentine government to strengthen its foreign exchange controls, most of which were eased by the Macri Administration. See “—The implementation in the future of new exchange controls, 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.”
Since 2007, the INDEC has experienced a process of institutional and methodological reforms that have given rise to controversy with respect to the reliability of the information that it produces including inflation, GDP and unemployment data. Reports published by the International Monetary Fund (“IMF”) state that their staff uses alternative measures of inflation for macroeconomic surveillance, including data produced by private sources, which have shown inflation rates considerably higher than those published by the INDEC since 2007. The IMF has also censured Argentina for failing to make sufficient progress, as required under the Articles of Agreement of the IMF, in adopting remedial measures to address the quality of official data, including inflation and GDP data. In February 2014, the INDEC released a new inflation index, known as National Urban Consumer Price Index (Indice de Precios al Consumidor Nacional Urbano) that measures prices on goods across the country and replaces the previous index that only measured inflation in the urban sprawl of the City of Buenos Aires. Even though the new methodology brought inflation statistics closer to those estimated by private sources, material differences between official inflation data and private estimates remained in 2015. On January 2016, based on its determination that INDEC had failed to produce reliable statistical information, the Macri administration declared a state of administrative emergency for the national statistical system and INDEC until December 31, 2016, which was not renewed. As consequence of the declaration of emergency, the INDEC ceased publishing certain statistical data until June 16, 2016, when it resumed publishing inflation rates, and began to release revised data, including GDP, poverty, foreign trade and balance of payments statistics, among others. See “—If the current levels of inflation continue, the Argentine economy and our financial position and business could be adversely affected.”
After recovering significantly from the 2001-2002 crisis, the pace of growth of Argentina’s economy diminished, suggesting uncertainty as to whether the growth experienced between 2003 and 2011 was sustainable. Economic growth was initially fueled by a significant devaluation of the Peso, the availability of excess production capacity resulting from a long period of deep recession and high commodity prices. In spite of the growth following the
2001-2002 crisis, the economy suffered a sustained erosion of direct investment and capital investment. The global economic crisis of 2008 led to a sudden economic decline in Argentina during 2009, accompanied by inflationary pressures, devaluation of the Peso and a drop in consumer and investor confidence.
Economic conditions in Argentina from 2012 to 2015 included increased inflation, continued demand for wage increases, a rising fiscal deficit and limitations on Argentina’s ability to service its restructured debt in accordance with its terms due to its ongoing litigation with holdout creditors. In addition, beginning in the second half of 2011, an increase in local demand for foreign currency caused the Argentine government to strengthen its foreign exchange controls. However, as of the issuance of Communication “A” 6037 by the Central Bank, which became effective on August 9, 2016, the government eliminated the monthly caps to the acquisition of foreign currency for non-specific purposes (Atesoramiento). During 2014, 2015, 2016 and 2017 the government imposed price controls on certain goods and services to control inflation. These price controls will remain in effect until April 2018, but as of the date of this annual report, there is uncertainty regarding what other specific actions will be taken to control inflation.
Presidential and Congressional elections in Argentina took place on October 25, 2015, and a runoff election (ballotage) between the two leading Presidential candidates was held on November 22, 2015, which resulted in Mr. Mauricio Macri being elected President of Argentina. The Macri administration assumed office on December 10, 2015.
Since assuming office, the Macri administration has implemented several significant economic and policy reforms, including those related to foreign exchange, the INDEC, financial policy, foreign currency-denominated bonds, foreign trade reforms, amendment to the Capital Markets Law, Tax Amnesty Law, correction of monetary imbalances, retiree program, fiscal policy, national electricity state of emergency and reforms, tariff increases and increase in minimum income.
Congressional elections were held in October 22, 2017 and President Macri’s governing coalition obtained the largest share of votes at the national level. However, even when the number of coalition members in Congress increased (holding in the aggregate 107 of a total of 257 seats in the House of Representatives and 24 of a total of 72 seats in the Senate), it still lacks a majority in either chamber of the Argentine Congress and, as a result, some or all of the Macri administration’s reforms aimed at improving the economy and investment environment (including the reduction of the fiscal deficit, reduction of the inflation rate and fiscal and labor reforms, among others) may not be implemented, which could adversely affect the continued improvement of the economy and investment environment. Any lack of ability of the Macri administration to adequately implement its measures as a consequence of the lack of sufficient political support could adversely affect the economy and the financial situation of Argentina, and, in turn our business, our financial and patrimonial situation and our results of operations. Argentina’s economy has undergone a significant slowdown, and any further decline in Argentina’s rate of economic growth could adversely affect our business, financial condition and results of operations. On the other hand, on November 16, 2017, the Argentine government, the governors of the majority of the Argentine provinces, including the Province of Buenos Aires, and the Head of Government of the City of Buenos Aires entered into an agreement pursuant to which guidelines were established in order to harmonize the tax structures of the different provinces and the City of Buenos Aires. Among other commitments, the provinces and the City of Buenos Aires agreed to gradually reduce the tax rates applicable to stamp tax and turnover tax within a five-year period, and withdraw their judicial claims against the Argentine government in connection with the federal co-participation regime. In exchange for this, the Argentine government, among other commitments, agreed to (i) compensate the provinces and the City of Buenos Aires (provided they enter into the agreement) for the effective reduction of its resources in 2018, resulting from the proposed elimination of section 104 of the Income Tax Law, quarterly updating such compensation in the following years, and (ii) issue a 11-year bond whose funds generate services for Ps.5,000 million in 2018 and Ps.12,000 every year starting from 2019, to be distributed among all the provinces, with the exception of the Province of Buenos Aires and the City of Buenos Aires, according to the effective distribution coefficients resulting from the federal co-participation regime. The provincial governments which took part in this agreement have committed to file, within the next 30 days after the execution of the agreement, the necessary draft bills for its implementation and authorize their respective executive branches to ensure its fulfilment. This agreement is effective in those provinces where their respective legislative branches have passed it. On December 22, the Argentine Congress passed the projects on fiscal consensus and fiscal liability (“Consenso Fiscal” and “Ley de Responsabilidad Fiscal”, respectively), with some amendments.
On November 13, 2017, the Argentine government submitted a draft bill to Congress concerning a series of amendments to the Capital Markets Law, the Mutual Funds Law No. 24,083 and the Argentine Negotiable Obligations Law, among others. Furthermore, the bill provides for the amendment of certain tax provisions, regulations relating to derivatives and the promotion of a financial inclusion program. As of the date of this annual report the draft bill is under consideration by the Argentine Congress and has not yet been approved.
On December 27, 2017, the Argentine Congress approved a tax reform that came into force on December 29, 2017 as Law No. 27,430 (the “Tax Reform Law”). The reform is intended to eliminate certain of the existing complexities and inefficiencies of the Argentine tax regime, diminish tax evasion, increase the coverage of income tax as applied to individuals and encourage investment while sustaining its medium and long term efforts aimed at restoring fiscal balance. The reform is part of a larger program announced by President Macri intended to increase the competitiveness of the Argentine economy (including by reducing the fiscal deficit) as well as employment, and diminish poverty on a sustainable basis. The main aspects of the Tax Reform Law include: (i) interest and capital gains realized by individuals that are Argentine tax residents on sales of real estate (subject to certain exceptions, including a primary residence exemption) acquired after the enactment of the bill will be subject to tax at the rate of 15%, calculated on the acquisition cost adjusted for inflation; (ii) income obtained from currently exempt bank deposits and sales of securities (including government securities) by individuals that are Argentine tax residents will be subject to tax at the rate of (a) 5% in the case of those denominated in pesos, subject to fixed interest rate and not indexed, and (b) 15% for those denominated in a foreign currency or indexed; income obtained from the sales of shares made on a stock exchange will remain exempt, subject to compliance with certain requirements; (iii) corporate income tax will initially decline to 30% in 2019 and 2020 and to 25% starting in 2021 and withholding taxes will be assessed on certain dividends or distributed profits bringing the total effective tax rate on corporate profits to 35%; (iv) social security contributions will be gradually increased to 19.5% starting in 2022, in lieu of the differential scales currently in effect; (v) the percentage of tax debits and credits that can be credited towards income tax will be gradually increased over a five year period, from the current 17% for credits to 100% for credits and debits; and (vi) holders of notes issued by the federal government, the provinces and municipalities of Argentina and the City of Buenos Aires that are not Argentine tax residents will be exempt from Argentine income taxes on interest and capital gains to the extent such beneficiaries do not reside in or channel their funds through non-cooperating jurisdictions. The non-cooperating jurisdictions list will be prepared and published by the executive branch. Short-term notes issued by the Central Bank (LEBACs) are outside the scope of these exemptions applicable to non-Argentine residents. The aforementioned amendments have been in force since January 1, 2018.
On January 10, 2018, the Macri administration issued Emergency Decree No. 27/2018 aimed at simplifying, expediting and promoting efficiency in the procedures within administrative entities and agencies, avoiding any unnecessary bureaucracy and expenses. The decree modifies and simplifies regulatory frameworks related to companies, transportation, trademark and patent procedures, transportation, digital signature, access to credit and work promotion.
As of the date of this annual report, the impact that these measures have had and any future measures taken by the Macri administration will have on the Argentine economy as a whole and the financial sector in particular cannot be predicted. We believe that the effect of the planned liberalization of the economy will be positive for our business by stimulating economic activity but it is not possible to predict such effect with certainty and such liberalization could also be disruptive to the economy and fail to benefit or harm our business.
Inflation, any decline in GDP and/or other future economic, social and political developments in Argentina, over which we have no control, may adversely affect our financial condition or results of operations.
2019.
A decline in international demand for Argentine products, a lack of stability and competitiveness of the Peso against other currencies, a decline in confidence among consumers and foreign and domestic investors, a higherhigh rate of inflation and future political uncertainties, among other factors, may affect the development of the Argentine economy, which could lead to reduced demand for our services and adversely affect 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 parties 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 candidate 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 about the measures that the new Fernández administration could take with respect 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.
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We can offer no assurances as to the policies that may be implemented by the new Fernández Argentine administration, or that political developments in Argentina will not adversely affect the Argentine economy 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 impair our business, financial condition or results of operations, or cause the market value of our shares to decline.
If the current levels of inflation continue or increase, the Argentine economy and our financial position and business could be adversely affected.
ArgentinaIn the past, inflation has confronted inflationary pressures since 2007. Accordingmaterially undermined the Argentine economy and Argentina’s ability to INDEC data, the CPI grew 9.5%create conditions that would permit growth. High inflation may also undermine Argentina’s competitiveness abroad and lead to a decline in 2011, 10.8%private consumption which, in 2012, 10.9% in 2013, 24.0% in 2014turn, could also affect employment levels, salaries and 11.9%interest rates. Moreover, a high inflation rate could undermine confidence in the ten-month period ended October 31, 2015. The INDEC did not publishArgentine financial system, reducing the CPI for the period between November 2015Peso deposit base and April 2016, and resumed publishing inflation rates using its new methodology for calculating CPI starting in June 2016, reporting increases of 4.2%, 3.1%, 2.0%, 0.2%, 1.1%, 2.4%, 1.6% and 1.2% during the months of May, June, July, August, September, October, November and December 2016, respectively.negatively affecting long-term credit markets.
According to unrevised INDEC data, the WPI increased 14.6% in 2010, 12.7% in 2011, 13.1% in 2012, 14.8% in 2013, 28.3% in 2014 and 10.6% in the ten-month period ended October 31, 2015. The INDEC did not publish the WPI for the last two months of 2015, and resumed publishing WPI data in May 2016, reporting that the WPI grew 34.5% in 2016.
The Argentine government declared a state of administrative emergency of the national statistical system and the INDEC —the official agency in charge of the system- until December 31, 2016 through Decree No. 55/2016, which was not renewed. During the implementation of rearrangement measures of its technical and administrative structure, the INDEC used official CPI figures and other statistics published by the Province of San Luis and the City of Buenos Aires. Despite the INDEC reforms, there is uncertainty as to (i) whether the official data will be sufficiently corrected, (ii) in what timeframe such data will be corrected and (iii) what effects these reforms will have on the Argentine economy. The Macri administration released an alternative CPI index based on data from the City of Buenos Aires and the Province of San Luis. According to the available public information based on data from the City of Buenos Aires, CPI grew 26.6% in 2013, 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 June 15, 2016, the INDEC resumed publishing inflation rates -which was previously suspended due to the state of administrative emergency on the national statistical system. The INDEC reported an increase of 4.2% in CPI for May 2016, while the CPI measured by the Argentine Congress reported an increase of 3.5%. Additionally, the INDEC published revised GDP data for the years 2005 through 2015, registering differences of up to 20 points between the original information reported by the prior administration and the revised information.
According to CPI figures of the INDEC, inflation was 16.9% between May and December 2016. The INDEC reported a cumulative variation of the CPI of 24.8% for 2017, while47.6% for 2018 and 53.8% for 2019.
There can be no assurances that inflation rates will not continue to escalate in the CPI measuredfuture or that the measures adopted or that may be adopted by the Argentine Congress registered an increase of 24.6%. The CPI variation was of 1.8%, 2.4% and 2.3%new Fernández administration to control inflation will be effective or successful. Inflation remains a challenge for the months of January, February and March 2018, respectively, compared to the previous month.
Also,Argentina. Significant inflation could have a material adverse effect on September 26, 2016, the Central Bank presented the inflation targeting regime, a system that seeks to offer a predictable and stable unit of value for inflation. In accordance with the data published by the Central Bank, the original year-on-year inflation targets were 12% to 17% for 2017; from 8% to 12% by 2018; and from 3.5% to 6.5% by 2019. However, on December 27, 2017, the Central Bank updated its inflation target regime by adopting the inflation targets set by the Ministry of the Treasury for the next three years, including targets of 15% for 2018, 10% for 2019 and 5% by the end of 2020.
In the past, inflation has materially undermined the ArgentineArgentina’s economy and the government’s ability to generate conditions that fostered economic growth. In addition, high inflation or a high level of volatility with respect to the same may materially and adversely affect the business volume of the financial system and prevent the growth of intermediation activity levels. This result, in turn could adverselyincrease our costs of operation, in particular labor costs, and may negatively affect the levelour business, financial condition and results of economic activity and employment.operations.
A high inflation rate also affects Argentina’s competitiveness abroad, real salaries, employment, consumption and interest rates. A high level of uncertainty with regard to these economic variables, and a general lack of stability in terms of inflation, could lead to shortened contractual terms and affect the ability to plan and make decisions. This may have a negative impact on economic activity and on the income of consumers and their purchasing power, all of which could materially and adversely affect our financial position, results of operations and business. The Argentine
government’s adjustments to electricity and gas tariffs, as well as the increase in the price of gasoline have impacted prices creating additional inflationary pressures.
The Macri administration has announced its intention to reduce the primary fiscal deficit as a percentage of GDP and to reduce the government’s dependence on financing from the Central Bank. If structural inflationary imbalances cannot be addressed and current levels of inflation persist, it could adversely affect the Argentine economy and financial situation.
Inflation rates could escalate in the future. There is uncertainty regarding the effects that the measures adopted, or that may be adopted in the future, by the Argentine government to control inflation may have. See “—Government intervention in the Argentine economy could adversely affect our results of operations or financial condition.”
If the high levels of inflation continue, the Argentine economy may be considered hyperinflationary for purposes of IAS 29, which could have an impact on our audited consolidated financial statements and other financial information, and we may need to adjust or restate our audited consolidated financial statements and other information.
On February 12, 2014, the Central Bank, through Communication “A” 5541, established the general guidelines towards conversion to IFRS as issued by the International Accounting Standards Board (IASB) for preparing financial statements of the entities under its supervision. We are in a convergence process towards such standards, which will be mandatory as from fiscal year starting on January 1, 2018. International Accounting Standard 29 (IAS 29), which is applicable to IFRS, but not to Argentine Banking GAAP, requires that financial statements of any entity whose functional currency is the currency of a hyperinflationary economy, whether based on the historical cost method or on the current cost method, be stated in terms of the measuring unit current at the end of the reporting period. IAS 29 does not establish a set 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 prior three years, along with the presence of several other macroeconomic-related qualitative factors. Despite the high inflation rates in Argentina in recent years, we conducted an analysis pursuant to the criteria set forth in IAS 29, and based solely on such internal review we do not currently believe that Argentina qualifies as a hyperinflationary economy for any of the years included in this annual report. We reassess inflation data periodically to determine whether this belief continues to be applicable. However, certain macroeconomic indicators have experienced a significant annual variation, a fact that must be considered when evaluating and interpreting our results of operations and financial condition as reflected in our audited consolidated financial statements included in this annual report.
Although we do not believe the current rate of inflation rises to the level required for Argentina to be considered a hyperinflationary economy under IAS 29, if inflation rates continue to escalate in the future, the Peso may qualify as a currency of a hyperinflationary economy, in which case our audited Consolidated Financial Statements and other financial information as from the IFRS transition date (as defined below), may need to be adjusted or restated by applying a general price index and expressed in the measuring unit (i.e., the hyperinflationary currency) current at the end of each reporting period. We cannot determine at this time the impact that this would have on our results of operations and 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.
In 2005 and 2010, Argentina conducted exchange offers to restructure part of its sovereign debt that had been in default since the end of 2001. As a result of these exchange offers, Argentina restructured over 92% of its eligible defaulted debt. However,litigation initiated by bondholders thatdid not accept Argentina’s settlement offers continued in several jurisdictions and limited the country’s access to international capital markets.In April 2016, 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 into a “stand-by” credit facility agreement for an amount of U.S.$57.1 billion with a 36-month maturity. As of the date of this annual report, litigationArgentina has received disbursements under the agreement for U.S.$46.1 billion. Notwithstanding the foregoing, thenew Fernández administration has publicly announced that they will refrain from requesting additional disbursements under the agreement, and instead vowed to renegotiate its terms and conditions in good faith.
Thenew Fernández administration has initiated by bondholders that have not accepted Argentina’s settlement offer continuesnegotiations with creditors in several jurisdictions, although order to restructurethe size of the claims involved has decreased significantly.country’s As of September 30, 2017, the amount ofcurrent Peso and U.S. dollar-denominated public debt. In this context, on February 5, 2020, the Argentine government’s non-restructuredCongress passed Law N° 27,544, by virtue of which the sustainability ofthe sovereign debt wasis declared a national priority, authorizing the Ministry of approximately U.S.$107.1 million basedEconomy 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 the most recent publicly available data.
Although the vacating of the pari passu injunctions removed a material obstacle to access to capital markets byApril 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 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”. As of the date of this annual report,the exchange offer is still open and there is uncertainty as evidenced by successful bond issuances in April 2016 to whether the Argentine government will be able to successfully carry out theexchangeofferand January 2017, future transactions may be affected asrestructure 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 continues,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 affecthave a material adverse effect on the Argentine government’s abilitycountry’s economy and, consequently, our business and results of operations. Furthermore, Argentina’s inability to implement certain expected reforms and foster economic growth, which mayobtain credit in international markets could have a direct impact on our own ability to access international credit markets thus affecting our ability to finance our operations and growth.growth, which could adversely affect our results of operations and financial condition.
Fluctuations in the value of the Peso could adversely affect the Argentine economy, and consequently our results of operations or financial condition.
Fluctuations in the value of the Peso may also adversely affect the Argentine economy, our financial condition and results of operations. Since January 2002,In 2017, 2018 and 2019, the Peso has fluctuated significantly in value. lost approximately 18.4%, 101% and 58% of its value against the U.S. dollar, respectively.The devaluation of the Peso in real terms in 2002 hadcan have a negative impact on the ability of certain Argentine businesses to honor their foreign currency-denominatedcurrency denominated debt, and also ledlead to very high inflation initially and significantlysignificant reduced real wages. The devaluation hascan also negatively impactedimpact businesses whose success is dependent on domestic market demand, and adversely affectedaffect the Argentine government’s ability to honor its foreign debt obligations. If the Peso depreciates significantly in real terms, all of the negative effects on the Argentine economy related to such devaluation could also have adverse consequences for our business.obligations. A substantial increase in the value of the Peso against the U.S. dollar also represents risks for the Argentine economy since it may lead to a deterioration of the country’s current account balance and the balance of payments. After several yearspayments which may have a negative effect on GDP growth and employment, and reduce the revenues of moderate variationsthe 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 nominal exchange rate in 2012was Ps.66.635 per dollar.
As a result of the Peso lost approximately 14.4% of its value with respect to the U.S. dollar. This was followed in 2013 and 2014 by a devaluationgreater volatility of the Peso, with respectthe former administration announced several measures to restore market’s confidence and stabilize the U.S. dollar that exceeded 32.5% in 2013 and 31.2% in 2014, including a loss of approximately 24.0% in January 2014. In 2015, the Peso lost approximately 52.0% of its value with respect to the U.S. dollar from January 1, 2015 to September 30, 2015 a 38.0% devaluation during the last quarter of the year, mainly concentrated after December 16, 2015. In 2016 and 2017, the Peso lost approximately 21.9% and 18.4% of its value against the U.S. dollar, respectively. In the first three months ofArgentine Peso. Among them, during 2018, the Peso lost approximately 7.3% of its value against the U.S. dollar.
In addition, the administration of former President Cristina Fernández de Kirchner adopted numerous measures to control directly or indirectly foreign trade and the foreign exchange market. From 2011 until President Macri assumed office, the Argentine government adopted increasingly stringentnegotiated 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, mostthe 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 which have been eliminatedapproximately 50% above the official exchange rate. The success of any measures taken by the Macri administration.
Any foreign exchange regulationsArgentine government to be issuedrestore market’s confidence and any modification resulting therefromstabilize the value of the exchange rate betweenArgentine Peso is uncertain and the continued depreciation of the Peso and the U.S. dollar may prevent or limit us from offsetting the risk derived from our exposure to the U.S. dollar and, accordingly, we cannot predict the impact of these changescould have a significant adverse effect on our financial condition and results of operations.
During its financial crisis in 2001 and 2002, Argentina experienced social and political turmoil, including civil unrest, riots, looting, nationwide protests, strikes and street demonstrations. During this crisis, the Argentine government adopted several measures to curb social unrest, including the devaluation of the Peso and a forced restructuring of financial liabilities with the banking system. Future policies of the Argentine government may include expropriation, nationalization, forced renegotiation or modification of existing contracts, suspension of the enforcement of creditors’ rights, new foreign exchange controls, changes in taxation and/or export duties and changes in laws and policies affecting foreign trade and investment. The implementation of any such future policies or significant protests resulting therefrom could destabilize the country and adversely and materially affect the Argentine economy and, in turn, our business, financial condition and results of operations.
The maintenance or implementation in the future of new exchange controls, 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.
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, 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, including a requirement that, for certain funds remitted into Argentina, an amount equal to 30.0% of the funds must be deposited into an account with a local financial institution as a U.S. dollar deposit for a one-year period without any accrual of interest, benefit or other use as collateral for any transaction.
In addition, fromcompanies. From 2011 until President Macri assumed office,2015, the Argentine government increased controls on the sale of foreign currency and the acquisition of foreign assets by local residents, limiting the possibility of transferring funds abroad. Together with regulations established in 2012 that subjected certain
After former Macri’s administration eliminated a significant portion of the foreign exchange transactions to prior approvalrestrictions, on September 1, 2019 it temporarily reinstated exchange restrictions, followed by Argentine authorities or the Central Bank, the measures takennew exchange restrictions imposed by the previous administration significantly curtailednew Fernandez’s administration. The new controls apply with respect to access to the foreign exchange market (Mercado Libre de Cambios or “MLC”) by individualsresidents for savings and private sector entities. In response, an unofficial U.S. dollar trading market developedinvestment purposes abroad, the payment of external financial debt abroad, the payment of dividends in whichforeign currency abroad, payments of imports of goods and services, and the peso-U.S. dollar exchange rate differed substantiallyobligation to repatriate and settle for Pesos the proceeds from the official peso-U.S. dollar exchange rate.exports of goods and services, among others. For more information on foreign exchange restrictions, see “Exchange Controls.“Item 10.D—Exchange Controls.”
Notwithstanding the measures recently adopted by the Macri administration eliminating a significant portion of the foreign exchange restrictions that developed under the Kirchner administration, in the future the Argentine government or the Central Bank could reintroduce exchange controls and impose restrictions on capital transfers, suchExchange control measures may negatively 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, and which in turn could adversely affect our business and results of operations and our ability to make payments under the Notes.operations.
The Argentine economy may be adversely affected by economic developments in other markets and by more general “contagion” effects, which could have a material adverse effect on Argentina’s economic growth, and consequently, could adversely affect our business, financial condition and results of operations.
Argentina’s economy is vulnerable to external shocks that could be caused by adverse developments affecting its principal trading partners. A significant decline in the economic growth of any of Argentina’s major trading partners (including Brazil, which is currently undergoing a recession, 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. In 2017, there were increases in exports of 13.7% to Chile, 0.2% to MERCOSUR (Brazil, Paraguay, Uruguay and Venezuela), 1.2% to NAFTA countries (United States, Canada and Mexico), while there was a decline of 1.6% in exports to China, each as compared to the same period in 2016. Declining demand for Argentine exports could have a material adverse effect on Argentina’s economic growth.
addition, Argentina couldmay be adversely affected by negative economic or financial developmentsand market conditions in other countries, whichmarkets worldwide, as was the case in turn may have an adverse effect on our 2008/2009, when the globalfinancial condition and results of operations. In addition, crisis led to a slowdown insignificant economic activitycontraction in Argentina would substantially affect our business.
in 2009.
Since 2015, the Brazilian economy, Argentina’s largest export 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 resulted in the Senate 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 period. Neverthelessperiod and in 2017,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 Brazilianlargest economy recorded an estimated growth of 1.1% after two years of recession.in Latin America, the measures taken to clean up its economy can have a great impact in the region. A further deterioration ofin economic conditions in Brazil may reduce the demand for Argentine exports to the neighboring country and, increase demand for Brazilian imports. While the impact of Brazil’s downturn on Argentina or our operations cannot be predicted, we cannot exclude the possibility that the Brazilian political and economic crisisif this occurs, it could have furthera negative impacteffect 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 and Europe. On June 23, 2016, the United Kingdom voted in favor of the United Kingdom exiting the European Union (“Brexit”). As ofThe United Kingdom formally left the date of this annual report, it is uncertain how Brexit may impact the relationship betweenEuropean Union on January 31, 2020. Even when the United Kingdom and the European Union, as the commercial terms under which the effective withdrawal of the United Kingdomagreed its departure from the European Union, negotiations on the terms and conditions are expected to continue during the transition period, which was officially notifiedis dueto expire on March 29, 2017, and its completion is currently scheduled for March 2019, remain subject to negotiation.December 31, 2020. The effects of the Brexit vote and the perceptions as to the impact of the withdrawal of 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.
Union and have a negative impact on the commercial exchange of Argentina with that region.
On November 8, 2016, elections were held inMr. Donald Trump was elected president of the United States and a new administration took office on January 20, 2017. The results of the presidential election haveStates. 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. These developments,We cannot predict how Mr. Trump’s protectionist measures will evolve or how they may affect Argentina, nor will the perceptioneffect that the same or any of themother measure taken by the Trump administration could occur, may have a material adverse effectcause 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 the United States ofother 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 into a recession, the Argentine economy would be impacted by a decline in its exports, particularly of its main agricultural commodities. All of these factors could have a negative impact on Argentina’s economy and, in turn, our business, financial condition and results of operations.
Furthermore, the financial markets have also been affected by the oil production crisis in March 2020 arising from the OPEC’s failure to reduce production. For more information, see in this section “Sustained declines 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.
In the past, the Argentine government has passed laws and regulations forcing privately owned companies to maintain certain wage levels and provide added benefits for their employees. Additionally, both public and private employers have been subject to strong pressure from the workforce and trade unions to grant salary increases and certain worker benefits.
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 companies together according to 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 banking 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 June 2017,August 2018, the National Labor Ministry resolved to increase the minimum salary to Ps.10,000Ps.12,500 in threefour stages: an increase (i) to Ps.8,860Ps.10,700 in July 2017,September 2018, (ii) to Ps.9,500Ps.11,300 in JanuaryDecember 2018, and (iii) to Ps.10,000Ps.11,900 in July 2018.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. On February 14, 2018, the INDEC published new data regarding the evolution of private and public-sector salaries. The total salaries index registeredThrough Decree No. 610/2019, a growth of 27.5% during 2017, as a resultstaggered increase of the 26.5%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, 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 issued Decree No. 34/2019, which established that in case of dismissals without cause during six (6) months after the publication in the registered sectorofficial gazette of such Decree, employees have the right to collect double indemnification. This Decree was enacted due to the economical emergency and the increase of the unemployment, and its aim was 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, 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 increaseadditional amount of 31.5%Ps.1,000 in the non-registered private sector.
February 2020 (total Ps.4,000 as from February 2020).
In the future, the Argentine government could take new measures requiring salary increases or additional benefits for workers, and the labor force and labor unions may apply pressure for such measures. Any such increase in wage or worker benefit could result in added costs and reduced results of operations for Argentine companies, including us. Such added costs could adversely affect our business, financial condition, results of operations and our ability to make payments under the notes.
Government intervention in the Argentine economy could adversely affect our results of operations or financial condition.
The two termsArgentine government exercises substantial control over the economy and may increase its level of President Fernández de Kirchner’s administration increased its direct state intervention in certain areas of the Argentine economy, including through the implementationregulation of expropriationmarket conditions and nationalization measures, price controls and exchange controls.prices.
InBy way of example, in 2008, the Fernández de Kirchner administration absorbed and replaced the former private pension system for a public “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 be administered by the National 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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InAlso, 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 to 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 Law No. 26,741, which declared the production, industrialization, transportation and marketing of hydrocarbons to be activities of public interest and fundamental policies of Argentina, and empowered the Argentine government to adopt any measures necessary to achieve self-sufficiency in hydrocarbon supply. In February 2014, the Argentine government and Repsol announced that they had reached an agreement on the terms of the compensation payable to Repsol for the expropriation of the YPF shares. Such compensation totaled U.S.$5 billion payable by delivery 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”).
Law No. 26,991 (the “Supply Law”) became effective on September 28, 2014. The Supply Law applies to all economic processes linked to goods, facilities and services which, either directly or indirectly, satisfy basic needs of the population (“Basic Needs Goods”) and grants broad delegations of powers to its enforcing agency to become involved in such processes. It also empowers the enforcing agency to order the sale, production, distribution and/or delivery of Basic Needs Goods throughout the country in case of a shortage of supply.
In February 2015, the Fernández de Kirchner administration sent a bill to Congress in order to revoke certain train concessions, return the national rail network to state control and provide powers to review all concessions currently in force. The bill was enacted on May 20, 2015 as Law No. 27,132.
In September 2015, the Argentine government, through Resolution No. 646/2015 issued by the CNV, modified the valuation criteria applicable to securities traded outside of Argentina that comprise asset management portfolios. The resolution established that such securities must be valued at the currency in which they were issued to the extent such currency is the currency in which payments are made. The purchaser exchange rate applicable to financial transfers set by the Central Bank must be used to make such valuation. Resolution No. 646/2015 led to an accounting change in the valuation of mutual funds.
During 2014, 2015, 2016 and 2017 the Argentine government imposed price controls on certain goods and services to control inflation. These price controls will remain in effect until May 2018, but as of the date of this annual report, there is uncertainty regarding what other specificHistorically, actions will be taken to control inflation. Actions takencarried out by the Argentine government concerning the economy, including decisions with respect toregarding interest rates, taxes, price controls, salarywage increases, provision of additional employeeincreased benefits foreignfor workers, exchange controls and potential changes in the market of foreign exchange market,currency, have had and could continue to have a materialsubstantial adverse effect on Argentina’s economic growth. In turn, these actions could affect our financial condition and results of our operations. Moreover, any additional Argentine government policy established in response to or to preempt social unrest could adversely and materially affect the economy, and therefore our business.
In December 2017, the Congress passed Law No. 27,426 which modifies the method of calculating increases in social security benefits, and Law No. 27,430 which introduced reforms to the general tax law.
It is widely reported by private economists that expropriations, price controls, exchange controls and other direct involvement by the Argentine government in the economy have had an adverse impact on the level of investment in Argentina, the access of Argentine companies to international capital markets and Argentina’s commercial and diplomatic relations with other countries. If the level of government intervention in the economy continues or increases, the Argentine 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:
· | Tax amnesty for MiPyMEs (i.e., micro, small and medium businesses). |
· | Increase in personal assets tax rate and delegation of power in the Executive Branch to increase tax rates on foreign financial assets. |
· | Changes to the formula of inflation adjustment in income tax. |
· | Creation of the tax for a solidary and inclusive Argentina (Impuesto para una Argentina Inclusiva y Solidariaor “PAIS,” per its Spanish acronym) for a 5-fiscal-period term on the purchase of foreign currency for saving purposes and on the payment of goods and services purchased abroad through credit cards. This tax rate oscillates between 8% and 30%, depending on the operation. |
· | Suspension of the pension and retirement adjustment mechanism for a 180-day period. |
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.
During the last years of the Fernández de Kirchner administration, theThe Argentine government substantially increasedhas high public expenditure, resortingexpenditures, and has in the past resorted to the Central Bank and to the ANSES to source part of its funding requirements. In light of increasingly tight public finances, the Fernández de Kirchner administration adopted certain measures to finance its public expenditures such as revising its subsidy policies (particularly those related to energy, electricity and gas, water and public transportation) and implementing an expansionary monetary policy. These policies have led to high inflation and, therefore, adversely affected, and could further adversely affect, consumer purchasing power and economic activity.
However, since assuming office, the Macri administration has taken steps to mitigate the increase in its fiscal deficit and reduce the current level of the fiscal deficit, including a process of comprehensive review of the contracts of public sector employees, as well as the elimination of subsidies to public services and other fiscal measures, which reduced the primary fiscal deficit by approximately 1.8% of GDP in December 2015 and reported a primary fiscal deficit of 4.6% of GDP in 2016, mostly due to taxes collected under the Tax Amnesty Law program in the last two months of 2016.
As of the date of this annual report, although the Macri administration is currently reviewing certain public sector contracts as well as the elimination of public service subsidies, there is uncertainty as to what additional actions the Macri administration will take with respect to public expenditure and its financing. 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 target for aregarding the primary fiscal deficit is 3.2%was 2.7% of GDP, with deficit targets of 0.6% in the first quarter, 1.6% in the second quarter and 2.2% in the third quarter.GDP. The Macri administration’s ultimate aim is to achieve a balanced primary budget by 2019, reachingfiscal result for 2018 showed a primary fiscal deficit of 2.2%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 GDP. 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 MacrinewFernández 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 continuingcontinuous 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 continuingcontinuous 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. As of the date of this annual report, the Macri administration has eliminated export taxes on many agricultural products and reduced the export taxes on soy from 35.0% to 30.0%. While the measure was intended to encourage exports, reductions in export taxes in the future, unless replaced with other sources of revenues, may negatively impact on the Republic’s public finances.
The Macri administration has begun to implement significant measures to solve the current energy sector crisis, but the eventual outcome of such measures is unknown, and could affect our business, financial condition and results of operations.
Economic policies since the 2001-2002 crisis have had an adverse effect on Argentina’s energy sector. The failure to reverse the freeze on electricity and natural gas tariffs imposed during the 2001-2002 economic crisis created a disincentive for investments in the energy sector. Instead, the Argentine government sought to encourage investment by subsidizing energy consumption. This policy proved ineffective and operated to further discourage investment in the energy sector and caused production of oil and gas and electricity generation, transmission and distribution to stagnate while consumption continued to rise. To address energy shortages starting in 2011, the Argentine government engaged in increasing imports of energy, with adverse implications for the trade balance and the international reserves of the Central Bank.
In response to the growing energy crisis, the Macri administration declared a state of emergency with respect to the national electricity system, which ended on December 31, 2017. The state of emergency allows the Argentine government to take actions designed to stabilize the supply of electricity. In this context, subsidy policies were reexamined and new electricity tariffs went into effect on February 1, 2016 with varying increases depending on geographical location and consumption levels. Additionally, the Ministry of Energy and Mining issued Resolution No. 6/16 increasing the electricity tariff as of February 1, 2016. This Resolution was later complemented by Resolution No. 7/16 which, among other things, determined the requirements needed to be fulfilled in order to apply for a social tariff (tarifa social) which exempts its beneficiaries from paying the electricity tariff up to a total consumption of 150Kwh per month and establishes a special price scheme for those beneficiaries who exceed this amount.
Additionally, the Macri administration announced the elimination of a portion of subsidies to natural gas and adjustment to natural gas rates. As a result, average electricity and gas prices have already increased and could increase further. However, certain of the government’s initiatives relating to the energy and gas sectors were challenged in Argentine courts and resulted in judicial injunctions or rulings against the government’s policies, which were later lifted.
The Macri administration has taken steps and announced measures to address the energy sector crisis while taking into consideration the implications of these price increases for the poorest segments of society, approving subsidized tariffs for users that satisfy certain requirements. A failure to address the negative effects on energy generation, transportation and distribution in Argentina with respect to both the residential and industrial supply, resulting in part from the pricing policies of the prior administrations, could weaken confidence in and adversely affect the Argentine economy and financial condition, lead to social unrest and political instability, and adversely affect our results of operations. There can be no assurance that the measures adopted by the Macri administration to address
the energy crisis will not continue to be challenged in the local courts and/or will be sufficient to restore production of energy in Argentina within the short or medium term.
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 20172019 Corruption Perceptions Index survey of 180 countries, Argentina was ranked 85,66, improving from the previous survey in 2016.2018. In the World Bank’s Doing Business 20182020 report, Argentina ranked 117126 out of 190 countries, down from 116119 in 2017.2019.
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, theformer Macri administration has announced several measures aimed at strengthening Argentina’s institutions and reducing corruption. These measures include 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 government’sadministration’s ability and determination to implement these initiatives taken by the former administration is uncertain, as it would require, among other things, the involvement of the judicial branch, which is independent, as well as legislative support from opposition parties.support.
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In addition, certain senior executive officers and directors of companies operating in the Argentine energy, infrastructure, oil and gas and other sectors, are currently facing judicial investigations 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 their 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 the Bank, 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 hashad seen a recovery in the amount of deposits since then, this trend may not continue andended 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, could be negativelyBank. This U.S. dollar-denominated deposit base drop has affected in the future by adverse economic, social and political events. Furthermore, 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. Recently, numerous local financial entities, such as the Bank, have accessed the global financial markets for funding through the placement of debt securities, on satisfactory terms, but this trend may not last and there is uncertainty as to whether the current availability of funds from the international markets will continue in coming 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 contracts,continues to contract, 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 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 long-term funding.
In recent years, the Argentine financial system grew significantly in nominal terms. Loans to the private sector grew by approximately 30.8% in 2013, 20.3% in 2014, 37.1% in 2015, 31.4% in 2016 and 51.7% 2017, for the financial system as a whole.
Since most term deposits (more than 95%) are short-term deposits with a term 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 level ofability to reduce inflation in the future and whether the Macri administration will be able to continue the declining trend observed in previous months and meet the inflation targets announces, 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.
Our asset quality and that of other financial institutions may deteriorate if the Argentine private sector does not fully recover.
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, due to the ongoing COVID-19 pandemic and thegovernment measures taken 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 measures to address the effects of the current macroeconomic environment;however, these measures may notbe sufficient to offset thesignificant impacts of Argentina’s economicrecession and the COVID-19 pandemic. Consequently, the quality of the Bank’sand CCF’s assets may further deteriorate, if customersare not able to repay their loans,thereby also increasing loan loss provisions.In such event our results of operations and financial conditionwould be adversely affected.
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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 order to protect debtors affected by the economic crisis in 2001-2002, 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, in order to mitigate theeconomic impact resulting from the ongoing COVID-19 pandemic and government measures taken to contain the spread of the virus, the new Fernández administrationhas, among other things, suspended mortgage foreclosures until September 30, 2020. 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.”
Although such measures have been rescinded, in the future they could be reinstated, or the government could take other measures that limit creditors’ rights. Any such measures, limitingand 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.
Argentine Consumer Protection Law No. 24,240, as supplemented or amended (the “Consumer Protection Law”) establishes a number of rules and principles for the protection of consumers. Although 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 new 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 sets forth several mandatory regulations designed to protect credit card holders.
The application of both the Consumer Protection Law and the Credit Card Law 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, granting broad protection to financial services customers, limiting fees and charges that financial institutions may validly collect from their clients.
In addition, the Argentine Supreme Court issued theAcordada 32/2014, creating the Public Registry of Collective Proceedings for the purpose of registering 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. For example, reducing our or their ability to collect payments due from services and financing provided us and 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 that financial entities may charge clients and the fees that they may charge merchants. Moreover, general legal provisions exist pursuant to which courts could decrease the interest rates and fees agreed upon by the parties on the grounds that they are excessively high. A change in applicable law or the existence of court decisions that lower the cap on interest rates and fees that clients and merchants may be charged would reduce the Bank’s and CCF’s revenues and therefore negatively affect our consolidated results.
Class actions against financial institutions for an indeterminate amount may adversely affect the profitability of the financial system and of the Bank, specifically.
Certain public and private organizations have initiated class actions against financial institutions in Argentina, including the Bank. See “Item 8.A Consolidated Statements and Other Financial Information—Legal ProceedingsInformation.” The Argentine National Constitution and the Consumer Protection Law contain certain provisions regarding class actions. However, 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, some 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 and other regulatory authorities. The Central Bank may penalize our main subsidiary, the Bank, as well as our subsidiary CCF, 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. In addition, pursuant to Law No. 26,831, the CNV may appoint supervisors with veto powers over resolutions of our Board of Directors and may temporarily remove our Board of Directors, when, as determined by the CNV, minority shareholders’ or bondholders’ interests or rights have been infringed upon.
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.
In addition to regulations specific to ourOur industry we areis the subject toof a wide range of federal, provincial and municipal regulations and supervision generally applicable to businesses operating in Argentina,tight regulatory framework, including laws and regulations pertaining to labor, social security, public health, consumer protection,measures that have affected the environment, competition and price controls.
Specifically, a series of new regulations were enacted from the beginning of 2012 until President Macri assumed office, incorporating new requirements and restrictions for financial institutions, including: (i) mandatory credit lines
for productive purposes, with a maximum interest rate established by regulation; (ii) rules limiting the reference interest rate for personal loans and car loans granted to retail customers that are not considered a micro, small or medium size company; (iii) a prior authorization requirement with respect to the introduction of new fees for new products and/or services offered and to increase existing fees; (iv) rules limiting minimum rates applicable to term deposits made by individuals; and (v) rules limiting the abilityprofitability of financial institutions to receive remuneration or profits from any insurance product that customers are obligated to purchase as a condition for accessing financial services. However, on December 17, 2015,and limit the limits imposed on interest rates applicable to transactions referred to in items (ii) and (iv) were eliminated and financial entities andpossibility of covering their customers may now freely agree upon such interest rates.positions against currency fluctuations. See “Item“Item 4.B Business overview—Argentine Banking Regulation—Interest Rate and Fee Regulations.Regulation.”
In 2012, the Central Bank increased the capital requirements for financial institutions following the Basel II standard as well as several other measures related to Basel III, including with respect to capital, leverage and liquidity. In addition, since January 2016, pursuant to Communication “A” 5827 issued by the Central Bank, there are additional capital margin requirements, composed of a capital conservation margin and a countercyclical margin. Pursuant to these regulations, the capital conservation margin is 2.5% of the amount of risk weighted assets, or RWA, and in the case of entities considered by the Central Bank to be systemically important, or D-SIB, the margin will be increased to 3.5% of RWA. The countercyclical margin must be within a range of 0% to 2.5% of RWA. Pursuant to Communication “A” 5938, as amended and supplemented, the applicable countercyclical margin is currently 0%. See “Item 4.B Business overview—Argentine Banking Regulation—Minimum Capital Requirements.”
In July 2016, by means of Communication “A” 6013, as amended by Communication “A” 6464, the Central Bank eliminated the requirement to maintain a certain regulatory capital threshold after the distribution of dividends by financial institutions.
The Central Bank has also imposed restrictions on the positive foreign currency net global position of financial institutions, which have been modified several times, to prevent the Central Bank’s foreign currency reserves from further decreasing. As of the date of this annual report, the positive foreign currency net global position, calculated by using monthly averages of daily balances, may not exceed 25% of the lesser of the financial institution’s RPC (as defined below) computed for the relevant preceding month or the financial institution’s own liquid assets for the preceding month. For a more detailed description of changes, see “Item 4.B Business overview—Argentine Banking Regulation—Foreign Currency Net Global Position.”
The absence of a stable regulatory framework orand the imposition of measures that may affectaffects the profitability of financial institutions and limit the capacity to hedgepossibility of covering their positions against currency fluctuations could resultresults in significant limitsimportant limitations with respect to the decisions of financial institutions’ decisions, suchinstitutions, as is the Bank and CCF, regarding asset allocation.case of us, in relation to the allocation of the asset. In turn, this situation could cause uncertainty and negativelymay adversely affect our future financial activities and resultsour result of operations. In addition, existingOn the other hand, current or future legislationlaws and regulation couldregulations may require material expendituressubstantial expenses or otherwise have a materialan adverse effect on our consolidated operations.
In addition, pursuant to Communication “A” 5785, as amended by Communication “A” 5813”, sanctions imposed by the Central Bank, the UIF, the CNV and/or the National Superintendency of Insurance on financial institutions and/or their authorities, may result in the revocation of their licenses to operate as financial institutions. Such revocation may occur when, in the opinion of the Board of Directors of the Central Bank, there was a material change in the conditions deemed necessary to maintain such license, including those relating to the suitability, experience, moral character or integrity of (i) the members of a financial institution’s Board of Directors (directors, counselors or equivalent authorities), (ii) its shareholders, (iii) the members of its supervisory committee and (iv) others, such as its managers.
Even though the Macri administration has taken steps towards increasing the flexibility of the regulatory framework for the financial entities, including the elimination of several restrictions adopted by the previous government as described above, thereThere 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 could require material expenditures or otherwise have a material adverse effect on our consolidated operations.
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Exposure to multiple provincial and municipal legislation and regulations could adversely affect our business or results of operations.
Argentina has a federal system of government with 23 provinces and one autonomous city (Buenos Aires),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. Although we have not experienced any material adverse effects from this, futureFuture 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 affect the economy and the operations of financial institutions.
The Argentine government has historically exercised significant influence over the economy, and financial institutions, in particular, have operated in a highly regulated environment. Laws and regulations currently governing the economy or the banking sector may continue to change in the future, and any changes may adversely affect our business, financial condition and results of operations.
SeveralIn 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. A thorough amendment of the FIL would have a substantial effect on the banking system as a whole. If any such a bill iswere passed, or any other amendment to the FIL isbe 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 amendmentasset quality of financial institutions, including the Bank, our main subsidiary, may be affected by exposure to public sector debt and short term securities issued by the Central Bank’s CharterBank.
Argentine financial institutions usually hold public sector debt issued by the national, provincial and the Convertibility Law may adversely affect the Argentine economy.
On March 22, 2012, the Argentine Congress passed Law No. 26,739, which amended the charter ofmunicipal governments and securities – generally short term – issued by the Central Bank as part of their portfolios. As of December 31, 2019, the financial institutions’ exposure to the public sector represented 8.4% of total assets and the Convertibility Law. This new law amended the objectivestheir holdings of short term securities issued by the Central Bank (as established in its charter) and removed certain provisions previously in force. Pursuantrepresented 5.6% of total assets. As of December 31, 2019, our exposure to the termspublic sector amounted to Ps.4.0 billion, representing 2.7% of the new law,our total assets as of that date and our exposure to short term securities issued by the Central Bank will focusamounted 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 promoting monetaryFebruary, 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”.
To some extent, the value of the assets held by Argentine financial stabilityinstitutions, as well as development with social equity. In addition,their income generation capacity, is dependent on the conceptpublic 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. 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 “freely available reserves” was eliminated, grantingoperations. Moreover, failure by the Argentine government access to additional reserves to pay debt. Further, this new law provides thatsuccessfully carry out the Central Bankrestructuring of its foreign financial indebtedness may set the interest rate and terms of loans granted by financial institutions.
Regarding the reserves, if the government were to utilize such Central Bank’s reserves to make payments on its public debt or finance public spending, this may result in increased inflation, which would hinder economic growth. In addition, a decrease in the Central Bank’s reserves could adverselyfurther affect the Argentine financial system’s capacitypublic sector’s creditworthiness and negatively affect the Bank’s exposure to withstandpublic sector debt and overcome the effects of an economic crisis (either domestic or international), negatively affecting economic growth and, in turn, our consolidated results and results of operations.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 concentrated inexposed 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—Selected Statistical Informationequipment.”
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 interestfinancial income represented 62.0%87.5% of our net financial incomeoperating revenue in 2019 and services income fee85.2% in 2015, 66.0% in 2016 and 70.2% in 2017.2018. 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 interestfinancial 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’s profitability.
Historically, the Argentine financial system witnessed a decrease in spreads between the interest rates on loans and deposits as a result of a decrease in inflation or increased competition in the banking sector.sector and the Argentine government’s tightening of monetary policy in response to inflation concerns. The interest rate spreads of the Bank and CCF follow the same trend. If inflation reduces, competition continues or increases and interest rate spreads decrease, without corresponding increases in the volume of the Bank’s loans such decrease could adversely affect our consolidated results of operations and financial condition.
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We are a holding company and 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 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.
A number of our products expose us to credit risk, including consumer loans, commercial loans and other receivables. Changes in the income levels of our borrowers, increases 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.
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.
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 2017,2019, the Bank made payments on behalf of ANSES to approximately 1,123,000988,000 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 (35.0%(26% as of December 31, 2017)2019) from the sale of financial services throughto senior citizens dedicatedin our service branches. The Bank’s agreement with ANSES provides that it will continue in effect as long as the parties continue performing their obligations for a six-year term. ANSES has the right to terminate the agreement with 90 days 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 short-term deposits are one of our main sources of funds, a sudden shortage of short-termthe 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 60.1%71.3% of our total liabilities as of December 31, 2017.2019. 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 powersintervention of and intervention by the Central Bank, which may limit the remedies otherwise available and extend the duration of the proceedings.
any insolvency proceeding.
Under Argentine law, the liquidation and commencement of bankruptcy or liquidation proceedings against financial institutions, until their banking license has been revokedthe 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 27, 2018, 126,738,18828, 2020, 61,738,188 Class A shares and 37,030,42298,684,713 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 business agreement with Walmart could have an adverse effect on our revenue.
In April 2000, CCF (formerlyGE Compañía Financiera) and Walmart entered into a commercial agreement pursuant to which CCF became the sole provider of financial services for Walmart’s customers in Argentina. The agreement was renewed in 2005, in 2010 and in December 2014. Such agreement is key to CCF’s overall performance. This agreement expires in August 2020 and, while it contains an option fora renewal 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 affect our expected benefit from this alliance and could result in a material adverse effect on CCF’s financial condition and results of operations.
Differences in the accounting standards between Argentina and certain countries with highly developed capital markets, such as the United States, may make it difficult to compare our audited consolidated financial statements and reported earnings with companies in other countries and the United States.
Except as otherwise described herein, we prepared our 2017 audited consolidated financial statements in accordance with the Central Bank regulations, which differ in certain significant respects from U.S. GAAP and from Argentine GAAP. As a result, except for our net income and our shareholders’ equity as of and for the years ended December 31, 2017 and 2016 which have been reconciled with U.S. GAAP, our audited consolidated financial statements are not directly comparable to those of banks in the United States. Implementation of IFRS in Argentina took place for the fiscal years beginning on January 1, 2018.
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 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 as to us. In addition, we provide our customers with continuous remote access to their accounts and the possibility of transferring substantial financial assets by electronic means. Accordingly, cybersecurity is a material risk for us. Cybersecurity incidents, such as computer break-ins, 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.
In addition, contingency plans in place may not be sufficient to cover liabilities associated with any such events, and we do not have insurance to cover 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 implement security technology devices and establish operational procedures to prevent such damage, it is possible that not all of our systems are entirely free from vulnerability and these security measures will not be successful. If any of these events occur, it could damage our reputation, entail serious costs and affect our transactions, as well as our results of operations and financial condition.
Our business is highly dependent on properly functioning information technology systems and improvements to such systems.
Our business is highly dependent on the ability of our information technology systems and the third party managers of such systems to effectively manage and process a large number of transactions across numerous and diverse markets and products in a timely manner. In addition, we provide our customers with continuous remote access to their accounts and the possibility of transferring substantial financial assets by electronic means. The proper functioning of our financial control, risk management, accounting, customer service and other data processing systems is critical to our business and our ability to compete effectively. Our business activities may be materially disrupted if there were a partial or complete failure of any of our information technology systems communication networks. Such failures could be caused by, among other things, software bugs, computer virus attacks or intrusions, phishing, identity theft or conversion errors due to system upgrading. 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 business, results of operations and financial condition.
Our ability to remain competitive and achieve further growth will depend in part on our ability to upgrade our information technology systems and increase our capacity on a timely and cost effective basis. Any substantial failure to improve or upgrade information technology 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 fines or other penalties, and we have not suffered business or reputational harm, as a result of any money laundering activities in the past.
You may not be able to effect service of process within the United States upon us, our directors and officers and certain advisors.
All of our directors and all our officers and certain advisors named herein reside in Argentina or elsewhere outside the United States. As a result, you may not be able to effect service of process within the United States upon such persons.
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. 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 is 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 apply(i)apply (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”, (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 Business overview—Argentine Banking Regulation—Liquidity and Solvency Requirements—Requirements Applicable to Dividend Distribution.”
In 2016 and 2017, we received the following dividend payments in cash from our subsidiaries: (i) Ps.73.0 million in 2017 and Ps.61.3 million in 2016 from SAM, (ii) Ps. Ps.23.1 million and Ps.42.3 million in 2017 and 2016 from Espacio Cordial, and (iv) Ps.150 million and Ps.76.8 million in 2017 and 2016 from Supervielle Seguros, and (v) Ps.0 million and Ps.6.5 million in 2017 and 2016 from Sofital. We did not receive dividend payments from the Bank or our other subsidiaries during 2017 and 2016.
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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ChangesFurthermore, on March 19, 2020, in the Argentine tax laws may adversely affectmidst of the resultscoronavirus’ outbreak crisis, the Central Bank issued Communication “A” 6939, by virtue of our operations and the tax treatment of our Class B shares and/or the ADSs for the period prior to December 31, 2017.
On September 23, 2013, Law No. 26,893, which amended the Income Tax Law, was enacted. According to the amendments, the distribution of dividends by an Argentine corporationfinancial entities was subjecttemporarily suspended until June 30, 2020. We cannot assure this measure will not be extended after this period nor the extent to income tax at a rate of 10.0%, unless such dividends were distributed to Argentine corporate entities (the “Dividend Tax”).
The Dividend Tax was repealed by Law No. 27,260, enacted on June 29, 2016, and consequently no income tax withholding is applicable on the distribution of dividends in respect of both Argentine and non-Argentine resident shareholders, except when dividends distributed are greater than the income determined according to the application of the Income Tax Law, accumulated at the fiscal year immediately preceding the year on which the distribution is made. In such case,measure may affect the excess is subjectBank’s ability to a rate of 35%, for both Argentine and non-Argentine resident shareholders. This treatment applies only topay dividends to be distributed at any time out of retained earnings accumulated until the end of the last fiscal year starting before January 1, 2018.us.
However, pursuant to Law No. 27,430, dividends to be distributed out of earnings accrued in fiscal years starting on or after January 1, 2018, and other profits paid in cash or in kind —except for stock dividends or quota dividends—by companies and other entities incorporated in Argentina referred to in the Income Tax Law, Sections 69 (a)(1), (2), (3), (6), (7) and (8), and Section 69(b) to Argentine resident individuals and foreign beneficiaries will be subject to income tax at a 7% rate on profits accrued during fiscal years starting January 1, 2018 to December 31 2019, and at a 13% rate on profits accrued in fiscal years starting 1 January 2020 and onwards. If dividends are distributed to Argentine corporate taxpayers (in general, entities organized or incorporated under Argentine law, certain traders and intermediaries, local branches of foreign entities, sole proprietorships and individuals carrying on certain commercial activities in Argentina), no dividend tax should apply. See “Item 10.E Taxation—Material Argentine Tax Considerations.”
In addition, capital gains realized from the disposal of shares and other securities, including securities representing shares and deposit certificates, are subject to capital gains tax.
Law No. 27,430 established that as from January 1, 2018, capital gains realized by Argentine resident individuals from the disposal of shares and ADSs are exempt from capital gains tax in the following cases: (i) when the shares are placed through a public offering authorized by the CNV, (ii) when the shares are traded in stock markets authorized by the CNV, under segments that ensure priority of price-time and interference of offers, or (iii) when the sale, exchange or other disposition of shares is made through an initial public offering and/or exchange of shares authorized by the CNV.
Such law also provides that the capital gains tax applicable to non-residents for transactions entered into until December 30, 2017 is still due, although no taxes will be claimed to non-residents with respect to past sales of Argentine shares or other securities traded in CNV’s authorized markets (such as ADSs) as long as the cause of the non-payment was the absence of regulations stating the mechanism of tax collection at the time the transaction was closed. General Resolution (AFIP) 4.227, which will come into effect on April 26, 2018, stipulates the procedures
through which the income tax should be paid to the AFIP. The payment of capital gains tax applicable for transactions entered into before December 30, 2017 is due on June 11, 2018.
In addition, Law No. 27,430 and Decree 279/2018, maintain the 15% capital gains tax (calculated on the actual net gain or a presumed net gain equal to 90% of the sale price) on the disposal of shares or securities by non-residents. However, non-residents are exempt from the capital gains tax on gains realized from the sale of (a) Argentine shares in the following cases: (i) when the shares are placed through a public offering authorized by the CNV, (ii) when the shares were traded in stock markets authorized by the CNV, under segments that ensure priority of price-time and interference of offers, or (iii) when the sale, exchange or other disposition of shares is made through an initial public offering and/or exchange of shares authorized by the CNV; and (b) depositary shares or depositary receipts issued abroad, when the underlying securities are shares (i) issued by Argentine companies, and (ii) with authorization of public offering. The exemptions will only apply to the extent the foreign beneficiaries reside in, or the funds used for the investment proceed from, jurisdictions considered as cooperating for purposes of the exchange of tax information.
In case the exemption is not applicable and, to the extent foreign beneficiaries do not reside in, or the funds do not arise from, jurisdictions not considered as cooperative for purposes of fiscal transparency, the gain realized from the disposition of shares would be subject to Argentine income tax at a 15% rate on the net capital gain or at a 13.5% effective rate on the gross price. In case such foreign beneficiaries reside in, or the funds arise from, jurisdictions not considerd as cooperative for purposes of fiscal transparency, a 35% tax rate on the the net capital cagin or at a 31.5% effective rate on the gross price should apply.
Therefore, holders of our Class B shares or the ADSs, are encouraged to consult their tax advisors as to the particular Argentine income tax consequences of owning our Class B Shares or the ADSs. See “Item 10.E Taxation—Material Argentine Tax Considerations.”
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 offor any sale of, the Class B shares underlying the ADSs.
Since the beginning of December 2001 until President Macri assumed office, the Argentine government implemented monetary and foreign exchange control measures that included restrictions on the withdrawal of funds deposited with banks and on the transfer of funds abroad, including dividends, without prior approval by the Central Bank, most of which were eliminated by the Macri administration.
Although the transfer of funds abroad by local companiesExchange controls currently in order to pay annual dividends only to foreign shareholders and the depositary for the benefit of the ADS holders based on approved audited financial statements no longer requires Central Bank approval, other exchange controlsplace 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 proceeds ofdividends 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 not subject to prior Central Bank approval, providedwhich may not be granted. Access to the foreign beneficiaryfree exchange market (“MLC,” as per its Spanish acronym) to pay dividends to non-resident shareholders is either a natural or legal person residing in or incorporated and established in jurisdictions, territories or associated states that are considered “cooperators forgranted subject to the purposes of fiscal transparency.” If such requirement is not met, prior Central Bank approval will be required.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. |
The Argentine government could reinstate restrictive measures in the future. In such a case, the depositary for the ADSs may be prevented from converting Pesos it receives in Argentina for the account of the ADS holders. If this conversion is not possible, the deposit agreement allows the depositary to distribute the foreign currency only to those ADS holders to whom it is possible to do so. If the exchange rate fluctuates significantly during a time when the depositary 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 Exchange Controls—Other Regulations—Sale of Foreign Currency to Non-residents.”
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 the Bolsas y Mercados Argentinos S.A. (“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. 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 Argentine Corporate Law,AGCL, 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 Argentine Corporate LawAGCL to 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 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 Argentine Corporate Law,AGCL, 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.rights, pursuant to the AGCL. 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; 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.
Non-Argentine companies that own our Class B shares directly and not as ADSs may not be able to exercise their rights as shareholders unless they are registered in Argentina.
Under Argentine law, foreign companies that own shares in an Argentine corporation are required to register with the Inspección General de Justicia (Superintendency of Legal Entities, or the “IGJ”), in order to exercise certain shareholder rights, including voting rights. If you own Class B shares directly (rather than ADSs) and you are a non-Argentine company and you are not registered with the IGJ, your ability to exercise your rights as a holder of our Class B shares may be limited.
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, 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 No. 26,831 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, 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.
· | 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 depositary how to vote the shares underlying ADSs. Because of the additional procedural step involving the 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, 2017,2019, the ten largest Argentine companies in terms of market capitalization represented approximately 80%66% of the aggregate market capitalization of ByMA. Accordingly, although you are entitled to withdraw the Class B shares underlying the ADSs from the depositary 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, if exchange controls are imposed by the Central Bank these 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 Exchange Controls.”
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 Argentine Corporate Lawthe AGCL or 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.A | History and development of the Company |
Item 4.Information of the Company
Recent Political and Economic Developments in Argentina
Presidential and congressional elections in Argentina took place in October and November 2015, resulting in Mr. Mauricio Macri being elected President of Argentina. The Macri Administration assumed office on December 10, 2015. Since assuming office, the Macri Administration has announced and executed several significant economic and policy reforms and transactions, including:
INDEC reforms. On January 8, 2016, based on its determination that the Instituto Nacional de Estadísiticas y Censos (the National Statistics and Census Institute, or “INDEC”) had failed to produce reliable statistical information, particularly with respect to consumer price index (“CPI”), gross domestic product (“GDP”), poverty and foreign trade data, the current administration declared the national statistical system and the INDEC in a state of administrative emergency through December 31, 2016. As of the date of this annual report, the INDEC has published certain revised data, including the CPI, foreign trade and balance of payment statistics. On June 29, 2016, the INDEC published INDEC Report including revised GDP data for the years 2004 through 2015 (the “2016 Revised INDEC Report”). On September 22, 2016, the INDEC resumed publication of its essential goods and services basket assessment. On November 9, 2016, the International Monetary Fund (“IMF”) Executive Board lifted its censure on Argentina, noting that Argentina had resumed the publication of data in a manner consistent with its obligations under the Articles of Agreement of the IMF. In March 2017, the INDEC published preliminary estimated GDP data for 2016, which shows a 2.3% GDP contraction compared to 2015. On September 21, 2017, GDP for the first quarter of 2017 increased by 1.1% compared to the last quarter of 2016, and 0.3% with respect to the same period in 2016, while according to the same source GDP for the second quarter of 2017 increased by 0.7% compared to the first quarter of 2017, and 2.7% with respect to the same period in 2016. See “Risk Factors—Risks Related to Argentina—Some national and international economic agents have expressed their concerns about the accuracy of the INDEC’s CPI and other economic data published by INDEC in the past.”
Foreign exchange reforms. The current administration eliminated substantially all of the restrictions, including certain currency controls, that were imposed under the previous administration. These reforms are expected to provide greater flexibility and easier access to the foreign exchange market (MLC). On August 8, 2016, the Central Bank issued Communication “A” 6037 as amended, which eliminated certain additional foreign exchange restrictions that were still in effect and established new foreign exchange rules, including:
the reestablishment of Argentine residents’ rights to purchase and remit foreign currency outside of Argentina without limit and without specific allocation (atesoramiento);
the effective elimination of a mandatory, non-transferable and non-interest bearing deposit in connection with certain transactions involving foreign currency inflows by reducing the amount of the deposit from 30% of such transactions to 0%;
the elimination of the requirement to transfer and settle the proceeds from new foreign financial indebtedness incurred by the foreign financial sector, the non-financial private sector and local governments through the MLC; and
the elimination of the mandatory minimum stay period, applicable to the proceeds of any new financial indebtedness and renewal of existing indebtedness incurred by residents, held by foreign creditors and transferred through the MLC.
On May 19, 2017, the Central Bank eliminated most of the foreign exchange restrictions then in place by means of Communication “A” 6244, effective as of July 1, 2017. In addition, on November 1, 2017, President Macri enacted Decree No. 893/17 which partially repealed Decrees No. 2,581/64, No. 1,555/86 and No. 1,638/01, and eliminated the obligation of Argentine residents to transfer to Argentina and sell in the MLC the proceeds of their exports of goods. On November 10, 2017, the Central Bank issued Communication “A” 6363, that eliminated all restrictions
applicable to Argentine residents related to the transfer and sale of proceeds in the MLC resulting from the export of goods. Furthermore, on December 26, 2017, by virtue of Communication “A” 6401, the Central Bank replaced the reporting regimes set forth by Communications “A” 3602 and “A” 4237 with a new, unified regime applicable for information as of December 31, 2017. The unified reporting regime involves an annual statement whose filing is mandatory for every person whose total flow of funds or balance of assets and liabilities is or exceeds U.S.$1 million during the previous calendar year.
Foreign trade reforms. The Kirchner and Fernández de Kirchner administrations imposed export duties and other restrictions on several sectors, particularly the agricultural sector. The current administration eliminated export duties on wheat, corn, beef, mining, oil, and regional products, and reduced the duty on soybean exports by 5%, from 35% to 30%. Further, a 5% export duty on most industrial exports was also eliminated. With respect to payments for imports of goods and services to be performed abroad, the current administration eliminated the restrictions on access to the MLC. Importers were offered short-term debt securities issued by Argentina to be used to repay outstanding commercial debt for the import of goods. In addition, the import system was modified by the replacement of the Declaraciones Juradas Anticipadas de Importación system with a new import procedure that requires certain filings and import licences for certain goods (including textiles, footwear, toys, domestic appliances and automobile parts), which, unlike the previous system, does not contemplate discretionary federal government approval of payments for the import of products through the MLC. By Decree No. 893/2017, published in the Official Gazette on November 2, 2017, the Argentine government repealed article 1 of Decree No. 2581/1964, article 10 of Decree No. 1555/1986 and Decree No. 1638/2001. This action eliminated the obligation of Argentine exporters to repatriate and settle for Pesos in the MLC foreign currency proceeds derived from the export of goods. On January 2, 2017, the Argentine government enacted a further reduction of the export duties rate set for soybean and soybean products, setting a monthly 0.5% cut on the export duties rate beginning on January 2018 and until December 2019. In addition, importers were offered short-term debt securities issued by the Argentine government to repay outstanding commercial debt for the import of goods.
Fiscal policy. The current administration took steps to anchor the fiscal accounts, to reduce the primary fiscal deficit and achieved a primary fiscal deficit of 4.6% of GDP in 2016 through the elimination of subsidies and the reorganisation of certain expenditures and the generation of increased revenue through the tax amnesty. The 2018 budget bill of the federal government projects a fiscal deficit representing 3.2% of GDP in 2017.
Correction of monetary imbalances. The current administration announced the adoption of an inflation targeting regime in parallel with the floating exchange rate regime and set inflation targets for the next four years. The Central Bank has increased sterilisation efforts to reduce excess monetary imbalances and raised Peso interest rates to offset inflationary pressure. Since January 2017, the Central Bank started to use the seven-day repo reference rate as the anchor of its inflation targeting regime. Short term notes issued by the Central Bank (“LEBACs”) would be used to manage liquidity. On December 28, 2017, the Central Bank announced its inflation targets for 2018, 2019 and 2020. The inflation target for 2018 is 15%, an increase from the Central Bank’s previous target range of 8%-12% for the same year. Inflation targets for 2019 and 2020 are 10% and 5%, respectively.
National electricity state of emergency and reforms. Following years of very limited investment in the energy sector, as well as the continued freeze on electricity and natural gas tariffs since the 2001-2002 economic crisis, Argentina began to experience energy shortages in 2011. In response to the growing energy crisis, the current administration declared a state of emergency with respect to the national electricity system, which will remain in effect until December 31, 2017. The state of emergency allowed the Argentine government to take actions designed to ensure the supply of electricity to the entire country, such as instructing the Ministry of Energy and Mining to design and implement, with the cooperation of all federal public entities a coordinated programme which guarantees the quality and safety of the electric system. Pursuant to Resolution No. 6/2016 of the Ministry of Energy and Mining and Resolution No. 1/2016 of the National Electricity Regulator (Ente Nacional Regulador de la Electricidad or “ENRE”), the current administration announced the elimination of a portion of the energy subsidies and a substantial increase in electricity tariffs. Consequently, the average price of electricity has increased and could increase further. By correcting tariffs, modifying the regulatory framework and reducing the government’s role as an active market participant, the current administration sought to correct distortions in the energy sector and stimulate investment. However, certain governmental initiatives were challenged in the Argentine courts and resulted in judicial injunctions or rulings limiting the government’s initiatives.
During 2016, lower court injunctions suspended in certain provinces and cities end-user electricity tariff increases implemented as of February 1, 2016, and instructed the Ministry of Energy and Mining and the ENRE to conduct a non-binding public hearing prior to sanctioning any such increases. On October 28, 2016, a non-binding public hearing was conducted by the Ministry of Energy and Mining and ENRE to present tariff proposals submitted by distribution companies covering the greater Buenos Aires area (approximately 15 million inhabitants) for the 2017-2021 period in the framework of the Integral Tariff Review (as defined below). On December 14, 2016, eight non-binding public hearings (in Buenos Aires, Mendoza, Neuquén, Mar del Plata, Formosa, Santiago del Estero and Puerto Madryn) were conducted by the Ministry of Energy and Mining and ENRE to present tariff proposals for electricity transmission at the national and regional level and the seasonal reference prices of capacity and energy in the wholesale electricity market, as well as a proposal to reduce subsidies for the 2017-2021 period.
Tariff increases. With the aim of encouraging companies to invest and improve the services they offer and enabling the Argentine government to assist those in need, the current administration has begun updating the tariffs for electricity, transportation, gas and water services (the “Integral Tariff Review”). Each of the announced tariff increases includes the tarifa social (social tariff), which is designed to provide support to vulnerable groups, including beneficiaries of social programmes, retirees and pensioners that receive up to two minimum pensions, workers that receive up to two minimum salaries, individuals with disabilities, individuals registered in the Monotributo Social programme, domestic workers and individuals receiving unemployment insurance. Subsequent modifications to these announced tariff increases were made, including a 20% discount on the regular distribution price for 400 designated energy-intensive companies that purchase electricity directly from distributors.
On August 18, 2016, the Supreme Court of Argentina in “Centro de Estudios para la Promoción de la Igualdad y la Solidaridad v/ Ministerio Federal de Energía y Mineria”, affirmed lower court injunctions suspending end-user gas tariff increases sanctioned as of April 1, 2016, and instructed the Ministry of Energy and Mining and the National Gas Regulator (Ente Nacional Regulador del Gas or “ENARGAS”) to conduct a non-binding public hearing prior to sanctioning any such increases. On September 16, 2016, a non-binding public hearing was conducted by the Ministry of Energy and Mining and ENARGAS to submit (i) transitional tariffs for transportation and distribution of natural gas at the national level in the framework of the Integral Tariff Review for the period 2017-2021, (ii) a new set of gas prices at the Point of Entry to the Transportation System (“PIST”) and (iii) a proposal to reduce subsidies for the period 2016-2022. Between October 2 and October 7, 2016, public hearings were also conducted at the national level with regard to tariff proposals for gas transportation and distribution throughout the country for the period 2017-2021 in the framework of the Integral Tariff Review.
On October 6 and October 7, 2016, after conducting non-binding public hearings, the Ministry of Energy and Mining and ENARGAS published a new end-user gas tariff scheme. The scheme establishes a two tariff schedule for private residences, establishing lower tariffs for units that decreased consumption compared to the same period in the previous year by at least 15%.
On October 11, 2016, the Ministry of Energy and Mining (a) expanded the amount of eligible beneficiaries of social tariffs to include retirees and pensioners that receive pensions equal to up to two minimum salaries, certain war veterans and medically dependent customers, and (b) decreed that institutions that perform activities of public interest would be entitled to residential rates.
In June 2017, an administrative court of the city of La Plata issued an injunction suspending the increases in electricity tariffs for customers located within the Province of Buenos Aires pursuant to a petition filed by the provincial Ombudsman, Guido Lorenzino. As of the date of this annual report, the injunction has been appealed and the decision is pending.
The year-on-year increase in the price of energy in the wholesale electricity market for end-users, which excludes transportation and distribution costs and accounts for approximately 45% of the tariff to end-users in the City of Buenos Aires, totalled 233% (from Ps.96/MWh to Ps.320/MWh on average), while the increase in the price of natural gas for end-users was 68% (from Ps.37/MMBtu to Ps.62/MMBtu on average).
Increase in transport tariffs. In January 2018, the Macri administration announced increases in public transport tariffs in the city of Buenos Aires and the Greater Buenos Aires area to be rolled out between January and February 2018.
Corporate Criminal Liability Law (Ley de Responsabilidad Penal Empresaria). On July 5, 2017, the Chamber of Deputies approved a bill providing for the criminal liability of corporate entities for criminal offenses against public administration and cross-border bribery committed by, among others, its shareholders, attorneys-in-fact, directors, managers, employees, or representatives. A company found liable under this bill may be subject to various sanctions, including, among others, fines ranging from 1% to 20% of its annual gross income and the partial or total suspension of its activities for up to ten years. In addition, the bill proposes to extend the criminal liability under the Argentine Criminal Code to cases of bribery committed outside Argentina by Argentine citizens or companies domiciled in Argentina. On September 27, 2017 the Senate approved the draft bill with modifications designed to reduce in part the impact of the statute, for instance by eliminating the inapplicability of the statute of limitations to certain of the criminal offenses originally proposed in the draft (the statute of limitations now has been set at six years). Further, the draft bill as modified by the Senate reduces the amount of fines originally proposed for criminal offenses that are not subject to a statute of limitations. On November 8, 2017, Congress passed the bill including those amendments as Law No. 27,401, which came into force on March 1, 2018.
Increase in minimum income thresholds. In December 2016, the Congress approved an increase in the minimum income threshold by approximately 23%, from Ps.25,000 to Ps.30,670 for married workers with two children and from Ps.18,880 to Ps.23,185 for single workers. The minimum income threshold will be subject to automatic adjustment going forward, by reference to increases in the average wages paid to public sector employees. The Congress also passed modifications to the income tax brackets to take into account the impact of inflation in recent years.
Draft bill for the development of the Argentine capital markets. On November 13, 2017, the executive branch submitted to Congress a draft bill that aims to develop the Argentine domestic capital markets. The draft bill provides for the amendment and update of the Argentine Capital Markets Law, the Mutual Funds Law and the Argentine Negotiable Obligations Law, among others. Furthermore, the bill provides for the amendment of certain tax provisions, regulations relating to derivatives and the promotion of a financial inclusion programme. On November 22, 2017, the draft was approved by the Chamber of Deputies of the Argentine Congress and was sent to the Senate for its signoff. However, as of the date of this annual report, the National Economy and Investment Commission of Senate has not reached an agreement on the proposed bill.
Project to Amend the Labor System. The Macri administration published a project to amend the labor system. The project’s main purpose is to improve the efficiency and productivity of different productive sectors, increase employment, attract investment and reduce employment costs. This project is expected to be considered by Congress in 2018.
Pension Reform Law (Ley de Reforma Previsional). On December 28, 2017, Congress passed the Pension Reform Law, with the goal of improving the sustainability and predictability of Argentina’s pension program, while still protecting the most vulnerable persons. To that effect, the Pension Reform Law modified the basic formula for the periodic adjustment of retirements, pensions and the Universal Child Allowance (Asignación Universal por Hijo). Under the pre-existing regime, the periodic adjustments occur twice a year, in March and September, and were based on the variation in certain tax revenues of ANSES (with a 50% weighting) and the change in the average wage, based on the greater of the Remuneración Imponible Promedio de los Trabajadores Estables (“RIPTE”), an index published by the Ministry of Labor that measures the salary increases of state employees, or the data published by INDEC (with a 50% weighting). Beginning in March 2018, the adjustments will be quarterly on the basis of a system that combines the variation of inflation (with a 70% weighting) and the RIPTE index (with a 30% weighting). The law also guarantees a one-time supplemental payment to beneficiaries of the Universal Basic Benefit (Prestación Básica Universal) who have established 30 years or more of service with effective contributions, so that the beneficiary’s pension is equivalent to eighty-two percent (82%) of the value of the minimum living wage.
The Pension Reform Law also modified Section 252 of the Labor Law by establishing that employers may request employees who have reached 70 years of age to initiate retirement proceedings (compared to age 65 under the prior regimen). The employer must maintain the employment relationship until the earlier of (i) one year or (ii) until de employee obtains the benefit. Notwithstanding the foregoing, male employees may exercise their right to request pension benefits at age 65 and female employees may exercise such right at age 60. Public sector employees are excluded from the foregoing provision.
To mitigate the adverse impact of the transition from the previous adjustment regime to the formula approved by Congress on certain beneficiaries, on December 20, 2017, President Macri granted a special one-time Ps.750 subsidy to pensioners who receive less than Ps.10,000 per month and meet certain age and years of service requirements under the law. Beneficiaries of non-contributory pensions for old age or disability who receive less than Ps.10,000 per month and those who meet the requirements of the Universal Pension for the Elderly (Pensión Universal para el Adulto Mayor) were also granted a one-time subsidy of Ps.375. Finally, the presidential measure provided a one-time subsidy of Ps.400 to beneficiaries of the Universal Child Allowance and/or the Universal Pregnancy Allowance (Asignación Universal por Embarazo).
Tax on Financial Transactions (Impuesto al Cheque). On December 27, 2017, the National Congress extended the tax on financial transactions through 2022, and earmarked amounts collected for the Argentine Integrated Pension System.
Tax Reform (Reforma Tributaria). On December 27, 2017, the National Congress also approved a series of reforms intended to eliminate certain of the existing complexities and inefficiencies of the Argentine tax regime, diminish evasion, increase the coverage of income tax as applied to individuals and encourage investment while sustaining Argentina’s medium and long term efforts aimed at restoring fiscal balance. The reforms will gradually come into effect over the next five years. The fiscal cost of the reform is estimated at 0.3% of GDP. The reforms form part of a larger program announced by President Macri intended to increase the competitiveness of the Argentine economy (including by reducing the fiscal deficit) and employment, and diminish poverty on a sustainable basis. The main aspects of the tax reform are the following:
Interest and capital gains derived from the sale or disposition of bonds issued by the federal government, the provinces and municipalities of Argentina and the City of Buenos Aires obtained by Argentine tax residents (individuals and undivided estates located in Argentina) will be subject to income tax at a rate of (a) 5%, in the case of Peso-denominated securities that do not include an indexation clause, and (b) 15%, in the case of Peso-denominated securities with an indexation clause or foreign currency denominated securities; gains realized by Argentine tax residents (individuals and undivided estates located in Argentina) from the sale of equity securities on a stock exchange will remain exempt, subject to compliance with certain requirements.
Holders of notes issued by the federal government, the provinces and municipalities of Argentina and the City of Buenos Aires that are not Argentine tax residents will be exempt from Argentine income taxes on interest and capital gains to the extent such beneficiaries do not reside in or channel their funds through non-cooperating jurisdictions. The non-cooperating jurisdictions list will be prepared and published by the executive branch. Short-term notes issued by the Central Bank (LEBACs) are outside the scope of these exemptions applicable to non-Argentine residents.
The aforementioned amendments have been in force since January 1, 2018.
Corporate income tax was reduced to 30% for the fiscal year commencing January 1, 2018, and will be further reduced to 25% for fiscal years commencing on or after January 1, 2020.
The tax reforms also provide for other amendments regarding social security contributions, tax administrative procedures law, criminal tax law, tax on liquid fuels and excise taxes.
Decree of de-bureaucratization and simplification. On January 10, 2018, the Macri administration issued Emergency Decree No. 27/2018 aimed at simplifying, expediting and promoting efficiency in the procedures within administrative entities and agencies, avoiding any unnecessary bureaucracy and expenses.
Fiscal Consensus. On December 22, 2017, the Chamber of Deputies passed into law the Fiscal Agreement (“Pacto Fiscal”), also known as the Fiscal Consensus (“Consenso Fiscal”). This law was based on an agreement signed on November 16, 2017 between the Argentine government and representatives from 23 out of Argentina’s 24 provinces, with the goal of implementing measures that favor sustained growth in economic activity, productivity and employment. The Fiscal Consensus includes a commitment to lowering distortive taxes by 1.5% of GDP over the next five years, a waiver of lawsuits against the Argentine government and a Ps.20,000 million payment to the province of Buenos Aires (which will increase over the next five years) as a partial and progressive solution to the conflict related to the Fondo del Conurbano Bonaerense (Buenos Aires Metropolitan Area Fund). The Fiscal
Consensus also set the basis for other policy reforms that were implemented by the Macri Administration in December 2017, such as the tax reform, the pension system reform and the Fiscal Responsibility Law (“Ley de Responsabilidad Fiscal”).
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 almostmore 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 Presidenthonorary 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.
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 Baron 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. OnIn March 20, 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. 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 country and penetrating the middle and lower-middle-income individual consumer and the SMEs segments. In 1998, Exprinter Banco S.A. and Banco San Luis S.A. merged to create Banco San Luis S.A.-BancoS.A. Banco Comercial Minorista, and was later renamed Banco Banex S.A. OnIn December 15, 2006, the government of the Province of San Luis extended the term of this financial agency agreement until 2021. On September 6, 2016, Banco Supervielle and the Province of San Luis, pursuant to the their commitment to enhance the economic development of the Province of San Luis, amended said agreement. 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.
Creation of Holding Company
Grupo Supervielle was incorporated in the City of Buenos Aires on October 8,in 1979, under the name Inversiones y Participaciones S.A., acquiringchanging the name to Grupo Supervielle S.A. in November 2008.
Acquisition of Banco Société Générale S.A. by Banco Banex S.A.
OnIn March 3, 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. 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 61.34%61.3% of the total assets of Banco Societé Générale S.A.
Merger of Banco Banex S.A. and Banco Supervielle S.A.
OnIn July 1, 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.
OnIn September 19, 2008, the Bank finalized the acquisition of 99.94% of the capital stock of Banco Regional de Cuyo S.A. On September 30, 2010, the Central Bank approved the merger ofThe Banco Regional de Cuyo S.A. merged with and into the Bank. The merger was completed onBank in November 1, 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 100%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, 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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Acquisition of Cordial Compañía Financiera S.A. (formerly known as “GE Compañía Financiera S.A.”)
OnIn July 6, 2010, Grupo Supervielle and the Bank agreed to acquired 100% of GECordial Compañía Financiera S.A. (“GECordial Compañía Financiera”), a financial services company that specialized in credit cards, personal loans and the distribution of certain third-party insurance products. The transaction was approved by the Central Bank on June 29, 2011. OnIn August 1, 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 a strategic alliance with Walmart Argentina, Cordial Compañía Financiera has exclusive rights to promote and sell financial and credit products in Walmart Argentina stores nationwide through August 2020.
2020 (with a renewal currently being negotiated).
We acquired GECordial Compañía Financiera to further our strategy of increasing our market share in the Argentine banking and financial services industry through the strategic purchase of financial services companies and financial institutions.
OnIn August 1, 2011, the shareholders of GECordial Compañía Financiera approved the name change from GE Cordial Compañía Financiera S.A. to Cordial Compañía Financiera. On August 29, 2011, the IGJ authorized the name change.Financiera S.A.
Creation of Espacio Cordial Servicios S.A.
For business strategy purposes and with the intention of furthering our goods and services business plan, onIn October 2, 2012, the Board of Directors created a new entity called ECM S.A., which was later renamed Espacio Cordial Servicios S.A.
Espacio Cordial was created to sell insurance plans and coverage, 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 parties byparty insurance companies, such as Supervielle Seguros, in accordance with laws and regulations as of the date of this annual report.Seguros.
Acquisition of Supervielle Seguros S.A. (formerly known as Aseguradores de Créditos del Mercosur S.A.)
OnIn February 5, 2013, we and Sofital accepted an offer for the acquisition of 100% of the purchase shares of Aseguradores de Créditos del Mercosur S.A., which onin October 30, 2013 was renamed Supervielle Seguros S.A.
On May 14, 2013, the National Superintendency of Insurance (Superintendencia de Seguros de la Nación) approved the transfer of the company’s shares. As a result, on In June 6, 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 S.A.
OnIn May 30, 2014, Grupo Supervielle S.A. and Sofital S.A. entered into an agreement for the sale of 100% of the shares of Adval S.A. to CAT Technologies S.A. The purchase price is scheduled to bewas paid in installments due between July 2014 and July 2019. Under this agreement, as of December 31, 2015, Grupo Supervielle and Sofital held credits with CAT Technologies S.A. of Ps.2.3 million and Ps.0.1 million, respectively.
Successful IPO onin May 19, 2016
Since May 19, 2016, the ordinary Class B shares of Grupo Supervielle S.A. have beenare listed on ByMA, and its American Depositary Shares (“ADSs”), representing five ordinary classClass B shares, have beenare listed in the NYSE under the symbol SUPV. Additionally,ticker “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 market inmarkets 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 ADSs and of whichIn the offering, 114,807,087 were newly issued ordinary Class B shares andwhile 31,818,000 were outstanding.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.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.
Grupo Supervielle and the Bank transferred on March 31, 2017 all their shares of Cordial Microfinanzas to Ciudad Microempresas as detailed below:
(i) Grupo Supervielle S.A.: 12,219,472 shares, which represented 87.5% of total capital stock of Cordial Microfinanzas; and
(ii) Banco Supervielle S.A.: 1,745,632 shares, which represented 12.5% of total capital stock of Cordial Microfinanzas.
As of December 31, 2016, Cordial Microfinanzas S.A. operated through 5five branches, had a total loan portfolio of Ps. 192Ps.192 million, and held assets representing 0.39%0.4% of the total assets of Grupo Supervielle. Its contribution to the net income of Grupo Supervielle in 2016 was 0.78%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. with a par value of Ps.1 and one vote per share made by Mr. Julio Patricio Supervielle and an increase of the capital stock of Grupo Supervielle of up to Ps.8,032,032, through the issuance of up to 8,032,032 new Class B shares with par value Ps.1 and one vote per share, at a subscription price of Ps.49.91 per share.shares. In connection with the capital increase, a total of 7,494,710 new Class B shares were subscribed as follows: on July 18, 2017, 4,321,208 were issued to Mr. Julio Patricio Supervielle in return for the in-kind contribution, representing 57.66%57.7% of the total capital increase, and 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 42.34%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. Grupo Supervielle transferred a total of 904,142 common, registered, non-endorsable shares to Ramón Francisco Federico and Guillermo Héctor Federico; Sofital S.A.F. Sofital S.A.F. e I.I. transferred a total of 47,000 common, registered, non-endorsable common shares to Ramón Francisco Federico and Guillermo Héctor Federico; and Mr. Julio Patricio Supervielle transferred a total of 2,618 common, registered, non-endorsable shares1,500,000 to Ramón Francisco Federico and Guillermo Héctor Federico.
Successful completion of capital increase
In September 2017, Grupo Supervielle S.A. made an increase of the capital stock through a globalan offer of Class B shares at a price of U.S.$4.0 per share. The global offer consisted of an international offer in United States and other countries outside of Argentina and a local offer in Argentina.shares. Simultaneously with the global 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, including the base offer and the additional shares.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. has not been registeredregistration process with the IGJ.IGJ is dormant.
Offer for the acquisition of the capital stock of Micro Lending S.A.
On April 6, 2018, the Board of Directors of Grupo Supervielle approved to issue an offer for the acquisition of 4,000,000 ordinary, nominative, non-endorsable shares of Ps.1 par value and entitled to one vote per share, representing 100% of the share capital of Micro Lending S.A. (“MILA”) for a total price of U.S.$20 million subject to price adjustment. MILA specializes in car financing, particularly for used cars. As of the date of this annual report, the acquisition is expected to close in the second quarter of 2018, and remains subject to certain customary conditions precedent.
Creation of Fideicomiso Financiero
Fintech Supervielle I
On February 16, 2018, the Board of Directors approved the creation of FinterchFideicomiso Financiero Fintech Supervielle I (“Fideicomiso Financiero”) to invest in financial technology (fintech) and insurance technology (insurtech) start up projects for an amount up to U.S.$3 million.
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 specializes in car financing, particularly for 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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Executive offices
Acquisition of the capital stock of InvertirOnline S.A.U. and InvertirOnline.com Argentina S.A.U.
On May 24, 2018, we acquired the capital stock of the online trading platform InvertirOnline (“InvertirOnline”), through the purchase of both InvertirOnline S.A.U. and InvertirOnline.com Argentina S.A.U.
Conversion of Class A shares
On April 24, 2019, and as per the request of Mr. Julio Patricio Supervielle, the Board of Directors of Grupo Supervielle authorized the conversion of 65,000,000 Class A shares, with a par value of Ps.1.00each 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) 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, Bolsillo Digital S.A.U. was created with the exclusive purpose of providing design, programming and developing 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 operating platforms and tools of payment methods of any type and in any of its forms. We are the sole shareholder of Bolsillo Digital S.A.U.
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 sites in its category with more than 10 years 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 allow us to create an innovative and disruptive business model in the online car market powered by Mila’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.
Creation of Supervielle Productores Asesores de Seguros S.A. (formerly known as Supervielle Broker de Seguros S.A.)
On December 21, 2018, Supervielle Broker 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 all of its share capital directly and 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 Supervielle Agente de Negociacion S.A.U.)
On December 18, 2019, Supervielle acquired 100% of the share ownership of brokerage firm Futuros del Sur S.A., 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 renamed Supervielle Agente de Negociación S.A.U.
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.B | Business Overview |
Overview
We own the fourtheighth largest Argentine private domestically-owned bank in terms of assets.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 Cordial Compañía Financiera S.A. (“CCF”),CCF, is our main asset, comprising 98.3%96.4% of our total assets, and has a history of strong growth. Between the 2015 and 2017 period, our loan portfolio grew at a CAGR of 47.7%, as compared to an average of 39.9% for the private financial system in Argentina for the same period (excluding public banks).As of December 31, 2017,2019, we served over two1.8 million active customers, and our assets totaled Ps.94.0Ps.146.5 billion (approximately U.S.U.$5.0.S.2.4 billion), in addition to Ps.14.7Ps.16.8 billion (approximately U.S.U.$780.6.S. 281 million) of assets managed by SAM.SAM and Ps.12.5 billion (U.$.S.209 million) of assets managed by InvertirOnline. As of December 31, 2017,2019, the Bank and CCF accounted for 90.8%91.1% and 7.3% of our total assets, respectively. In 2017, our loan and financial leasing portfolios (before loan loss provisions and including our securitized loan portfolio) grew 55.7%. In the same period, loans to the private sector in the Argentine financial system grew 51.7%.
The table below shows the evolution of our loan and financial leasing portfolios, our securitized loan and leasing portfolios and non-performing loans and coverage ratios on a quarterly basis between December 31, 2016 and December 31, 2017 and the annual variations (in percentages) of such portfolios between December 31, 2016 and December 31, 2017.
|
| As of |
| As of |
| As of |
| As of |
| As of |
| Year on Year |
|
|
| 2017 |
| 2016 |
| Variation(1) |
| ||||||
|
| (in thousands of Pesos, except percentages) |
| ||||||||||
Total Loans |
| 54,954,373 |
| 47,835,751 |
| 39,371,973 |
| 37,093,363 |
| 34,896,509 |
| 57.5 | % |
Receivables from financial leases |
| 2,519,201 |
| 2,219,887 |
| 1,877,238 |
| 1,693,673 |
| 1,527,855 |
| 64.9 | % |
Total Loans & Receivables from financial leases(2) |
| 57,473,574 |
| 50,055,638 |
| 41,249,211 |
| 38,787,036 |
| 36,424,364 |
| 57.8 | % |
Securitized loan portfolio |
| 1,295,322 |
| 1,841,286 |
| 2,143,002 |
| 1,288,220 |
| 1,413,427 |
| (8.4 | )% |
Total |
| 58,768,896 |
| 51,896,924 |
| 43,392,213 |
| 40,075,256 |
| 37,837,791 |
| 55.3 | % |
NPL |
| 2.8 | % | 2.8 | % | 2.9 | % | 2.9 | % | 2.8 | % |
|
|
Coverage ratio |
| 91.8 | % | 88.9 | % | 88.0 | % | 87.0 | % | 87.1 | % |
|
|
(1) Variation of portfolio balances between December 31, 2016 and December 31, 2017.
(2) Includes loan loss provisions and excludes our securitized loan portfolio.
The table below shows the evolution of our total deposits and unsubordinated negotiable obligations on a quarterly basis between December 31, 2016 and December 31, 2017 and annual variations (in percentages) of such deposits and unsubordinated negotiable obligations between December 31, 2016 and December 31, 2017.
|
| As of |
| As of |
| As of |
| As of |
| As of |
| Year on |
|
|
| 2017 |
| 2016 |
| Year Variation(1) |
| ||||||
|
| (in thousands of Pesos, except percentages) |
| ||||||||||
Total Deposits |
| 56,487,027 |
| 47,181,898 |
| 42,831,613 |
| 38,826,752 |
| 35,897,864 |
| 57.4 | % |
Unsubordinated Negotiable Obligations |
| 8,307,202 |
| 7,116,718 |
| 6,701,967 |
| 6,580,070 |
| 1,966,936 |
| 322.3 | % |
Total Deposits & Unsubordinated Negotiable Obligations |
| 64,794,229 |
| 54,298,616 |
| 49,533,580 |
| 45,406,822 |
| 37,864,800 |
| 71.1 | % |
(1) Variation of total deposits and unsubordinated negotiable obligations between December 31, 2016 and December 31, 2017.
As of December 31, 2017, we served over 2 million customers, and our assets totaled Ps.94.0 billion (approximately U.S.$5.0 billion), in addition to Ps.14.7 billion (approximately U.S.$780.6 million) of assets managed by SAM. As of December 31, 2017, the Bank and CCF accounted for 90.8% and 7.3%5.3% of our total assets, respectively.
As of December 31, 20172019 and December 31, 2016, 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:
· Personal loans (advanced by the Argentine private financial system): our market share as of December 31, 2017 was 6.9%, compared to a 7.0% market share as of December 31, 2016;
· Leasing (made by the Argentine private financial system): a 15.2% market share as of December 31, 2017, compared to a market share of 12.7% (and greater than 13.1% when taking into account our securitized leasing portfolio) as of December 31, 2016;
· Our factoring market share of the Argentine private financial system as of December 31, 2017, was 7.5% compared to a 6.9% market share as of December 31, 2016; and
· MasterCard credit cards for which billing statements were issued (latest available information): a 9.8% market share as of December 31, 2017, compared to a 9.2% market share as of December 31, 2016;
· | Personal loans (advanced by the Argentine private financial system): our market share as of December 31, 2019 was 7.0%, compared to a 7.3% market share as of December 31, 2018; |
· | Leasing (made by the Argentine private banks): a 19.9% market share as of December 31, 2019, compared to a market share of 17.6% as of December 31, 2018; |
· | Our factoring market share of the Argentine private financial system as of December 31, 2019 was 9.5%, compared to a 7.4% market share as of December 31, 2018; and |
· | MasterCard credit cards with a 9.3% market share as of December 31, 2019, compared to a 8.6% market share as of December 31, 2018; |
Based on the latest information published by ANSES, we made 14.1%13.7% of all social security payments to senior citizens in Argentina in 2017,June 2019, compared to 14.7%14.0% in 2016.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. As of the date of this annual report, ourOur infrastructure supports our multi-channel distribution strategy with a strategic national footprint through 340316 access points (compared to 326 access points as of December 31, 2017), which include 180185 bank branches, (compared to 179 bank branches as of December 31, 2017), 78 of these bank branches are fully dedicated to serve senior citizens, 1913 banking payment and collection centers, and 8079 CCF sales points located in Walmart supermarkets, (compared to 67 sales points in Walmart supermarkets as of December 31, 2017), Tarjeta’s 6134 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 other retailers,our different digital channels such as our Online Banking platforms for Business and 521 ATMsfor Individuals, the Supervielle Mobile and 193 self-service terminals.
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, 2017,2019, 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.300.8Ps.443.4 million, compared to Ps.191.5Ps.393.0 million as of December 31, 2016 and Ps.120.5 million as of December 31, 2015.2018. 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, 2017,2019, the loan portfolio to branches ratio of (i) Banco Macro S.A. was Ps.298.8Ps.476.1 million, (ii) Banco de Galicia y Buenos Aires S.A. was Ps.532.1Ps.934.5 million and (iii) BBVA Banco Francés S.A. was Ps.503.9Ps.740.5 million. The loan portfolio to branches ratio as of December 31, 20162018 of (i) Banco Macro S.A. was Ps.194.8Ps.379.2 million, (ii) Banco de Galicia y Buenos Aires S.A. was Ps.379.1Ps.739.4 million and (iii) BBVA Banco Francés S.A. was Ps.309.3 million. The loan portfolio to branches ratio as of December 31, 2015 for (i) Banco Macro S.A. was Ps.138.3 million, (ii) Banco de Galicia y Buenos Aires S.A. was Ps.287.3 million, (iii) BBVA Banco Francés S.A. was Ps.227.5 million and (iv) the Argentine private banks was Ps.190.4 million. According to publicly available information provided by the Central Bank, as of December 31, 2017, the loan portfolio to branches ratio for all Argentine private banks was Ps.363.8Ps.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. For example, as of the date of this annual report, we acted as the exclusive on-site provider of financial services to Walmart Argentina customers at 80 of Walmart Argentina’s approximately 108 supermarkets located in 21 provinces.
As of December 31, 20172019 and December 31, 2016,2018 on a consolidated basis, we had:
· Approximately 1.9 million active retail customers (including 1.4 million active retail customers of the Bank and approximately 0.5 million active retail customers of our other subsidiaries), 18,860 small businesses and 4,873 SMEs, Middle-Market Companies and Large Corporates as of December 31, 2017, compared to approximately 1.8 million active retail customers (including 1.4 million active retail customers of the Bank and approximately 0.4 million active retail customers of our other subsidiaries), 16,078 small businesses and 4,587 SMEs, Middle-Market Companies and Large Corporates as of December 31, 2016;
· Ps.94.0 billion in total assets as of December 31, 2017, compared to Ps. 53.2 billion in total assets as of December 31, 2016;
· Ps.56.0 billion in loans to the private sector and Ps.2.5 billion in financial leases as of December 31, 2017, compared to Ps. 35.3 billion in loans to the private sector and Ps. 1.5 billion in financial leases as of December 31, 2016;
· Ps.1.4 billion in securitized loan portfolio as of December 31, 2017, compared to Ps. 1.4 billion in securitized loan portfolio as of December 31, 2016;
· Ps.56.5 billion in deposits, including Ps.6.2 billion from the non-financial public sector, Ps.15.7 million from the financial sector and Ps.50.3 billion from the non-financial private sector as of December 31, 2017, compared to Ps. 35.9 billion in deposits, including Ps. 33.3 billion from the non-financial private sector, Ps. 9.3 million from the financial sector and Ps. 2.6 billion from the non-financial public sector as of December 31, 2016;
· Ps. 15.1 billion in shareholders’ equity as of December 31, 2017, compared to Ps. 6.9 billion in shareholders’ equity as of December 31, 2016; and
· 5,320 employees as of December 31, 2017, compared to 4,982 employees as of December 31, 2016.
· | approximately 1.8 million active retail customers (including 1.4 million active retail customers of the Bank and approximately 0.4 million active consumer finance customers of our other subsidiaries), 22,012 small businesses and 4,981 SMEs, middle-market companies and large corporates as of December 31, 2019, compared to approximately 1.8 million active retail customers (including 1.4 million active retail customers of the Bank and approximately 0.4 million active consumer finance customers of our other subsidiaries), 21,905 small businesses and 4,934 SMEs, middle-market companies and large corporates as of December 31, 2018; |
· | Ps.148.7 billion in total assets as of December 31, 2019, compared to Ps.218.0 billion in total assets as of December 31, 2018; |
· | Ps.92.2 billion in loans as of December 31, 2019, compared to Ps.123.4 billion in loans as of December 31, 2018; |
· | Ps.89.0 billion in deposits, including Ps.5.5 billion from the non-financial public sector, Ps.29.1 million from the financial sector and Ps.83.5 billion from the non-financial private sector as of December 31, 2019 compared to Ps.146.0 billion in deposits, including Ps.17.1 billion from the non-financial public sector, Ps.38.8 million from the financial sector and Ps.128.9 billion from the non-financial private sector as of December 31, 2018; |
· | Ps.23.4 billion in attributable shareholders’ equity as of December 31, 2019 compared to Ps.26.1 billion in attributable shareholders’ equity as of December 31, 2018; and |
· | 5,019 employees as of December 31, 2019, compared to 5,253 employees as of December 31, 2018. |
In our cross-selling segments we had:
· Ps.14.7 billion (approximately U.S.$780.6 million) in assets under management through Supervielle Asset Management Sociedad Gerente de FCI S.A.had as of December 31, 2017;2019:
· | Ps.16,809 million (approximately U.S.$281 million) in assets under management through Supervielle Asset Management Sociedad Gerente de FCI S.A.; |
· | Ps.12,520 million (approximately U.S.$209 million ) in assets under management through InvertirOnline; |
· Ps.789.6 million in gross written premiums (approximately U.S.$42.1 million) calculated as December 31, 2017, through Supervielle Seguros S.A. for the twelve-month period ended December 31, 2017;
· Ps.390.5 million in net revenue (approximately U.S.$42.1 million) through Espacio Cordial Servicios S.A., our retail company selling non-financial products and services for the twelve-month period ended December 31, 2017.
· | Ps.1,781.2 million in gross written premiums (approximately U.S.$30.2 million) calculated as of December 31, 2019, through Supervielle Seguros S.A. for the year ended December 31, 2019; and |
· | Ps.630.4 million in net revenue (approximately U.S.$10.5 million), through Espacio Cordial Servicios S.A., our retail non-financial products and services, for the year ended December 31, 2019. |
We have developed a segmentation strategy of our customer base to target the specific needs of each category of customers. Our business model has allowed us to deliver sustained levels of growth and profitability, that accelerated since our 2016 initial public offering (“IPO”) and capital raise executed in May 2016 and later the follow-on equity offering in September 2017.
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 banking segments as of December 31, 2017.2019.
(1) As of December 31, 2017, SMEs refers to individuals and businesses with annual sales between Ps.40.0-200.0 million, middle market refers to individuals and businesses with annual sales between Ps.200.0-1,000.0 million and large refers to individuals and businesses with annual sales over Ps.1.0 billion.
(1) | As of December 31, 2019, 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. |
The following charts set forth the breakdown of our deposits by type of account and customer category as of December 31, 2017.2019.
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Between 20152017 and 2017,2019, 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 47.7%33.6%, as compared to 39.9%31.7% for the Argentine private financial system (excluding public banks). Our ROAE was 30.8%19.1%, 22.7%, 32.2%, 26.3%16.5% and 25.4%22.6% for the fiscal years ended December 31, 2013, 2014, 2015, 20162017, 2018 and 2017,2019, compared to an average ROAE of 26.5%25.0%, 29.6%, 28.9%, 27.5%33.5% and 25.0%53.4% for the Argentine private financial system over the same periods. We achieved net interest margins of 16.4%20.1%, 17.4%, 18.1%, 20.6%19.4% and 19.1%21.6% for the fiscal years ended December 31, 2013, 2014, 2015, 20162017, 2018 and 2017,2019, which compares favorably to averages for Argentine private financial system of 12.5%13.4%, 14.3%, 19.8%, 14.9%15.3% and 13.4%21.2% for the fiscal years ended December 31, 2013, 2014, 2015, 20162017, 2018 and 2017,2019, respectively. As of December 31, 2017,2019, we accounted for 5.1%5.0% of all loans and leasing held by Argentine private financial sector (excluding public banks) and 4.4%3.2% of all deposits maintained with the Argentine private financial sector, compared to 4.0% and 3.5%, respectively, in 2013.sector.
Our technology-based sales model enhances our ability to offer customers efficient, high quality service. The Bank has made significant investments in its ATMs, self-service terminals, and self-service terminalcash dispensers with biometric identification network, more than doublingmultiplying by three the network from 2010 to 2017.2019. 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
SegmentsIn 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:
· | Retail Banking; |
· | Corporate Banking; |
· | Treasury; |
· | Consumer Finance; |
· | Insurance; and |
· | Asset Management and Other Services. |
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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.
· Retail Banking
· Corporate Banking
· Treasury
· Consumer Finance
· Insurance
· Asset Management & Other Services
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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· | Banco Supervielle S.A,. a universal commercial banking institution; |
· | Cordial Compañía Financiera S.A., a consumer financing company; |
· | Tarjeta Automática S.A., consumer financing company and distribution network; |
· | Supervielle Seguros S.A., an insurance company; |
· | Supervielle Asset Management Sociedad Gerente de FCI S.A., an asset management company; |
· | Espacio Cordial de Servicios S.A., a retail company selling non-financial products and services; |
· | InvertirOnline S.A.U. and InvertirOnline.com Argentina S.A.U., an online broker; |
· | Micro Lending S.A.U., a company specialized in car financing; |
· | Supervielle Productores Asesores de Seguros S.A., an insurance brokerage Company; and |
· | Futuros del Sur S.A. (in the process of being renamed Supervielle Agente de Negociación S.A.U.). |
· Banco Supervielle S.A. a universal commercial banking institution,
· Cordial Compañía Financiera S.A., a consumer financing company,
· Tarjeta Automática S.A., consumer financing company and distribution network,
· Supervielle Seguros S.A., an insurance company,
· Supervielle Asset Management Sociedad Gerente de FCI S.A., an asset management company, and
· Espacio Cordial de Servicios S.A., a retail company selling non-financial products and services.
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 and investees as of the date of this annual report:
Subsidiary | Jurisdiction of |
|
Banco Supervielle S.A. | Argentina |
|
Cordial Compañía Financiera S.A. | Argentina |
Servicios Financieros Hipertehuelche Pesos Ya |
Tarjeta Automática S.A. | Argentina | Carta Automática Pesos Ya |
Supervielle Seguros S.A. | Argentina |
|
Supervielle Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión S.A. | Argentina |
|
|
| |
|
| |
Espacio Cordial de Servicios S.A. | Argentina | Cordial |
Sofital S.A.F. e I.I. | Argentina | N/A |
Micro Lending S.A.U. | Argentina | MILA |
InvertirOnline S.A.U. | Argentina | InvertirOnline |
InvertirOnline.com Argentina S.A.U. | Argentina | InvertirOnline |
Supervielle Productores Asesores de Seguros S.A. | Argentina | N/A |
Futuros del Sur S.A. (in the process of being renamed Supervielle Agente de Negociación S.A.U.) | Argentina | N/A |
Bolsillo Digital S.A.U. | Argentina | N/A |
Our 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:
·Retail Customers. We maintain leading positions in attractive retail banking and consumer financing segments, offering a variety of products, from personal loans and credit cards to social security payment services to senior citizens. As of December 31, 2017, we had approximately 1.9 million retail customers, accounting for Ps.37.9 billion (approximately U.S.$2.0 billion) in deposits. As of December 31, 2017,
· | Individual Customers. We maintain leading positions in attractive retail banking and consumer financing segments, offering a variety of products, from personal loans and credit cards to social security payment services to senior citizens. As of December 31, 2019, we had approximately 1.8 million retail customers, accounting for Ps.59.6 billion (approximately U.S.$995 million) in deposits. As of December 31, 2019, loans to retail customers of the Bank and of CCF represented 7.0% of the Argentine financial private system market for personal loans, which ranked fifth out of 65 private financial institutions in Argentina. Based on information published by ANSES, as of June 30, 2019, the Bank made 13.7% of all monthly social security payments to senior citizens (who collect their payments on a monthly basis). Additionally, we have a leading position as issuer of Mastercard credit cards and the exclusive on-site provider of financial services to Walmart Argentina customers, with a contract extended through August 2020 (and a renewal currently being negotiated). |
· | Corporate Customers. We are also a leading provider of specially tailored financial services and products to the corporate sector, with a particular focus on SMEs and middle-market companies. As of December 31, 2019, we had a 19.9% market share in leasing, ranking second out of 50 private banks in Argentina, according to our estimates based on Central Bank information. As of December 31, 2019, we had a 9.5% market share in factoring in terms of Argentine private banks. |
· | Capital Markets. We have a leading position in Argentine capital markets, which we have developed as part of our funding strategy. Since our IPO and after the expansion of our capital base, we have reduced securitization of our originated assets, and intend to take advantage of our capital markets capabilities and expertise to serve corporate customers in connection with capital markets transactions. In 2019, however, the macroeconomic conditions were volatile and affected by high inflation, high interest rates, uncertainty and an increased country risk index, which made it difficult for companies to issue debt instruments. However, we continued participating in the debt market in the issuance of certain third party corporate bonds and financial trusts. Additionally, during 2019, the area provided advice to different companies on valuations and mergers and acquisitions. |
Leading position in certain geographical regions in Argentina. being one of the Bankmost active players in the Cuyo region and of CCF represented 6.9% of the Argentine financial private system market for personal loans, which ranked fifth out of 65 private financial institutions in Argentina. Based on information published by ANSES, in 2017, the Bank made 14.1% of all monthly social security payments to senior citizens (who collect their payments on a monthly basis). Additionally, we are the largest private issuer of Mastercard credit cards with billing statements and the exclusive on-site provider of financial services to Walmart Argentina customers, with a contract extended through August 2020, renewable at expiration subjet to renegotiation with Walmart Argentina.
·Corporate Customers. We are also a leading provider of specially tailored financial services and products to the corporate sector, with a particular focus on SMEs and middle-market companies. As of December 31, 2017, we had a 15.2% market share in leasing, ranking first out of 50 private banks in Argentina, according to our estimates based on Central Bank information. As of December 31, 2017, we had a 7.5% market share in factoring in terms of Argentine financial market.
·Capital Markets. We have a leading position in Argentine capital markets, which we have developed as partterms of our funding strategy. In 2017, we had a 19% share in bank asset securitization and a 5.12% share in the overall Argentine asset securitization market according to our own estimates based on Central Bank and CNV information. In 2017, we had Ps.5.3 billion (approximately U.S.$ 283.9 million) in securitization and bond issuances for us and our subsidiaries, and Ps.2.6 billion (approximately U.S.$139.8 million) in securitization and bond issuances for third parties. Since our IPO and after the expansion of our capital base, we have reduced securitization of our originated assets, and intend to take advantage of our capital markets capabilities and expertise to serve corporate customers in connection with capital markets transactions.banking network
· | Mendoza: We have a leading position in the Province of Mendoza, where as of December 31, 2019 we had 198,000 customers and a market share of loans and deposits among private banks of 21.2% and 7.1%, respectively. In terms of banking network we have 27 branches out of a total of 180 bank branches in the province and 7 collection centers. |
· | San Luis: We have a leading position in the Province of San Luis, where as of December 31, 2019 we had 192,000 customers and a market share of loans and deposits among private banks of 49.6% and 62.8%, respectively. In terms of banking network we have 24 branches out of a total of 50 bank branches in the province and 6 collection centers. |
Solid sources of funding
We have traditionally had access to diversified, competitive and stable sources of funding. Our low-costlow cost demand deposit base comprises 55.3%49% of our funding base (33.0% savings accounts and 18.7% checking accounts and 3.6% other accounts as of December 31, 2017).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 18.4%11.4% as of December 31, 20172019 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.
WeAlong 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 and weto 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 offer a wide range of financial services. The Bank offers customized financial products and services to corporate clients in SMEs and middle-market companies, as well as to high net worth and middle-income individuals and to middle and lower-middle-income senior citizens. CCF and Tarjeta focus their products and services on the middle 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.opportunities once the macroeconomic conditions in Argentina stabilize.
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We consistently seek to leverage the strong cross-selling potential of our multi-brand and multi-channel business model and our stable pool of overalmost 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 with 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 141 consumer finance points of sale (compared to 128113 consumer finance points of sale as of December 31, 2017)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’ dedicatedcitizens branches.
We believe our investment in developing a strategic national footprint positions us to capture profitable growth and benefit from economies of scale.
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 340316 access points (compared to 326 access points as of December 31, 2017), including branches, bank branches fully dedicated to serve senior citizens, 1913 banking payment and sales and collection centers, 79 consumer finance, branches and access points within Walmart stores, Tarjeta’s 6134 consumer finance sales points and through other retailers, 5 MILA customer support offices, a network of 393 car dealers and 521536 ATMs, and 193217 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 15.620.3 million or 39%46% of Argentina’s population resides), through 112113 branches and 1 collection center, and CCF has 2627 sales points within Walmart locations in the City of Buenos Aires and Greater Buenos Aires (compared to 21 sales points within Walmart locations as of December 31, 2017).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 5052 branches, 1 mobile branch and 1713 collection centers. The Bank has approximately 281,000198,000 active customers in Mendoza and approximately 227,000192,000 in San Luis. CCF has seveneight 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 4114 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 indirect 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 our CEO and has led Grupo Supervielle for over 1618 years. During his tenure, we have experienced growth in terms of net worth, assets, deposits and our network, and we have successfully completed some of our most significant acquisitions. We rely on a 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 stable senior management team is comprised of seasoned officials and experts in their fields that foster a business culture of high performance.
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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, competitive landscape. We believe the Argentine market has significant underutilizedunderused financial infrastructure, in the form of checking and savings accounts, but also good mobile and internet penetration levels. This situation presents a number of growth opportunities, as the country continues its stabilization process.opportunities. We believe we are positioned to capture these growth opportunities given our focus on a differentiated customer experience, 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:
We plan to continue focusing on becoming the premier bank for certain specific customer segments including high net worth customers, senior citizens, middle and lower-income populations, entrepreneurs and small businesses, SMEs and middle market companies. We aim to achieve this objective through multiple brands, by delivering customized value propositions in retail banking, corporate banking, treasury, consumer financing, insurance and asset management and other services. We intend to differentiate by reducing time- to-cash and with agile and robust processes. We will strive to capture increased efficiency and synergies derived from cross sell, customer loyalty and payroll customers from our corporate banking segment.1. Digital transformation
We believe we have the capabilities required to be successful, including, among others, a long-standing reputation; a strong franchise of 2 million customers; an extensive distribution network; a strong digital footprint; stable, atomized and diversified funding; a prudent risk management track record; and a strong culture based on shared values: leadership, innovation, simplicity, efficiency, commitment and respect.
We believe that our holistic approach to mortgage underwriting exemplifies our strengths. We are seeking to become one of the market leaders in this segment, by, for example, forging alliances with real estate developers, offering customers a competitive2. Enhance value proposition and having an exclusivity agreement with Zona Prop, a popular online real estate website.
The “Superate” advertising campaign launched in 2017 aims to continue differentiating our positioning by focusing on the potential for personal and collective lifestyle improvements and financial well-being among our customers. The campaign highlights that our mortgages, personal loans, SME loans, platform services and personal attention are tailored to our customers’ needs, and thereby become important tools for our customerstarget segments
3. Increase customer acquisition and cross selling
4. Streamline operations
5. Develop new products and businesses to realize their goals.
expand our franchise
The key components of our strategy are as follows:described below:
Transform our company into a modern, leading edge, cost efficient player and position our business to serve consumer’s evolving needs and aspirations
We have made significant progress on digital transformation. Increasingly, customers want and expect to engage with us anytime from anywhere. Our digital strategy is aimed at responding to that demand. We have a three-pronged approach:
· | Transformation of core businesses (banking, consumer finance and insurance) to enhance customer experience, agility and efficiencies. For example, we recently launched a groundbreaking senior citizens app which addresses their transactional needs and launched a 100% digital onboarding platform for new customer acquisition. |
· | Development of 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. |
· | Development of a new system by building traffic from financial services into new platforms enhancing and deepening customer engagement. |
Increase our market presence among attractive customers through an effective segmentation strategy and strengthened value proposition
We continue to strengthen and improve the customer experience. We are working hard to give customers new ways to connect with us. Additionally, we are consistently adding new products and services which increase our value proposition to customers. A few to mention include: insurance products for entrepreneurs 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.
We seek to increase revenues through cross-selling enabled by big data and CRM: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 fully dedicated 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 as opportunities to forge new alliances with other retailers.
Entrepreneurs and Small Businesses: We aim at continuing expanding our market share within our customer base of entrepreneurs and small businesses. We intend to leverage our branch network as a primary means of attracting business and focus on building our customized cash management services.
SMEs: Our aim is to become the premier bank for SMEs by deploying outstanding transactional and cash management services. We intend to developcontinue 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 willintend to target specific opportunities and customers in the agroindustry sector, energy, infrastructure construction 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 and medium and large construction companies.projects.
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
We have a direct presence in Argentina’s major regions and cities. The Bank has a particularly important presence in the Greater Buenos Aires metropolitan area 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 intend tomay selectively expand the bank’sBank’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 grow the number of hub and spoke sales units specialized in leasing, foreign trade financing and cash management services.
We intend to build upon our leadership position in retail and corporate banking services in the provincesProvinces of Mendoza and San Luis.Luis. We plan to continue our partnerships with premium retail stores and shopping outlets to obtain differentiated discounts and benefits for our retail customers, relying on our existing network, which is the largest in the Cuyo region.
We aim to increase our access to non-banking customers, by developing partnerships with key medium-sized retailers across the country to provide banking services along the lines of our existing alliance with Walmart Argentina.
We plan to continue to expand our dedicated sales force with a focus on new entrepreneurs, small businesses and payroll services, to drive revenues and cross-selling ratios.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, in the north of Argentina.rdoba.
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 access through our distribution networks and aim to further develop our Bancassurancebancassurance 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 balance sheetstatement 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 have been growinggrew systematically above industry growth levels.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. Since the IPO, we increased our deposits following the pace of loan growth, and we will continue to cross-sell to retail and consumer customers and attract cash management deposits from corporate clients. We also intend to continue to access long-term funding from the international capital markets as the Bank did in February 2017 through the issuance of a Peso denominated 3.5 years floating rate note for the equivalent amount of U.S.$300 million.
Continue to improve our efficiency by focusing on innovation and technology
We will seek to increase commercial productivity by optimizing sales time using onlineredesigning processes with two goals: (i) making life simpler for our clients and mobile banking, salesenhancing customer experience and collection centers, streamlining risk assessmentsatisfaction, and CRM technology. We also plan(ii) extending processes automation to continue working with world-class business intelligence tools to increase sales productivity and to improve relationships with clients through better predictive sales actions and communications.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 banking channel and online banking platform.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, and introduced “iFactus,” the first portal providing electronic factoring services and “e-Factoring,” an electronic platform which allows for check scanning and electronic delivery to the bank for immediate deposit, custody or discounting, with deferred physical delivery.
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. During 2017, Banco
As a further step towards the acceleration of Supervielle’s Digital Innovation Team workeddigital 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 servicesyears an agile operating model and disruptive technologies: Digital On Boarding; Mobile Corporate Banking; Face Biometricsmethodology (“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 new Cordial Compañia Financiera Application (Digital Acquisition Process).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.
Business Segments
Segment Reporting during 2019
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 | ) |
(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. |
|
| For the year ended December 31, 2017 |
| ||||||
Segment |
| Net Revenue |
| Percentage |
| Net Income |
| Percentage |
|
|
| (in thousands of Pesos) |
| ||||||
Retail Banking |
| 7,200,565 |
| 56.8 | % | 681,019 |
| 36.3 | % |
Corporate Banking |
| 1,660,577 |
| 13.1 | % | 538,216 |
| 28.7 | % |
Treasury |
| 426,137 |
| 3.4 | % | 47,746 |
| 2.5 | % |
Consumer Financing |
| 2,320,345 |
| 18.3 | % | 179,440 |
| 9.6 | % |
Insurance |
| 469,671 |
| 3.7 | % | 205,614 |
| 11.0 | % |
Asset Management & Other Services |
| 601,584 |
| 4.7 | % | 223,554 |
| 11.9 | % |
Total Allocated to Segments |
| 12,678,879 |
| 100.0 | % | 1,875,590 |
| 100.0 | % |
Adjustments(1) |
| 577,989 |
|
|
| 561,470 |
|
|
|
Total Consolidated |
| 13,256,868 |
|
|
| 2,437,059 |
|
|
|
(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 liquity at the holding company, as well as transactions between segments.
The following graphs set forth the breakdown of our net revenue and net income by segment before adjustments as of December 31, 2017.
The following table sets forth the breakdown of our assets by segment as of December 31, 2017.2019.
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, 2017 |
| ||||||||||||||
|
| Retail |
| Corporate |
| Bank |
| Consumer |
| Insurance |
| Asset |
| Adjustments(1) |
| Consolidated |
|
|
| (in thousands of Pesos) |
| ||||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
| 2,799,066 |
| 260,107 |
| 8,000,292 |
| 74,143 |
| 3,012 |
| 340 |
| (7,485 | ) | 11,129,475 |
|
Government and corporate securities |
| — |
| — |
| 15,255,201 |
| — |
| 87,832 |
| 3,003 |
| — |
| 15,346,036 |
|
Loans |
| 20,868,845 |
| 27,605,696 |
| 2,302,233 |
| 6,093,736 |
| — |
| — |
| (1,916,137 | ) | 54,954,373 |
|
Other receivables from financial transactions |
| (4,251 | ) | 506,331 |
| 4,570,399 |
| 794,727 |
| 330,864 |
| 315,115 |
| 48,211 |
| 6,561,396 |
|
Receivables from financial leasing |
| 439,189 |
| 2,080,012 |
| — |
| — |
| — |
| — |
| — |
| 2,519,201 |
|
Other assets |
| 379,155 |
| 10,893 |
| 244,148 |
| 522,328 |
| 111,323 |
| 285,235 |
| 1,907,715 |
| 3,460,797 |
|
Total Assets |
| 24,482,004 |
| 30,463,039 |
| 30,372,273 |
| 7,484,934 |
| 533,031 |
| 603,693 |
| 32,304 |
| 93,971,278 |
|
(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.
|
| As of December 31, 2017 |
| ||||||||||||||
|
| Retail |
| Corporate |
| Bank |
| Consumer |
| Insurance |
| Asset Mgmt |
| Adjustments(1) |
| Consolidated |
|
|
| (in thousands of Pesos) |
| ||||||||||||||
Securitized Portfolio |
| 549,743 |
| — |
| — |
| 745,579 |
| — |
| — |
| — |
| 1,295,322 |
|
Loan portfolio on Balance |
| 21,308,034 |
| 29,685,708 |
| 2,302,233 |
| 6,093,736 |
| — |
| — |
| (1,916,137 | ) | 57,473,574 |
|
Total Assets |
| 21,857,777 |
| 29,685,708 |
| 2,302,233 |
| 6,839,315 |
| — |
| — |
| (1,916,137 | ) | 58,768,896 |
|
(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. |
The following table sets forth the breakdown of our customers and active customers from December 31, 2016 to December 31, 2017.in 2019 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 |
|
| As of December 31, 2017 |
| As of September 30, 2017 |
| As of June 30, 2017 |
| As of March 31, 2017 |
| As of December 31, 2016 |
| ||||||||||
|
| Total |
| Active |
| Total |
| Active |
| Total |
| Active |
| Total |
| Active |
| Total |
| Active |
|
Retail Banking |
| 1,930,750 |
| 1,433,187 |
| 1,876,093 |
| 1,386,025 |
| 1,850,582 |
| 1,375,338 |
| 1,833,793 |
| 1,385,745 |
| 1,810,281 |
| 1,391,199 |
|
Corporate Banking |
| 4,873 |
| 4,873 |
| 4,662 |
| 4,662 |
| 4,569 |
| 4,569 |
| 4,647 |
| 4,647 |
| 4,587 |
| 4,587 |
|
Consumer Finance |
| 463,416 |
| 463,416 |
| 460,231 |
| 460,231 |
| 450,157 |
| 450,157 |
| 441,789 |
| 441,789 |
| 434,495 |
| 434,495 |
|
Total |
| 2,399,039 |
| 1,901,476 |
| 2,340,986 |
| 1,850,918 |
| 2,305,308 |
| 1,830,064 |
| 2,280,229 |
| 1,832,181 |
| 2,249,363 |
| 1,830,281 |
|
Retail Banking segment.
The BankBank’s Retail Banking segment offers its retail customers a wide range of bankingfinancial products includingand services designed to meet the needs of individuals and entrepreneurs and small businesses: personal loans, short termmortgage loans, unsecured loans, loans with special facilities for project and work capital financing, leasing, bank guarantee for tenants, salary advances, securedpledge loans, domestic and international factoring, international guarantees and letters of credit, payroll services through Plan Sueldo,payment plan (planes sueldo), credit cards, debit cards, savings accounts, time deposits, and checking accounts, as well as financingand financial services and investments such as mutual funds, insurance coverage,and guarantees, and benefits payments to senior citizens benefit payments. Until December 31, 2019, we offered services to SMEs through our Corporate Banking segment. On January 1, 2020 our SMEs portfolio was effectively transferred to the Retail Banking segment, which has been renamed as our Personal and pensioners, among others.Business Banking segment.
The Bank hasTo promote digital transformation, focus was placed on development and strengthening of autonomous management channels, with special emphasis on digital contact channels. Face 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 automaticincreasing 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.
Based on the assessment of their distinctive features, their needs and specific requirements, the Bank’s customers are grouped in four strategic groups which are further described below: (i) SMEs customers, composed of natural persons engaged in commercial activities, small one-person ventures and small and medium sized companies with a billing lower than Ps.700 million per year, (ii) Identité customers, which gathers natural personas belonging to serial ACB1 segments, (iii) personal customers, which includes individual customers with no commercial activities (not included in the Identité segment), and (iv) senior citizens customers, which includes senior citizens who are paid their pension benefits through the Bank.
· | Personal customers. Agile teams developed projects focused on the generation of open market and wage salary payment plan customers. In addition, work was done on the readjustment of processes for customers of the segment to have a better experience in their relationship with the Bank and more focused on the agility of digital operations. Moreover, campaigns were launched to encourage digitalization, and value propositions and benefits were communicated digitally to customers for the development of self-management channels, through the placement of products transactions and other customer transactions. |
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· | Identité customers (High Net Worth Customers). We offer our high net worth customers exclusive services such as priority access to our branches with minimal waiting time, concierge services, exclusive back offices for conducting banking activities, dedicated customer service representatives at the call center, a remote investment center and dedicated locations at our branches. |
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 provide greater functionalitywe are the first-choice bank in face-to-facenew customers, so that they are offered benefits and digital automatic platforms,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 expediting transactionsleading customers to use digital channels and generating new sales channels
Products and services are tailored to the needs of the different segments with which the bank works, focused on continuous improvement of customers’ experience. Two of our more strategic segments are the small companies, grouped in Emprendedores & Pymes (Entrepreneurs & Small Businesses), and high net worth customers, which we refer to as our Identité segment. Additionally, products and services are offered to meet the needs of senior citizens.
In 2017, the size of the mortgage market in Argentina increased by 113%. We believe mortgages represent a greenfield opportunity. We are among the top 5 private banks in Argentina, in terms of market size, in the mortgage market, according to private estimates, with about 10% of new mortgages lent by private banks after just one year. Through the offer of mortgages, we expect to gain new customers and to cross sell existing customers by building long-term and loyal relationships.
The service model is customized to strategic segments while the operations model fosters a commercial and personal approach to customers,achieve an enhanced approach. The bank has also developed a service model integrating new technologies and digital platforms to accelerate processes and improve customers’ experience, tailored to each profile.
As of December 31, 2017, the Retail Banking segment had Ps.21.9 billion of outstanding loans and financial leases (including securitized loan portfolio), and contributed with Ps.7.2 billion to our consolidated net revenues (56.8% of our net revenues before adjustments) and with Ps.681.0 million to our consolidated net income (36.3% of total segments’ net income before adjustments).We conduct our Retail Banking operations through the Bank.
Our Retail Banking services are focused on the customer segments discussed below.
·Entrepreneurs and Small Businesses. The Bank considers small businesses to be fundamental drivers for strengthening of productivity in the Argentine economy. For this reason, the Bank redefined its approach to the small business segment in order to develop the necessary tools and services to help small businesses grow and to respond to their needs with convenient and simple solutions. We service small businesses through our Retail Banking segment and SMEs and Middle-Market Companies through our corporate banking segment.
In order to enhance strategic sub-segments, the Bank worked on lead generation through different sources, including agreements with small business associations and a presence at specific franchises and transportation events. Together with these actions, new tools were implemented to improve response speed to customers. Protocols for referral towards different channels were also implemented to improve efficiency.
Development of the differentiated service model continued to include over 79% of the branches and over 91% of the Retail Banking segment’s customers. The Bank focused on two specific executive profiles, offering specialized services to larger SMEs and streamlined services to smaller SMEs.
Focus was also placed on obtaining a deeper knowledge of a company’s lifecycle and its needs at different stages. To that end, two value propositions were developed, addressed at franchises and transportation market niches, and offering companies an adequate proposal for their needs in the different stagesearly activation of their development. In addition, we continue to develop new value propositions for other new sub-segments.products.
· | SMEs customers. The Bank considers small businesses to be fundamental drivers for strengthening productivity in the Argentine economy. For this reason, the Bank redefined its approach to the small business segment in order to develop the necessary tools and services to help small businesses grow and to respond to their needs with convenient and simple solutions. Until December 31, 2019, we served SMEs through our Corporate Banking segment. Since January 1, 2020 this portfolio was transferred to the Personal and Business Banking segment. |
o | Specific Subsegments. Customized Value Proposition. The proposals launched between 2017 (Franchise and Transportation) and 2018 (Health) consolidated in 2019 as Franchises, Transportation and Health subsegments. The number of customers increased by 49.9% in Franchises, 38.2% in Transportation and 28.8% in Health, as compared to December 2018. During 2020, Supervielle intends to continue launching to the market special proposals for different sectors/industries which gather over 50% of the SMEs in the country. |
o | Franchises. The Bank has introduced innovative loan models including franchise system options to support the growth of entrepreneurship in Argentina through a professional system. The Bank finances up to 40% of the initial investment (capped at Ps.800,000 for new franchisees), offering preferential rates and a five month grace period on principal payments. Through the agreement with mutual guarantees companies, maximum financing caps may be increased according to each brand’s performance. |
o | Transportation. The Bank has developed products for the cargo transportation segment activities and the value chain that enhances the growth of entrepreneurs and SMEs in general. For example, one of the attributes deemed key for a value proposition for this segment is the prompt response for the approval of loans for expansion of their truck fleet. The Bank has implemented single-day approvals of preferential rate financing for secured loans and leasing for the purchase of trucks and/or semitrailers. This allows SMEs to face new business opportunities and plan their activities more accurately. Despite the economic conditions and the increase in interest rates during 2019, the pace of origination of new customers was 36%, which implies growth above the average growth in the SMEs segment in 2019. |
·High Net Worth Customers. We offer our high net worth customers exclusive services such as priority access to our branches with minimal waiting time, concierge services, exclusive back offices for conducting banking activities, dedicated customer service representatives at the call center, a remote investment center and dedicated locations at our branches.
A new lead generation scheme was developed that adds attractive benefits for prospective customers and combines welcome credit card benefits, such as promoting early activation and exclusive benefits in
supermarkets, gas stations, and restaurants, in addition to interest-free financing for the purchase of airline tickets.
The Bank continued to focus on our relationship with customers through promotions that encourage product placement. The development of credit approval platforms for credit cards and personal loans through digital channels continued throughout the year.
Taking into account the needs and requirements of customers, the face-to-face service model expanded to 60% of the branches, reaching 82% of the Retail Banking segment’s customers.
·Senior Citizens. The Bank facilitates ANSES payments to more than 1 million beneficiaries per month, including retirees, pensioners and social plans, and it believes it is the private bank with the largest presence in this segment.
o | Health. In November 2019, a new value proposition was presented, intended to cater for the needs of health and diagnostic centers, outpatient doctors’ offices, laboratories and pharmaceutical companies and wholesalers. Focus groups were held with sector companies and customers. This value proposition is characterized by promptness in loan granting and agreements with vendors. As regards to credit, requests for amounts lower than Ps.10 million were answered within 24 hours and requests for amounts above Ps.10 million were answered within 72 hours. The subsegment consolidated in 2019 achieving a growth pace exceeding that of the sector prior to the creation of the value proposition. |
· | Senior Citizens customers.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. The Bank facilitates ANSES payments to close to 950 thousand beneficiaries per month, including senior citizens and pensioners, and we believe it is the private bank with the largest presence in this segment.The Bank’s agreement with ANSES provides that it will continue in effect as long as the parties continue performing their obligations for a six-year term. ANSES has the right to terminate the agreement with 90 days prior notice. |
In 2017,2019, the Bank continued offering products and services addressing the needs of senior citizens, while further improving its value proposition and service model. Based on the knowledge of the customers’ life cycle and their distinctive characteristics, we promoted the redesign of the commercial management model particularlywith 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 (Cash dispenser with biometric identification) in its service centers.
With these new dispensers,Service Centers, reaching a 100% coverage of the Bank aims at providing a streamlinednetwork and innovative service, reducingfocusing on communication of this system to and adoption by senior citizens, with clear benefits in terms of waiting times significantly and introducing to its senior citizen customers new forms of interacting with the Bank. At December 31, 2017, there were 124 Cajas Rápidas, covering 79% of the network.
·Middle-Income Persons. In 2017, digital and alternative channels were developed to ease migration for the customers of this segment. To that end, new functionalities were added to Home Banking, Mobile and Contact Centers.
The Bank focuses on providing a streamlined service in line with the customer needs as well as on enhancing the service model as regards product acquisition and placement.
The comprehensive proposal for the Retail Banking segment is aimed at optimizing service channels, satisfying customers’ expectations and becoming our customers’ first choice bank.
The Bank’s focus on payroll customers has yielded a significant increase of the customer base in this category
Through our Retail Banking segment, we offer retail customers a wide range of products and services as described below.
Packages of banking services. As of December 31, 2017, the Bank maintained more than 2.5 million savings accounts and more than 88,000 checking accounts. In 2017, the Bank serviced more than 791,000 product bundles for senior citizens, more than 173,000 Plan Sueldo (“Payroll”) accounts and more than 49,000 product bundles for high net worth customers. During 2017, the Bank encouraged bancarization at all levels, promoting streamlined transactions and enhancing the use of automatic channels. Campaigns were carried out to open savings accounts with debit cards for youth scholarships and social inclusion programs, which reached over 80,000 people. Likewise, the Bank offers bank accounts for minors to encourage the early development of savings habits and allowing for early contact with future generations of economically active individuals.
agility.
In line with the developmentefforts to improve our service level, a new queue management system was implemented. This system allows a better experience, management and control of strategic segments,transactions and of the customer segment.
The innovation milestone for the segment was the launching of “Supervielle Jubilados", an app offering our customers a new proof of life method required to receive their monthly payment, adapted to new technologies. The platform includes 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 assessedcustomers to provide their proof of life on a monthly basis, without the specific needsneed to go to the bank and to do so 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 of a newcheque app 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 view to designing productsteam of experts on capital markets who provide advice on and services packages that meetmanage the requirements of each sub-segment in order to actively support the developmenttransactions of customers and their community.
Investments.in all Bank segments. In line with the tax amnesty law implementedBank’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 2017, the Bank developed special services addressed to financial customers, which resulted in depositsterms of U.S.$127.0 million. With a focus on the efficiency of operations, the Bank continued strengtheningmanaged funds and developing autonomous channels for comprehensive management of investment operations. Time deposits through digital channels exceeded Ps.4.3 billion. A specific function was
implemented in Homebanking for the management of bonds and stock holdings. A high percentage of time deposits, mutual fund transactions and share purchases and sales were made through automatic channels. Exchange transactions were consolidated during 2017 due to the extension of transaction hours, with an increase of 40% in the use of digital channels for exchange transactions. However, based on the principle of maintaining direct contact with strategic segment customers, the Bank created the Comprehensive Investment Center, and trained staff to provide personal advice to customers and instill in them the confidence necessary to attract their whole investment portfolio. During 2017, share and mutual fund portfolios managed by the Bank recorded an 86% and 167% increase, respectively.high net worth customer generation.
Insurance. The Bank has continued to grow in the insurance business. During 2017, the Bank launched products such as insurance on mortgages and other secured loans. Developments were made in sales through digital channels, including simulators that allow customers to assess which service is in line with their profile, to customize our product.
Loans. The Bank offers personal loans, short-term advances and salary advances to payroll customers. The placement of personal loans was boosted by a renewed offer and special facilities in line with the needs of each segment, together with the sales through digital channels implemented during the year. Accordingly, and with a view to further enhancing the placement of personal loans, the Código de descuento product was relaunched in the province of Mendoza, with a renewed commercial proposal.
Our mortgages strategy focuses on inflation adjusted credit lines. These are denominated in unidades de valor adquisitivo (“UVA”), an inflation adjusted unit that allows capital loans to be adjusted daily. As a result, interest rates are set in real terms and currently range between 5.9% and 8.4%, depending on the type of mortgage and the customer segment.
The UVA was introduced by the Central Bank in September 2016. Since then, mortgages with low monthly installments are more accessible to clients, and a higher number of clients at lower income levels can access larger loans. According to the respective regulations, monthly credit payments cannot exceed 30% of the individual’s monthly salary.
During 2017, in view of the widening of the market following the implementation of the UVA Mortgage Loans, commercial management focused on the development of a new, highly competitive product, with no cap restrictions and a maximum term of 30 years, managed by an outsourced center, which accounted for placements amounting to Ps.1.5 billion.
Credit Cards. As of December 31, 2017, the Bank maintained approximately 717,130 Visa and MasterCard accounts. Over the course of 2017, the Bank added nearly 60,000 new credit card customers. During 2017, the Bank moved forward in the process of card renewal by the implementation of the CHIP technology, which will reduce skimming.
The Bank also worked in the implementation of the new OnBoarding digital platform, which will act as a contact point for non-customers and will enhance and streamline sales processes through merchants and sales points and web channels where customers may apply for credit cards using self-service solutions. The Bank maintained a strong focus on store adherence. With focus on efficiency, the processes and documents required for store admission were unified and updated. In a second stage, and with focus on experience, manual processes were replaced by digital templates.
Total deposits from the Retail Banking segment (now, Personal and Banking segment) as of December 31, 20172019 amounted to Ps.37.9Ps.59.6 billion (U.S.(approximately U.S.$2.0 billion), a 45.4% increase from the Ps.26.0 billion recorded as of December 31, 2016.994.6 million). Retail branch deposits in Pesos and Senior Citizenssenior citizens deposits continued to represent a high portion of total deposits. In 2017,2019, retail branch deposits in Pesos plus Senior Citizensenior citizen deposits represented 53.8%55% of total deposits compared to 60% in 2016.deposits.
In 2017 the network’s area of influence was expanded with the opening of three new branches. These openings were intended to consolidate the Bank’s presence in areas with a high density of stores and to achieve full coverage in commercial corridors where SMEs are established.
Additionally, 2017 featured substantial changes in Service Centers, modernizing daily operations and meeting the needs of the elderly. With the development of automatic solutions for queries and cash withdrawals that include biometric identification, the Bank has paved the way for future generations of retired customers.
Corporate Banking
The Bank, through its corporate banking segment, generally works with SMEs, middle-market companies and large corporates. corporates with annual billing exceeding Ps. 700 million in 2019. Until December 31, 2019, SMEs customers were included under the Corporate Banking segment. 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, Greater Buenos Aires, Rosario and Mar del Plata. |
(2) | Provinces Corporate Banking which deals with the commercial relations in the Provinces of Mendoza, Córdoba, Tucumán, San Juan and Neuquén. |
(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.
As of December 31, 2019, the corporate banking segment had Ps.36.8 billion of outstanding loans and other financings, and contributed almost 40% of our net operating revenues before adjustments.
The customer service model is based on regionalization. Services to SMEs and medium-largelarge companies in the Citycity 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 teams of the different areas, industrial areasfocusing on improvement of existing processes and the acquisition of new technologies intended to significantly improve customer service quality.
The main guidelines on which the management focused were:
· | Development of comprehensive proposals seeking to become the first-choice bank in terms of reciprocity and cross-selling |
· | Protection of business profitability improving effectiveness, productivity and efficiency of commercial and operational areas |
· | Generation of work sessions with other areas seeking to improve existing processes, increasing synergies and strengthening results |
Wines Division. During 2019, the Wine Division continues consolidating its position as a leader in the wine industry, remaining the only Argentine bank among the top 20 to have an expert team to deal with commercial activity.the sector.
The Bank’s target market consists of wine estates with high added value products, that focus mainly on the export market. However, Banco Supervielle continued supporting all industry players in the entire value chain of wine production, from 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 authorized in the country (33 out of 47 authorized SGRs and Guarantee Funds). The Bank believesis recognized as the bank of the SGRs by theCámara Argentina de Sociedades y Fondos de Garantías and the Ministry of Production/Sepyme, the authority that its proximitysupervises SGRs.
The Bank also remained a leader in terms of development and innovation for being the first private Bank to its corporate banking customers givesoffer 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 a competitive advantage.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 December 31, 2017,large operators, taking advantage of the corporate banking segment had Ps.29.7 billionexperience 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 outstanding loansthem are based in the City of Buenos Aires and financial leases,provide cross-functional services to all of the Bank’s commercial channels and contributed with Ps.1.7 billionmake available their products to our consolidated net revenues (13.1% of our net revenues before adjustments)all customers, whether they are individuals or legal entities.
Teams focused on products include the Assets Management, Liabilities and with Ps.538.2 million to our total net income (28.7% of total segments’ net income before adjustments).Insurance, International Commerce (Comercio Exterior, or “Comex”), Leasing and Transactional Banking areas.
The main financial and transactional products and services that the Bank’sAssets Management area offers personal, corporate, banking segment offers are factoring, leasing, employee payroll services (through which it offers solutions to meet its customers’ working capital needs), foreign trade and cash management and transaction services. In addition, the Bank’s corporate banking segment also offers checking account short-term advances, factoring, secured and unsecured loans, Sociedad deGarantía Recíproca (SGR)-guaranteed 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 supplierto 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 check custody services, armored transportation services, collections services, corporate credit cards, pension services, deposit accounts (including time depositsto human and short-term deposits).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 Sueldo 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:
· | Loans. The bank offers offers personal, corporate, secured and unsecured loans, overdraft, factoring and/or guarantees issued, among other products, at fixed, variable or UVA adjusted rate . |
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 corporate banking segment:customers.
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Leasing. Banco Supervielle’s leasing product maintained a high levelRegarding commercial loans-, special facilities were developed to suit the needs of market acceptance,the different corporate segments together with over 1,100 contracts for a volume exceeding Ps.2.1 billionsales in 2017. Asdigital and face-to-face channels, enhancing the placement of December 31, 2017, we had a 15.2% market share in leasing in terms of private banks in Argentina.factoring, checking account and loan agreements.
During 2017, with a view to maintaining leadership and in the search for excellence in customer service, the leasing back office was established focusing on optimizing the response to, customers. For this purpose, the commercial team was restructured in the Branch Channel (dedicated to Large Companies, SMEs and Retail Banking) and the Vendor Channel (intended to increase penetration in the Vendor channel).
Factoring (check discounting, invoices and work certificates). 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. Corporate banking factoring transactions represented 17.1% of the Bank’s loan portfolio as of December 31, 2017, and the Bank estimated that itsThe share of the factoring market of Argentine financial system as of December 31, 20172019 was approximately 7.5%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.
· | Means of Payment: During 2019, we continued working on the transition from magnetic band debit cards to chip technology, which we had started in 2018, ensuring a better operation and the reduction of skimming fraud. The Bank thus managed to improve its position in the industry regarding the implementation of this technology in debit cards. |
As of December 31, 2019, the Bank maintained approximately 740,000 Visa and MasterCard accounts.
In 2017,connection with the Bank continued promoting E-Factoring, which allows, by meansdigital transformation proposal, focus was maintained on the use of installed readers, imagescontactless technology for all debit cards of the checksIndividuals 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 be receivedoffer an innovative product to make payments in a quick, comfortable and cashed or deposited, streamlining their processing and reducing time and cost.
Foreign Trade. The Bank is an active participant in foreign trade financing and offer personalized advice regarding technical, commercial and regulatory matters related to foreign trade. The Bank draws on a trained staff to advise customers on foreign trade, foreign exchange transactions, international transfers, credit assistance in connection with products offered, and operating issues.
During 2017, exchange regulations affecting foreign trade continued to be eased, which led to a more agile settlement process.safe way, enhancing customer experience. In addition, migration continued from physical to digital credit card account statements, through email delivery. In the yearsame line, Telephone Banking was characterized bycreated as a significant growthnew 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
· | Leasing. The Bank’s leasing area meets the leasing needs of all commercial banking areas of the Bank, through lease agreements of machinery, equipment and truck manufacturers and dealers, in a variety of industries and segments. While leasing remains a very attractive instrument for companies to finance investments related to business growth and operating efficiency, the rise in interest rates and the contraction of the economy in 2018 and 2019 caused a significant fall in the volume of contracts executed. As of December 31, 2019, we had a 19.9% market share in leasing in terms of private banks in Argentina. |
· | Foreign Trade. The Bank is an active participant in foreign trade financing and offers personalized advice regarding technical, commercial and regulatory matters related to foreign trade. The Bank has a trained staff that allows it to advise customers on foreign trade, foreign exchange transactions, international transfers, credit assistance in connection with products offered, and operating issues. |
During the first three quarters of 2019 simplification of exchange transactions related to foreign trade especiallycontinued, following the trend 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 second halfArgentina 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 SMEs 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’s digital platform was completed.
In addition, and in line with the objective of improving the 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 hours of the year, reaching a historic record of financingreceiving entity. On the other hand, thanks to its new system, users may track their transactions in U.S. dollars.
The E-Comex channel, which allows importer and/or exporter customers to make inquiries regarding on-going transactions and manage their payments and/or collections throughuntil they are received by the Home Banking of Corporate Banking, continued to be consolidated. 59% of the Bank’s total foreign trade related transactions were settled through this channel.
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), the largest and most prestigious chain of factoring companies..
· | Plan Sueldo: During 2019 the Bank implemented a deep restructuring of product operation, aimed at attaining high efficiency standards both in onboarding and in the customer cross selling and subsequent profitability. |
By mid-December 2017,In line with digital transformation, new agile services were developed to support the Bank establishedadmission 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 service center called “Contacto Comex”, staffed byearly profitability.
In such regard, a team of experts fully dedicatedspecific application was developed for mass onboarding reaching a milestone in online payroll processing.
In addition to responding to E-Comex inquiries from customers.
Cash Managementthe actions based on the adopted digital path, new and Transaction Services. The Banks offers a range of products and services designed to assist in the corporate administration process, including payments to suppliers, electronic banking, payments and collections, cash management and armored transportation. Supplier payment services ensure timely payment, optimizebetter generation proposals were developed for target companies. With the use of customers’ fundsopportunity maps, a greater efficiency was obtained in contact with companies, incorporating new tools for generation of quality agreements and simplify our customers’ administrative tasks. The various payment options are designed to meet each company’s needslead generation and include short-term advances based on deferred payment checks, with their respective statementscustomer retention campaigns were launched.
All the actions taken inured in a greater efficiency in contact customer and tax payment receipts, as well as transferslead generation and payments against revolvingin a greater efficiency in customer relations and credit facilities. Additionally, the Bank offers a convenient integrated check issuance, delivery and discounting service. Under various collection agreements entered into with service providers and public sector agencies, the Bank offers a comprehensive invoice and tax collection service using tellers, as well as a range of electronic payment options. Moreover, in the event that a company is paid for its products or services by credit card or voucher, the Bank serves as a payor bank for the major brands in the market, which enables credit card or voucher payments to be credited to the company’s account with us.offer.
· | Cash Management and Transaction Services. The Bank offers a range of products and services designed to assist in the corporate administration process, including payments to suppliers, electronic banking, payments and collections, cash management and armored transportation. Supplier payment services ensure timely payment, optimize the use of customers’ funds and simplify our customers’ administrative tasks. The various payment options are designed to meet each company’s needs and include short-term advances based on deferred payment checks, with their respective statements and tax payment receipts, as well as transfers and payments against revolving credit facilities. Additionally, the Bank offers a convenient integrated check issuance, delivery and discounting service. Under various collection agreements entered into with service providers and public sector agencies, the Bank offers a comprehensive invoice and tax collection service using tellers, as well as a range of electronic payment options. Moreover, in the event that a company is paid for its products or services by credit card or voucher, the Bank serves as a payor bank for the major brands in the market, which enables credit card or voucher payments to be credited to the company’s account with us. |
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.
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.
Sociedad de Garantía Recíproca (Mutual Guarantee Agents - “SGRs”). In 2017,During 2019, the Bank remainedfocused on the market leader, operating with 82%strengthening of the MGSs authorized in the country (28 out of 34 authorized SGRssupply, especially on strategic products, collections, direct payment, payments to suppliers, remote cheque scanners and Guarantee Funds)e-cheque. The Bank is recognized as the bank of the SGRs by the Cámara Argentina de Sociedades y Fondos de Garantíasprimary objective was to provide agile and the Ministry of Production/Sepyme, the authority that supervises SGRs
In addition, during 2017,simple solutions to customer treasury management, seeking to generate high value positive experiences. To such end, the Bank launched certain financing facilities secured by an SGR and addressed to SMEs that are part of value chains of large companies (e.g., wineries), in the City of Buenos Aires as well as in certain provinces.
Wines Division. During 2017, the Wines Division of Banco Supervielle continued implementing its strategy to become a specialized financial advisor to the wine industry.
The Bank’s target market consists of wine estates with high added value products, that focus mainlyfocused on the export market. However, Banco Supervielle continued supporting all industry players, from leading grape producersincrease of collection and payment capabilities and on the training and communication to major wine estates as well as suppliers of wine manufacturing and bottling supplies.increase the service level in internal operations.
54
· | Packages of banking services. As of December 31, 2019, the Bank maintained almost 3.2 million savings accounts and more than 140,000 checking accounts. In 2019, the Bank serviced more than 860,000 product bundles for senior citizens, more than 420,000Plan Sueldo accounts and more than 72,000 product bundles for high net worth customers. |
The Bank’s strategy targets participants in the entire value chain of wine production, from grape producers through wineries. This broad based strategy also allows us to develop our Retail Banking products with these customers.Treasury
Customized Value Proposition
1. Franchises. The Bank has introduced innovative loan models including franchise system variables to support the growth of entrepreneurship in Argentina through a professional system. The Bank finances up to 40% of the initial investment (capped at Ps.800,000 for new franchisees), offering preferential rates and a 6-month grace period on principal payments.
2. Transportation. The Bank has developed products for the cargo transportation segment activities and the value chain that enhances the growth of entrepreneurs and SMEs in general. For example, one of the attributes deemed key for a value proposition for this segment is the prompt response for the approval of loans for expansion of their truck fleet. The Bank has implemented single-day approvals of preferential rate financing for secured loans and leasing for the purchase of trucks and/or semitrailers. This allows SMEs to face new business opportunities and plan their activities more accurately.
Treasury
The Treasury segment is primarily responsible for the allocation of the Bank’s liquidity according to the needs of the RetailPersonal and Business Banking segment, the corporateCorporate 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. In 2017, this segment contributed Ps.426.1 million to the our consolidated net revenues (3.4% of total segments’ net revenues) and Ps.47.7 million of net income (2.5% of total segments’ net income). Below is a description of the services offered under this segment:
Trading Desk and Institutional Sales
Treasury. 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. This shows
Correspondent Banking
During 2019, commercial relationships were maintained with foreign banks both as to financing of foreign trade transactions and to guarantees and letters of credit.
A syndicated loan was entered into in August 2019 and subsequently disbursed in September 2019 through the FMO, the Dutch Development Bank, and Proparco, a great presencesubsidiary of the French Development Agency, for US$80 million, with a 3-year term, intended to strengthen the Bank’s support to SMEs.
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 Argentine marketorganization and placement of negotiable obligations and in terms ofequity 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 products.
Correspondent Banking. The substantial increase in foreign credit facilities during 2016 continued in 2017, with the clear support of international banks, which resulted in new and significant credit facilities both for foreign trade and for working capital.
International banks also offered 5-year loans, disbursements of which were made during the second half of 2017.
Additionally, the international factoring operation allowedinstruments. However, the Bank to play an active rolecontinued participating in the debt market, as the only Argentine bank that promotes specifically providing services to YPF Energía non-traditional foreign trade product and is a member of Factors Chain International.
Capital Markets. The Bank’s capital markets department is responsible for structuring and placing debt and securitization instruments, primarily financial trusts, both for third parties and for all our subsidiaries. The Bank is one of the leading entitiesEléctrica S.A. in the Argentine capital markets, with a 7.8% market share in Argentinareopening of Class I negotiable obligations for US$25 million, YPF S.A. in the year ended December 31, 2017.
During 2017,issuance of Class II, III and IV negotiable obligations for Ps.1,683 million, Ps.1,157 million 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 underwriterdealer of securitizations for Ps.4.1 billion, Ps.2.5 billion of which correspondedthe 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 six issues of Banco Supervielledifferent companies on valuations and Cordial Compañía Financieramergers and Ps.1.6 billion of which corresponded to eight third party issues.acquisitions.
During 2017 the Bank acted as arranger of negotiable obligations for Ps.8.6 billion, Ps.2.8 billion of which corresponded to five local market issues of Banco Supervielle and Cordial Compañía Financiera, Ps.4.8 billion to foreign market issues of Banco Supervielle, and Ps.1.0 billion to five third party issues.
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. The Financial Agency Agreement had been renewed twice and was duefinancial agency agreement. Since February 2017, the Bank has continued to expire in 2021. Theprovide financial services to the Provincial government of the Province of San Luis has indicated that it will invite banks, includingand its employees despite the termination of the financial agency agreement.
On June 7, 2018, the Province 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 participateprovide since the termination of the financial agency agreement with the Province in February 2017.
In January 2019, the selectiongovernment of a new financial agent. Thethe Province has not yetof 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 provincial government of the Province of San Luis and its employees in spite of the termination of the Financial Agency Agreement.employees.
The Bank has maintained a presence in the Province of San Luis since 1996. After acquiring Banco de San Luis in 1996, the Bank was appointed exclusive paying agent for the government of the Province of San Luis to provide financial agency and tax collection services to the Province of San Luis and serve as payor bank to provincial government employees.
As of the date of this annual report, 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, 2017,2019, the Bank’s exposure in the Province of San Luis was as follows:
As of December 31, 2017(in thousands of Pesos, except for ratios and operating data)
| As of December 31, 2019 | |||||
(in thousands of Pesos, except for ratios and operating data) | ||||||
Loans | ||||||
Banco Supervielle Total Loan Portfolio |
| |||||
Payroll loan to the Province of San Luis employees |
| |||||
Payroll loans to the Province of San Luis employees / Banco Supervielle Total Loan Portfolio |
|
| ||||
Loans to the provincial government | — | |||||
Deposits | ||||||
Consolidated Total Deposits |
| |||||
Deposits made by the Province of San Luis |
| |||||
Deposits made by the Province of San Luis / Consolidated Total Deposits | 1.9% |
|
| |||
| ||||||
Net Revenue | ||||||
Related Net Revenue / Banco Supervielle’s Consolidated Net Revenue |
|
| ||||
Operating Data | ||||||
Employees |
| |||||
Branches |
| |||||
Senior Citizen Service Center | 3 | |||||
ATM’s & Self Service Terminals |
|
Of the Bank’s approximately 227,000192,000 active customers in San Luis, it offers payroll services to about 24,00030,000 employees that were covered by the services provided under the Financial Agency Agreement.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 we offer personalAutomática, 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 consumer credit for goodsinsurance 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 underserved banking segments focusing its operationslower-middle income population, with focus on two key tenets:core pillars:
(i) | Accessibility: flexible customer centric proposals. |
(ii) | Diversification: tailored products to meet customers’ needs in every stage of their life with distinct value propositions for each stage. |
(i) Accessibility: flexible proposals focused on the client and adapted to the multichannel concept.
(ii) Diversification: products that satisfy the needs of customers at each stage of their lives with personalized offerings and differential value proposals depending on the different clusters to which they belong.
The Consumer Financing segment’s loan portfolio totaled approximately Ps.6.8Ps.5.0 billion (U.S.(approximately U.S.$364.384 million) at December 31, 2017 (including the securitized loan portfolio).
For the year ended December 31, 2017, Consumer Financing contributed Ps.2.3 billion to our consolidated net revenues (18.3% of our net segments’ revenues) and Ps.179.4 million of net income (9.6% of total segments’ net income).
Asas of December 31, 2017, CCF offered2019.
The multichannel concept allows the Bank to be present countrywide through 116 branches of its 3 main marketing channels:
· | Walmart financial services |
· | Tarjeta Automática |
· | “Tu Crédito Hipertehuelche” |
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 products:measures:
· | New strategic pillars were established: enhance the customer experience through digital transformation, expand the consumer product offer and increase cross selling to drive a greater efficiency and profitability. |
· | The application assessment process was reengineered and more adjustments were made on credit policies, with a view to limiting the loan offer to segments more exposed to macroeconomic uncertainty. |
· | Changes were implemented in collection strategies and teams so as to support non-performing customers, implementing statistical tools to set priorities in collection management, through data enrichment processes and improvement of allocation and control tools of collection agencies. These changes led to the stabilization of early NPL indicators and non-performing portfolio. |
· | Product cross selling increased. |
· | The structure was tailored to the new situation and expenses were cut. |
· | Focus was placed on the portfolio quality, reducing exposure. |
Personal Loans. CCF offers cash loansWhile the placement of financial products decelerated during 2019 as a result of the macroeconomic context, the following products continued to individuals at a fixed interest rate. In 2017, CCF granted more than 182,000 personal loans, amounting to Ps.3.8 billion in the balance of personal loans.
be marketed:.
Open Credit Cards. CardCCF’s credit card: it is a financial tool through which its clients can makethat may be used for purchases in the networkstores of businesses that acceptmerchants accepting MasterCard and obtainfor cash advances, pursuant to limitations set forthwithin the limits determined by CCF. Marketing for the CCF credit card is carried outentity, which may be obtained in permanent marketing spacesthe Permanent Promotion Booths located in Walmart Argentina stores, Hipertehuelche and Tarjeta’s branches. CCF has exclusive rights to promote and sell financial and credit products in Walmart Argentina stores nationwide through August 2020.
Tarjeta Automática stores.
Private LabelPersonal Loans: fixed rate cash loans using the french amortization system
Consumer Loans: Credit Cards. CCF’s private label credit cards are credit cards that may only be used in Pesos and at the business through which they were issued. These private label credit cards aim to increase customer loyalty and generate incremental sales for the business. As of the date of this annual report, Walmart Argentina is the only business that offers a private label credit card.
Insurance and other non-financial products. CCF offers personal accident insurance, protected bag insurance for personal property contained in a bag, backpack, wallet, fanny pack or other bag that is either lost or stolen, health insurance, unemployment insurance, total protection, household assistance, extended warranty, protected technology, and home on behalf of the insurance companies with which CCF has an agreement.
Consumer Loans. CCF offers lines of credit for the purchase of specificcertain 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 offer car loans 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 of personal accidents, protected bag, unemployment, total protection and pets insurance policies.
New products under development: borrowing products: CVU, remunerated account, fixed term deposits, among others.
The agreement as exclusive provider of financial services to Walmart’s customers in its stores is in force until August 2020, pursuant to the third consecutive renewal of this agreement executed in December 2014. This is the fourth consecutive period in which this agreement has been in effect.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.
Insurance
Insurance
Through Supervielle Seguros, Grupo Supervielle offers insurance products, primarily personal accidents insurance, protected bag insurance, life insurance and life insurance. Allintegral insurance products are offered to all our customers.policies for entrepreneurs and SMEs. In 2019 Supervielle Seguros offers credit related and othersstarted marketing new products focused on the marketing of the special multiple peril insurance to satisfy the needs of our customers as well.
In 2017, our insurance operations throughentrepreneurs and SMEs segment. Supervielle Seguros contributed Ps.469.7 millionis continuously offering new products to our consolidatedthe different customer segments of Grupo Supervielle such as: high net, revenues (3.7%worth individuals (Identité), senior citizens, entrepreneurs and SMEs, customers of our net segments’ revenues)the consumer financing and Ps.205.6 million of net income (11.0% of our segments’ net income).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”protected bag insurance and “personal accident”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.
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 2017, Supervielle Seguros began offering home, protected technology, protected contents, total protection and broken bones policies in addition to personal accidents, protected bag, temporary life and debtor’s credit life insurance policies.
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 and medium and large entities segments.
Supervielle Seguros focuses on the marketing of insurance policies through the networks of the Bank and CCF, as well as on credit related and other insurance intended to meet the needs of our different channels and customers.
Though the current organizational structure remains flexible, focused on critical strategic and control duties, supporting the remaining processes with core areas of Grupo Supervielle and with the advice of independent specialists through the implementation of services agreements, the company began during this year with the survey of processes to determine the investments required in technology and infrastructure, with a view to optimizing its processing capacity.
In 2017, 2019, 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 center 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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Protected Bag Insurance. Protected bag insurance covers theft and accidental damage in relation with purchases paid with Walmart card, Mastercard Walmart card and Carta Mastercard card.
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.
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 has experienced a trend of growth inreported gross written premiums reporting Ps.182.0of Ps.404.9 million in the first quarter of 2017, Ps.188.82019, Ps.407.6 million in the second quarter of 2017, Ps.186.72019, Ps.530.0 million in the third quarter of 20172019 and Ps. 232.1Ps.438.7 million in the fourth quarter of 2017.
2019.
The following table sets forth the breakdown of Supervielle Seguros’s gross written premiums per quarter as of December 31, 2017.
2019.
Gross written premiums by product
(in millions of Pesos)Pesos)
% 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% |
|
|
|
|
|
|
|
|
|
|
|
| % Change |
| ||
|
| 4th |
| 3rd |
| 2nd |
| 1st |
| 4th |
| 4th quarter |
| 4th quarter |
|
Life insurance and total permanent disability insurance for debit balances |
| 35.7 |
| 48.9 |
| 64.3 |
| 82.4 |
| 103.4 |
| (27.0 | )% | (65.5 | )% |
Personal Accident Insurance |
| 17.6 |
| 17.1 |
| 16.0 |
| 13.8 |
| 13.2 |
| 3.2 | % | 32.9 | % |
Protected Bag Insurance |
| 36.3 |
| 35.3 |
| 33.7 |
| 27.9 |
| 28.0 |
| 2.7 | % | 29.9 | % |
Broken Bones |
| 6.7 |
| 6.2 |
| 6.5 |
| 0.1 |
| — |
| 8.9 | % | — |
|
Others |
| 7.0 |
| 0.5 |
| 0.4 |
| — |
| — |
| 1,346.3 | % | — |
|
Home Insurance |
| 28.0 |
| 3.1 |
| — |
| — |
| — |
| 809.1 | % | — |
|
Technology Insurance |
| 10.8 |
| 1.6 |
| — |
| — |
| — |
| 564.2 | % | — |
|
ATM Insurance |
| 5.9 |
| 1.5 |
| — |
| — |
| — |
| 290.7 | % | — |
|
Mortgage Insurance |
| 2.8 |
| 0.2 |
| 0.3 |
| — |
| — |
| 1,300.0 | % | — |
|
Life Insurance |
| 81.3 |
| 72.4 |
| 67.7 |
| 57.8 |
| 54.4 |
| 12.3 | % | 49.5 | % |
Total |
| 232.1 |
| 186.7 |
| 188.8 |
| 182.0 |
| 199.0 |
| 24.3 | % | 16.6 | % |
Asset Management &and Other Services
We also offerGrupo 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 SAM, InvertirOnline S.A.U. Since the MILA acquisition, the new portfolio of used car loans and non financial servicesits respective results are recorded under Consumer Financing segment. MILA portfolio outstanding at the moment of the acquisition and products through Espacio Cordial.its respective results are recorded under Asset Management and Others segment.
In 2017, these additional operations contributed Ps.601.6 million to our consolidated net revenues (4.7% of our segments’ net revenues before adjustments) and Ps.223.6 million of net income (11.9% of our segments’ net income before adjustments).
In 2017, SAM recorded Ps.113.2 million of net income, compared to Ps.77.4 million and Ps.81.8 million for years ended December 31, 2016 and 2015, respectively.
SAM’s assets under management amounted to Ps.14.7 billion as of December 31, 2017, compared to Ps.10.0 billion and Ps.5.9 billion as of December 31, 2016 and 2015, respectively.
As of December 31, 2017, SAM had approximately 12,000 customers.
The following graph sets forth the breakdown of SAM’s assets under management as of December 31, 2017.
Mutual Funds. SAM offers mutual funds services designed to meet customers’ particular investment objectives and risk profiles through its Premier funds family. As of December 31, 2017,2019, SAM had U.S.$780.6 millionPs 16.8 billion of assets under management.
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As of December 31, 2019, SAM had approximately 4,590 customers.
The PREMIER family of funds consists of 14 mutual funds: a Fixed Time DepositMoney Market Fund (Money Market (Premier Renta CP in Pesos)Corto Plazo en Pesos), fivethree Argentina short-term fixed income funds in Pesos (Premier Renta Plus, Premier Renta Fija Ahorro, Premier Capital), five Argentina fixed income and mixed income funds in Pesos (Premier Renta Fija Crecimiento, Premier Commodities, Premier Inversión, Premier Balanceado and Premier Renta Mixta), two Argentina fixed income funds in U.S. dollars)US dollars (Premier Renta Mixta en Dólares and Premier Performance), a variable income fund (Premier Renta Variable), an Investment Fundinvestment fund in SME securities (Premier FCI Abierto PyMEs) and three Mixed Income Funds, that invest in agricultural commodities derivativesa fixed income LatAm fund (Premier Commodities AgrariosGlobal Dólares).
The money market fund showed an increase of 143%, mainly due to the investments of corporate and institutional customers, representing 79% of the managed funds in combined portfolios of negotiable securitiesDecember 2019, as compared to 40% in December 2018.
The Argentina Short Term Fixed Income funds in Pesos U.S. dollars(t+1) fell by 85%, and futures contracts (Premier Inversiónits share on the total managed funds fell to 3% in December 2019 as compared to 28% in December 2018. As from August, due to the devaluation and Premier Balanceado).the rise 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 result of the low volatility of interest rates and exchange rates.
Fixed The Argentina fixed and mixed income funds offer the possibility to invest in short and medium term private and public debt assets. The Mutual Fund Premier Renta Plus portfolio is mainly made up of Lebacs and Provincial Bills, Mutual Fund Premier Renta Fija Ahorro invests in Lebacs, time deposits and negotiable obligations, Mutual Fund Premier Renta Fija Crecimiento is made up of short and medium term public and private debt assets and Mutual Fund Premier Capital invests in financial assets computable for the insurance companies’ investment regulations. The portfolio of Mutual Fund Premier Renta Mix in U.S. dollars is made uprecorded 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 spite of the fact that during the last quarter of 2019 the downward trend ceased, investments in this segment have not yet recovered.
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 banking 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 denominated in U.S. dollars issued byrepresent 5% of the Argentine government, provincial governments and companies.
The placement of these products is made by the Bank primarily through its commercial channels,funds managed by SAM, as per the average balance of December 2019.
InvertirOnline is an online platform that offers brokerage and by brokerage firms. In December 2014, SAM began to offer its fundsavings and investment services, to customers through the Bank’s corporate home banking service. This service broadens SAM’s channels of distribution and offers clients a high quality service.
In 2018, SAM plans to broaden its products to take advantage of new opportunities expected to be introduced by the new Capital Markets Law.
Retail Sales. Espacio Cordial sells various types of goods and services through a wide range of distribution channels, with a focus on cross-selling to our banking customers.improving the quality of life of persons, through the increase of their income.
During 2017, we continued doing businessAs part of Grupo Supervielle,InvertirOnline can leverage its growth and growing in already developed direct and indirect channels. In the direct channel, we continued to grow through points of sale located at the Bank’s senior citizens dedicated branches throughout Argentina, mainly selling home appliances, health care plans, safety plans, prepaid services and tourist packages. Using indirect channels, we offered prepaid health services and the sale of electronic and home appliances by telephone and home appliances. We also offered through Tienda Supervielle technology products, home related products, furniture, sport products, clothing, well being and beauty related products, toys, perfumes and accessories.
Likewise, in 2017, we implemented new sales channels for all goods and services categories. In the tourism category, we launched our online channel through Tienda Supervielle Viajes with a competitive offer for hotels, flights, trains, travel assistance and experiences such as the 2018 FIFA World Cup. In the services category, we sold health care plans in the digital channel through a strong online strategy in social media and, in the electronic category, we entered into agreements with strategic partners for the marketing of such goods on their networks.
In partnership with CCF and Emilio Luque, a retail and wholesale supermarket chain, in December 2017, the electronic sector, fully managed by Cordial Servicios, was opened at the Salta branch of such company. This is the first step of Emilio Luque’s branch expansion plan as well as the kick-offtake advantage of the first expansion projectsynergy of Cordial Servicios on third party networks intended to attract customers forthe different businesses of Grupo Supervielle.
Our health care products and services offers were also enhanced. In the case of home and technology, categories and number of goods were doubled, and the tire and car accessories category was created in Tienda Supervielle. In relation with services, we launched a new kinesiology plan and we designed custom plans for the different customer segments.
In 2017, Espacio Cordial sold approximately 102,943 electronic products and approximately 146,000 service plans.
In 2017, net revenues from Espacio CordialInvertirOnline’s assets under management amounted to Ps.390.5 million (U.S.$20.8 million) compared to Ps.152.2 million in 2016.Ps.12.5 billion as of December 31, 2019.
As of December 31, 2019,InvertirOnline had approximately 51,829 active customers located country-wide.
For 2018, the objective of Cordial Servicios is to increase income in the 78 existing points of sale and at the already developed and recently implemented indirect sales channels.
Corporate Social Responsibility
Grupo Supervielle has become an important part ofleader in the Argentine financial system with a high visibility potential of visibility in its social investments.community actions. Its social commitmentengagement has been growing steadily as its clients continuegrown 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 increase their expectations regarding the social impactefficient management of its projects. energy, plastic reduction and technological scrap recycling.
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Grupo Supervielle hasissues a strong regional presence which allows itSustainability 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 participate in social actions, particularly in places and areas of poor social investment.identify those issues that are relevant to the business.
TheWe have four strategic objectives of CSR are as follows:for all actions taken:
(i) Be perceived not just as a profitable and innovative bank but also as an agent of change and creator of sustainable social value;
(ii) Develop an innovative and transformative strategy with concrete, measurable and high-impact actions;
(iii) Synergize CSR initiatives with local communities in which the bank has commercial activity; and
(iv) Build a collaborative and co-responsible organizational culture through programs designed in alliance with NGOs and Corporate Volunteering actions.
· | Become an agent of change and creator of sustainable social value. |
· | Develop an innovative and transforming strategy with measurable and high-impact actions. |
· | Synergize CSR initiatives with local communities in which the bank has commercial activity. |
· | Build a cooperative and co-responsible organizational culture, through initiatives in partnership with different NGOs and corporate volunteering. |
The CSR strategic plan is developed through 20 programs grouped in four core axis:
(i)
(i) | Senior Citizens: Programs for senior citizens aim to promote active and healthy aging, social participation and the prevention of dependency. |
(ii) | Childhood: Programs for children help fight child poverty and malnutrition. |
(iii) | Education: Education programs promote opportunities through education. |
(iv) | Institutional Strengthening: Programs designed to contribute to the strengthening of public institutions and the construction of a long-term public agenda. |
In 2019, we carried out 20 programs. Three of our main programs are aimed at senior citizens aimand reached 7,675 individuals. Four programs target childhood and fighting poverty and malnutrition, seven are related to promote activeeducation and healthy aging, social participationfour 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 prevention of dependency.
(ii) Childhood: Programs for children help fight child poverty and malnutrition.
(iii) Education: Education programs promote opportunities through education.
(iv) Institutional Strengthening: Programs designed to contribute to the strengthening of public institutions and the construction of a long-term public agenda.
In 2017, Grupo Supervielle published its annual edition of the Sustainability Report covering 2016. The sustainability Report is prepared basedother focused on the guidelinessubstantial reduction of single-use plastic and standards of the Global Reporting Initiative (“GRI”) and is available on the Banco Supervielle website.correct recycling in our biggest buildings.
Our Subsidiaries
Banco Supervielle S.A.
We own 96.8%97.10% of the share capital of the Bank and Sofital owns 3.1%the remaining 2.79%. The Bank is a universal commercial bank and our largest subsidiary. When consolidated with CCF, the Bank accounted for 98.2%96.4% of our total assets as of December 31, 2017. During the last fifteen years, the Bank experienced significant growth while efficiently managing risks, including those posed by the 2001-2002 crisis and the 2008 international economic downturn.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, 2017,2019, the Bank ranked ninth10 in terms of deposits, eighth8 in terms of total loans and ninth10 in terms of total assets among private banks in Argentina. As of such date, the Bank ranked fourth in terms of deposits and in terms of total assets among domestically-owned private banking groups. In 2017,2019, 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 7.5% in the financial system9.5% share among private banks as of December 31, 20172019 and (ii) leasing services, with a market share estimated to be above 15.2%19% as of December 31, 2017.2019.
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As of December 31, 2017,2019, the Bank on a consolidated basis had total assets of Ps.92.4for Ps.142.3 billion, a total loan portfolio (including the securitized loan portfolio) of Ps.60.3Ps.87.5 billion and total deposits of Ps.60.8for Ps.91.5 billion, and its shareholders’ equity totaled Ps.10.0Ps.18.2 billion.
Cordial Compañía Financiera S.A.
The Bank owns 95% of CCF’s common shares and Grupo Supervielle owns the remaining 5%. As of December 31, 2017, CCF had total assets of Ps.7.0 billion, net shareholders’ equity of Ps.1.6 million and a personal loan portfolio and credit card loan on balance of Ps.6.2 billion (including the securitized loan portfolio, the total loan portfolio and credit card loans amounted to Ps.7.4 billion) and approximately 393,000 active credit cards issued.
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 includes108 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. This new extensionA renewal of the agreement is expected to foster the expansion of CCF’s business and the development of large, long term projects that are expected to bolster the growth of both parties to the agreement.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 i) (i) Accessibility: Convenient services centered on the customer and adapted to the concept of multi-channel banking. (ii) Diversification: Products that satisfy the customers’ needs in every stage of life with personalized offers and differentiated value propositions. adapted to the conceptas of multi-channel banking.
ii) Diversification: Products that satisfy the customers’ needsDecember 31, 2019 it was present in every stage of life with personalized offers and differentiated value propositions.
The concept of multi-channel banking requires CCF to have a presence everywhere in Argentina, including each of the 2322 provinces which it does through 116113 branches and three main channels of distribution:
· Walmart Financial Services: Through this channel, CCF offers loans, credit card origination and insurance through an exclusive agreement with Walmart Argentina, reaching approximately 390,000 customers.
·
· | Walmart Financial Services: Through this channel, CCF offers loans, credit card origination and insurance through an exclusive agreement with Walmart Argentina, reaching approximately 309,000 customers as of December 31, 2019. |
· | Tarjeta Branches: Through this channel, CCF offers financing to middle and lower-middle-income customers. This service has a strong presence in the Patagonia region, reaching approximately 36,600 customers as of December 31, 2019. |
· | “Tu Crédito Hipertehuelche”: Through this channel, CCF offers loans, credit card origination and insurance through an exclusive agreement with Hipertehuelche Supermarkets, reaching approximately 11,800 customers as of December 31, 2019. |
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 and reaches approximately 54,000 customers.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.
· “Tu Crédito Hipertehuelche”: Through this channel, CCF offers loans, credit card origination and insurance through an exclusive agreementis the leader in the consumer loan segment in the Carta Automática markets, with Hipertehuelche Supermarkets, reaching approximately 20,000 customers.
To secure its market presence and to maximize customerhigh satisfaction and prospects, CCF owns financial service stands in all medium and large Walmart Argentina locations and has a total of 80 sales and services points (compared to 67 sales and services points as of December 31, 2017)brand awareness levels among its customers (source: 2018 Quantitative Survey). In smaller Walmart Argentina locations, CCF has developed a customer sales and services model through exclusive technology that does not require on-site presence.
Since 2014, CCF has been an exclusive financial services provider of customers of Hipertehuelche Supermarkets in the 16 stores Hipertehuelche has in the Argentine Patagonia. In these stores, CCF’s has a financial services stand where it offer its products. Hipertehuelche is a home improvement and construction products retail chain.
For the year ended December 31, 2017, CCF was the first private issuer of MasterCard credit cards with account summary in Argentina.
Tarjeta Automática S.A.
Tarjeta was founded in 2002 to offer credit services to a segment of customers to whom banking services were not previously available. Its operations are concentrated primarily on granting personal loans. In 2007, we acquired Tarjeta.
Tarjeta has 20 public service branches and 41 stands at retail chains. The highest concentration of Tarjeta branches is in Patagonia.
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.
In parallel withThe challenge for 2020 is to continue consolidating the consolidation of its non-credit relatedcurrent insurance business Supervielle Seguros plansand to advance itsmake 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 adaptthat contribute to the needsprovision of its distribution channelsfinancial services and clients and evaluate howinsurance to incorporate the business into the credit-related businesses.customers.
Supervielle Asset Management S.A.
Through SAM, we have become a player in the mutual funds market with the “Premier” funds family. In November 2014, Standard & Poor’s published its “FundStar Ranking,” which ranks
As of December 31, 2019, SAM offered 14 mutual funds based on relative strengths comparedservices designed to other mutualmeet customers’ particular investment objectives and risk profiles through its Premier funds with similar long-term investment strategies. Premier Fixed-Income Savings Fund and Premier Income Fund Qualified received the highest rating of five stars and Premier Equity Fund received four stars.
family. As of December 31, 2017,2019, SAM managed 11 mutual funds and had U.S.$780.6281 million of fundsassets under management. Based on data from the Argentine Association of Mutual Funds, we estimate that we have a market share of approximately 2.63%2,12% of the mutual fund industry in Argentina and that SAM is ranked 1318 out of 4652 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 including those 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, as compared to 2018, totaling 1,123,000 transactions. In 2018 the number of transactions through InvertirOnline hit a record, with over 724,000 transactions. Also, the transacted amount in 2019 exceeded the Ps.76 billion, representing a 213% increase as compared to the previous year, and over 59,000 accounts opened by new customers during that period, which represents an increase of more than 750% 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 operation in the second half of 2019.
The 2020 goal is to expand the offer to the group’s customers with a focus on the entrepreneurs 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 changing its corporate name to Supervielle Agente de Negociación S.A.U.)
On December 18, 2019, Grupo Supervielle acquired 100% of the capital stock of Futuros del Sur S.A., 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 asociedad anónima whose main activity consists of holding participations in other companies.
AsAs of the date of this annual report, Sofital holds 3.1%2.7944% of the capital stock of the Bank, 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.
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An in-kind capital contribution by Mr. Julio Patricio Supervielle of 7,672,412 non-endorsable ordinary registered shares of Sofital S.A.F. e I.I. to Grupo Supervielle was approved at a shareholders’ meeting of Grupo Supervielle dated April 27, 2017. The capitalization of such capital contribution was approved by the CNV and registered by the IGJ on February 28, 2018.
Investments in and Divestments of Grupo Supervielle in its Subsidiaries
On February 5, 2013, we accepted an offer for the acquisition of 95% of the purchase shares of Aseguradores de Créditos del Mercosur S.A. (which was later renamed Supervielle Seguros). On May 14, 2013, the National Superintendency of Insurance approved the transfer of the company’s shares. As a result, on June 6, 2013, 95% of the shares of Aseguradores de Créditos del Mercosur S.A. were transferred to us and the remaining 5% was transferred to Sofital.
On May 30, 2014, Sofital and Grupo Supervielle entered into an agreement for the sale of 100% of the shares of Adval to CAT Technologies S.A. The purchase price is scheduled to be paid in installments due between July 2014 and July 2019. As of December 31, 2015, Grupo Supervielle recorded a credit of Ps.2.3 million and Sofital S.A. a credit of Ps.0.1 million.
On February 25, 2014, the shareholders of Supervielle Seguros voted to increase the share capital by an amount of Ps.5,000,000 in proportion to their holdings to be integrated in cash and in kind.
On November 26, 2014, our Board of Directors decided to make a capital contribution to Supervielle Seguros for an amount of Ps.12,462,232.05. The capital contribution did not change our stake in Supervielle Seguros. The increase in share capital of Supervielle Seguros is pending the approval of the Superintendency of Insurance.
On April 29, 2016, we and the Bank made capital contributions to CCF for a total amount of Ps.25.0 million.
On May 31 and June 3, 2016, we made capital contributions to the Bank for Ps.2.2 billion. On September 22, 2016, the Bank held an Extraordinary Shareholders’ meeting in which it resolved to capitalize said contributions by increasing the capital stock by Ps.182.1 million with an issue premium of Ps.2.0 billion.
On May 31 and June 16, 2016, we made capital contributions to CCF for Ps.14.0 million. On October 24, 2016, CCF held an Extraordinary Shareholders’ meeting by which it resolved to accept such contributions for the total amount of Ps.305.0 million under the terms established in the respective agreements for the irrevocable capital contribution, to increase the capital stock in the amount of Ps.31.4 million increasing it from Ps.73.0 million to Ps.104.4 million, and issue 31,370,057 ordinary, non-endorsable nominative shares with a nominal value of Ps.1 each and entitled to one vote per share.
On February 17, 2017, we and the Bank made capital contributions to CCF for Ps.100.0 million. On March 9, 2017, CCF held an Extraordinary Shareholders’ meeting by which it resolved to accept such contributions and increase the capital stock in the amount of Ps.19.5 million, from Ps.104.4 million to Ps.123,7 million, and issue 19,348,722 ordinary, non-endorsable nominative shares with a nominal value of Ps. 1 each and entitled to one vote per share.
On March 20, 2017, both our Board of Directors and the Bank’s Board of Directors, accepted an offer from Ciudad Microempresa, to acquire 100% of the shares of Ciudad Microfinanzas. The offer was subject to the compliance of certain conditions, and the transaction was closed on March 31, 2017 when the conditions were met. Grupo Supervielle sold its 12,219,472 shares, representating 87.5% of the total capital stock, and Banco Supervielle sold its 1,745,632 shares, representing 12.5% of the total capital stock.
On March 27, 2017, we made a capital contribution to the Bank for Ps 95.0 million.
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. Grupo Supervielle transferred a total of 904,142 common, registered, non-endorsable shares to Ramón Francisco Federico and Guillermo Héctor Federico; Sofital S.A.F. Sofital S.A.F. e I.I. transferred a total of 47,000 common, registered, non-endorsable common shares to Ramón Francisco Federico and Guillermo Héctor Federico; and Mr. Julio Patricio Supervielle transferred a total of 2,618 common, registered, non-endorsable shares to Ramón Francisco Federico and Guillermo Héctor Federico.
On July 24, 2017, Grupo Supervielle and the Bank made an irrevocable capital contribution in advance of future capital increases to CCF for an amount of Ps.2.5 million and Ps.47.5 million, respectively.
On September 20, 2017, Grupo Supervielle, the Bank and CCF made an irrevocable capital contribution in advance of future capital increases to Tarjeta Automática for an amount of Ps.131.3 million, Ps.15.0 million and Ps.3.8 million, respectively.
On November 24, 2017, Grupo Supervielle made an irrevocable capital contribution to the Bank for an amount of Ps.2.6 billion. On same date, the Bank held an ordinary shareholders’ meeting by which it resolved to accept such contributions and increase the capital stock in the amount of Ps.105.5 million.
On December 13, 2017, Grupo Supervielle and the Bank made an irrevocable capital contribution in advance of future capital increases to CCF for an amount of Ps.30.0 million and Ps.570.0 million, respectively.
On January 16, 2018, Grupo Supervielle and the Bank made an irrevocable capital contribution in advance of future capital increases to CCF for an amount of Ps.19.0 million and Ps.361.0 million respectively. On January 24, 2018, CCF held an ordinary shareholders’ meeting by which it resolved to accept the contributions received on July 24, 2017, December 12, 2017 and January 16, 2018, and increase the capital stock in the amount of Ps.56.751 million.
On April 6, 2018, the Board of Directors of Grupo Supervielle approved to issue an offer for the acquisition of 4,000,000 ordinary, nominative, non-endorsable shares of Ps.1 par value and entitled to one vote per share, representing 100% of the share capital of MILA for a total price of U.S.$20 million subject to price adjustment. MILA specializes in car financing, particularly for used cars. The acquisition is expected to close in the second quarter of 2018 subject to certain customary conditions precedent.
On April, 19, 2018, the shareholders’ meeting of the Bank approved the capitalization of the capital contribution commited by us for an amount of Ps.861 million.
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 the publicly available information released by region,company estimates, the City of Buenos Aires had a GDP per capita in 20052019 of approximately U.S.$40,00028,000 and the INDEC estimated a population of approximately 2.9 million (approximately 7.2% of Argentina’s overall population). as of December 31, 2019. As of December 31, 2017,2019, the unemployment rate in the City of Buenos Aires increased to 5.9% from 5.7%was 6.9%, same rate as of December 31, 2016.2018. In terms of the banking sector, there are 843855 bank branches (out of a total of 4,4974,773 bank branches in Argentina) in the City of Buenos Aires. As of June 30, 2016, according to the last available information, the city accounts for 47% of total deposits and 53% of loans in Argentina.
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 on the most recent publicly available information released by region,Company estimates, the Province of Buenos Aires had a GDP per capita in 20052019 of approximately Ps.12,000U.S.$7,000 and the INDEC estimate a population of approximately 15.6 million (approximately 38.9% of Argentina’s overall population). as of December 31, 2019. As of December 31, 2017,2019, the unemployment rate in the Province of Buenos Aires decreased to 8.4%10.0% from 8.5%11.4% as of December 31, 2016.2018. 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 1,4491,504 bank branches (out of a total of 4,497)4,773) bank branches in Argentina) in the Province of Buenos Aires. As of June 30, 2017, according to the last available information, the region accounted for 23% and 18% of total deposits and loans in Argentina, respectively.
Mendoza. The Province of Mendoza is located in the Cuyo region and is the center of the wine industry in Argentina. Based on the most recent publicly available information released by region,Company estimates, Mendoza had a GDP per capita in 20052019 of approximately Ps.13,000U.S.$7,000 and the INDEC estimated a population of approximately 1.7 million (approximately 4.3% of Argentina’s overall population). as of December 31, 2019. As of December 31, 2017,2019, the unemployment rate in Mendoza decreasedincreased to 2.7%7.3% from 3.3%5.9% as of December 31, 2016.2018. In terms of the banking sector, there are 173179 bank branches (out of a total of 4,4974,773 bank branches in Argentina) in Mendoza. As of June 30, 2016, according to the last available information, the city accounts for 2% of total deposits and loans in Argentina.
San Luis. 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. Based on the most recent publicly available information released by region, the Province of San Luis had a GDP per capita in 2005 of approximately Ps.13,000 and a population of approximately 0.4 million (approximately 1.1% of Argentina’s overall population). As of December 31, 2017,2019, the unemployment rate in the Province of San Luis decreasedincreased to 1.2%2.9% from 3.6%2.8% as of December 31, 2016.2018. In terms of the banking sector, there are 5150 bank branches (out of a total of 4,4974,773 bank branches in Argentina) in the Province of
San Luis. As of June 30, 2016, according to the last available information, the Province of San Luis accounts for 0.5% and 0.3% of each of total deposits and loans in Argentina respectively.
Distribution Network
Our infrastructure supports our multi-channel distribution strategy with a strategic national footprint through 340316 access points, (compared to 326 access points as of December 31, 2017), which include 180185 bank branches, (compared to 179 bank branches as of December 31, 2017), 78 of these bank branches are fully dedicated to serve senior citizens, 1913 banking payment and collection centers, 8079 CCF sales points located in Walmart supermarkets, (compared to 67 sales points in Walmart supermarkets as of December 31, 2017), 6134 consumer financing branches of Tarjeta and other points of sale, 5 Mila’s customer support offices, network of 393 car dealers and 521536 ATMs, 217 self-service terminals and 193 self-service terminals.202 Cash Dispensers with biometric identification..
As of December 31, 2017,2019, 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.300.8 million,Ps.443.4, compared to Ps.191.5Ps.393.0 million as of December 31, 2016 and Ps.120.5 million as of December 31, 2015. 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, 2017, the loan portfolio to branches ratio of (i) Banco Macro S.A. was Ps.298.8 million, (ii) Banco de Galicia y Buenos Aires S.A. was Ps.532.1 million and (iii) BBVA Banco Francés S.A. was Ps.503.9 million. The loan portfolio to branches ratio as of December 31, 2016 of (i) Banco Macro S.A. was Ps.194.8 million, (ii) Banco de Galicia y Buenos Aires S.A. was Ps.379.1 million and (iii) BBVA Banco Francés S.A. was Ps.309.3 million. The loan portfolio to branches ratio as of December 31, 2015 for (i) Banco Macro S.A. was Ps.138.3 million, (ii) Banco de Galicia y Buenos Aires S.A. was Ps.287.3 million, (iii) BBVA Banco Francés S.A. was Ps.227.5 million and (iv) the Argentine private banks was Ps.190.4 million. According to publicly available information provided by the Central Bank, as of December 31, 2017, the loan portfolio to branches ratio for all Argentine private banks was Ps.363.8 million2018.
.
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The following table and map showshows the geographicaldetail of our distribution of branches, senior citizens dedicated branches and sales and collection centers, except otherwise indicated:network:
Distribution Network | |||
As of December 31, 2019 | |||
Banco Supervielle S.A. Branches | 185 | ||
Banco Supervielle S.A. Sales and Collection Centers | 13 | ||
Tarjeta Automática S.A. Branches | 20 | ||
Tarjeta Automática S.A. Sales and Collection Centers | 14 | ||
Cordial Compañía Financiera Sales Points | 79 | ||
Micro Lending S.A.U. | 5 | ||
ATMs | 536 | ||
Self-service Terminals | 217 | ||
“Caja Rapida” - Cash Dispensers with biometric identification | 202 | ||
Deposits
Distribution Network
|
| As of December 31, 2017 |
| As of the date |
|
Banco Supervielle S.A. Branches(1) |
| 179 |
| 180 |
|
Banco Supervielle S.A. Sales and Collection Centers |
| 19 |
| 19 |
|
Tarjeta Automática S.A. Branches |
| 20 |
| 20 |
|
Tarjeta Automática S.A. Sales and Collection Centers |
| 41 |
| 41 |
|
Cordial Compañía Financiera Sales Points |
| 67 |
| 80 |
|
ATMs |
| 518 |
| 521 |
|
Self-service Terminals |
| 186 |
| 193 |
|
(1) In February and March 2017, the Central Bank approved our request to convert the remaining senior citizen service centers into full bank branches. As a result, as of the date of this annual report, we have 180 bank branches.
Deposits
The following tables compare the composition of the Bank’s (on a consolidated basis) total liabilities and depositsfunding with those of all Argentine private banks’ in each case as of December 31, 2017:2019:
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, 2017 |
| ||||||
Liabilities |
| Banco Supervielle |
| Private Banks |
| ||||
|
| (in millions of Pesos) |
| % |
| (in millions of Pesos) |
| % |
|
Deposits |
| 60,758 |
| 73.7 |
| 1,374,702 |
| 75.6 |
|
Other Liabilities |
| 21,646 |
| 26.3 |
| 442,967 |
| 24.4 |
|
Total |
| 82,404 |
| 100 |
| 1,817,669 |
| 100 |
|
|
| Year ended December 31, 2017 |
| ||||||
Deposits Breakdown |
| Banco Supervielle |
| Private Banks |
| ||||
|
| (in millions of Pesos) |
| % |
| (in millions of Pesos) |
| % |
|
Checking accounts |
| 5,700 |
| 9.4 |
| 238,408 |
| 17.3 |
|
Saving Accounts |
| 29,579 |
| 48.7 |
| 595,372 |
| 43.3 |
|
Time deposits |
| 17,259 |
| 28.4 |
| 413,838 |
| 30.1 |
|
Other deposits |
| 8,220 |
| 13.5 |
| 127,084 |
| 9.2 |
|
Total |
| 60,758 |
| 100 |
| 1,374,702 |
| 100 |
|
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, 2017,2019, retail plus senior citizens deposits in Pesos represented 54%55% of total deposits, compared to 60% as of December 31, 2016.
deposits.
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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. Our loan portfolio has grown significantly since 2001. As of December 31, 2017,2019, we had a loan portfolio (including the securitized loan portfolio) of Ps.60.3Ps.92.2 billion (equivalent to U.S.$3.21.5 billion converted to U.S. dollars at the reference exchange rate as of December 31, 2017), compared to December 31, 2001, when we had a loan portfolio of Ps.92.9 million (equivalent to U.S.$92.9 million, converted to U.S. dollars at the reference exchange rate as of December 31, 2001)2019).
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 “—Credit Risk Management.”
Loans to individuals (personal loans, credit card loans, car loans and mortgages) are priced only on a fixed rate basis, whilebasis. 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. |
· | Both rates: corporate unsecured loans. |
· 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.
· 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 (checking and invoice discounts and warrants) |
(2) | Receivables from financial leases |
(3) | Foreign trade loans |
(4) | Mortgage loans |
(5) | Corporate unsecured loans |
(6) | Corporate credit cards |
(7) | Overdrafts |
1. Promissory notes (checking and invoice discounts and warrants)69
(8) | Automobile and other secured loans |
(9) | Personal loans and credit card loans (from the Personal and Business segment) |
(10) | Personal loans and credit card loans (from the Consumer Financing segment) |
2. Receivables from financial leases
3. Foreign trade loans
4. Mortgage loans
5. Corporate unsecured loans
6. Overdrafts
7. Automobile and other secured loans
8. Personal loans and credit card loans (from the Retail Banking segment)
9. Personal loans and credit card loans (from the Consumer Financing segment)
Summary of Loan Portfolio Categories
Promissory notes (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 aid 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 and tobacco.mate. We take collateral in respect of the warrants for at least 20% to 35% in excess of the value of the products, 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. We establish maximum warranty amounts ranging from Ps.5.0U.S.$5.0 million to Ps.40.0U.S.$ 40.0 million depending on the type of product. We set interest rates for our warrants based on the term of the warrant and the quality of the underlying product.
Receivables from financial 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 interest rates for our financial leases based on prevailing market rates.
Mortgage loans
The Bank grants inflation adjusted mortgage loans. The Bank sets 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 capital and the installment is updated by inflation). The Bank evaluates the creditworthiness of the client based on credit 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 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 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. Interest rates for pre-financing and financing loans for exports depend on the term of the loan and range from 2% to 7.5%.
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 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.
Corporate unsecured loans
Corporate financial loans. Our corporate financial loans finance short term working capital needs of up to one year or medium 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.50Ps.150 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 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.50Ps.150 million. The maximum loan assistance that we provide is Ps.725,000Ps.12.5 million for unsecured loans and Ps.725,000Ps.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.150,000Ps.2.5 million of unsecured loans and Ps.150,000Ps.3.3 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 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.
Automobile 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 40%50% to 80%75% of the value of the vehicle at the time of sale.
Personal loans and credit card loans (from the RetailPersonal and Business Banking segment)
Our RetailPersonal 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, See “—Credit Risk Management—Banco Supervielle S.A.”
Retail banking in Argentina is heavily regulated, including with respect to maximum interest rates and fees. See “Item 4.B Business overview—Argentine Banking Regulation—Interest Rate and Fee Regulations.” We tailor our policies related to issuing and granting loans and credit to comply with these regulations.
Personal loans and credit card loans (from the Consumer Financing segment)
The personal and consumer loans offered by CCF 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 be approved for such loans, these customers must provide proof of an available means of repayment and they typically but do not always have credit history.
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, 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.200,000,Ps.0.2 million, while the average loan is Ps.22,900.as of December 31, 2019 was Ps.32,500. The average term of our personal and consumer loans is 18as of December 31, 2019 was 17 months, with a maximum of 60 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.
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, 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. |
· 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.
With regard to risk appetite, the Credit Risk Management 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.
The 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. Regarding corporate clients, the
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 products,and leasing market, as well as being leader in foreign trade.
Within the Plan Sueldo corporate banking segment, we seek to have a solid proposal for the SMEs and middle-market 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 citizencitizens, the retail banking services. In addition,is specially focused on entrepreneurs and SMEs as well as the Bank grants short and long term financing for specific products (such as leasing and secured transactions).
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 Entity is able to recover (Loss in the event of default (“LGD”)). Based on these parameters, the expected loss (“PE”) and economic capital are estimated. As a result of this, a methodological and developmental plan has been developed in order to calculate the Risk Adjusted Return (“RAROC”) at Banco Supervielle in order to optimize the management linked to Credit Risk.
·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.
·
· | 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 Entity is able to recover (Loss in the event of default (“LGD”)). Based on these parameters, the expected loss (“PE”) and economic capital are estimated. As a result of this, a methodological and developmental plan has been developed in order to calculate the Risk Adjusted Return (“RAROC”) at Banco Supervielle in order to optimize the management linked to Credit Risk. |
· | 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
a) | Definition |
Grupo Supervielle recognizes an impairment in the value to 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 portfolio’scontractual 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:
· | 12-month expected credit losses: arising from the potential default events, as defined in the following sections that are estimated to be likely to occur within the 12 months following the reporting date. These losses will be associated with financial assets classified as Stage 1. |
· | Expected credit losses over the life of the financial instrument: arising from the potential default events that are estimated to be likely to occur throughout the life of the financial instruments. These losses are associated with financial assets classified as Stage 2 or Stage 3. |
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.).
b) | Financial instruments presentation |
For the purposes of estimating the impairment amount, and in accordance with its internal policies, Grupo Supervielle classifies 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 do not meet the requirements to be classified in the rest of the categories. |
· | Normal risk under watchlist (“Stage 2”): includes all instruments that, without meeting the criteria for classification as doubtful risk, have experienced significant increases in credit risk since initial recognition. |
· | Doubtful Risk (“Stage 3”): includes financial instruments, overdue or not, in which there are reasonable doubts about their total repayment (principal and interests) by the client in the terms contractually agreed. Likewise, off-balance-sheet exposures whose payment is probable and their recovery doubtful are considered in Stage 3. |
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c) | Impairment valuation assessment |
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 withinat the balance sheet date, assessed both individually and collectively.
· | Individually: for the purposes of estimating the provisions for credit risk arising from the insolvency of a financial instrument, Grupo Supervielle individually assesses impairment by estimating the expected credit losses on those financial instruments that are considered to be significant and with sufficient information to make such an estimate |
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.
· | Collectively: Grupo Supervielle also assesses impairment by estimating the expected credit losses collectively in cases where they are not assessed on an individual basis. This includes, for example, loans with individuals, sole proprietors or businesses in retail banking subject to a standardized risk management. |
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 99.9% confidence intervalseries 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 individualsthe 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 99.0% confidence interval for corporate customers. We have two minimum capital requirementmanagement purposes, adapting the development of the impairment models (oneunder IFRS 9.
· | EAD: is the amount of risk exposure at the date of default by the counterparty. |
· | PD: is the estimated probability that the counterparty will default on its principal and/or interest payment obligations. |
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· | LGD: is the estimate of the severity of the loss incurred in the event of non-compliance. It depends mainly on the updating of the collaterals associated with the operation and the future cash flows that are expected to be recovered. |
The definition of default implemented by Grupo Supervielle for corporate customersthe purpose of calculating the impairment provision models is based on the requirements of IFRS 9, which considers 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 that 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 one for individuals), which includeas 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 capital required for our concentrationanalysis, repayment capacity, among others.
Assets with low credit risk and securitization 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, the prospective information is taken into account. Specifically, Grupo Supervielle considers three prospective macroeconomic scenarios, which are updated periodically, for a time horizon of 12 months. Grupo Supervielle considers the following variables for estimating expected credit losses on the different scenarios:
Parameter | Segment | Macroeconomic Indicator |
Probability of Default | Retail | Real Wage |
Corporate | Interest Rate | |
Consumer Finance | Monthly Economic Activiy Estimator | |
Loss Given Default | Retail | Private sector real wage |
Country Risk Management
Country risk arises from losses in investments or 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 the another country’s circumstances, investments made abroad and contracts with foreign service providers.
We believe that the Bank has an adequate framework in place to manage this risk, given the complexity 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 Chairman of the Board. The CEO of the Bank, the Chief Credit Risk Officer (“CCRO”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.
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.
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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:
· | maintaining independence between the risk management function and the business and management team; |
· | maintaining a highly professional corporate structure around risk management; |
· | keeping the Board of Directors and senior management involved in risk management decision-making; |
· | ensuring that risks are consistent with the risk appetite framework and subject to ongoing monitoring; and |
· | propose limits for credit risk tolerance to be approved by the Board of Directors. |
· maintaining independence between the risk management function and the business and management team;
· maintaining a highly professional corporate structure around risk management;
· keeping the Board of Directors and senior management involved in risk management decision-making;
· ensuring that risks are consistent with the risk appetite framework and subject to ongoing monitoring; and
· propose limits for credit risk tolerance to be approved by the Board of Directors.
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 area 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 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 foreseeforesee 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 Department traces alert indicators for signals that may affect credit collection. Signals could be late payments of more than 30 days, alerts from 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 Departments 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; |
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· | detecting market alerts, customer behavior in the market and the financial system, lawsuits, etc.; |
· | proposing action plans; |
· | involving the Corporate Committee and the Small Enterprises Committee; |
· | reporting customer alerts to officials and managers; and |
· | establishing allowances for estimated loan losses. |
· 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;
· detecting market alerts, customer behavior in the market and the financial system, lawsuits, etc.;
· proposing action plans;
· involving the Corporate Forum and the Small Enterprises Forum;
· 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 | ||||||
|
|
|
| Credit Approval Limit | ||
|
|
|
| Unsecured |
| Secured |
House Limit (Senior Committee + Board of Director’s Chairman) |
| Total | ||||
Credit Approval Committee Corporate Banking |
| Senior Committee (Credit Manager + Commercial Coordinator Manager + CEO + Credit Coordinators + One Member of the Board of Directors) |
| 300 |
| 300 |
| Coordinating Officers Committee (Credit + Corporate Banking) |
| 80 |
| 140 | |
| 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:
· | Approves credit retail policies and oversees correct implementation and compliance with such policies. |
· | Defines credit evaluation criteria, including the cut-off points concerning scoring models, minimum income levels required and others. |
· | Monitors the evolution of the credit portfolio. |
· Approves credit retail policies and oversees correct implementation and compliance with such policies.
· Defines credit evaluation criteria, including the cut-off points concerning scoring models, minimum income levels required and others.
· Monitors the evolution of the credit portfolio.
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 3rd to the 7th8th 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 90150 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.
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In the case of corporate customers,clients and SMEs, payment defaults are analyzed on a case-by-case basis, taking into consideration the size of the loan amount and the number of days in arrears, among other factors. However, generally, pastThe 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 creditsfor more than 90 days, or if they request their Extrajudicial Preventive Agreement, Bankruptcy or reorganization process (Concurso Preventivo) or there are indications of corporate customersinsolvency, they enter under the collection process after 90 days. For financial leasing customers,orbit of the collection process begins afterdirect management of the Recovery team that determines whether to treat the case internally or refer ir to a credit is past due by 60 days.law firm. The Recovery Department may engagecan participate in extra-judicialout-of-court and judicial settlement negotiations and approve debtor payment proposals by debtors ofin amounts for up to Ps.1Ps. 10 million. Likewise, the Recovery Department meets in forums 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 ForumCommittee meets every month to review the past due credits after 35 days, while the Retail SME ForumCommittee 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 Forum,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
To evaluate a prospective customer and detect possible fraud, CCF and Tarjeta maintaincarried out a centralized credit analysisreengineering of the application assessment process for issuing credit cardsto update its processes and granting personal loans.assessment systems. This reengineering allowed CCF and Tarjeta use an Experian decision engine, which combines automatic evaluation processes (including scorecards,a faster and more flexible implementation of its credit policy. The assessment process continues to be centralized and seeks to automatize and streamline most controls using information available from credit bureaus (such as Equifax), negative file, maximum exposure, installment or,Central de Deudores (“Debtors Central”).
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 implemented to income ratiosthe origination and line assignment) with digitalized documentation controls performedcross 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 model 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 underwriting team. This process also features different parameters for determining exposureexisting processes, thus improving the repayment capacity assessment and maximum risk per applicant, including pointlimiting customer indebtedness.
Taking into account the increase of sale, channel, product, incorporation process, risk level, among others.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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In addition, each branch is categorized by risk level based on its portfolio’s behavior trends per score range. A cut off by level is determined accordingly. These classifications are updated and validated regularly to ensure their accuracy.
CCF and Tarjeta periodically perform a risk analysis of their entire respective customer bases, evaluating payment behavior and exposure level, and using this information to offer better credit options for existing services and new products and services.
Collection efforts are managed internally at the early stages of delinquency and are tailored to each customer’s risk level and behavior. CCF and Tarjeta conduct collection actions using an Avaya predictive dialer and applying different communication channels such as call centers, virtual messaging, SMS, letters and telegrams. After 180 days past due, collection efforts are outsourced to third-party collection agencies.
Information Technology and Operations
During 2017,2019, the InformationCorporate Technology and Operations Department was restructured to boost existing capacity, and adaptManagement of the functionsBank continued adapting its functional scheme to its strategy.
A three-year strategic plan was developed, based on three pillars: adapting our information technology to our strategicstrategy, in line with the business, projects, developingand 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 capabilitiesarchitecture 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 improvement opportunitiesbest practices ensuring an efficient management of technological services and guidelines associatedsupporting the transformation of operational processes) and the search 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 strategy;strategies) and definingthe definition and executingexecution of strategic IT specific strategic plans whichthat pave the way for advancesthe evolution in areas such as technological infrastructure, applications, service operation, quality and governance.
The business’ strategic business projects that called for IT initiatives were grouped into the followingin 5 programs: Cash Management, Digital Banking, Service Model, Senior Citizens, Banking, Commercial Platform and Business Intelligence. 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 networking and in data architecture and implementation of a new tool for application.
CCF
During 2017,2019, the Information Technology area of CCF, aligned with the corporate general strategy, worked on the exploration and implementation of new technologies to offer a competitive, innovative and flexible value proposition, and started transitioning to digital transformation, through the implementation of new platforms, apps and processes.
The creation of the Digital Strategy area, focused on onboarding and customer experience, was key for the consumer segment.
Thus, the “Mobile” app continued evolving, offering new capabilities that enhance experience, enabling new services and customer service models (100% digital).
Digital Transformation
In 2019, we have made significant progress on Digital Transformation. Increasingly, customers want and expect to engage with us anytime from anywhere. Our digital strategy is aimed at responding to that demand. We have a three-prongued approach:
· | Transformation of core businesses (banking, consumer financing and insurance) to enhance customer experience, agility and efficiencies. For example, we recently launched a groundbreaking senior citizens app which addresses their transactional needs and launched a 100% digital onboarding platform for new customer acquisition. |
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· | Development of 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 financing business and allow acquisition of multisegment clients with full digital financial services. |
· | Development of an ecosystem by building traffic from financial services into new spaces enhancing and deepening customer engagement. |
In April 2019, the COO of the Bank fullywas appointed. The COO 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 redesignwillingness to change and the prompt delivery of Individual Homebanking, Corporate Homebankingvalue 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 Mobile customer experience.I), 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 Bank also fully adaptedgoal is double fold: to generate a financial profit from investments made and to create commercial synergies to add mutual value.
With the biometric identification systemvision to the provisions of ANSES Resolution No. 648. A Wi-Fi connectivity system was installed in many Service Centers, the Comprehensive Customer Platform was optimized as well as processes to improve customer experience, commercial users and economic benefits. The Bank’s IT and Operations Department also completed initiatives relating to our loan origination process (Entrepreneurs and SMEs), cash management plans, customer identification and referral at the Service Center level and other aspects of our business.
Projectscreate incremental business opportunities for the evolution of current capacities focused on the Bank’s strategy and the improvements resulting from the analysiscompanies of the operating model maturity, withportfolio and of Grupo Supervielle, four investments were made: 123Seguro, an online car insurance broker; Increase, a viewfinancial solutions platform for stores and businesses; Avancargo, a Company that uses technology to ensuring an efficient operating modelfacilitate cargo freight contracts to match demand and to positioning the IT area as Digital Bank enabler.
Centralized Operations
In 2017, important measures were adoptedsupply; and more recently, in furtherance of the Bank’s continued efforts to improve operating efficiencyJanuary 2020, Blended, a comprehensive school management platform for kinder, primary and service quality to internal and external customers, reduce expenditure and search for innovative processes, in compliance with local and international practices in an adequate internal control environment.
secondary levels.
The Bank consolidated the operations of the Identité Service Centers to render a focused service intended to improve customer satisfaction.
Transaction load and sales management processes were automated, eliminating manual processes and optimizing productivity and reducing expenses.
CCF
CCF has implemented improvements in its technological infrastructure in telecommunications, datacenter and end user devices, to improve the availability and performance of the services offered to the business. In 2017, projects were developed and implemented to continue offering an agile, simple and cordial service, emphasizing statements via email, launching a mobile application for consultation of credit card status and making improvements in interactive voice response via phone in order to provide a better customer experience and expand self-management.
CCF’s initiatives for the short and medium term include projects relating to technological infrastructure, especially, improvements to increase perimeter security and updates of the call center platform. At the same time, there is a plan to support the businesscontinues participating in the implementation of “Embozado en Tienda” (to produceArfintech fund together with another 7 local capital Banks and participates in investment rounds; the physical credit card plastic on the spot); the development of a new origination model, and to continue innovating the mobile application by adding more functionalities.
In 2017, CCF created the consumer IT unit aiming at a transformation of IT by introducing the concept of customer experience and generating a comprehensive vision of their needs.
Digital Innovation Unit
In 2016, we created the Digital Innovation Unit. We believe that ongoing technological evolutionArfintech fund portfolio already has given rise to a digital revolution which has had a profound impact10 companies in the financial system. Changes in customer preferences could result in profound changes in the banking industry in the future. Ourinsurance, payment, security, SMEs and blockchain segments.
Bolsillo Digital Innovation Unit aims at establishing a deep and dynamic research process for the creation of value for new generations and profiles of users. The Digital Innovation Unit participates in the development of new tools (products or services).SAU
We expect the future of financial services to be marked by a migration to a digital business model. The challenge for organizations is to optimize the technological innovation of traditional banking to attract new consumers of financial services, withWith the aim of creatingbroadening the bankportfolio of tomorrow today. During 2017, therefore, Banco Supervielle’sproduct and services offered by Grupo Supervielle, we have created Bolsillo Digital Innovation Team worked inS.A.U. This company is a fintech that belongs to the following servicescollecting payment’s industry. It will design, program and disruptive technologies:
Digital On Boarding: Customers are accustomed to accessing digital services to satisfy their needs and desire a consistent experience in their use. With this in mind, we worked on digital platform in Argentina to purchase financial products. With a redesigned and simplified process, starting from registration, the platform will allow users to become customers in only two steps and have immediate access to tailor-madedevelop products and services.
services related to the management and processing of payments, offering payment solutions to retail businesses and individuals. Mobile Corporate Banking: In pursuit of offering innovative digital technologiesPOS and mobile wallet will be the first products to our corporate customers, in 2018 webe launched during 2020. Commercial efforts will be directed, initially, to the Corporate Mobile application. This application supplementsCuyo Region where the omnichannel portfolio and offers quick and convenient access to all the functionalities and financial services that we offer.
Face Biometrics: We believe that technological advances in the financial system should not be detrimental to its security. Our Digital Innovation teamBank is dedicated to providing customers with simpler and more secure access to their financial services and information. In particular, we have begun developing facial recognition capabilities in order to allow customers to access digital channels through biometric identification software.
New Cordial Compañia Financiera Application (Digital Acquisition Process): We released a new versionone of the Mobile application for Walmartmain market players.
Bolsillo Digital will enrich Supervielle’s value proposition in those client segments, and Carta Automática customers, adding additional digital services, such as the acquisitionwill also seek to establish new sales alliances & partnerships with social, educational and public institutions based on possibilities and flexibility of new products.mobile payments and wallet platforms.
Competition
Competition
Retail Banking, Corporate Banking and Treasury
The Argentine financial system remains highly fragmented compared to the rest of Latin America.
In 1999,As of December 31, 2019, the Argentine financial system had 11678 financial entities. This number decreased to 100 in 2002 and 89 in 2005. As of December 31, 2017, this number decreased to 77,entities, of which 6263 were banks (1313 public and 4950 private). In terms of ownership, in 1999 Argentine and foreign entities each held 41.3% of the Argentine banks while the remaining 17.3% of the banks were held by the public sector. Asas of December 31, 2017,2019, while the participation of the public sector was 21.0%20.6%, the portion of banks controlled by Argentine entities represented 53.2%54.0% and the portion of banks controlled by foreign entities represented 25.8%25.4%.
In 1999, there were 17 financial companies, nine of which were controlled by Argentine entities and eight of which were controlled by foreign entities, and seven credit unions. As of December 31, 2017,2019, the number of financial companies was 14, five15, six of which were controlled by Argentine entities and nine of which were controlled by foreign entities, and only one credit union remained.
Digital Banking
In recent years, following 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, owned 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 million 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
We were one of the top 10 private banks in the Argentine financial system with respect to loans, deposits, assets and equity as of December 31, 2017,2019, as presented in the following tables: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, 2017 |
| As of December 31, 2019 | |||||||||
|
| Total Assets |
| Total Loans | |||||||||
|
| (in millions of Pesos) |
| Share of Total (%) |
| (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. |
| 332,926.8 |
| 16.1 | % | 266,431.1 | 16.1 | % | |||||
Banco de Galicia y Buenos Aires S.A. |
| 299,710.8 |
| 14.5 | % | ||||||||
Banco Macro S.A. |
| 225,514.8 |
| 10.9 | % | 218,772.0 | 13.3 | % | |||||
BBVA Banco Francés S.A. |
| 221,165.6 |
| 10.7 | % | 184,200.4 | 11.2 | % | |||||
HSBC Bank Argentina S.A. |
| 126,371.1 |
| 6.1 | % | 107,099.7 | 6.5 | % | |||||
ICBC S.A. |
| 109,628.0 |
| 5.3 | % | 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 |
| 103,839.4 |
| 5.0 | % | 37,665.6 | 2.3 | % | |||||
Banco Patagonia S.A. |
| 93,718.0 |
| 4.5 | % | ||||||||
Banco Supervielle SA |
| 88,808.8 |
| 4.3 | % | ||||||||
Citibank N.A. |
| 69,785.2 |
| 3.4 | % | 33,115.8 | 2.0 | % | |||||
Banco Hipotecario S.A. |
| 58,974.8 |
| 2.8 | % | ||||||||
Nuevo Santa Fe |
| 49,222.0 |
| 2.4 | % | 32,975.1 | 2.0 | % | |||||
Itau Argentina |
| 45,215.7 |
| 2.2 | % | ||||||||
Comafi |
| 29,526.4 |
| 1.4 | % | ||||||||
Banco de San Juan S.A. |
| 27,686.0 |
| 1.3 | % | ||||||||
Others |
| 190,447.7 |
| 9.2 | % | 132,849.7 | 8.0 | % | |||||
Total Private Banks |
| 2,072,541.1 |
|
|
| 1,650,907.7 |
Source: Central Bank
|
| As of December 31, 2017 |
| As of December 31, 2019 | |||||||||
|
| Total Loans |
| Total Deposits | |||||||||
|
| (in millions of Pesos) |
| Share of Total (%) |
| (in millions of Pesos) | Share of total (%) | ||||||
Banco Santander Río S.A. |
| 166,220.7 |
| 15.5 | % | 474,903.3 | 17.2 | % | |||||
Banco de Galicia y Buenos Aires S.A. |
| 158,817.4 |
| 14.8 | % | 397,839.6 | 14.4 | % | |||||
Banco Macro S.A.(1) |
| 132,952.4 |
| 12.4 | % | ||||||||
BBVA Banco Francés S.A. |
| 123,705.6 |
| 11.5 | % | 293,411.8 | 10.6 | % | |||||
Banco Macro S.A. | 262,383.5 | 9.5 | % | ||||||||||
HSBC Bank Argentina S.A. |
| 65,921.2 |
| 6.2 | % | 219,362.3 | 7.9 | % | |||||
Credicoop Cooperativo Limitado | 184,876.4 | 6.7 | % | ||||||||||
ICBC S.A. |
| 60,661.0 |
| 5.7 | % | 128,485.1 | 4.6 | % | |||||
Citibank N.A. | 119,830.1 | 4.3 | % | ||||||||||
Banco Patagonia S.A. |
| 56,337.7 |
| 5.3 | % | 119,535.4 | 4.3 | % | |||||
Banco Supervielle SA |
| 50,776.8 |
| 4.7 | % | ||||||||
Credicoop Cooperativo Limitado |
| 46,379.3 |
| 4.3 | % | ||||||||
Banco Hipotecario S.A. |
| 31,909.0 |
| 3.0 | % | ||||||||
Banco Supervielle S.A. | 89,737.1 | 3.2 | % | ||||||||||
Nuevo Santa Fe |
| 27,526.8 |
| 2.6 | % | 69,869.9 | 2.5 | % | |||||
Citibank N.A. |
| 26,457.1 |
| 2.5 | % | ||||||||
Itau Argentina |
| 22,895.6 |
| 2.1 | % | 48,359.3 | 1.7 | % | |||||
Banco Comafi S.A. |
| 16,486.1 |
| 1.5 | % | 44,226.1 | 1.6 | % | |||||
Nuevo Banco de entre Rios S.A. |
| 11,853.4 |
| 1.1 | % | ||||||||
Otros |
| 72,909.7 |
| 6.8 | % | ||||||||
Others | 310,825.5 | 11.2 | % | ||||||||||
Banco Santander Río S.A. | 474,903.3 | 17.2 | % | ||||||||||
Total Private Banks |
| 1,071,809.8 |
|
|
| 2,763,645.4 |
|
| As of December 31, 2017 |
| ||
|
| Total Deposits |
| ||
|
| (in millions of Pesos) |
| Share of total (%) |
|
Banco Santander Río S.A. |
| 234,037.3 |
| 17.0 | % |
Banco de Galicia y Buenos Aires S.A. |
| 200,884.4 |
| 14.6 | % |
BBVA Banco Francés S.A. |
| 153,962.7 |
| 11.2 | % |
Banco Macro S.A.(1) |
| 143,636.5 |
| 10.4 | % |
Credicoop Cooperativo Limitado |
| 89,049.7 |
| 6.5 | % |
HSBC Bank Argentina S.A. |
| 85,860.2 |
| 6.2 | % |
Banco Patagonia S.A. |
| 68,685.4 |
| 5.0 | % |
ICBC S.A. |
| 64,952.7 |
| 4.7 | % |
Banco Supervielle SA |
| 60,057.4 |
| 4.4 | % |
Nuevo Santa Fe |
| 36,163.5 |
| 2.6 | % |
Citibank N.A. |
| 33,928.6 |
| 2.5 | % |
Itau Argentina |
| 29,903.1 |
| 2.2 | % |
Banco Hipotecario S.A. |
| 21,006.3 |
| 1.5 | % |
Banco de Santiago del Estero S.A. |
| 20,891.1 |
| 1.5 | % |
Nuevo Banco de entre Rios S.A. |
| 20,889.5 |
| 1.5 | % |
Otros |
| 110,976.4 |
| 8.1 | % |
Total Private Banks |
| 1,374,884.8 |
|
|
|
Source: Central Bank.
(1) Includes Banco del Tucumán S.A.
(2) Includes 33 private banks with assets below Ps.27 billion, as of December 31, 2017.
When consolidated with CCF, we were one of the top five private banks in the Argentine financial system with respect to personal loans as of December 31, 2017,2019, as presented in the following table:table (figures are expressed in original currency and not adjusted for inflation):
85
|
| As of December 31, 2017 |
| ||
|
| Personal Loans |
| ||
|
| (in millions of Pesos) |
| Share of total (%) |
|
Banco Macro S.A.(1) |
| 47,376.7 |
| 22.4 | % |
Banco Santander Río S.A. |
| 29,382.2 |
| 13.9 | % |
Banco de Galicia y Buenos Aires S.A.(2) |
| 22,288.7 |
| 10.5 | % |
BBVA Banco Francés S.A. |
| 16,318.5 |
| 7.7 | % |
Banco Supervielle SA(3)4) |
| 14,579.4 |
| 6.9 | % |
Nuevo Banco de Santa Fe |
| 9,686.9 |
| 4.6 | % |
Banco Patagonia S.A. |
| 8,731.1 |
| 4.1 | % |
HSBC Bank Argentina S.A. |
| 7,087.3 |
| 3.4 | % |
Banco Hipotecario S.A. |
| 6,262.2 |
| 3.0 | % |
ICBC S.A. |
| 5,907.1 |
| 2.8 | % |
Nuevo Banco de Entre Rios |
| 5,493.2 |
| 2.6 | % |
Others |
| 38,316.8 |
| 18.1 | % |
Financial Private System |
| 211,430.2 |
|
|
|
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.
(1) Includes Banco del Tucumán S.A.
(2) Consolidated with Compañía Financiera Argentina S.A.
(3) Does not include securitized personal loan portfolio
(4) Consolidated with CCF.
(1) | Consolidated with CCF. |
We were one of the top five private banks in the Argentine financial system with respect to leasing, as presented in the following table as of December 31, 2017:2019 (figures are expressed in original currency and not adjusted for inflation):
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 |
|
| As of December 31, 2017 |
| ||
|
| Leasing |
| ||
|
| (in millions of Pesos) |
| Share of total (%) |
|
Banco Supervielle SA |
| 2,519.20 |
| 15.2 | % |
Banco Comafi S.A. |
| 2,293.20 |
| 13.8 | % |
BBVA Banco Francés S.A. |
| 2,273.80 |
| 13.7 | % |
Banco de Galicia y Buenos Aires S.A. |
| 1,872.60 |
| 11.3 | % |
HSBC Bank Argentina S.A. |
| 1,363.0 |
| 8.2 | % |
Banco Patagonia S.A. |
| 1,361.70 |
| 8.2 | % |
Credicoop Cooperativo Limitado |
| 919.7 |
| 5.5 | % |
Banco Santander Río S.A. |
| 903.2 |
| 5.4 | % |
ICBC S.A. |
| 852.5 |
| 5.1 | % |
Citibank N.A. |
| 766.5 |
| 4.6 | % |
Others |
| 1,488.9 |
| 9.0 | % |
Total Private Banks |
| 16,614.3 |
|
|
|
Source: Central Bank
(1) Does not include securitized leasing portfolio.
The Bank, when consolidated with CCF, ranked firstsecond among private banks in the Argentine financial system with respect to MasterCard active accounts as of December 31, 20172019 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 | % |
|
|
|
| As of December 31, 2017 |
|
|
|
|
| MasterCard active accounts with billing statement |
|
1 |
| Banco Supervielle S.A.(1) |
| 9.8 | % |
2 |
| Banco de Galicia y Buenos Aires S.A |
| 8.0 | % |
3 |
| Banco Macro S.A. |
| 6.9 | % |
4 |
| BBVA Banco Francés S.A. |
| 6.9 | % |
5 |
| HSBC Bank Argentina S.A. |
| 5.7 | % |
6 |
| Banco Patagonia S.A |
| 4.3 | % |
7 |
| Industrial and Commercial Bank of China (Argentina) S.A. |
| 3.5 | % |
8 |
| Banco Itaú Argentina S.A |
| 2.9 | % |
9 |
| Banco Columbia S.A. |
| 2.4 | % |
10 |
| Banco Comafi S.A. |
| 1.2 | % |
Source: First Data Cono Sur S.R.L.
(1) Consolidated with CCF.
Until our IPO in May 2016, the Bank ranked first among private banks in the Argentine financial system with respect to the origination of all bank asset securitization in the Argentine market. Since the IPO we significantly reduced the number of our own securitizations. The Bank’s market share as of the periods indicated, are shown in the following table:
|
| As of December 31, 2017 |
| ||
|
| Bank asset securitization |
| ||
|
| (in millions of Pesos) |
| Share of total (%) |
|
Banco Sáenz S.A. |
| 169 |
| 4.4 | % |
Banco Supervielle S.A |
| 736 |
| 19.1 | % |
Banco BICA S.A |
| 1,406 |
| 36.4 | % |
BST S.A. |
| 975 |
| 25.2 | % |
Banco Comafi S.A |
| 573 |
| 14.8 | % |
Total |
| 3,862 |
| 100.0 | % |
Source: Company estimates based on data from the CNV.
We were one of the top ten companies in the Argentine capital markets with respect to the origination of total asset securitizations as of the periods indicated, as shown in the following table:
|
| As of December 31, 2017 |
| ||
|
| Total Securitizations |
| ||
|
| (in millions of Pesos) |
| Share of total (%) |
|
Grupo Electrónica Megatone |
| 8,762 |
| 17.7 | % |
Grupo Garbarino |
| 4,578 |
| 9.3 | % |
Grupo Frávega |
| 4,283 |
| 8.7 | % |
Grupo Carsa |
| 4,253 |
| 8.6 | % |
Grupo Supervielle |
| 2,534 |
| 5.1 | % |
Grupo Cencosud |
| 2,270 |
| 4.6 | % |
Vicentín S.A.I.C. |
| 2,177 |
| 4.4 | % |
Ribeiro S.A.C.I.F.A. e l. |
| 1,790 |
| 3.6 | % |
CMR Falabella S.A. |
| 1,641 |
| 3.3 | % |
Grupo Comafi |
| 1,640 |
| 3.3 | % |
Source: Company estimates based on data from the CNV.
(1) | Consolidated with CCF. |
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 the face of this competition is to maintain aggressive business policies, differentiate itself with respect to product offering and customer service, and redesign processes for greater sales productivity.
Notwithstanding this competitive challenge, our strategy for growth, both organic and through acquisitions, has resulted in an 133.4%%an increase in our financial system market share (excluding public banks) since 2005 according to the Central Bank. Throughout this period, we gained some of the market share lost by several of our larger competitors.
The following graph shows the Bank’s loan market share on a consolidated basis since 2001.
Source: Central Bank.
Taking into consideration total loan portfolio and receivables from financial leases portfolio, total loans and leasing market share was 5.1%5.0% as of December 31, 2017.2019.
The graph below shows a comparison of the Bank’s loan portfolio CAGR as of December 31, 2019 compared to the average loan portfolio CAGR of Argentine private Banks and the private financial system (excluding public banks).
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 Financing
CCF offers its products primarily to the middle and lower-middle-incomelower 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 Provencred, Tarjeta Naranja, Tarjetas Cuyanas Credial and Tarjeta ShoppingCredial and (2) those that are subject to Central Bank oversight such as Compañía Financiera Argentina and BST CrediLogros.Banco Columbia.
88
With respect to its Walmart Argentina private label credit card, CCF’s primary competitors in terms of the types of products offered are Tarjeta MásCENCOSUD (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, unlike its competitors, CCF was the first to also issue an open MasterCard credit card, allowing CCF to operatetherefore operating in the banking and retail sectors. Currently, Tarjeta MásCENCOSUD is the only other competitor with a similar strategy. In addition, CCF is the sole provider of in-storein 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, BST CrediLogros, Banco Columbia, Credil, Corefin and Empresur. In terms of the credit card space, Tarjeta’s main competitor is Tarjeta Naranja, followed by regional competitors.
MILA is a financial company focused on car financing solutions that had been providing products in the Argentine market for almost 14 years. MILA’s main competitors can be divide into two groups: (1) those that are banks or financial companies such as NevadaSantander, ICBC, BBVA, MG Group and Credimas.
With respectHSBC 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 products offered through the Hipertehuelche channel, even though there are no financial companies dedicated solely to the construction sector, CCF’s competitors include CETELEM, Cuota sí (CFA), DIRECTO and Cuota YA. However, these competitors do not operatetop five players in the Patagonia region where Hipertehuelche operates,new car financing market with 3.0% market share and are competitors onlyachieved the fifth position in the used car financing market with respect4.9% 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 types of products offered.whole country.
Mutual Funds
With respect to the mutual fund market, based on third party sourcesthe Chamber of Mutual Funds information we estimate our market share is 2.63%was 2.12% as of December 31, 2019, and that SAM is ranked thirteentheightteenth out of 4352 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, as of December 31, 2019, our equity trading volume market share was 3.3% andInvertirOnline was ranked 8 out of 235 brokers.
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.
89
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.
The Central Bank establishes different technical ratios that must be observed by financial entities with respect to levels of solvency, liquidity, the maximum credits that may be granted per customer and foreign exchange asset and liability positions.
In addition, financial entities need authorization from the Central Bank for the disposition of their assets, 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 for the financial institution to continue to operate.
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 headquarters,head offices or parent companies, as well as those of their branches in Argentina and abroad, and 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 serve asperform habitual financial intermediariesintermediation 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 to the extentinasmuch 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 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 referred authority,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 Boardboard of Directors’directors’ meeting, or (ii) the Central Bank does not authorize the acquisition.
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Furthermore, in respectaccording to the rules regarding “Complementary Services of supplementary services, pursuant to Communication “A” 5700,the Financial Entities and Allowed Activities”, as amended, by Communication “A” 6241 and “A” 6342 issued on May 16 and October 13, 2017, respectively, 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 shareholders’ or board of directors’ meeting. IfThe financial entities shall give notice to the Superintendency if the corporate purposes of such companies include twoany of the corporate purposes listed in section 2.2 of Communication “A” 5700, the authorization of the Central Bank is required.that rule.
Under Central Bank regulations, the total amount of the investments of a commercial bank in the capital stock of third parties, including interests in Argentine mutual investment funds, may not exceed 50% of such bank’s regulatory capital (Responsabilidad Patrimonial Computable, or “RPC”). In addition, the total amount of a commercial bank’s investments in the following, taken as a whole: (i) unlisted stock, excluding interests in companies that provide services that are supplementary to the finance business and interests in state-owned companies that provide public services, (ii) listed stock and interests in mutual funds that do not give rise to minimum capital requirements on the basis of market risk, and (iii) listed stock that does not have a “largely publicly available market price,” is limited to 15% of such bank’s RPC. To this effect, a given stock’s market price is considered to be “largely publicly available” when daily quotations of significant transactions are available, and the sale of such stock held by the bank would not significantly affect the stock’s quotation.
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 financial 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
Legal Reserve
According FIL rules andAs of 1994, the Central Bank regulations,supervision of financial institutions is 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 headquarters 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 Reservelegal reserve to be funded with no more than 20% and no less than 10% of their 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“Item 5. Operating and Financial Review and Prospects—Prospects–Item 5.A Operating Results.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 swap,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.
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:
|
| Year ended December 31, |
| ||||
|
| 2017 |
| 2016 |
| 2015 |
|
|
| (in thousands of Pesos, except percentages and ratios) |
| ||||
Calculation of excess capital: |
|
|
|
|
|
|
|
Allocated to assets at risk |
| 4,710,391 |
| 3,178,270 |
| 2,082,489 |
|
Allocated to Bank premises and equipment, intangible assets and equity investment assets |
| 191,549 |
| 172,154 |
| 102,252 |
|
Market risk |
| 121,155 |
| 45,385 |
| 30,741 |
|
Interest rate risk |
| — |
| — |
| — |
|
Public sector and securities in investment account |
| 131,109 |
| 78,472 |
| 16,739 |
|
Operational risk |
| 1,016,501 |
| 713,227 |
| 512,948 |
|
Required minimum capital under Central Bank regulations |
| 6,170,705 |
| 4,187,508 |
| 2,745,169 |
|
Basic net worth |
| 9,903,099 |
| 5,706,639 |
| 2,597,534 |
|
Complementary net worth |
| 913,256 |
| 778,885 |
| 662,679 |
|
Deductions |
| (386,192 | ) | (338,671 | ) | (291,653 | ) |
Total capital under Central Bank regulations |
| 10,430,163 |
| 6,146,853 |
| 2,968,560 |
|
Excess capital |
| 4,259,458 |
| 1,959,345 |
| 223,391 |
|
|
|
|
|
|
|
|
|
Selected capital and liquidity ratios: |
|
|
|
|
|
|
|
Regulatory capital/risk weighted assets(1) |
| 13.9 | % | 12.5 | % | 8.7 | % |
Average shareholders’ equity as a percentage of average total assets |
| 10.5 | % | 11.2 | % | 9.5 | % |
Total liabilities as a multiple of total shareholders’ equity |
| 8.2x |
| 7.8x |
| 10.9x |
|
Cash as a percentage of total deposits |
| 18.2 | % | 22.6 | % | 28.5 | % |
Liquid assets as a percentage of total deposits |
| 42.4 | % | 26.6 | % | 31.2 | % |
Tier 1 Capital / Risk weighted assets |
| 12.6 | % | 10.9 | % | 6.7 | % |
(1) Risk Weighted Assets includes operational risk weighted assets, market risk weighted assets,As stated above under “Presentation of Financial and credit risk weighted assets. Operational risk weighted assetsOther Information”, we have prepared our audited consolidated financial statements for 2019, 2018 and market risk weighted assets are calculated by multiplying their respective required minimum2017 under IFRS. Minimum capital underrequirement has been prepared in accordance with the rules of the Argentine Central Bank, regulations by 12.5. Credit Risk Weighted Assetswhich is calculated by applying the respective credit risk weightsnot comparable to our assets, following Central Bank regulations.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 | % |
(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, 2017,2019, Banco Supervielle’s Tier 1 Capital ratio on a consolidated basis with CCF was 12.6%10.8%, compared to 10.9% atjust as it was as of December 31, 2016.2018. Including the Ps.4.3 billion funds from the follow-on equity offering proceedsPs. 645 million retained at the holding company Grupo Supervielle, which are available for furtherfuture capital injections to our subsidiaries in its subsidiaries,order to fund our growth strategy, the consolidated proforma TIER1pro-forma Tier 1 Capital ratio as of December 31, 20172019 stood at 18.41%11.3%. Supervielle’s Tier1Tier 1 ratio coincides with CET1 ratio.
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As of December 31, 2017,2019, the Bank’s total capital ratio on a consolidated basis with CCF was 13.9%11.6% compared to 12.5% as of11.9% at December 31, 2016.2018. Including the fundsPs.645 million retained at the holding company (Grupo Supervielle) level after the follow-on equity offering of Grupo Supervielle, which are available for further capitalfuturecapital injections into itsto our subsidiaries in order to fund our growth strategy, the consolidated pro-forma total capital ratio as of December 31, 2017 was 19.6%2019 stood at 12.1%.
The capital composition to be considered in order to determine compliance with minimum capital requirements is the financial institution’s RPC (Communication “A” 5580(Central Bank rules regarding to “Financial Entities Minimum Capital”, as amended).
Basic minimum capital
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 mortgagesecurities 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 |
(*) |
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(*) Except credit entities.
Additionally, financial entities located in ports and airports must comply with Category I requirements and those entities engaged in foreign trade transactions must comply with the requirements applicable to banks under such category.
Notwithstanding the foregoing, the regulatory capital of commercial banks acting as custodians of securities representing investments of the Fondo de Garantía de Sustentabilidad del Sistema Integrado Previsional Argentino
must be equal to or exceed the greater of Ps.400 million or an amount equivalent to 1% of the total book value of the securities in custody.
Description of Argentine 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 consists of (i) ordinary capital level 1 (“COn1”), (ii) deductible items from ordinary capital level 1 (CDCOn1), (iii) additional capital level 1 (“CAn1”), and (iv) deductible items from additional capital level 1 (CDCAn1).
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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· with respect to results from prior fiscal years, 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;
· | with respect to results from prior fiscal years, 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:
(a) | 100% of the results registered in the following items belonging to the account “Other comprehensive cumulative results” for the most recent audited quarterly or annual financial statements: |
(a) 100% of the results registered in the following items belonging to the account “Other comprehensive cumulative results” for the most recent audited quarterly or annual financial statements:
· Revaluation of property, plant, equipment and intangible assets;
· Gains or losses of financial instruments at fair value with changes in other comprehensive income.
(b) 100% of the debtor balance of each of the items recorded under “Other comprehensive cumulative results” not mentioned in the preceding item, for the most recent audited quarterly or annual financial statements,
(viii) share premiums of the instruments included in COn1, and, in the case of consolidated entities, (ix) minority shareholdings (common shares issued by subsidiaries subject to consolidated supervision and belonging to third parties, if certain criteria are met).
· | 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 Capital”. |
(viii) | share premiums of the instruments included in COn1, and, in the case of consolidated entities, and |
(ix) | minority shareholdings (common shares issued by subsidiaries subject to consolidated supervision and belonging to third parties, if certain criteria are met). |
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.
Deductible Items
The above-mentioned items will be considered without certain deductions pursuant to subsection 8.4.1 and 8.4.2 (as applicable) of the Central Bank Communication “A” 5580.rules regarding “Financial Entities Minimum Capital”, as amended.
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Items 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;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 least ‘investment grade’ according to Communication “A” 5671; (e) subordinated debt instruments issued by other financial institutions; (f) certain credits related to the application of tax deferrals;shareholders; (g) shareholders; (h) 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-ordered auction sale; (h) intangible assets; (i) goodwill; (j) organization and development costs; (k) items pending allocation, debtor balances and other; (l)(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; (m)(k) any deficiency relating to the minimum loan loss provisions required by the Superintendency; (n)(l) 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) the issuanceexcess to the limits set forth for secured assets on Section 3 of credit or debit cards as provided by Communication “A” 5700 (75% deductible asthe rules on “Affectation of June 2017 and 100% deductible as of June 2018); (o) excess in the granting of asset-backed guaranties, according to Central Bank’s regulations; (p)Secured Assets” (n) 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, when certain conditionssector” surpass the authorized limit and/or are met; (q) earningsnot settled within the terms established therein; (o) income from sales relatedrelating to securitizations under certain circumstances; (r)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) in the case of liabilities from derivatives accounted for at fair value, unrealized gains andor losses related to derivative transactions due to changes in the financial institution’s credit risk ofwill be deductible. The deduction will be limited to the financial institution; (s) losses from derivatives under certain circumstances and (t)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) equity interests in other Argentine or foreign 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 consolidated supervision.
proportional basis to their respective interests.
CAn1 includes certain debt instruments of financial entities not included under COn1 andthat meet the regulatory criteria established in section 8.3.2 of Communication “A” 5580 (asthe rules regarding “Financial Entities Minimum Capital”, as amended and supplemented),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 items 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”, 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 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. |
· Must be totally subscribed and paid in full.
· 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.
· 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.
· 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.
· After 5 years as from the issuance date, the financial entity can buy back the debt instruments if: (i) it has the previous authorization of the Superintendency, (b) the entity does not create any expectations regarding the exercise of the purchase option, and (c) 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.
· 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.
· The financial entity can pay dividends/interest coupons at any time. The included dividends/interest coupons shall not have periodic adjustments because of the financial entity’s credit risk.
· Debt instruments should not have been bought by the financial entity or any other entity over which the financial entity has control or significant influence.
· Debt instruments should not have been bought with direct or indirect financing from the financial entity and they shall not contain elements that make re-capitalization difficult.
(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 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 common 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): Tier 2 capital consists of
Tier 2 Capital includes
(i) certain debt instruments of financial entities which are not included in Tier 1 capitalCapital and which meet the regulatory criteria established in section 8.3.3 of Communication “A” 5580 (asthe Central Bank rules regarding “Financial Entities Minimum Capital” as amended and supplemented),supplemented, (ii) share premium from instruments included in Tier 2 capital,Capital, and (iii) loan loss provisions on the loan portfolio of debtors classified as being in a “normal situation” pursuant to Central Bank regulationsrules 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 items will be considered minus deductible items pursuant to section 8.4.2 of Communication “A” 5580 (asthe Central Bank rules regarding “Financial Entities Minimum Capital”, as amended and supplemented) issued by the Central Bank,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. |
· | Subordinated to depositors, unsecured creditors and the subordinated debt of the financial entity. |
· Must be totally subscribed and paid in full.
· Subordinated to depositors, unsecured creditors and the subordinated debt of the financial entity.
· Must not be insured or guaranteed by the issuer or a related entity, and has no agreement in place to improve payment priority in the case of the entity’s bankruptcy either legally or economically.
· Maturity: (i) original maturity date within no less than 5 years, (ii) clauses considering gradually increasing remuneration or other incentives for anticipated amortization are not allowed, and (iii) from the beginning of the last five years of life of the indebtedness, the computable amount will be diminished by 20% of its nominal issuance value. After 5 years as from the issuance date, the financial entity can buy back the debt instruments with the previous authorization of the Superintendency, and if the entity does not create any expectations regarding the exercise of the purchase option. The debt instrument must be replaced by an 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 in a 20% of the minimum capital requirements.
· 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.
·
· | Must not be insured or guaranteed by the issuer or a related entity, and has no agreement improving either legally or economically the payment priority in case of the entity’s bankruptcy. |
· | Maturity: (i) original maturity date within no less than 5 years, (ii) clauses considering gradually increasing remuneration or other incentives for anticipated amortization are not allowed, and (iii) from the beginning of the last five years of life of the indebtedness, the computable amount will be diminished by 20% of its nominal issuance value. After 5 years as from the issuance date, the financial entity can buy back the debt instruments with the previous authorization of the Superintendency, and if the entity does not create any expectations regarding the exercise of the purchase option. The debt instrument must be replaced by an 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 in a 20% of the minimum capital requirements. |
· | 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. |
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 common shares, pursuant to applicable regulations.
c) The financial entity must have been granted the authorization required for the immediate issuance of the corresponding common shares in the case of a triggering event, as described below.
(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 common shares, pursuant to applicable regulations. |
(c) | The financial entity must have been granted the authorization required for the immediate issuance of the corresponding common shares in the case of a triggering event, as described below. |
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 regularizationamnesty 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, all of which are outstanding as of the date of this annual report. The series issued in 2013 and 2014 comply 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“Item 5.B Liquidity and Capital Resources—Financings—Bank —– Foreign currency-denominated Subordinated Notes.Notes.” 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 common shares regarding the RPC.
Deductible items applied to the different capital levels: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 Con1 (Common Capital Tier 1), AT1 (Additional Capital Tier 1) or PNc (Supplementary Capital) of the financial institution shall be regarded as Con1 –common equity shares, for the purposes of this regulatory adjustment. If the aggregate amount of these interests in the capital of financial institutions, companies providing services supplementary to the financial industry and insurance companies – which individually represent less than 10% of the Con1 of each issuer – exceeds 10% of the Con1 of the financial entity, net of applicable deductions, the amount over such 10% shall be deducted from each capital tier in accordance with the following formula: i) Amount to be deducted from Con1: aggregate excess amount over 10% multiplied by the proportion represented by the Con1 holdings over the aggregate equity interests; ii) Amount to be deducted from Can1: aggregate excess amount over 10% multiplied by the proportion represented by the Can1 over the aggregate equity interests. iii) Amount to be deducted from PNc: aggregate excess amount over 10% multiplied by the proportion represented by the PNc holdings over the aggregate equity interest. If the financial institution does not have enough capital to make the deduction pertaining to a particular capital tier, the remaining amount shall be deducted from the next higher level. Amounts below the threshold, which 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 Con1, Can1 or PNc of the financial institution shall be regarded as Con1, common equity shares, for the purposes of this regulatory adjustment. The amount of these interests, taking into account the applicable type of instrument, shall be deducted from each of the applicable capital tiers of the financial institution. If the financial institution does not have enough capital to make the deduction pertaining to a particular capital tier, the remaining amount shall be deducted from the next higher level. |
(iii) | Own repurchased instruments that satisfy the criteria for being included in Can1 or PNc must be deducted from the applicable capital tier. |
Investments in computable instruments under the financial entity’s RPC are 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 to be placed within 5 business days. When the holdings in other financial entity’s capital (individually representing less than 10% of each issuer’s COn1) exceed 10% of the COn1 of the financial entity, net of deductions, the amount over 10% must be deducted from each one of the capital levels according to the following formula:Limits
· Amount to be deducted from COn1: the amount exceeding 10% multiplied by the proportion of holdings of COn1 over total capital interests.
· Amount to be deducted from CAn1: the amount exceeding 10% multiplied by the proportion of holdings of CAn1 over total capital interests.
· Amount to be deducted from complementary net worth: the amount exceeding 10% multiplied by the proportion that represents the holdings of complementary net worth over total capital interests.
Investments in computable instruments under the financial entity’s RPC are not subject to consolidated supervision when the entity owns up to 10% of the issuer’s ordinary capital or when the issuer is a subsidiary of a financial
entity according to the following criteria: (i) investments include direct, indirect or synthetic interests; (ii) investments include the acquired net position; and (iii) securities issued to be placed within 5 business days.
Limitations
Communication “A” 5580 (asCentral Bank Rules regarding “Financial Entities Minimum Capital”, as amended and supplemented)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 regulationsrules by 12.5.12.5%. The failure to comply with any of these limitations is considered an infringement of the minimum capital integration requirements.
Pursuant to Communication “A” 5867,5889, RWA shall be calculated as follows:
RWA = RWAc + [(MR+OR) x 12.5]
Where:
RWAc: credit risk weighted assets
RM:MR: minimum capital requirement for market risk
OR: minimum capital requirement for operational risk
Economic Capital
Communication “A” 5398 of the 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, 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 Board of Directors 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, the 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.
(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, 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 entities may opt for a simplified calculation methodology. Such option must be approved by the board of directors of such entity.
Group B entities which have opted for the simplified methodology shall apply the following expression:
EC = (1.05 x MC) + max [0; ρ 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
The Central Bank has imposed restrictions on the payment of dividends, substantially limiting the ability of financial institutions to distribute such dividends without its prior consent.
By meanssubject to compliance with the rules set forth in the “Rules on Dividend Distributions” of Communication “A” 6464, the Central Bank, amendedunder the criterion that the amount to be distributed cannot affect the institution’s liquidity and restated its regulations regarding dividend distributions by financial institutions. Pursuant to such regulations, dividend distributionssolvency, which shall be admitted as long as none of the following circumstances apply:
1) the financial institution is subject to a liquidation procedure or the mandatory transfer of assets orderedverified by the Central Banksatisfaction of certain requirements, on a consolidated basis.
Such regulations provides that the payment of dividends (other than dividends on common shares), the acquisition of treasury shares, the payment on other tier 1 equity instruments (as determined in accordance with section 34 the provisions set forth in the rules on “Minimum capital of financial institutions”) and/or 35 bisthe payment of financial incentives (bonuses) to personnel – in this case, subject to the FIL;
2)public order labor regulations (legal, statutory and contractual) governing the financial institution is receiving financial assistance from the Central Bank;institutions’ relationships with their personnel– shall be subject to these rules.
3) the financial institution is not in compliance with its reporting obligations to the Central Bank and;
4) 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.
5) 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
6) 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 conditionsInstitutions may distribute dividends up to an amount equal to: (i) the positive balanceamount 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 account “unappropriated earnings” (resultados no asignados) at the end of the fiscal year plus (ii)to which they belong, in the account “Unassigned Results” (Resultados no asignados) and in the voluntary reservesreserve for future paymentsdistributions of dividends minus (iii) voluntary reservesshall be computed, deducting the amounts – recorded on the same date – of the legal and mandatory statutory reserves registered as of that date– whose creation is mandatory – and other items, such as (a)the following items:
1. 100% of the debitnegative balance of each of the items recorded under the line “Other accumulated comprehensive income”, (b) theretained earnings.”
2. The result derived from the revaluation of property, plant and equipment and intangible assets and investment properties, (c) theproperties.
3. The net positive balance ofdifference resulting from the book-valuecalculation at amortized cost and the market-value of certain public debt securities and Central Bank notes thatfair market value recorded by the financial institution owns that are not marked to market, (d) unrecordedin 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 of asset value informednotified by the Superintendency – whether accepted or mentionednot by the institution– that are pending registration and/or those indicated by the external auditors on their report, and (e)audit that have not been accounted.
5. The individual exemptions fordeductibles – regarding asset valuation granted– established by the Superintendency.
SEFyC, including the adjustments derived from the failure to consider agreed adjustment plans.
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.”
In addition, for financial institutions that are branches of foreign financial institutions,The amount to be distributed, which shall not exceed the Superintendency will considerlimits set forth by the Central Bank, shall not compromise the liquidity and solvency of their headquarters and the marketsinstitution. This requirement shall be considered satisfied once it has been verified that there are no integration defects in which they operate.
Pursuant to Communication “A” 5580, the minimum regulatory 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 items set forth above in points 1 to 5, if applicable, from the assets. |
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 items from the unappropriated retained earnings: |
· | 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.” |
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 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 accountrecalculate 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 requirementdistribution of counterparty risk capital for securitizations for every ongoing transaction at the time of determination.
Central Bank’s Communication “A” 5689, as amended by Communication “A” 6324, dated January 8, 2015, set forth that financial entities shall make an accounting entry for and provide information about any administrative
and/or disciplinary penalties, and adverse criminal judgments issued by courts, which were applied or filed by the Central Bank, the UIF, the CNV and the National Insurance Superintendence (SSN). The amount corresponding to the accounting entry shall include all of the penalties and a provision for 100% of each penalty must be made. Such provisions must be maintained until payment is made or a final judgment is issued. According to Central Bank Communication “A” 5707, as amended by Central Bank Communication “A” 5827, if dividends are to be distributed, this amountearnings. This requirement shall also be deductedapplicable 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 distributable amount. In April 2016,midst of the coronavirus’ outbreak crisis, the Central Bank issued Communication “A” 5940,6939, by virtue of which amended provisionsthe distribution of dividends by financial entities was temporarily suspended until June 30, 2020.
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Capital Conservation Buffer
Communication “A” 5689. Pursuant to such Communication, the financial entities that, to the date thereof, have an amount for these items registered in the account “Provisions — For administrative, disciplinary and criminal penalties,” must analyze, according to the enforcing legal reports, if each such penalty meets the conditions for its total or partial accountable registration, according to the provisions in the “Accounts Plan and Manual” (which set forth that penalties must be probable and that their amount can be reasonably estimated).
In January 2015, Communication “A” 56945827 of the Central Bank also establishedestablishes that those entities considered domestic systemically important (D-SIB) must take into account an extra minimum capital requirement equivalent to 1% of the total risk-weighted assets which they must comply with using exclusively ordinary capital level 1 (Con1) according to the schedule described under “—Liquidity and Solvency Requirements—Requirements Applicable to Dividend Distribution” (currently, RWA is calculated by multiplying the required minimum capital under Central Bank regulations by 12.5). According to Central Bank Communication “A” 5707, as amended by Central Bank Communication “A” 5827, if dividends are to be distributed, this requirement becomes effective immediately.
Pursuant to Central Bank Communication “A” 5827, as amended by Communication “A” 6213, as of January 1, 2016, financial entities are required to establishshall maintain a capital conservation margin in addition to theirthe minimum capital requirements for the purpose of accumulating their own resources, which they will be able to use if they incur losses, thus reducing the risk of non-compliance with minimum capital requirements (“Additional Capital Margins”). The higher the use of such marginal amounts, the higher the percentage of profits that financial entities will be required to withhold in order to restoreensure 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”), shall have a capital level that margin. Additionally,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 preservation margin shall be 2.5% of the entity’s RWA,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 addition to applicable minimum capital requirements. In the case of financial entities qualified as systematically significantconsidered systemically important, must be integrated exclusively with Common Equity Tier 1 (COn1), net from deductible items (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 preservationconservation 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 close to the minimum required in section 8.5.1 of regulations over “Minimum Capital for Financial 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 are not categorized as D-SIBs or G-SIBs- | D-SIBs and G-SIBs Financial Entities | Minimum coefficient of capital conservation – as percentage of dividend distribution - | |||
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.
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 3.5%observed by means of their respective RWA (the “Capital Conservation Buffer”)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 the CER – 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 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 by dividingapplying the sum of each item’s daily balance by the amount of days corresponding to the month. Pursuant to Communication “A” 6128, as of January 1, 2017, the minimum capital requirement for credit risk will be calculated as follows:
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:
Rating |
| K Factor |
|
1 |
| 1 |
|
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 credit risk weighted assets, calculated by adding the following:
A x p + PFB x CCF x p + no DvP + (DVP + RCD+ INC(fractioning)) x 12.5
Variable “A” refers to computable assets/exposures; “PFB” is computable items which are not registered on the balance sheet (“off balance sheet items”); “CCF” the conversion credit factor; and “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.
“RCD” refers to requirements for counterparty risk in over-the-counter (“OTC”) transactions.
“INC(fractioning)” 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%
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.”
“INC” incremental minimum capital requirements based on any excess in the fixed assets and other ratios, the limitations established under “Credit risk fractioning” rules, and the limitations derived from the credit risk degree.
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:
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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 | |||
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 credit risk weighted assets, calculated by adding the following:
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CAMELBIG Rating |
| K Factor |
|
1 |
| 1.00 |
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2 |
| 1.03 |
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3 |
| 1.08 |
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4 |
| 1.13 |
|
5 |
| 1.19 |
|
A * p + PFB * CCF * p + no DVP “DvP”+ (DVP + RCD + INC significant holding in other companies) * 12,50
Variable “A” refers to eligible assets/exposures; “PFB” are eligible items which are not registered on the balance sheet; “CCF” the conversion credit factor; and “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.
“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”.
“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% |
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”.
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 | 100 |
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Type of Asset | Weighting (%) | ||
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 Sector”, pursuant to the credit rating assigned to the respective jurisdiction | |||
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), the European Investment bank (EIB), among others. | 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 national government in foreign currency, as provided for the Exposure to 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 the weighting percentage will be 150%. | 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 | ||
Primary mortgages and mortgages of any ranking on residential homes, to the extent the entity is the mortgagee | |||
If credit facility does not exceed 75% of the appraised value of such real property | |||
- Sole, permanently-occupied family home | 35 | ||
- Other | 50 |
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Type of Asset | Weighting (%) | ||
On the amount exceeding 75% of the appraised value of such real property | 100 | ||
Primary mortgages and mortgages of any ranking other than on residential homes, to the extent the entity is the mortgagee | |||
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 exposure. | * | ||
Exposures to individuals or companies originated in credit card purchases made in installments of travel tickets to foreign destinations and other touristic services abroad (logding, car rental), either made directly to the service provider or through a travel agency or web platform | 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;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 former regime by regulating “large exposures to credit 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
Communication “A” 6620 sets at 15% the limit of exposure with a counterparty 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, 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 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 arewere intended to capture the sensitivity of assets and liabilities to changes in the interest rates. Communication “A” 5369 removed all of theserules and regulations regarding minimum capital requirements.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 be 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 will beis the arithmetic sum of the minimum capital requirement for interest rate (trading portfolio), stock (trading portfolio), exchange rate, commodities and options risks.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” 5867,6690, 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”. Financial entities must calculate the minimum capital requirement for the counterparty credit risk involved in over-the-counterOTC transactions involving derivatives and securities financing transactions, (SFT) — 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 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: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 — aportfolio. 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.
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” 58896690 if the entity only purchases options —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“delta plus”) method, also contemplatedprovided for in the regulation.
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As from the effective date of Communication “A” 5867 and until August 31, 2016, financial entities were required to calculate the market risk minimum capital requirement in accordance with the method set forth in Communication “A” 5867 and also on an off-balance sheet basis, pursuant to the method in effect as of December 31, 2015, and to consider, for purposes of determining the minimum capital requirement, the result of the method involving the highest amount of the market risk capital requirements. After August 31, 2016, only the method set forth in Communication “A” 5867 is applicable.
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 becoming non-compliant or submit a restructuring plan within 30 calendar days following the last day of the month in which such non-compliance occurred. In addition, non-compliance with minimum capital requirements will entail a number of consequences for the financial institution, including prohibition from opening branches in Argentina or in other countries, establishing representative offices abroad, or owning equity in foreign financial institutions, as well as a prohibition from paying cash dividends. Also, the Superintendency may appoint a delegate, who shall have the powers set forth by the FIL.
(ii)Non-compliance identified by the Superintendency: the institution must file its defense within 30 calendar days after being served notice by the Superintendency. If no defense is filed, or if the defense is disallowed, the non-compliance will be deemed to be final, and the procedure described in item (i) confirm will apply.
(i) | non-compliance reported by the institutions: the institution must meet the required capital no later than the end of the second month after becoming non-compliant or submit a restructuring plan within thirty (30) calendar days following the end of the month in which such non-compliance was reported. In addition, non-compliance with minimum capital requirements will entail a number of consequences for the financial institution, including a prohibition to open branches in Argentina or in other countries, establish representative offices abroad, or own equity in foreign financial institutions, as well as a prohibition to pay cash dividends. Moreover, the Superintendency may appoint a representative, who shall have the powers set forth by the FIL. |
(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. |
Furthermore, pursuant to Communication “A” 5867, 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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· 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.
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 done 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.
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 (at least annually) of control strategies and risk mitigation, and adjust these as necessary.
(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. |
(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 36thirty-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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· 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.
IB is defined as the sum of (a) financial and service income minus financial and service expenses and (b) other income minus other expenses.
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 financial public sector notes, as set forth under the Central Bank regulations (“Valuación de instrumentos de deuda del sector público no financiero y de regulación monetaria del Banco Central de la República Argentina”).
(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. 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. Pursuant to Communication “A” 3498 (astransactions and it is included in the Central Bank “Rules of Minimum Cash”, as amended and supplemented) as of March 1, 2002, the minimum cash requirement includes deposits and obligations for other financial intermediation transactions (overnight and fixed term transactions).
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 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, (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 72seventy-two (72) business hour term as from their deposit.
deposit and (iii) 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-term deposit of UVA and UVIs, 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 monthly average of the daily balances of the liabilitiesliabilities:
· | registered at the end of each day during the period (monthly or bimonthly) prior to the one of its integration, in the case the liabilities are denominated in Pesos (in the July/August and December/January periods, the June and November averages shall be used, respectively, and in September and February, the average of the previous two-month period shall be used); or |
· | 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 day during each calendar month, except for the period ranging from December of a year to February of the next year, period in which it shall be applied on a quarterly average. period.
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, depending on whether: (i) the financial entities are included in Group “A” 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 caseamount of transactionstheir 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 previous year will be considered, according to the data that arise from the corresponding information regime); and (b) Group “B” composed of all those entities that are not included in Peso,Group “A”. The following fees arise from Communication “A” 6616, as amended, dated December 20, 2018, its effectiveness will depend on the category undergroup to which the jurisdictionfinancial entity belongs, being February 2, 2019 for Group “A” and G- SIB and on January 1, 2019 for the remaining entities:
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 |
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 |
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 main officerate 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.
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.
In order to be admitted the integration with “National Treasury Bonds in Pesos at a fixed rate due November 2020”, 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:
(1) | 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; |
112
Participation, in the total of financing operations to MiPyMES with % | Reductions (over the % | ||
Less than | 0.00 | ||
From 4 to less than 6 | 0.75 | ||
From 6 to less than 8 | 1.00 | ||
From 8 to less than 10 | 1.25 | ||
From 10 to less than 12 | 1.50 | ||
From 12 to less than 14 | 1.75 | ||
From 14 to less than 16 | 2.00 | ||
From 16 to less than 18 | 2.20 | ||
From 18 to less than 20 | 2.40 | ||
From 20 to less than 22 | 2.60 | ||
From 22 to less than 24 | 2.80 | ||
From 24 to less than 26 | 3.00 | ||
From 26 to less than 28 | 3.20 | ||
From 28 to less than 30 | 3.40 | ||
30 or more than 30 | 3.60 |
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.
(2) | 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 671/2014 and 267/2014 of the former Ministry of Economy and Public Finance and the Ministry of Industry), in an amount equivalent to 2% of the sum of the financing in Pesos that the entity grants: |
(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 increased the 20% decrease of the requirement for “Ahora 12,” as set forth in Communication “A” 6857, to 35% of the aggregate financings in Pesos granted by the relevant institution. Additionally, Communication “A” 6916 set the limit of the deduction at 4% over the items in Pesos subject to the Central Bank Rules of Minimum Cash. Amended by Communication “A” 6937, effective from March 19, 2020, the latter percentage was raised to 6%.
(3) | 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 Rules”. |
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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(4) | 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: |
a. | 40% fixed nominal per annum until and including February 16, 2020 (which may continue to be counted until its termination). |
b. | 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.
(5) | In accordance with the special treatment provided for financing under Resolution No. 1/19 of the Ministry of Territorial Development and Habitat. |
For the period from February 2020 until January 2021 inclusive, the minimum cash requirement in Pesos will be reduced by 0.8% over the contractual balance – at the end of November 2019- from the financings that the institution decides to subject to the special treatment provided by point 6.4 of the “Credit Policy Rules.”
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 falls (Communication “A” 6195) and Communication “A”6080):and/or those complementary measures that are deemed pertinent.
|
| Rate % |
| |||||||
|
| Category I |
| Categories II to VI |
| |||||
Item |
| Pesos |
| Foreign |
| Pesos |
| Foreign |
| |
1- | Checking account deposits |
| 20 |
|
|
| 18 |
|
|
|
2- | Savings account, basic account and free universal account |
| 20 |
| 25 |
| 18 |
| 25 |
|
3- | Legal custody accounts, special accounts for savings clubs, salary/social security accounts, special checking accounts for legal entities and social security savings accounts |
| 20 |
| 25 |
| 18 |
| 25 |
|
4- | 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 |
| 20 |
| 25 |
| 18 |
| 25 |
|
5- | Unused balances of advances in checking accounts under executed overdraft agreements |
| 20 |
|
|
| 18 |
|
|
|
6- | Deposits in checking accounts of non-bank financial institutions, computed for purposes of meeting their required minimum cash reserve |
| 100 |
|
|
| 100 |
|
|
|
|
| Rate % |
| |||||||
|
| Category I |
| Categories II to VI |
| |||||
Item |
| Pesos |
| Foreign |
| Pesos |
| Foreign |
| |
7- | Time deposits, liabilities under acceptances, repurchase agreements (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 11, 12, 13 and 14 of this table: |
|
|
|
|
|
|
|
|
|
| (i) Up to 29 days |
| 14 |
| 23 |
| 13 |
| 23 |
|
| (ii) From 30 days to 59 days |
| 10 |
| 17 |
| 9 |
| 17 |
|
| (iii) From 60 days to 89 days |
| 5 |
| 11 |
| 4 |
| 11 |
|
| (iv) From 90 days to 179 days |
| 1 |
| 5 |
| 0 |
| 5 |
|
| (v) From 180 days to 365 days |
| — |
| 2 |
| — |
| 2 |
|
| (vi) More than 365 days |
| — |
| 0 |
| — |
| 0 |
|
8- | Liabilities owed due to foreign facilities (not executed by means of time deposits or debt securities) |
| — |
|
|
| — |
|
|
|
9- | Securities (including Notes) |
|
|
|
|
|
|
|
|
|
| (i) Up to 29 days |
| 14 |
| 23 |
| 14 |
| 23 |
|
| (ii) From 30 days to 59 days |
| 10 |
| 17 |
| 10 |
| 17 |
|
| (iii) From 60 days to 89 days |
| 5 |
| 11 |
| 5 |
| 11 |
|
| (iv) From 90 days to 179 days |
| 1 |
| 5 |
| 1 |
| 5 |
|
| (v) From 180 days to 365 days |
| — |
| 2 |
| — |
| 2 |
|
| (vi) From 365 days |
| — |
| — |
| — |
| — |
|
10- | Liabilities owing to the Trust Fund for Assistance to Financial and Insurance Institutions |
| — |
|
|
| — |
|
|
|
11- | Demand and time deposits made upon a court order with funds arising from cases pending before the court, and the related immobilized balances |
| 13 |
| 15 |
| 13 |
| 15 |
|
12- | Special deposits related to inflows of funds. Decree 616/2005 |
|
|
| 100 |
|
|
| 100 |
|
13- | 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 |
| 16 |
|
|
| 15 |
|
|
|
14- | Deposits and term investments —including savings accounts and securities (including Notes)— in UVIs and UVAs |
|
|
|
|
|
|
|
|
|
| (i) Up to 29 days |
| 7 |
| — |
| 6 |
| — |
|
| (ii) From 30 days to 59 days |
| 5 |
| — |
| 4 |
| — |
|
| (iii) From 60 days to 89 days |
| 3 |
| — |
| 2 |
| — |
|
| (iv) More than 90 days |
| — |
| — |
| — |
| — |
|
15- Deposits and fixed term investments created in the name of minors for funds they receive freely |
| — |
| — |
| — |
| — |
|
Likewise, the minimum cash requirement may be increased due to non-compliance with the rules on the “Credit Line for productive 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. |
(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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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 and ATM transactions and immediate transfer funds.
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.
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.
(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.
The Central Bank makes interest payments on reserve requirements up to the legal cash requirement level established for term transactions. Reserves in excess of that requirement will not be compensated.
Compliance on public bonds and time deposits must be done with holdings marked to market and of the same type, only in terms of monthly status. Holdings must be deposited in special accounts at the Central Bank.
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 monthperiod 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, be less than 50%25% of the total required cash reserve, excluding the requirement for incremental deposits, determined for the next preceding month,period, recalculated on the basis of the requirements and items in force in the month to which the cash reserves relate.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 70%50% when a deficit to the admitted transfer margin occurs in the previous month.
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 twice1.5 times the private banks’ Buenos Aires Depositsaverage nominal interest rate of Large Amount Rate (“BADLAR”) rate for deposits in Pesos forthe shorter term peso denominated LELIQs auction published on the last business day of the month.
Any deficiencies in meeting the required minimum cash reserve and the daily minimum reserve in foreign currency are subject to a penalty equal to twice the private banks’ BADLAR rate for deposits in U.S. dollarsrelevant period or, twice the 30-day U.S. dollar LIBOR rate forif not available, the last business dayone available.
LELIQ global daily position
Pursuant to Communication “A” 6661 of the month (whichever is higher).
Minimum cash requirements may decrease:
1. according toCentral Bank, the participation in total financing to the non-financial private sector in pesos in the micro, small and medium-sized enterprise (“MiPyMES”);
2. based on cash withdrawals made through ATMsLELIQ global daily position of the entity;
3. depending onbanks shall not exceed the accreditations made by the National Social Security Administration (ANSES) for the payment of social security benefits;larger sum between:
(1) | the RPC of the bank in the immediately preceding month; and |
(2) | 100% of the monthly average of the total deposits in Pesos, excluding the financial sector’s and the notes in Pesos issued until February 8, 2019 in the current month. |
4. depending on the granting of financing to MiPyMES from section 1.1.14 of Section 1, Chapter XVIII, LISOL of Central Bank regulations;
5. 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 671/2014 and 267/2014 of the former Ministry of Economy and Public Finance and the Ministry of Industry. Minimum cash requirements may increase with a defect in the application of credit quotas to clients other than MiPyMEs. Minimum foreign cash requirements may decrease in the event of a relaunching of LEBAC’s (Central Bank bills) subscriptions.
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 ratio established thereunder, under a 30-day stress test scenario with a 30 day horizon.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 and 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 liquidity coverage ratio (“LCR”),LCR, which will require daily monitoring. The participation and coordination of the entity’s top management authority (e.g., a CEO) will be necessary.
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.
115
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 10ten (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.
· | 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.
Pursuant to Communication “A” 5724, for implementing the above, the financial institutions must consider the following schedule:
|
| ||
|
| ||
|
| ||
|
| ||
|
|
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 International Monetary Fund,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
Recently,In August 2017, the Central Bank introduced 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 financed with stable resources and, in this way, mitigate the risk of eventual tense situations in funding. By requiring financial institutions to maintain a stable funding profile in relation to the composition of their assets and off-balance sheet operations, the NSFR limits excessive dependence on short-term wholesale funding, promotes a better assessment of the funding risk of the items on and off balance sheet and favors the stability of the sources of funds.
116
The NSFR is defined as the quotient between the available amount of stable funding (MDFE) andrelative to the required amount of stable funding, (MRFE):
NSFR: MDFE / MRFE
Where:
MDFE:where: AASF (Available Amount of Stable Funding) is part of the capital and liabilities of the financial entityinstitution – calculated in the manner set forth in Section 2 – that are expected to be available forover a periodone -year term. RASF (Required Amount of one year; and itStable Funding) is calculated based on the general characteristics of the funding sources that financial institutions have that affect their stability, such as the contractual maturity of their liabilities and the different propensities to withdraw funds that have different providers of anchoring.
MRFE: the amount of funding necessary during thisfor such period which is a function– calculated in the manner set forth in Section 3 – based on its liquidity and remaining life of the liquidity and residual term of the entity’sinstitution’s assets and of its off-balance sheet commitments; and it is calculated taking into account the general characteristics of the liquidity risk profile of the assets and of the off-balance-sheet exposures of the financial institution.
obligations.
The NSFR mustshall be at all times be greater than or equal to one.1 (NSFR > 1). It shall be supplemented with the assessment made by the Superintendency. The Superintendency may requiredemand the entityinstitution to adopt stricter standards in order to reflect its funding risk profile, also taking into account for that purpose the evaluation that has beenassessment made of compliancein connection with the rules on “Guidelines“Risk Management Guidelines for risk managementFinancial Institutions” in financial institutions” in terms of liquidity byconnection with the entity.institution’s liquidity.
Entities mustThe Financial Institutions shall observe the NSFR at all times and report it on a quarterly basis to the Superintendency quarterly through the information regime established for this purpose.Superintendency.
Credit Risk Regulation
The regulations on credit risk establish standards in order to reduce such risk without significantly eroding average profitability. There are three types of ratios that limit a lender’s risk exposure, namely: risk concentration limits, limits on transactions with customers on the basis of the institution’s capital and credit limits on the basis of the customer’s net worth.
Risk concentration: regulations include the concept of risk concentration, defined as the sum of loans that individually exceed 10% of the financial institution’s RPC. Total operations may not exceed, at any time:
· three times the institution’s RPC for the previous month, without considering the operations involving local financial institutions;
· five times the institution’s RPC for the previous month, on total financings; and/or
· ten times the institution’s RPC for the previous month, for second tier commercial banks when taking into account transactions with other financial institutions.
The three times and five times limits listed above are increased to four times and six times the institution’s RPC for the previous month, respectively, whenever increases are allocated to provide assistance to trusts or fiduciary funds from the non-financial public sector.
Loans (other than inter-bank loans) that exceed 2.5% of the financial institution’s RPC must be recommended by senior management and approved by the institution’s Board of Directors or similar authority.
Diversification of risk: Financial institutions must ensure that their loan portfolio is diversified among the highest possible number of individuals or companies and across all economic sectors to avoid a concentration of risk arising from a small group of individuals or companies or related to a specific sector that could significantly affect the institution’s assets.
Degree of risk: In the case of credit limits based on the customers’ net worth, as a general rule the financial assistance cannot exceed 100% of the customer’s net worth. The basic margin may be increased by an additional 200% provided such additional margin does not exceed 2.5% of the financial institution’s RPC as of the last day of the second month prior to the date of the financing and the increase is approved by the Board of Directors of the relevant financial institution.
Limits on Credit Assistance
Maximum individual limits on credit assistance for non-related clients are calculated as a percentage of the financial institution’s RPC.
Maximum limits for credit assistance to non-financial public sector are as follows:
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(*) Individual limits will be increased by 15% when the increase is applied to financial assistance granted to trusts or fiduciary funds, subject to certain conditions and related to the financing of public sector or the inclusion of debt instruments issued by them.
Globally, lending to the public sector cannot exceed 75% of the institution’s RPC. Monthly credit assistance to the public sector cannot exceed 35% of a financial institution’s assets.
Maximum limits for credit assistance to the non-financial private sector of the country and non-financial sector abroad are as follows:
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Maximum limits for credit assistance to the financial sector of the country are as follows:
|
|
|
| Taker |
| |||
Transactions with the financial sector of the country |
| Lender |
| Rated 1, 2 or 3 |
| Rated 4 or 5 |
| |
i) | Financing by a financial institution that is not a second tier commercial bank to a local financial institution |
| Rated 1, 2 or 3 |
| 25 | % | 25 | % |
| Rated 4 or 5 |
| 25 | % | 0 | % | ||
ii) | Financing by a financial institution that is a second tier commercial bank |
| Rated 1, 2 or 3 |
| 100 | % | 100 | % |
| Rated 4 or 5 |
| 100 | % | 0 | % |
*This limit can be divided in two segments, with and without collateral, in each case by 25% subject to compliance with certain requirements.
Maximum limits for credit assistance to the financial sector abroad are as follows:
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The allocation of margins for exposure to counterparty credit risk in derivative contracts is done on the basis of risk-sensitive measures and the features of each particular type of transaction (type of contract, frequency of marking to market, volatility of the asset). Transactions to be included are forwards, futures and options on shares and public bonds, and Central Bank debt instruments for which volatility is published, purchase and sale options on such assets, and swaps.
Limits for Affiliated Individuals
The aggregate amount of relevant transactions with affiliated companies or individuals may not exceed at any time the limits of the financial institution’s net worth as of the last day of the month prior to the month of calculation, according to the following general rules:
· in the case of local financial institutions which have transactions that are subject to consolidation by the lender or borrower, when the entity receiving financial assistance (i) has received a grade 1 rating by the Superintendency, the financial institution can provide assistance in an amount up to 100% of its computable net worth; or (ii) has received a grade 2 rating by the Superintendency, general financial assistance can be provided for an amount up to 10% of the financial institution’s computable net worth; and additional assistance in an amount up to 90% of said computable net worth as long as loans and other credit facilities mature within 180 days;
· in the case of local financial institutions not included in (i) above, the financial institution can provide assistance in an amount up to 10% of its computable net worth; and
· in the case of other related local companies that exclusively provide complementary services to the activity performed by the financial institution, as well as related foreign banks rated “investment grade,” such companies may receive assistance in an amount of up to 10% of the computable net worth of the financial institution which grants assistance.
If the financial institution has a rating of 4 or 5, financial assistance to a related person or company cannot be granted, except in certain special situations.
Finally, the total, non-excluded amount of financial assistance provided to, and the shareholder participation in the related individuals and companies by a financial institution cannot exceed 20.0% of the institution’s Argentine regulatory capital, except when the applicable limit is 100.0%.
Under Central Bank regulations, a person is “related” to a financial institution (and thus part of the same “economic group”):
· if the financial institution directly or indirectly controls, is controlled by, or is under common control with, such person;
· if the financial institution or the person that controls the financial institution and such person has or may have common directors to the extent such directors, voting together, will constitute a simple majority of each board; or
· as an exception, determined by the Board of Directors of the Central Bank (pursuant to a proposal from the Superintendency).
In turn, control by one person over another is defined under such regulations as:
· holding or controlling, directly or indirectly, 25.0% or more of the voting stock of the other person;
· having held 50% or more of the voting stock of the other person at the time of the last election of directors;
· holding, directly or indirectly, any other kind of participation in the other person (even if it represents a participating interest below the abovementioned percentages) so as to be able to prevail in its shareholders’ or Board of Directors’ meetings; or
· when the Board of Directors of the Central Bank, pursuant to a proposal from the Superintendency, determines that a person is exercising a controlling influence, directly or indirectly, in the direction or policies of another person.
The regulations contain several non-exclusive factors to be used in determining the existence of such controlling influence, including, among others:
· the holding of a sufficient amount of the other person’s capital stock as to exercise influence over the approval of such person’s financial statements and payment of dividends;
· representation on the other person’s Board of Directors;
· significant transactions between both persons;
· transfers of directors or senior officers between both persons;
· technical and administrative subordination by one person to the other; and
· participation in the creation of policies of the financial institution.
Interest rate and fee regulations
Maximum lending rates
Leverage Ratio
Pursuant to Communication “A” 5590, which was in force from June 2014 to December 2015,6431, effective as of March 1, 2018, the Central Bank established limitsincorporated a ratio to lending rates applicablelimit the leverage of financial institutions in order to consumer financingavoid 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 respecta minimum capital requirement simple and not based on risk.
The leverage ratio, which must be greater than or equal to personal loans3%, 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 pledge loans granted to retail customers, that are not considered as MiPyMEs.
Pursuant to these limits, two groups of institutions were defined: (i) financial entities with non-financial private sector deposits in Pesos, taking into account the averagemeasure of the three months priorexposure will be the sum of (i) the exposures in the asset (excluding the items corresponding to April 2014, equal to or higher than 1% of the total non-financial private sector deposits of the financial system (Group I)derivatives and Securities Financing Transactions (SFT)), (ii) all other financial institutions (Group II).
In the case of institutions falling under Group I, the Central Bank would publish on a monthly basis the maximum interest rates that these financial institutions were authorized to apply to each financing disbursed and/or restructured. The maximum interest rates wereexposures by derivatives, (iii) exposures for SFT transactions, and (iv) off-balance-sheet items. Both measures must be calculated based on the productclosing balances of multiplying the most recent “reference interest rate” (as published by the Central Bankeach quarter.
Interest rate and based on the simple average of the cut-offfee regulations
Maximum lending rates applicable to Central Bank bills for a term closest to 90 days, two months before the disbursement) by the following multiples: (i) in respect of pledge loans: 1.25; (ii) in respect of overdrafts, credit card loans and mortgages on housing assigned to financial institutions by third parties, as receivables in respect to trusts where trust assets were constituted by them, and as collateral for granting loans: 2.00; and (iii) in respect of personal loans: 1.45.
In the case of Group II, the multiples used were as follows (i) in respect of pledge loans: 1.40; (ii) in respect of overdrafts, credit card loans and mortgages on housing assigned to financial institutions by third parties, as receivables in respect to trusts where trust assets were constituted by them, and as collateral for granting loans: 2.00; and (iii) in respect of personal loans: 1.80.
On December 17, 2015, the Central Bank issued Communication “A” 5853 (as amended by Communication “A” 5891, among others), pursuant to which the provisions that established maximum interest rates applicable to the lending transactions described above 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 regulationsrules which state the maximum interest rate applicable to credit card facilities. Also, the punitive fee in addition to compensatory interest will be freely agreed upon among financial institutions and their customers.
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 conductedlinked to credit cards:
· | 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.
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 AFIPto whom the financial institutions may grant credit card financings to be paid in at least 12 equal and consecutive installments after a regulated rate, any non-compliance identified until December 31, 20156-month grace period. In regards to these loans, the minimum cash requirement will be addressed pursuantreduced 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 rulesformation of external assets, remittance of family aid and derivatives; and, (ii) sell securities with settlement in effect as of December 16, 2015. For any non-compliance identified as from January 1, 2016, the rules established by Communication “A” 5849 will be applicable. Communication “A” 5849 establishes the procedure for reimbursing customers any amounts charged by financial institutions in excess of the applicable maximum lending rate.foreign currency or transfer them to other depositary entities (contado con liquidación).
Minimum term deposit rates
Pursuant to Communication “A” 5640, which was in effect from October 2014 to December 2015, the Central Bank established minimum interest rates applicable to term deposits made by individuals (in a principal amount equal to or lower than the amount covered by Seguro de Depósitos S.A. (“SEDESA”) at the time) (i.e., deposits not exceeding Ps.350,000). Communication “A” 5659, issued on October 31, 2015, increased the monthly contribution that banks were required to set aside each month to fund the Deposits Guarantee Fund (“Fondo de Garantía de los Depósitos”) from 0.015% to 0.060% of the monthly average of the daily deposits balance. On April 7, 2016, the Central Bank issued Communication “A” 5943, as5853 (as amended and supplemented by Communication “A” 6462, pursuant to which the monthly contribution rate reverted back to 0.015% of the monthly average of the daily deposits balance, and as of May 1, 2016, the amount covered was extended to Ps.450,000.
The interest rate applicable to such deposits could not be lower than the result of multiplying the most recent “reference borrowing rate” (as published by the Central Bank and based on the simple average of the cut-off rates applicable to Central Bank bills for a term closest to 90 days, two months before the withdrawal of the deposits) by
the following multiple, depending on the original term of each deposit: (a) from 30 to 44 days: 0.91, (b) from 45 to 59 days: 0.93 and (c) from 60 to 119 days: 0.97, (d) from 120 to 179 days: 0.98 and (e) over 180 days: 0.99.
On December 17, 2015, the Central Bank issued Communication “A” 5853, pursuant to which5891, among others) the provisions that established minimum interest rates applicable to the term deposits described above ceased to have effect in respect of any new transactions conducted as from and including such date. The remuneration for fixed-rate deposits and term investments will be established at a rate freely agreed upon among the parties.
With respect to transactions conducted at a regulated rate, any non-compliance identified on or before December 31, 2015 will be addressed pursuantparties according to the applicable rules in effect asfor each type of December 16, 2015. For any non-compliance identified as from January 1, 2016, the rules established by Communication “A” 5849 will be applicable. Communication “A” 5849 established the procedure by which financial institutions must pay customers any amounts due as a result of non-compliance with the applicable minimum term deposit rates.operation.
Fees
On October 6, 2013, the Central Bank issued Communication “A” 5460, granting broad protection to financial services customers. The protection includes, among other things, the regulation of fees and commissions charged by financial institutions for services provided. 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” 5514 sets forth an exception to the enforcement 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 products 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 services 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, (asas amended and supplemented by several regulations, including but not limited to Communication “A” 5828)5828, establishing additional rules aimed at protecting financial services 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 it is a customer request or a condition set by the financial institution to access the financial service. In this regard, beginning on November 13, 2015, financial institutions may not receive remunerations or profits from 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 users.user and an increase of the banking services use. In this regard, beginning on April 1, 2016, the electronic transfers ordered or received by clients categorized as financial services customers who make electronic transfers willwould not be charged with fees or commissions. ClientsFor clients that do not meet suchthis category, (such as certain companies) that makecompanies, transfers of funds of 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 per account can be made via the internet (home banking)home banking every day of the year.
On March 21, 2016, the Central Bank issued Communication “A” 5928, pursuant to which all savingssaving accounts willshall be free, including the use of the corresponding debit card. In this regard, all existing and new savingssaving accounts will nowshall be free of charge. Savingcharge, as well as for new clients. The saving accounts willshall not face minimumhave amount requirementslimits, or any charge related to their creation, maintenance or renewal.renovation. In addition, pursuant to such regulation, commissions could be increased up to 20%, but clientssuch increase must be notified of such increase 60informed to the client sixty (60) days in advance. Furthermore, as of September 1, 2016 commissions’ caps on commissions will beare eliminated, but financial institutions will have to notifyinform their customers regardingin advance about the commissions that other financial entities will beare charging.
Lastly, throughCentral Bank issued Communication “A” 6212, effective as of April 1, 2017, the Central Bank issued a scheme to gradually reduce, on an annual basis, which reduces credit card and debit card sales commissions. In this regard,commissions on a gradual annual plan. Pursuant to Comminication “A” 6212, the maximum credit card sales commission rate for 2017 is 2.0% and for 2018, 2019, 2020 and 2021 and after, will be 1.85%, 1.65%, 1.50% and 1.30%, respectively. The maximum debit card sales 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, pursuant to Communication “A” 6681, banks are not allowed to charge fees or commissions to SMEs for over-the-counter cash deposits.
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, 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 extension of credit facilities for productive investments
On July 5, 2012, the Central Bank issued Communication “A” 5319, mandating financial entities to extend credit facilities for productive investments, (the “2012 Quota”), according to the terms and conditions described therein. Subsequently,Recently, the Central Bank issued CommunicationCommunications “A” 5380 and “A” 5449 (the “2013 Quota”), “A” 5516 and “A” 5600 (the “2014 Quota”), “A” 5681 and “A” 5771 (the”2015 Quota”),”A” 5874 and “A” 5975 (the “2016 Quota”), “A” 6084 and6352 “A” 6259 (the “2017 Quota”) and “A” 6352 (the “2018 Quota”), establishing newthe regulations applicable to credit facilities for productive investments (the “Quota”).corresponding for those years. The 2012 Quota, the 2013 Quota, the 2014 Quota, the 2015 Quota, the 20162017 Quota and the 20172018 Quota are not cumulative and must be complied with, independently, in each year.
Financial Institutionsinstitutions 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.
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2014 Quota
Financial entities included in the 2014 quota must extend credit facilities for an amount equivalent to 5% of the nonfinancial private sector deposits in Pesos, calculated according to the balance resulting as of the end of November 2013, for the first tranche, and for an amount equal to at least 5.5% of deposits of non-financial private sector deposits in Pesos, calculated according to the balance resulting as of the end of May 2014, for the second tranche.
The maximum interest rate for the first tranche is 17.50% and for the second tranche is 19.50% fixed per annum for at least the first 36 months. After the completion of this period, if the financing continues, institutions may apply a variable rate that may not exceed the total BADLAR rate in Pesos plus 300 basis points.
The 2014 Quota must target 100% of the credit facilities rendered to micro, small- and medium-sized enterprises. The credits granted must be denominated in Pesos and, at the time of disbursement of the funds, must have a weighted average life equal to or greater than 24 months and shall mature beyond 36 months. Financing under the first tranche must be granted by June 30, 2014. Financing under the second tranche must be granted by December 31, 2014.
The maximum interest rate for the second semester of 2014 Quota is 19.50% fixed per annum for at least the first 36 months. After the completion of this period, if the financing continues, institutions may apply a variable rate that may not exceed the total BADLAR rate in Pesos plus 300 basis points.
2015 Quota
Financial entities included in the 2015 Quota must extend credit facilities in the first tranche for an amount equal to at least 6.5% of deposits of non-financial private sector deposits in Pesos, calculated according to the average
balances of November 2014, and in the second tranche for an amount equal to at least 7.5% of deposits of non-financial private sector deposits in Pesos, calculated according to the average balances of May 2015.
The maximum interest rate for the 2015 Quota was established at a fixed 19% per annum for the first tranche and at a fixed 18% per annum for the second tranche, for at least the first 36 months. After the completion of this period, if the financing continues, institutions may apply a variable rate that may not exceed the BADLAR rate in Pesos plus 150 basis points for the first tranche and BADLAR rate in Pesos plus 50 basis points for the second tranche.
The 2015 Quota must target 80% of the credit facilities rendered to micro, small- and medium-sized enterprises. The remaining 20% can target enterprises that exceed the maximum established for their area of activity in the rules on “micro-, small- and medium- sized enterprises” and that the total exports do not exceed the 20% of total sales of the last financial year. The credits granted must be denominated in Pesos and, at the time of disbursement of the funds, must have a weighted average life equal to or greater than 24 months and shall mature beyond 36 months. All financing under the 2015 Quota must be granted by December 31, 2015.
2016 Quota
Central Bank Communication “A” 5874, as amended, sets forth the following guidelines for the 2016 Quota:
Financial entities acting as financial agents for the national, provincial, Autonomous City of Buenos Aires’ and/or municipal governments and/or whose share in the non-financial private sector deposits in Pesos in the financial system is equal to or greater than 1%, based on the simple average of daily balances of the non-financial private sector deposit in Pesos for the previous calendar six-month period, will be required to extend credit facilities equivalent to at least 14% of the non-financial private sector deposits in Pesos, calculated on the basis of the monthly average of daily balances in November 2015 and, as of July 1, 2016, to at least 15.5% of the non-financial private sector deposits in Pesos, calculated on the basis of the monthly average of daily balances in May 2016.
In the case of entities falling within the above scope whose share of total non-financial private sector deposits in Pesos is lower than 0.25% (calculated as described in the preceding paragraph) the percentage to be applied will be not less than 8% - and not less than 9% from July 1, 2016, to December 31, 2016.
Not less than 75% of the 2016 Quota must be allocated to credit facilities intended for micro-, small- and medium- sized enterprises.
Communication “A” 5874 and “A” 5975 established the type of financing which may be considered eligible to be computed as part of the 2016 Quota, which includes the following:
(i) Financing of investment projects (meaning financing extended for the purchase of capital goods and/or the construction of facilities necessary for the production of goods and/or services and for the commercialization of goods and/or services; financing of working capital for investment projects for up to an amount equivalent to 20% of the total project amount; the purchase of real estate, provided the financing amount does not exceed 70% of the value attributable to the constructions built on the land; financing for the purchase of motor vehicles and machinery, provided that the purchase transaction be carried out at the selling price applied to cash transactions; among others);
(ii) Discount of deferred payment checks, certificates of public works (or any documentation that may replace them) and invoices and promissory notes for customers that are micro-, small- and medium- sized enterprises for up to an amount equivalent to 30% of the first tranche of the 2016 Quota, and for the whole quota of the second tranche of the 2016 Quota;
(iii) Inclusion, by means of an assignment or discount, of financing facilities provided to users of financial services, or of receivables in respect of trusts whose trust assets consist — primarily — of such financing provided by financial entities not included within the scope of the above mentioned rules, with a total nominal annual financial cost not exceeding 27%, for the financings granted as of October 31, 2016, and 21% for the financings granted as of November 1, 2016, which may amount to up to 5% of the 2016 Quota;
(iv) Microcredit extended to micro entrepreneurs that meet certain requirements (including that, either individually or as a family group, they do not have revenues exceeding two adjustable minimum living wages and are not registered as value added tax, income tax and personal assets tax payers with AFIP). On a supplemental basis, micro entrepreneurs may be granted loans for the purchase of consumption goods or services;
(v) Loans extended to natural persons at an interest rate of up to a nominal annual 22% for the first year and as from the second year, if the above rate is not maintained, at a variable interest rate equivalent to the Peso BADLAR rate charged by private banks, plus 150 basis points. The proceeds of these loans must be used directly for the purchase of a sole family dwelling for the respective family group, and must be implemented by means of a collateral assignment of rights in the trusts created for the construction of those properties , subject to certain conditions. This type of financing may collectively amount to up to 10% of the 2016 Quota;
(vi) Mortgage loans extended to individuals for the purchase, construction or enlargement of dwellings, at an interest rate of up to a nominal annual 22% for the first year and as from the second year, if the above rate is not maintained, at a variable interest rate equivalent to the Peso BADLAR rate charged by private banks, plus 150 basis points. These loans may collectively amount to up to 10% of the 2016 Quota;
(vii) Assistance provided to natural persons and/or legal entities in areas where an emergency situation prevails as a result of natural disasters. This assistance may amount to up to 15% of the 2016 Quota; and
(viii) Financing extended by financial entities that do not fall within the scope of these rules and/or to companies that provide financial assistance through capital lease transactions, provided the proceeds of such transactions are applied to funds, as of the effective date of the legal regulation, to provide financing to MIPyMEs for the purchase of motor vehicles and/or machinery at prices not exceeding cash transaction prices (i.e., list price, net of any general discounts) and pursuant to the conditions of the 2016 Quota. The proceeds must be used within a term of 10 business days between the date when financial assistance is received from the financial entity and the date the funds are used for lending to MiPyMEs (Communication “A” 5929); and
(ix) Financing extended to financial institutions regarding assistance mentioned in item (vii) and incorporations made from that assistance if granted by financial institutions. The entity which provides financing or its assignee, may compute such assistance, for which a report from the external auditor is required;
(x) Working capital financing to MiPyME, extended as of August 1, 2016, for working capital allocated to livestock farming (e.g., for the purchase and/or production of cattle, sheep, pigs, poultry, apiculture, etc.), dairy farming or other productive activities carried out in regional economies within the scope of section 2.2.9. of the “Minimum loan loss provisions” regulations, for up to an amount equivalent to 10% of the 2016 Quota; and
(xi) Financing to non-financial institutions that issue credit cards and have joined the “Ahora 12” program.
(xii) The maximum interest rate to be applied, except for the financing facilities described in items (iii), (v) and (vi) above, will be a nominal annual fixed rate of 22% for the financings granted as of October 31, 2016, and of 17% for the financings granted as of November 1, 2016. In the case of financings restated in purchasing power units, CER adjustable (UVA), the maximum interest rate will be a nominal annual fixed rate of 1%. The rate will be free for transactions with customers who do not meet the conditions of a micro-, small- or medium-sized enterprise.
Financing facilities must be denominated in Pesos and have — at the time of disbursement — an average maturity period equal to or longer than 24 months, based on weighted principal maturities, and the total maturity period must not be less than 36 months. Financing facilities described in item (i) above and to be used for working capital purposes must have an effective weighted average maturity period equal to or longer than 24 months. The discount transactions contemplated in items (ii) and (iii) will not be subject to a minimum maturity period requirement. The mortgage loans referred to in item (vi) must have a minimum maturity period of 10 years. The working capital financing facilities for MiPyMEs described in item (ix) must have an effective weighted average maturity period equal to or longer than 18 months.
The entities may make up this portfolio with loans extended on a joint basis with other entities, in the relevant proportion.
In case early pre-payment is accepted, only debtors will be entitled to such pre-payment right.
2017 Quota
As of January 1, 2017, and up to June 30, 2017, financial entities included in the 2017 Quota must maintain a balance of comprised financings, equal to at least 18% of the non-financial private sector deposits in Pesos, calculated on the basis of the monthly average of daily balances in November 2016.
In the case of entities falling within the above scope whose share of total non-financial private sector deposits in Pesos is lower than 0.25% (calculated as described in the preceding paragraph) the percentage to be applied will be no less than 10% from January 1, 2017 to June 30, 2017. According to Communication “A” 6217, at least 75% of the 2017 Quota must be granted to MiPyMEs and/or financial services customers.
With respect to the second half of 2017, the financial entities reached must maintain, from July 1, 2017 until December 31, 2017, a balance of comprised financings equal to at least 18% of private sector deposits in Pesos, calculated on the basis of the monthly average daily balances from May 2017. For the case of financial entities whose participation in deposits in the non-financial private sector in Pesos amounts to less than 0.25%, the percentage to apply, from July 1, 2017 and until December 31, 2017, will not be less than 10%, and must also be at least 75% of the 2017 Quota must be granted to MiPyME and/or financial services customers.
2018 Quota
The financial entities reached must maintain, in each of the months in 2018, a balance of comprised financings equal to at least the amount that arises from applying the percentages provided in the following table to the monthly average daily balances of November 2017 of total non-financial private sector deposits in Pesos:
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For financial entities whose total non-financial private sector deposits in Pesos is less than 0.25%, the applicable percentage to apply will be derived from the table below:
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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”).
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, 2016.2016. As of March 22, 2018,April 28, 2020, the value of UVI and UVA are 22.67Ps.48.93 and 22.49,Ps.52.84, respectively.
Both units are amended based on the indices published by the INDEC and the Central Bank on their websites.
Foreign Exchange System
DuringOn September 1, 2019, with the first quarterpurpose of 2002,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 established certain foreignreinstated exchange controls. The new controls and restrictions.
On February 8, 2002, Decree No. 260 was issued, establishing as of February 11, 2002 the MLC system through which all foreign exchange transactions must be traded at exchange ratesapply to be freely agreed upon.
On such date, the Central Bank issued Communications “A” 3471 and “A” 3473, which stated that the sale and purchase of foreign currency can only be performed with entities authorized by the Central Bank to operate in the foreign exchange. Item 4 of Central Bank Communication “A” 3471 stated that the sale of foreign currency in the local exchange market shall in all cases be against Peso bills.
Since January 2, 2003, there have been further modifications to the restrictions imposed by the Central Bank. For further information, see “Item 10.D Exchange Controls.”
As of mid-December 2015, there have been significant changes to the legal framework applicableaccess to the foreign exchange market aiming at granting greater flexibility to foreign exchange transactions.
These changes, initially contemplated under Communication “A” 5850, Communication “A” 5899by residents for savings and Communication “A” 5955, among others, allowed those entities authorized to operate ininvestment purposes abroad, the exchange market to engagepayment of external financial debts abroad, the payment of dividends in foreign currency arbitrageabroad, payments of imports of goods and exchange transactions with their customers. In addition, these regulations made it less burdensome for residents to access the foreign exchange market in order to acquire external assets,services, and for the repatriation by non-residents of both portfolio and direct investment.
Effective as of August 9, 2016, the Central Bank continued to establish more flexible rules for foreign exchange transactions, for example through the issuance of Communication “A” 6037, followed by Communication “A” 6244 which resulted in a simplification of the rules that had been in place since 2002.
The new regulations provide that foreign exchange transactions may be performed under a sworn statement detailing the subject matter of the transaction; insofar no specific requirements apply to the transaction, and eliminated the obligation to produce documents supporting each foreign exchange transaction.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 – Exchange Controls”.
In addition, transactions involving the creation of external assets by residents are no longer limited by a specific amount, and regulations restricting market access to transactions involving derivative instruments with foreign counterparties have been suppressed. The new regulations also provided greater flexibility to the requirements needed to engage in exchange transactions during extended schedule hours.
Foreign Currency Lending Capacity
The Regulations on the allocation of deposits in foreign currencies, (including Communication “A” 48516428 as amended,amended), establish that the lending capacity from foreign currency deposits, including U.S. dollar-denominated depositsmust be applied in the corresponding deposit currency to be settled in Pesos, must fall under one of the following categories:
(a) | 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; |
(b) | 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; |
(c) | 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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(d) | 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; |
(e) | 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; |
(f) | 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; |
(g) | financings to commercial portfolio clients and loans granted for consumption or housing purposes-according to the provisions established in the rules on “Classification of debtors”, whose destination is the importation of capital goods (“BK” in accordance with the Mercosur’s Common Nomenclature established in Annex I to Decree No. 690/02 and other complementary provisions), which increase the production of merchandise destined for the domestic market; |
(h) | 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; |
(i) | 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; |
(j) | inter-financing loans; |
(k) | Central Bank bills (Letras y Notas) denominated in dollars; |
(l) | 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; |
(m) | 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. |
(n) | 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; |
(o) | financing of investment projects for bovine cattle, including their working capital, without exceeding 5% of deposits in foreign currency of the entity; |
(p) | 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 |
(q) | 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 assessments”, requiring for that purpose an international rating of investment grade risk, to the extent that such letters of credit are unrestricted and that the accreditation of the funds is made immediately at the simple request of the beneficiary entity. |
a. 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;124
b. financing for manufacturers, processors or collectors of goods, provided they refer to non-revocable sales agreements with exporters for foreign currency-denominated prices (irrespective of the currency in which such transaction is settled), and they refer to exchangeable foreign-currency denominated goods listed in local or foreign markets, broadly advertised and easily available to the general public;
c. 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;
d. financing of investment projects, working capital or purchase of any kind of goods—including temporary imports of commodities—that increase or are related to the production of goods to be exported, including syndicated loans, whether granted by local or foreign financial institutions;
e. financing for commercial clients or commercial loans considered as consumer loans, with the purpose of importing capital goods, whenever they help to increase goods production for the domestic market;
f. debt securities or financial trust participation certificates whose underlying assets are loans made by the financial entities in the manners set forth in (a) to (d) above (excluding syndicated loans);
g. foreign currency debt securities or financial trust participation certificates, publicly listed under an authorization by the CNV, whose underlying assets are securities bought by the fiduciary and guaranteed by reciprocal guarantee companies or public guarantee funds, in order to finance export transactions;
h. 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;
i. inter-financing loans (any inter-financing loans granted with such resources must be identified);
j. Central Bank bills denominated in dollars;
k. 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; and
l. 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.
Communication “A” 5534 as amended, provides a specific formula in order to calculate the financial institution’s capacity to lend money in foreign currency for imports (relating to items (d) and (e), and, as applicable items (f) to (h) of the foregoing paragraph).
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 OECDOrganization 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”), and correspondents’ debit and credit balances.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.days and correspondent balances for third-party transfers pending settlement. It does not include, however, foreign currency notes held in custody, correspondent balances for third-party transfers pending settlement, term sales and purchases of foreign currency or securities nor direct investments abroad (Communication “A” 4646 and “A” 4814).
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. In this regard, the aforementionedGEP, thus allowing such entities are allowed to manage their foreign currencyexchange positions, both in terms ofregarding the composition of their assets, andas well as the possibility of entering and exitingto maintain or transfer their holdings inout of the country, with their consequentits subsequent impact on the reserves.
In addition,Furthermore, the aforementioned Communication providedregulation establishes that the entities authorized to operate in foreign exchange may alsoshall carry out arbitrage and foreign exchange transactions,operations, to the extent that the counterparty is a branch or agency abroad of local official banks, a foreign financial entity whollyinstitution, total or majority owned byownership of an entity in foreign states, a foreign financial or exchange entity that is not incorporated in countries or territories pursuant towhere the Recommendations of the Financial Action Task Force, or a foreign company dedicated to the purchase and saletrading 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 and 6780. 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
AllThe foreign currency net global position shall consider all assets, liabilities, commitments and other instruments and operations fromtransactions through financial intermediation in foreign currency and or linked to the variations of the exchangeexchamge rate are included in the net global position,movement, including cash and term transactions andforward transactionsand other derivatives agreements,derivative contracts, deposits in foreign currency deposits in accounts maintainedopened with the Central Bank, gold, positions,position, the Central Bank monetary regulation instruments in foreign currency, subordinated debt in foreign currency and debt securities issuedinstruments in foreign currency.
It also includesForward transactions under master agreements executed in authorized domestic markets paid by settlement of the term transactions carried out within a framework agreement regarding markets authorized by the CNV with the settlement by difference mode,net amount without delivery of the underlying asset traded.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 Dollars shall be expressed in that currency, at the respective exchange rate published by the Central Bank.
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 forwhen determining a bank’s RPC, and anyArgentine government bonds linked to the growth of the GDP, the included items recorded byconcepts that the financial entity registers in its foreign 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.
Two ratios are considered in the Foreign Currency Net Global Position:
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
Pursuant(assets exceeding liabilities): This daily position (daily balance converted to Communication “A” 6128, asPesos at the reference exchange rate of January 1, 2017 this positionthe immediately preceding month) cannot exceed 25%5% of the RPC of the immediately preceding month.
Positive Foreign Currency Net Global Position
Pursuant to Communication “A” 6128 of the Central Bank, as of January 1, 2017 in Cash: this daily position (monthly average of the daily(daily balance converted to Pesos at the reference exchange rate)rate of the immediately preceding month) cannot exceed 25%the higher of U.S.$ 2,500,000 or the 4% of the lesser of the RPC or the entity’s own liquid assets (own liquid assets meaning the RPC surplus over fixed assets and other concepts to be computed in accordance with Central Bank regulation related to the “Fixed assets and other concepts ratio”) of the immediately preceding month.
ExcessesAs of June 18, 2018 the Central Bank allows that the Positive Foreign Currency Net Global Position may reach up to such position will be30% 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; and/or |
(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. |
The excesses of these ratios are subject to a charge equivalentequal to 1.5 times the average nominal interest rate of the Lebac in Pesos (Central Bank bills). The chargesshorter term Peso-denominated LELIQs auction published on the last business day of the relevant period or, if not entered in time and form will beavailable, the last one available for a shorter term. Charges not paid when due are subject to an interest equivalenta charge equal to one and a half times the rate that arises from adding 50% to the rate applicable to thosecharge established for excesses.
In addition to the aforementioned charges, theabove-mentioned charge, sanctions establishedset forth in Sectionsection 41 of the Financial Institutions Act may be appliedFIL shall apply (including attention call,caution, warning, fines,fine, temporary or permanent disqualification for the useto dispose of the banka banking current account, temporary or permanent disqualification to act as promoters, founders, directors, administrators, members of the supervisory boards, trustees,surveillance committees, comptrollers, liquidators, managers, auditors, partnerspartner or shareholders, and revocation of the authorization to operate)license revocation).
Rosario Futures Index (“ROFEX”) U.S. dollar futures state of emergency
On December 14, 2015, Argentina Clearing S.A. and Mercado a Término de Rosario S.A. resolved, through Communication 657 (subject to the CNV’s express approval, which was subsequently granted): (i) to declare a state of emergency with respect to any open positions as of such date involving U.S. dollar futures contracts maturing prior to June 2016 and entered into after September 29, 2015; and (ii) to provide, in respect of any open purchased positions as of such date involving U.S. dollar futures maturing prior to and including June 2016, the following remedies: (a) the original transaction price was adjusted by adding Ps.1.25 per U.S. dollar for those transactions opened from and including September 30, 2015 to and including October 27, 2015; (b) the original transaction price was adjusted by adding Ps.1.75 per U.S. dollar for those transactions opened as of October 28, 2015.
The adjustments referred to in the preceding paragraph were applied by registering a sale transaction at the original transaction price and a simultaneous purchase at the original price plus the amount indicated in items (a) and (b) above, which caused a novation of the transactions involved into new transactions at the new established price.
For the purposes of complying with registration requirements involving the relevant ROFEX and Argentina Clearing S.A. transactions, the Central Bank was registered as counterparty to such transactions.
Assignment of foreign exchange positions by financial and foreign exchange entities
On December 17, 2015, Communication “A” 5852 provided that financial entities authorized to deal in exchange transactions and foreign exchange entities were required to sell to the Central Bank their respective positive foreign currency positions at closing on December 16, 2015, valued at the reference exchange rate of such date, and then repurchase them in full. The repurchase transaction could be effected on December 17, 18 or 21, 2015, at the reference exchange rate prevailing on the day of the repurchase.
In particular, an open purchase position in U.S. dollar futures traded on ROFEX and having had its original price adjusted as provided under Item II) of Communication 657 of Argentina Clearing and Mercado a Término de Rosario S.A. was required to be sold to the Central Bank at the adjusted original price resulting from the enforcement of such Communication, and then repurchased in full at the reference exchange rate prevailing on the day of the repurchase.
For the purpose of exercising the repurchase date option contemplated in the first paragraph, an entity was required to submit a letter signed by its president or chief local officer to the General Operations Sub-department before 10:00 a.m. of the selected day, expressly stating the decision it had adopted.
If an entity failed to exercise the option contemplated in the first paragraph or to comply with any of the formal requirements set forth above, the repurchase was to be completed on December 22, 2015 at the reference exchange rate prevailing on such date.
The notion of “foreign currency position” referred to above was determined as follows: (i) for foreign exchange bureaus, agencies and offices: their general exchange position; and (ii) for financial entities authorized to deal in foreign exchange transactions: their net global foreign currency position, less any net assets corresponding to their liabilities in foreign-currency denominated government securities, based on the currency in which the respective financial services were paid (either a foreign currency or U.S. dollar-linked Argentine Pesos).
If the determined foreign currency position was negative, no sale to the Central Bank and repurchase was required.
On December 18, 2015, the Bank carried out the above-mentioned repurchase at the reference exchange rate established for such date. In addition, on December 22, 2015, CCF carried out the above-mentioned repurchase at the reference exchange rate established for such date.
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; |
· | Miscellaneous receivables; |
· | Property and equipment; and |
· | Other assets. |
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· Shares of local companies
· Miscellaneous receivables
· Property and equipment
· Other assets
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, 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 regulationsrules 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.5 millionPs.29,740,000 to micro-credit institutions and commercial loans of up to Ps.5 millionPs.29,740,000 with or without preferred guarantees. All other loans are considered commercial loans. Consumer or housing loans in excess
of Ps.5 million,Ps.29,740,000, 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.5Ps.7.9 million, 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.
Commercial Loans Classification
The principal criterion by which 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 regulations,rules, commercial loans are classified as follows:
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Classification | Criteria | |
| Borrowers | |
Subject to special Monitoring/Under observation | 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 special Monitoring/Under negotiation or refinancing agreement | 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. | |
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 high risk of insolvency | 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. | |
Irrecoverable according to Central Bank’s Rules | (a) | |
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 of such loans. Under the Central Bank regulations,rules, consumer and housing borrowers are classified as follows:
Classification | Criteria | |
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. | |
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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Classification | Criteria | |
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. | |
Non-recoverable loans | Loans in which payment obligations are more than one year overdue or the debtor is insolvent or in bankruptcy or liquidation. | |
Irrecoverable loans Central Bank’s rules | Same criteria as for commercial loans in the Irrecoverable according to Argentine Banking GAAP. | |
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 |
|
“Normal” |
| 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 | % |
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 SuperintendencySuperintendency. The frequency of the review of existing classifications must be linked to review at any time.the importance considering all facilities. The classification analysis shall be duly documented. The classification review must include (i) clients whose outstanding credit (in Pesos and in foreign currency) exceeds the lesser of 1% of the financial institution’s RPC corresponding to the prior month and Ps.4.0 million and (ii) at least 20% of the financial institution’s total active credit portfolio, which, if applicable, shall be completed by incorporating clients whose total indebtedness is less than the limits described in (i) in this sentence.
In the case of commercial loans, the applicable regulations also require a minimum frequency of review. Such review must take place: (i) quarterly for clients with indebtedness equal to or greater than 5% of the financial entity’s RPC for the prior month and (ii) semi-annually for clients whose indebtedness is (x) greaterhigher than the lesserlower of 1% and Ps.19.8 million of the financial entity’s RPC for the prior month, and Ps.4.0 million, and (y) lesserlower than 5% of the financial entity’s RPC for the prior month. At the end of the second quarter,first calendar semester, the fulltotal review under points (i) and (ii) should coverhave covered no less than 50% of the financial institution’sentity’s commercial loan portfolio and, if less, it shall be completed by incorporating customersclients (in descending order) whose total indebtedness is less thaninferior to the limits described in (ii)(x) of the preceding sentence.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 is maintainedunder the expected credit losses method included in accordance with applicable regulatory requirementsIFRS 9. The most significant judgements of the Central Bank. Increasesmodel 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 1.13 of our audited consolidated financial statements, provides more detail of how the expected credit loss allowance are based on the level of growth of the loan portfolio, as well as on the deterioration of the quality of existing loans, while decreases in the allowance are based on regulations requiring the write-off of non-performing loans classified as irrecoverable after a certain period of time and on decisions of the management to write off non-performing loans evidencing a very low probability of recovery.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. 450,000Ps.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.450,000,Ps.1,500,000, 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 thisthese 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.
Mandatory Deposit Insurance System
deposit insurance system
Law No. 24,485 passed on April 12, 1995, as amended, created a Deposit Insurance System, or “SSGD”,“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”, managed by a private-sector corporation called SEDESA.Seguro 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 regulations.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 Argentine 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, as set forth by Central Bank Communication “A” 5659, dated October 31, 2014, as amended. Pursuantamended, which pursuant to Communication “A” 5943,6973 of the Central Bank, set the guarantee amount for these deposits as of May 1, 2016 at Ps.450,000.
2020 the amount covered by the SSGD is currently Ps.1,500,000.
Effective payment on this guaranty will be made within 30thirty (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) immobilized balances from deposits and other excluded operations, and (vi) 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 deposits or closed accounts.
accounts, and (vi) immobilized balances from deposits and excluded transactions.
Pursuant to Communication “A” 5710,5943, every financial institution is required to contribute to the FGD a monthly amount of 0.06%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. Communication “A” 5943, set the monthly contribution to the FDG at 0.015%.
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.
GovernmentMeasuresin Response to theOngoing COVID-19Pandemic
The Argentine government and the Central Bank issued a series of preventive measures tocontain the spread of COVID-19 and mitigate its economic impact. In this regard, on March 19, 2020, the Executive Branchdeclared a nationwide lockdown from March 20, 2020 through March 31, 2020, whichhas now been extended to May 10, 2020. However, since April 13, 2020, the nationaland provincial governments have supervised a gradual relaxation of thelockdown and social distancing measures.
In this context, the Central Bank issued Communications “A” 6939 and “A” 6942, by means of which it was determined that during thelockdown period: (i) financial institutions shall not be open to the public; and (ii) the maturity 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.
On a different note, by means of Communication “A” 6939, the Central Bank suspended, until June 30, 2020, the distribution of dividends by financial entities. For more information, please see “Argentine Banking Regulations— Requirements applicable to 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
o | Classification of Debtors: On March 19, 2020, the Central Bank issued Communication “A” 6938, by which new rules regarding the criteria for debtor classification and provisioning are to be adopted until September 30, 2020. These rules provide an additional 60 days period of non-payment before a loan is required to be classified as non-performing, and include all financings to commercial portfolio clients and loans granted for consumption or housing purposes. |
o | Facilities and Government Guarantees to Finance Payment of Salaries: Decree 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. Simultaneously, the Central Bank set 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.On March 26, 2020, the Central Bank also issued Communication “A” 6946, by means of which the facilities granted at a preferential rate (not more than 24% per year) within the framework of Communication “A” 6937 to SMEs and households may be deducted from reserve requirements, considering 130% of its amount when its proceeds are for the payment of salaries and the granting entity is the agent of payment of those salaries. These assistances will be provisioned in the financial statements until their cancellation based on the classification of the small and medium-sized company at the time of granting. The amounts of: a) the reduction of the provisions by application of this measure; b) the reduction of the provisions due to the suspension of the application of the expected credit losses criterion for Group B entities; and c) the increase in the RPC due to the positive difference between the provisions according to IFRS and according to the BCRA regulatory framework for Group A entities, must be subtracted from the calculation to determine the distributable profit. |
o | 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. |
o | Time deposits minimum rate. By virtue of Communication “A” 6980, the Central Bank ruled that all non-adjustable time deposits under Ps.1 million made by individuals as of April 20, 2020, shall have a minimum rate equivalent to the 70% of the average LELIQ’s tendering during the week prior to the date in which the deposit is made. |
o | Securities-guaranteed transactions prohibition. By means of Communication “A” 6978, the Central Bank forbid financial institutions to guarantee transactions via securities (caución bursátil). |
o | Deposit Insurance System. Pursuant to Communication “A” 6973, the Central Bank raised the amount covered by the Deposit Insurance System to Ps.1,500,000. |
Other restrictions
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.
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 regulations,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.
Law 26,831 (the “CapitalThe Argentine Capital Markets Law”),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. |
TM20
Beginning October 5, 2017, the Central Bank has begun to publish on a daily basis a survey of the average interest rates paid by Banks for their fixed-term deposits of over Ps.20 million, for terms 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.
The information published by the Central Bank is broken down by public vs. private banks, both for operations in Pesos and foreign currencies.
Financial Institutions with Economic Difficulties
The FIL provides that any financial institution, including a commercial bank, operating at less than certain required technical ratios and minimum net worth levels,(i) with its solvency impaired, in the judgment of the Central Bank adoptedBank; (ii) recording deficiencies on the minimum cash reserve requirement during the periods established by members representing the majority ofCentral Bank; (iii) recording repeated failures to comply with the Board of Directors, with impaired solvencyvarious limits or liquiditytechnical relations established; or in any of(iv) that could not maintain the other circumstances listed in Section 44 of the FIL,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, or a restructuring plan.). The plan must be submitted to the Central Bank on a specified date, notno later than 30thirty (30) calendar days afterfrom the date on which a request to that effect is made by the Central Bank. UponIf the institution’s failureinstitution 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.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 distribuition 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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Furthermore, theThe Central Bank’s charter authorizes the Central Bank 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 30thirty (30) days if the liquidity or solvency thereof areis adversely affected. Such term could be renewed for up to 90ninety (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.
Institution restructuring to safeguard credit and bank deposits
If pera financial institution meets the Central Bank’s criteria a financial institutionand is undergoing a situation which, underfound to be in any of the FIL, would authorizesituations set forth in Section 44 of the Central Bank to revoke its license to operate as such,FIL, the Central Bank may before considering such revocation, order a plan ofauthorize the restructuring that may consist of a series of measures, including, among others:
· adoption of list measures to capitalize or increase the capital of the financial institution;
· revoke the approval granted to the shareholders of the financial institution in defense of depositors, prior to hold interests therein;
· restructure or transfer assets and liabilities;
· grant temporary exemptions to comply with technical regulations or payment of charges and penalties arising from such flawed compliance; or
· appoint a delegate or auditor (“interventor”) that may prospectively replace the Board of Directorsrevocation of the financial institution.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) at the request of the legal or statutory authorities of the institution; (b) in casethe cases contemplated by the Argentine Civil and Commerce Code or in the laws governing its existence as a restructuring plan fails or is not deemed feasible, or local laws and regulations are violated, orlegal entity; (c) when, to the judgment of the Central Bank, the affections to the solvency and/or liquidity of the financial institution is affected, or significant changes occurcannot be solved through a regularization and sanitation program; (d) in the institution’s condition sincerest of the original authorization was granted, or if any decisioncases provided by the financial institution’s legal or corporate authorities concerning its dissolution is adopted, among other circumstances set forth in the FIL. In addition, pursuant to Communication “A” 5785, sanctions imposed by the Central Bank, the UIF, the CNV and/or the National Superintendency of Insurance (Superintendencia de Seguros de la Nación) on financial institutions and/or their authorities, may result in the revocation of their licenses to operate as financial institutions. Such revocation may occur when, in the opinion of the Board of Directors of the Central Bank, there was a material change in the conditions deemed necessary to maintain such license, including those relating to the suitability, experience, moral character or integrity of (i) the members of a financial institution’s Board of Directors (directors, counselors or equivalent authorities), (ii) its shareholders, (iii) the members of its supervisory committee and (iv) others, such as its managers. For such purposes, the Superintendency also takes into consideration information that it receives from, and/or sanctions imposed by, equivalent foreign agencies or authorities. When weighing the significance of the sanctions, the Superintendency takes into account the type of sanctions, the underlying reason for such sanctions and the amount of sanctions imposed on the financial institution. Additionally, the Superintendency factors in the degree of participation in the events leading up to the sanction, the economic effects of the violation, the degree of damage caused to third parties, the economic benefit that the sanctioned party received from the violation, the sanctioned party’s operating volume, its liability and the title or function that such party holds.
Once the license to operate as a financial institution has been revoked, the financial institution will be liquidated.
LiquidationFIL.Liquidation of Financial Institutions
As provided in the FIL, the Central Bank must notify the revocation decision to a competent court, of the revocation decision, 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 or not there isare sufficient assuranceassurances that the corporate authorities are capable of carrying out such liquidation properly.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 60sixty (60) calendar days has elapsed since the license was revoked.
Once the bankruptcy of a financial institution has been adjudged, provisions of the Bankruptcy Law (as defined below)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 Consolidation and Transfer of Goodwill
Merger consolidation 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 fortowards those banks benefitingthat 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.
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—Liquidity and Solvency Requirements—Minimum Capital Requirements”), the Major Exposure to Credit Risk regulations (please see “Argentine Banking Regulation—Credit Risk Regulation—Large Exposures”), the Liquidity Coverage Ratio (please see “Argentine Banking Regulation—Internal Liquidity Policies of Financial Institutions—Liquidity Coverage Ratio) and the Net Stable Funding Ratio (please see “Argentine Banking Regulation—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 regulations
The Central Bank has recently issued Communications “A” 6885 (repealing Communication “A” 6859), by means of which it began to regulate certain aspects ofFintech operations. Through these communications, it 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 PSPs and established a specific registry for them. 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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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”. 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.
Anti-Money Laundering Regulation
Anti-Money Laundering/Combating theand Terrorism Financing of Terrorism (“AML/CFT”)
Regime
The concept of money laundering is generally used to denote transactions intended to introduce criminal proceedsaimed at introducing funds from illicit activities into the institutional system and thus to transform profitsgains from illegal activities into assets of a seemingly legitimate origin.
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.
On April 13, 2000, the ArgentineNational Congress passed Law No. 25,246, assubsequently amended including by Laws No. 26,087; 26,119;26,087, 26,119, 26,268, 26,683 26,734, 26,831 and 26,860 (the “Anti-Money Laundering26.734 (jointly, the “AML/ CFT Law”), which definescreated at the national level the Anti- Money Laundering and Terrorism Financing Regime (“AML/CFT Regime”), criminalizing money laundering, creating and designating the UIF as a type of crime. In addition, the law, which supersedes several sectionsenforcement authority of the Argentine criminal code established severe penaltiesregime, and establishing the legal obligation for anyone participating in any such criminal activityvarious public and createdprivate sector entities and professionals to provide information and cooperate with the UIF, establishing an administrative criminal system. Following the enactment of Law No. 27, 260 and its complementary Decree No. 895/2016, theUIF.
The UIF is nowa decentralized agency that operates with autonomy and financial independency under the supervision of the Ministry of Economy, and Public Finance (currently the Ministry of Treasury).
On June 1, 2011, the Argentine Congress passed Law No. 26,683, amending several sections of the Argentine Criminal Code and Law No. 25,246. This law included money laundering as an autonomous crime separating it from the crime of concealment. It also modified the integration of the UIF, establishing more restrictive rules for the appointment of its agents; expanded the UIF’s powers by allowing its agents to request reports from both private and public entities; and provided that the UIF may seize unlawfully obtained funds and property without a court order.
The main purpose of the Anti-Money Laundering Lawmission is to prevent and deter the crimes of money laundering. In line with internationally accepted practice, it does not attribute responsibility for controlling these criminal transactions only to government agencies, but also assigns certain information-gathering duties to diverse private sector entities such as banks, stockbrokers, brokerage houseslaundering and insurance companies.terrorist financing.
On December 22, 2011, the Argentine Congress passed Law No. 26,734 (the “Countering Financing of Terrorism Law”), which includes terrorism financing as a crime.
Below is a summary ofThe following are certain provisions regarding the provisions ofrelating to the AML/CFT regime set forthRegime established by the Anti-Money LaunderingAML/ CFT Law and Combating Financing of Terrorism Laws, as amendedits amending and supplemented by other rules and regulations,complementary provisions, including regulations issued by the UIF the Central Bank,and the CNV and other regulatory entities. Investors are advised tothe Central Bank. It is recommended that investors consult their own legal counseladvisors and to read the Anti-Money Laundering and Combating Financing of Terrorism LawsAML/ CFT Law and its statutorycomplementary regulations. The UIF is
Money laundering and terrorist financing in the agency responsible for the analysis, treatment and transmission of information, with the aim of preventing money laundering resulting from different
crimes and the financing of terrorism. The Argentine Criminal Code
(a) | Money laundering |
Section 303 of the Argentine Criminal Code (the “ACC”) defines money laundering as a crime committed by anywhenever a person who exchanges,converts, transfers, manages, sells, levies, disguisesencumbers, conceals or in any other way commercializes goods obtained through a crime,puts into circulation in the market, property derived from an unlawful act, with the possible consequence that the origin of the original assetsproperty or the substitute thereof appear to come fromsubordinate property acquires the appearance of a lawful source, provided that their value exceeds Ps.300,000, whether such amount results from oneorigin, either in a single act or more related transactions. The penalties established areby the following:repetition of various acts linked to each other. Section 303 of the ACC establishes the following penalties:
(i)
(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 Ps. 300,000, the penalty shall be imprisonment for a term of six months to three years. |
(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; |
(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 transaction;
(ii) the penalty provided in section (i) shall be increased by one thirdcommission of the maximumoffense, the size, nature and a halfeconomic capacity of the minimum, when (a)legal entity. In the person carries outcases in which it is essential to maintain the act on a regular basisoperational continuity of the entity, or as a member of an association or gang organized with the aim of continuously committing acts of a similar nature,public work, or particular service, the sanctions of suspension of activities or dissolution and (b) the person is a governmental officer who carries out the act in the course of his duties;
(iii) if the valueliquidation of the assets doeslegal person shall not exceed Ps.300,000, the penalty shall be imprisonment for six (6) months to three (3) years.applicable.
The Argentine Criminal Code also punishes any person who receives money or other assets from a criminal source with the purpose of applying them to a transaction, making them appear to be from a lawful source.
(c) | Terrorism financing |
Section 306 of the Argentine Criminal Code (as amended by Law No. 26,734) defines terrorismACC criminalizes the financing as a crimeof terrorism. This offense is committed by any person who directly or indirectly collects or provides property or money, with the intention that they beof it being used, or knowingin the knowledge that theyit will be used, in wholefull or in part: (a) to finance the commission of the crime established in Section 41 quinquies; (b) by an organization that commits or attempts to commit the crimes established in Section 41 quinquies; (c) by a person who commits, attempts to commit or participates in any way in the commission of the crimes established in Section 41 quinquies.
(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 fines froma fine of two (2) to ten (10) times the amount of the transaction.operation. Likewise, the same penalties shall apply to legal persons as described for the crime of money laundering.
Reporting Subjects obliged to inform and collaborate 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 lineaccordance with internationally accepted practices, the Anti-Money LaunderingAML/ CFT Law does not merely assign responsibility for controlling these criminal transactions to government agencies, but also assigns certain duties to various private sector entities such as banks, stockbrokers, brokerage houses and insurance companies, which become legally bound reporting parties. These duties basically consist of information-capturing functions.
According to the Anti-Money Laundering Law,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, AFIP, the Superintendence of Insurance of the Nation (SSN), the CNV and the Public Registry; and |
(v) | professionals in the area of economic sciences and notaries public. |
The Reporting Subjects have the following duties:
(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 report to the UIF: (i) financial institutions and insurance companies; (ii) exchange agencies and individuals or legal entities authorized by the Argentine Central Bank to operate in the purchase and saleAnnex I of foreign currency in the form of cash or checks drawn in foreign currency or by means of credit or debit cards or in the transfer of funds within Argentina or abroad; (iii) broker-dealers, companies managing investment funds, over-the-counter market agents, and intermediaries engaged in the purchase, lease, or borrowing of securities; (iv) armored transportation services companies and companies or concessionaires rendering postal services that carry out foreign currency transfers or remittance of different types of currency or notes; (v) governmental organizations, such as the Central Bank, the Argentine Tax Authority, the National Superintendency of Insurance (Superintendencia de Seguros de la Nación), the CNV and the IGJ; (vi) professionals in economics sciences and notaries public; and (vii) individuals and legal entities acting as trustees of any kind and individuals or legal entities related directly or indirectly to trust accounts, trustees and trustors under trust agreements.
Individuals and entities subject to the Anti-Money Laundering Law must comply with some duties that include: (i) obtaining documentation from their customers that irrefutably evidences their identity, legal status, domicile, and other data stipulated in each case (know your customer policy); (ii) reporting any suspicious event or transaction (which according to the customary practicesResolution No. 154/2018 of the field involved, as well as toUIF (which establishes the experiencesupervision and competenceinspection mechanism of the parties who have the duty to inform, are those transactions attempted or consummated that, having been previously identified as unusual transactions by the legally bound reporting party, or have no economic or legal justification or are unusually or unjustifiably complex, whether performed on a single occasion or repeatedly (regardless its amount); and (iii) abstaining from disclosing to customers or third parties any act performed in compliance with the Anti-Money Laundering Law. Within the framework of analysis of a suspicious transaction report, the aforementioned individuals and entities cannot refrain from disclosing to the UIF any information required from it by claiming that such information is subject to bank, stock market or professional secret, or legal or
contractual confidentiality agreements. The AFIP shall only disclose to UIF the information in its possession when the suspicious transaction report has been made by such entity and refers to the individuals or entities involved directly with the reported transaction. In all other cases the UIF shall request that the federal judge holding authority in a criminal matter order the AFIP to disclose the information in its possession.
Argentine financial institutions must comply with all applicable anti-money laundering regulations as provided by the Central Bank, the UIF, and, if applicable, the CNV. In this regard, in accordance with Resolution No. 229/2014 of the UIF,UIF), both the Central Bank and the CNV are considered “Specific Control Organs.”Agencies”(“Órganos de Contralor Específico”). In such capacity, they must cooperatecollaborate with the UIF in the evaluation of the compliance with the anti—money laundering proceedingsAML/CFT procedures by the legally bound reporting partiesReporting Subjects subject to their control. In that respect,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 if necessary,apply to implement certain corrective measuresmanage, in accordance with their policies, procedures and actions.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 121/2011No. 156/18), change the formal regulatory compliance approach to a risk-based approach (“RBA”), based on the revised recommendations issued by the UIF, as amended (“Resolution 121”Financial Action Task Force (the “FATF”), was applicable in 2012, in order to financial entities subjectensure that the implemented measures are proportional to the FIL,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 entities subject to the Law No. 18,924, as amended, and to individuals and legal entities authorized by the Central Bank to intervene in the purchase and sale of foreign currency through cash or checks issued in foreign currency or through the use of credit or payment cards, or in the transfer of funds within or outside the national territory. Resolution No. 229/2011 of the UIF, as amended or supplemented by Resolutions No. 52/2012 and 140/2012 (“Resolution 229”), was applicable to brokers and brokerage firms, companies managing common investment funds, agents of the over-the-counter market, intermediaries in the purchase or leasing of securities affiliated with stock exchange entities with or without associated markets, and intermediary agents registered on forwards or option markets. Resolution 121 and Resolution 229 regulated, among other things, the obligation to collect documentation from clients and the terms, obligations and restrictions for compliance with the reporting duty regarding suspicious money laundering and terrorism financing transactions and set forth general guidelines in connection with the client’s identification (including the distinction between occasional and regular clients), the information to be requested, the documentation to be filed and the procedures to detect and report suspicious transactions.
The main duties established by such resolutions were the following: (a) to create a manual establishing the mechanisms and procedures to be used tomore effectively prevent money laundering and terrorism financing; (b) to appoint a memberterrorist financing. Likewise, the provisions of the Board of Directors as compliance officer; (c) to implement periodic audits; (d) to offer personnel training; (e) to create a record of detected unusual (as such term is explained below) and suspicious operations; (f) to implement technological tools to allow for the development of efficient control systems for the prevention of money laundering and terrorism financing; (g) to implement measures to allow persons obliged under Resolution 121 and Resolution 229 to electronically consolidate the transactions carried out with clients, and to develop electronic tools to identify certain behaviors and observe possible suspicious transactions, requesting information and, if applicable, supporting documents from its customers; and (h) to adopt reinforced identification methods applicable to customers with specific features as provided by applicable regulations. Entities covered by Resolution 121 and Resolution 229, as legally bound reporting parties, had to report any money laundering suspicious activity to the UIF within 150 calendar days of its occurrence (or attempt) and any terrorism financing suspicious activity before a 48-hour period of its occurrence (or attempt) has elapsed. In addition, pursuant to UIF Resolution No. 3/2014, within4/17 established the maximum 150 calendar day period, entities covered by Resolution 121possibility of conducting special due diligence procedures with respect to clients supervised abroad (formerly called “international investors”) and Resolution 229 had to report any money laundering suspicious activitylocal clients who are Reporting Subjects to the UIF within 30 calendar days asUIF.
Asset Freezing Regime
Decree No. 918/2012 establishes the procedures for the freezing of assets linked to terrorism financing, and the day on which any such activity is qualified as suspicious by such legally bound reporting party.
Reporting parties must also fulfil other requirements, including but not limited to: (a) put together a manual outliningcreation and maintenance procedures (including the mechanismsinclusion and removal of suspected persons) for registries created in place to complyaccordance with the applicable anti-money laundering law and the rules handed down by the UIF; (b) appoint a Compliance Officer who must necessarily be a member of the Board and who shall watch for the adherence to and implementation of the procedures and obligations set forth in the applicable rules and regulations; (c) set up a “money laundering control and prevention committee” to plan for, coordinate and watch for compliance with the policies laid down by the entity’s Board of Directors, (d) arrange for periodical and independent audits of the global anti-money laundering program; and (e) embrace risk analysis policies and develop a written record of the risk analysis and management actions taken in connection with the reported suspicious operations.relevant United Nations Security Council’s resolutions.
In August 2016,Additionally, UIF Resolution No. 94/2016 established that legally bound reporting parties under Resolution 121 could apply simplified due diligence measures for customer identification when opening a savings account (i.e., presentation of ID, PEP declaration and checking that29/2013, regulates the holder in the lists of terrorists and/or terrorist
organizations) in cases where the client met certain specified requirements. According to the resolution, the simplified identification measures did not release the legally bound reporting party from the duty of monitoring the operations carried out by such customer. Also, in case any of the requirements stated in the resolution could not be verified, the legally bound reporting parties had to apply the identification measures set out in Resolution 121.
Additionally, following the guidelinesimplementation of Decree No. 918/2012 described below, the UIF’s Resolution No. 29/2013 regulatedand establishes: (i) the method of reportingprocedure 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.
On January 11, 2017,Politically Exposed Persons
Resolution No. 134/2018 of the UIF published(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).
Following the aforementioned RBA, Resolution No. 4/17 (“Resolution 4/17”), which allows134/2018 establishes that Reporting Parties must determine the legally bound reporting parties detailed in subsections 1, 4level of risk at the time of beginning or continuing the contractual relationship with a PEP, and 5 of section 20 of Law No. 25,246, as amended (i.e., financial entities subjectmust take due diligence measures, adequate and proportional to the FIL, brokersassociated risk and brokerage firms, companies managing common investment funds, agentsthe operation or operations involved.
In addition, the UIF has issued the Guide for the management of the over-the-counter market, intermediariesrisks of money laundering and financing of terrorism in the purchase or leasing of securities affiliated with stock exchange entities with or without associated markets, and intermediary agents registered on forwards or option markets),relation to apply special due diligence identification measurescustomers (and ultimate beneficiaries) that are PEPs, which sets up guidelines for Reporting Parties in order to foreign and national investors (which must comply with the requirements established by Resolution 4/17 to qualify) to Argentina when at-distance opening special investment accounts. The special due diligence regime shall not exempt the legally bound reporting parties of Resolution 4/17 from monitoring and supervising the transactions performed during the course of the commercial relationship, according to a risk-based approach.No. 134/2018.
Resolution 4/17 also regulates the due diligence measures between legally bound financial reporting parties. It requires that when the opening of the accounts is requested by settlement and clearing agents, or the “ALyCs,” the local financial entity will have complied with current anti-money laundering and counter terrorist financing regulations after performing due diligence with respect to the ALyCs. The ALyCs shall be responsible for performing due diligence with respect to its customers. Resolution 4/17 expressly establishes that, even though the financial entities are not responsible for performing due diligence with respect to the ALyCs’ customers, they are not exempt from monitoring and supervising the transactions performed by their clients (the ALyCs) during the course of the commercial relationship, according to a risk-based approach.
CNV Regulations
The Central Bank and the CNV must also comply with anti-money laundering regulations set forth by the UIF, including reporting suspicious transactions. In particular, the Central Bank must comply with UIF Resolution No. 12/2011, as supplemented by,Rules stipulate, among other resolutions, Resolutions No. 1/2012 and No 92/2012, which, among other things, sets forthprovisions, that the Central Bank’s obligation to evaluate the anti-money laundering controls implemented by Argentine financial institutions (with the limitation of access to the reports and records of suspicious operations, which are, as explained above, confidential and subjectregulated entities under its control shall only to the UIF’s supervision), and lists examples of what circumstances should be specifically considered in order to establish whether a particular transaction may be considered unusual and eventually qualified as suspicious.
Central Bank regulations require Argentine banks to take certain minimum precautions to prevent money laundering and terrorism financing. Each institution must have an anti-money laundering committee, formed by a member of the Board of Directors, the officer responsible for AML/CFT matters (Oficial de Cumplimiento) and an upper-level officer for financial intermediation and foreign exchange matters (i.e., with sufficient experience and knowledge on such matters and decision-making powers). Additionally, as mentioned, each financial institution must appoint a member of the Board of Directors as the person responsible for money laundering prevention, in charge of centralizing any information the Central Bank may require on its own initiative or at the request of any competent authority and reporting any suspicious transactions to the UIF. Notwithstanding the officer’s role as a liaison with the UIF, all board members have personal, joint, several and unlimited responsibility for the entity’s compliance with its reporting duties with the UIF. In addition, this officer will be responsible for the implementation, tracking and control of internal procedures to ensure compliance with the regulations in financial institutions and its subsidiaries.
In this regard, the guidelines issued by the Central Bank to detect unusual, suspicious or terrorist financing money laundering transactions require reporting suspicious transactions, based on the legally bound reporting party’s resources and the type of analysis carried out. In particular, the following circumstances, among others, should be
considered: (a) the amounts, types, frequency and nature ofperform the operations carried outprovided for under the public offering system when these operations are performed or ordered by the clients that are not related to their economic background and activity; (b) unusually high amounts, the complexity and the unusual modalities of the operations carried out by the clients; (c) when clients refuse to provide datapersons constituted, domiciled or documents required by the entities or when the information supplied by them is detected to be altered; (d) when the client does not comply with the applicable rulesresident in the matter; (e) when the client exhibits an unusual disregard for the risks assumed and/or the costs of the transactions are inconsistent with the economic profile of the transaction; (f) when the transactions involvecountries, domains, jurisdictions, territories or associated states that arenot considered “cooperatorsto be non-cooperative or high risk by the FATF.
Similarly, they establish the payment modalities and control procedures for the purpose of fiscal transparency” according to the provisions of Article 1 of Decree 589/2013, (g) when several different entities report the same address, or when the same persons represent or are authorized signatories of several different entities, without any economic or legal reason, with special consideration for any of the companies or organizations included in the list contained in section 2(b) of Decree No. 589/2013 whose main activity involved offshore transactions; (h) when the transactions involved are of similar nature, amount, modality or simultaneity, implying that they could have been fragmented into several small-volume transactions, in order to evade the procedures for detecting and/or reporting operations; (i) continued gains or losses on repeated transactions between the same parties; or (j) when there is evidence of the illegal origin, management or destinationreception and delivery of funds used in operations, for which the legally bound reporting party does not have an explanation.from and to clients.
Central Bank Rules
Furthermore, pursuantPursuant to Communication “A” 5738 (as6399 of the Central Bank, as amended and supplemented, including without limitation, by Communication “A” 6060)6709, Reporting Subjects must keep - for a period of 10 years - written records of the Central Bank, Argentine financial institutions must comply with certain additional “know yourprocedure applied in each case for the discontinuation of a client's operations. Among these records, they shall keep a copy of any notification sent to the customer policies.” In this sense, pursuant to such Communication, under no circumstance may new commercial relationships be initiated ifrequesting further information and/or documentation, the “know your customer policies”corresponding notices of receipt and the risk management legal standards have not been complied with. In addition, in respect ofdocuments identifying the existing clients: if the “know your customer policies” could not be complied with, the Argentine financial institution must carry out an analysis based on risk, in order to assess the continuation of operations with such client. The criteria and procedure must be describedofficials who took part in the financial entity’s risk management internal handbook regarding money laundering regulations. If the Argentine financial institution must discontinue operations with such client, it must do it in accordance with Central Bank’s regulations for each type of product. Furthermore, pursuant to this Communication, Argentine financial entities must keep the documentation related to the discontinuance for 10 years and include in their prevention manuals the detailed procedures to initiate and discontinue operations with clientsdecision, in accordance with the above-mentioned additional “know your customer policies” implemented.respective procedural manuals.
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Tax Amnesty System
The CNV Rules include a specific chapter regarding “Preventionvoluntary system of Money Laundering and the Financing of Terrorism” and state that the persons set forth therein (Negotiation Agents, Clearing and Settlement Agents (which are stockbrokers), Distribution and Placement Agents, Manager and Custody Agents of Collective Investment Funds, Brokerage Agents, Collective Depositary Agents, issuers with respect to capital contributions, irrevocable capital contributions for future capital increases or significant loans that have been made in its benefit, specifically with respect to the identity of contributors and/or creditors and the origin and legality of the funds so contributed or loaned) are to be considered legally bound to reportdeclaration under the Anti-Money Laundering Law, and therefore must comply with all the laws and regulations in force in connection with anti-money laundering and terrorism financing, including resolutions issued by the UIF, presidential decrees referring to resolutions issued by the United Nations Security Council in connection with the fight against terrorism and the resolutions (and its annexes) issued by the Ministry of Foreign Affairs. In addition, CNV Rules impose certain restrictions in connection with payment arrangements (limiting, among other things, the cash amount that the entities set forth therein could receive or pay per day and per client, to Ps.1,000) and impose certain reporting obligations.
In addition, the CNV Rules establish that the above-mentioned entities shall only be able to carry out any transactions contemplated under the public offering system, when such transactions are carried out or ordered by persons organized, domiciled or resident in dominions, jurisdictions, territories or associated States included in the cooperating countries list contained in Executive Decree No. 589/2013, section 2(b). When such persons are not included in such list and in their home jurisdiction qualify as registered intermediaries in an entity under control and supervision of a body that carries out similar functions to those carried out by the CNV, they will only be allowed to carry out such transactions if they provide evidence indicating that the relevant securities and exchange commission in their home jurisdiction has signed a memorandum of understanding for cooperation and exchange of information with the CNV.
Regarding terrorism financing, Decree No. 918/2012 established the procedures for the freezing of assets linked to terrorism financing (including automatic freezing), 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.
On February 17, 2016, the “National Coordination Program for the Prevention of Asset Laundering and the Financing of Terrorism” was created by Executive Decree No. 360/2016 as an instrument of the Ministry of Justice and Human Rights. This Program was assigned the duty to reorganize, coordinate and strengthen the national system for the prevention of money laundering and the financing of terrorism, taking in consideration the specific risks that might have an impact on Argentine territory and the global demand for a more effective compliance with international obligations and recommendations established under United Nations Conventions and the standards of the Financial Action Task Force (FATF). These duties will be performed and implemented through a National Coordinator appointed for this purpose. Also, applicable statutory rules were modified, and it was established that the Ministry of Justice and Human Rights will be the Argentine government’s central authority in charge of the inter-institutional coordination among all public and private agencies and entities with competent jurisdiction on this matter, while the UIF will retain the ability to perform operating coordination activities at the national, provincial and municipal levels in relation to matters strictly inherent in its jurisdiction as a financial intelligence agency.
Additionally, through the enactment ofTax Amnesty Law No. 27,260 and its supplementalRegulatory Decree No. 895/2016,16 (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 was grantedhas the rightpower to providecommunicate information to other public entities who also have intelligence or investigation rights, insofar as the sharing of this information has been previously authorized by the presidentagencies, based on a previous resolution of the UIF as long asUIF’s President and provided that there is reasonable,are serious, precise and serious evidenceconcordant indications of the commission of any of the crimes contemplated under the Anti-Money Laundering Law. The entities receiving the communications of the UIF providing this information will be subject to the confidentiality obligations of Section 22 of the Anti-Money Laundering Law, and will be subject to the criminal penalties of such law if they breach their duty of confidentiality and reveal secret information.
In June 2017, the UIF published Resolution No. 30-E/17, which abrogated Resolution 121 and set the new guidelines that financial and foreign exchange entities must follow as legally bound financial reporting parties under the Anti-Money Laundering Law, based on the revised FATF recommendations of 2012, in order to adopt a risk-based approach. Resolution No. 30-E/17, effective as of September 15, 2017 (except for a few provisions, which are set to become effective on March and June 2018), determines the minimum compliance elements that must be included in a system for the prevention of money laundering and terroristand/or terrorism financing such ascrimes. Furthermore, the process of customer due diligence, training programs, operations monitoring, reporting of suspicious operations and non-compliance normative, among others.
Resolution No. 30 provides that financial entities, such as us, are requiredAFIP remains obliged to take certain actions embracing a Risk-Based Approach, aimed at identifying and assessing their respective risk exposure to money laundering and terrorism financing, in respect of their customers, countries and geographic areas, products and services, operations or distribution channels, including without limitation, reportingreport to the UIF suspicious operations detected within the operations it considers suspicious of Money Laundering / Financing of Terrorism within 15 calendar days, asframework of the date on which the entity qualifies the transaction as suspicious. Likewise, the reporting date mayTax Amnesty System and to provide it with all information required by it, not exceed 150 calendar days as of the date of the suspected or attempted operation. The term for the report of a suspicious operation of financing of terrorism will be 48 hours, computed from the date of the operation performed or attempted..
Recently, the Resolution No. 21/2018 (“Resolution 21”) was published which replaces the regime imposed by Resolution 229 and amends the Resolution No. 140/2012 regarding publicly offered financial trusts, their trustees, trustors and individuals or legal entities directly or indirectly relatedbeing able to them, in order to adjust to the recommendations of the FATF and implement a risk-based approach. Resolution 21 is applicable to the parties indicated in Section 20 of the Anti-Money Laundering Law, subsection 4): Broker-dealers and stockbrokers, mutual fund management companies, electronic open market agents, and all those intermediaries in the purchase, lease or loan of securities that operate under scope of stock exchanges with or without attached markets; and subsection 5); the intermediary agents enrolled in the markets, futures and options whatever their purpose, including the liquidation and compensation agents, the negotiation agents and the collective investment products management agents of mutual funds. The legal entities referred to in subsection 22) of Section 20 of the Anti-Money Laundering Law that act as financial fiduciaries whose fiduciary securities have authorization of public offering of the CNV are also included under the scope of Resolution 21.oppose fiscal secrecy.
Item 4.C | Organizational structure |
Under Resolution 21, the clients will be categorized according to the risk implied (low, medium or high), which will allow for the application of differentiated due diligence measures while permitting that simplified due diligence measures are executed with respect to clients and stockholders of foreign funds (to the extent they comply with the applicable conditions of their country of origin), thus easing the identification process without weakening the prevention system. Within this framework, individuals are enabled to implement reputable technological platforms that allow carrying out long-distance procedures, without the need to file documentation in person, without it affecting the fulfillment of the applicable requirements.
For an extensive analysis of the money laundering regime in effect as of the date of this annual report, investors should consult legal counsel and read Title XIII, Book 2 of the Argentine Criminal Code and any regulations issued by the UIF, the CNV and the Central Bank in their entirety. For such purposes, interested parties may visit the websites of the Argentine Ministry of Economy, at www.minhacienda.gob.ar, the Argentine Ministry of Public Finance, at www.minfinanzas.gob.ar, the UIF, at www.uif.gov.ar, the CNV, at www.cnv.gob.ar, or the Central Bank, at www.bcra.gob.ar. The information found on such websites is not a part of this annual report.
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.
The following information is related to our subsidiaries and investees as of the date of this annual report:
Subsidiary | Jurisdiction of |
| |
Banco Supervielle S.A. | Argentina |
| |
Cordial Compañía Financiera S.A. | Argentina |
Servicios Financieros Hipertehuelche Pesos Ya | |
Tarjeta Automática S.A. | Argentina | Carta Automática Pesos Ya | |
Supervielle Seguros S.A. | Argentina |
| |
Supervielle Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión S.A. | Argentina |
| |
|
| ||
|
| ||
Espacio Cordial de Servicios S.A. | Argentina | Cordial | |
Sofital S.A.F. e I.I. | Argentina | N/A | |
Micro Lending S.A.U. | Argentina | MILA | |
InvertirOnline S.A.U. | Argentina | InvertirOnline | |
InvertirOnline.com Argentina S.A.U. | Argentina |
| |
Supervielle Productores Asesores de Seguros S.A. | Argentina | N/A | |
Futuros del Sur S.A. (in the process of being renamed Supervielle Agent de Negociacion S.A.U.) | Argentina | N/A | |
Bolsillo Digital S.A.U. | Argentina | N/A |
Item 4.DProperty, plants and equipment
Item 4.D | Property, plants and equipment |
The Bank owns 4,346 square meters of office space at Reconquista 330 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 15,046 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), 1,322 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.
In November 2007 Banco Supervielle securitized certain strategic located branches through the transfer of such properties to a real estate trust “Renta Inmobiliaria I” (the “Supervielle Renta Inmobiliaria Financial Trust”) which issued multiple classes of bonds and certificates of participation in the local capital market. Its initial value was U.S.$14.3 million. The Bank leased the branches from the financial trust and paid a monthly rental since then.
Following the securitization terms and conditions, in November 2016, the Bank exercised its priority right to buy all or part of the properties from the Supervielle Renta Inmobiliaria Financial Trust, before these properties were divested by the trustee.
As a consequence, on December 14, 2016, the Bank acquired at market price, all of the properties from the financial trust, using their franchise value, for a total amount of Ps.329.8 million. Subsequently, the Supervielle Renta Inmobiliaria Financial Trust was terminated and the securities were paid back to its holders including the gain on sale of those properties as they were valued at historical acquisition cost.
As we had relevant holdings in the securities issued by the Supervielle Renta Inmobiliaria Financial Trust, we recognized a gain in income from our participation in securization trusts of Ps.137.7 million, a turnover tax of Ps.9.6 million in financial expenses and income tax of Ps.35.7 million.
Supervielle Seguros owns 1,9541,954 square meters of office space located at Reconquista 330 in Buenos Aires.
The rest of our administrative buildings and offices (including our headquarters), branches, senior citizens dedicated 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.
Selected 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 Operating Results” included elsewhere in this annual report. We prepared this information from our financial records,statements, which are maintainedprepared in conformity with Argentine Banking GAAP,IFRS. For further information, see notes 1.2 and do not reflect adjustments necessary2 to reflect the information in accordance with U.S. GAAP.our audited consolidated financial statements.
Average Balance Sheets, Interest Earnedearned 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.
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.
142
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, 2017, 20162019, 2018 and 2015.2017.
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% | ||||||||||||||||||
143
|
| Year ended December 31, |
| ||||||||||||||||
|
| 2017 |
| 2016 |
| 2015 |
| ||||||||||||
|
| Average Balance |
| Interest Earned/ |
| Average Nominal |
| Average Balance |
| Interest Earned/ |
| Average Nominal |
| Average Balance |
| Interest Earned/ |
| Average Nominal |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government and corporate securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 313,110 |
| 81,137 |
| 25.9 | % | 165,383 |
| 33,260 |
| 20.1 | % | 197,733 |
| 13,932 |
| 7.0 | % |
Dollars |
| 1,786,243 |
| 437,561 |
| 24.5 | % | 597,712 |
| 145,409 |
| 24.3 | % | 306,386 |
| 119,440 |
| 39.0 | % |
Total |
| 2,099,353 |
| 518,698 |
| 24.7 | % | 763,096 |
| 178,669 |
| 23.4 | % | 504,119 |
| 133,372 |
| 26.5 | % |
Participation in our securitization trusts(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 817,612 |
| 148,627 |
| 18.2 | % | 1,277,081 |
| 362,241 |
| 28.4 | % | 1,348,974 |
| 283,428 |
| 21.0 | % |
Dollars |
| 1,240 |
| — |
| 0.0 | % | — |
| — |
| 0.0 | % | — |
| — |
| 0.0 | % |
Total |
| 818,852 |
| 148,627 |
| 18.2 | % | 1,277,081 |
| 362,241 |
| 28.4 | % | 1,348,974 |
| 283,428 |
| 21.0 | % |
Securities issued by the Central Bank |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 5,282,857 |
| 1,318,422 |
| 25.0 | % | 1,846,240 |
| 673,993 |
| 36.5 | % | 707,491 |
| 257,274 |
| 36.4 | % |
Dollars |
| — |
| — |
| 0.0 | % | 106,696 |
| 49,838 |
| 46.7 | % | 1,716 |
| — |
| 0.0 | % |
Total |
| 5,282,857 |
| 1,318,422 |
| 25.0 | % | 1,952,936 |
| 723,831 |
| 37.1 | % | 709,207 |
| 257,274 |
| 36.3 | % |
Total Investment Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 6,413,579 |
| 1,548,186 |
| 24.1 | % | 3,288,704 |
| 1,069,494 |
| 32.5 | % | 2,254,198 |
| 554,634 |
| 24.6 | % |
Dollars |
| 1,787,483 |
| 437,561 |
| 24.5 | % | 704,408 |
| 195,247 |
| 27.7 | % | 308,102 |
| 119,440 |
| 38.8 | % |
Total |
| 8,201,062 |
| 1,985,747 |
| 24.2 | % | 3,993,113 |
| 1,264,742 |
| 31.7 | % | 2,562,300 |
| 674,074 |
| 26.3 | % |
Loans and financings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Promissory notes(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 6,190,479 |
| 1,395,622 |
| 22.5 | % | 3,811,989 |
| 1,086,442 |
| 28.5 | % | 3,165,116 |
| 837,789 |
| 26.5 | % |
Dollars |
| 221,412 |
| 8,063 |
| 3.6 | % | 25,772 |
| 882 |
| 3.4 | % | 12,530 |
| 675 |
| 5.4 | % |
Total |
| 6,411,891 |
| 1,403,685 |
| 21.9 | % | 3,837,761 |
| 1,087,324 |
| 28.3 | % | 3,177,646 |
| 838,464 |
| 26.4 | % |
Overdrafts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 3,262,587 |
| 1,162,911 |
| 35.6 | % | 2,509,796 |
| 996,571 |
| 39.7 | % | 1,638,881 |
| 594,315 |
| 36.3 | % |
Dollars |
| 63 |
| — |
| 0.0 | % | — |
|
|
| 0.0 | % | — |
| — |
| 0.0 | % |
Total |
| 3,262,650 |
| 1,162,911 |
| 35.6 | % | 2,509,796 |
| 996,571 |
| 39.7 | % | 1,638,881 |
| 594,315 |
| 36.3 | % |
Loans to the financial sector |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 494,945 |
| 89,845 |
| 18.2 | % | 240,611 |
| 73,754 |
| 30.7 | % | 28,977 |
| 9,173 |
| 31.7 | % |
Dollars |
| 13,943 |
| 306 |
| 2.2 | % | — |
| — |
| 0.0 | % | — |
| — |
| 0.0 | % |
Total |
| 508,888 |
| 90,151 |
| 17.7 | % | 240,611 |
| 73,754 |
| 30.7 | % | 28,977 |
| 9,173 |
| 31.7 | % |
Mortgage loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 457,344 |
| 109,801 |
| 24.0 | % | 40,766 |
| 8,999 |
| 22.1 | % | 59,344 |
| 10,014 |
| 16.9 | % |
Dollars |
| — |
| — |
| 0.0 | % | — |
| — |
| 0.0 | % | — |
| — |
| 0.0 | % |
Total |
| 457,344 |
| 109,801 |
| 24.0 | % | 40,766 |
| 8,999 |
| 22.1 | % | 59,344 |
| 10,014 |
| 16.9 | % |
Automobile and other secured loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 157,946 |
| 30,916 |
| 19.6 | % | 78,980 |
| 17,271 |
| 21.9 | % | 133,740 |
| 32,678 |
| 24.4 | % |
Dollars |
| — |
| — |
| 0.0 | % | — |
| — |
| 0.0 | % | — |
| — |
| 0.0 | % |
Total |
| 157,946 |
| 30,916 |
| 19.6 | % | 78,980 |
| 17,271 |
| 21.9 | % | 133,740 |
| 32,678 |
| 24.4 | % |
Corporate unsecured loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 4,041,754 |
| 1,076,056 |
| 26.6 | % | 2,418,252 |
| 819,097 |
| 33.9 | % | 1,769,763 |
| 561,635 |
| 31.7 | % |
Dollars |
| — |
| — |
| 0.0 | % | — |
| — |
| 0.0 | % | — |
| — |
| 0.0 | % |
Total |
| 4,041,754 |
| 1,076,056 |
| 26.6 | % | 2,418,252 |
| 819,097 |
| 33.9 | % | 1,769,763 |
| 561,635 |
| 31.7 | % |
Personal loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 12,443,671 |
| 6,104,346 |
| 49.1 | % | 7,884,433 |
| 3,631,979 |
| 46.1 | % | 5,170,131 |
| 2,144,410 |
| 41.5 | % |
Dollars |
| — |
| — |
| 0.0 | % | — |
| — |
| 0.0 | % | — |
| — |
| 0.0 | % |
Total |
| 12,443,671 |
| 6,104,346 |
| 49.1 | % | 7,884,433 |
| 3,631,979 |
| 46.1 | % | 5,170,131 |
| 2,144,410 |
| 41.5 | % |
Credit Card Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 6,124,034 |
| 1,802,651 |
| 29.4 | % | 5,399,079 |
| 1,733,539 |
| 32.1 | % | 4,108,877 |
| 1,289,162 |
| 31.4 | % |
Dollars |
| 241,143 |
| 62 |
| 0.0 | % | 145,684 |
| 67 |
| 0.0 | % | 84,161 |
| 224 |
| 0.3 | % |
Total |
| 6,365,177 |
| 1,802,713 |
| 28.3 | % | 5,544,763 |
| 1,733,606 |
| 31.3 | % | 4,193,038 |
| 1,289,386 |
| 30.8 | % |
|
| Year ended December 31, |
| ||||||||||||||||
|
| 2017 |
| 2016 |
| 2015 |
| ||||||||||||
|
| Average Balance |
| Interest Earned/ |
| Average Nominal |
| Average Balance |
| Interest Earned/ |
| Average Nominal |
| Average Balance |
| Interest Earned/ |
| Average Nominal |
|
Receivables from financial leases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 1,772,213 |
| 440,811 |
| 24.9 | % | 1,310,083 |
| 359,116 |
| 27.4 | % | 834,193 |
| 207,296 |
| 24.8 | % |
Dollars |
| 191,606 |
| 14,040 |
| 7.3 | % | 7,606 |
| 471 |
| 6.2 | % | 2,958 |
| 115 |
| 3.9 | % |
Total |
| 1,963,819 |
| 454,851 |
| 23.2 | % | 1,317,689 |
| 359,587 |
| 27.3 | % | 837,151 |
| 207,411 |
| 24.8 | % |
Total Loans excl. Foreign trade and U$S loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 34,944,973 |
| 12,212,959 |
| 34.9 | % | 23,693,989 |
| 8,726,768 |
| 36.8 | % | 16,909,022 |
| 5,686,472 |
| 33.6 | % |
Dollars |
| 668,167 |
| 22,471 |
| 3.4 | % | 179,062 |
| 1,420 |
| 0.8 | % | 99,649 |
| 1,014 |
| 1.0 | % |
Total |
| 35,613,140 |
| 12,235,430 |
| 34.4 | % | 23,873,051 |
| 8,728,188 |
| 36.6 | % | 17,008,671 |
| 5,687,486 |
| 33.4 | % |
Foreign Trade Loans and U$S loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| — |
| — |
| 0 | % | — |
| — |
| 0.0 | % | — |
| — |
| 0.0 | % |
Dollars |
| 7,218,244 | �� | 361,112 |
| 5.0 | % | 2,375,825 |
| 130,047 |
| 5.5 | % | 645,829 |
| 42,975 |
| 6.7 | % |
Total |
| 7,218,244 |
| 361,112 |
| 5.0 | % | 2,375,825 |
| 130,047 |
| 5.5 | % | 645,829 |
| 42,975 |
| 6.7 | % |
Total Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 34,944,973 |
| 12,212,959 |
| 34.9 | % | 23,693,989 |
| 8,726,768 |
| 36.8 | % | 16,909,022 |
| 5,686,472 |
| 33.6 | % |
Dollars |
| 7,886,411 |
| 383,583 |
| 4.9 | % | 2,554,887 |
| 131,467 |
| 5.1 | % | 745,478 |
| 43,989 |
| 5.9 | % |
Total |
| 42,831,384 |
| 12,596,542 |
| 29.4 | % | 26,248,876 |
| 8,858,235 |
| 33.7 | % | 17,654,500 |
| 5,730,461 |
| 32.5 | % |
Other receivables from financial transactions(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 1,642,667 |
| 391,933 |
| 23.9 | % | 692,438 |
| 218,755 |
| 31.6 | % | 159,750 |
| 35,164 |
| 22.0 | % |
Dollars |
| 1,236 |
| 239 |
| 19.3 | % | 1,625 |
| 187 |
| 11.5 | % | 143,294 |
| 18,408 |
| 12.8 | % |
Total |
| 1,643,903 |
| 392,172 |
| 23.9 | % | 694,063 |
| 218,942 |
| 31.5 | % | 303,044 |
| 53,572 |
| 17.7 | % |
Total interest-earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 43,001,219 |
| 14,153,078 |
| 32.9 | % | 27,675,131 |
| 10,015,018 |
| 36.2 | % | 19,322,972 |
| 6,276,271 |
| 32.5 | % |
Dollars |
| 9,675,130 |
| 821,383 |
| 8.5 | % | 3,260,920 |
| 326,901 |
| 10.0 | % | 1,196,874 |
| 181,837 |
| 15.2 | % |
Total |
| 52,676,349 |
| 14,974,461 |
| 28.4 | % | 30,936,051 |
| 10,341,919 |
| 33.4 | % | 20,519,846 |
| 6,458,108 |
| 31.5 | % |
Non interest-earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 6,506,050 |
|
|
|
|
| 4,804,565 |
|
|
|
|
| 3,339,803 |
|
|
|
|
|
Dollars |
| 4,609,488 |
|
|
|
|
| 2,149,089 |
|
|
|
|
| 1,000,228 |
|
|
|
|
|
Total |
| 11,115,538 |
|
|
|
|
| 6,953,654 |
|
|
|
|
| 4,340,031 |
|
|
|
|
|
Unlisted equity Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 1,580 |
|
|
|
|
| 7,806 |
|
|
|
|
| 5,973 |
|
|
|
|
|
Dollars |
| 6 |
|
|
|
|
| 1 |
|
|
|
|
| 1 |
|
|
|
|
|
Total |
| 1,586 |
|
|
|
|
| 7,807 |
|
|
|
|
| 5,974 |
|
|
|
|
|
Premises and equipment and miscellaneous and intangible assets and unallocated items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 1,297,229 |
|
|
|
|
| 1,022,713 |
|
|
|
|
| 878,180 |
|
|
|
|
|
Dollars |
| — |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
|
Total |
| 1,297,229 |
|
|
|
|
| 1,022,713 |
|
|
|
|
| 878,180 |
|
|
|
|
|
Allowance for loan losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| (1,061,319 | ) |
|
|
|
| (705,117 | ) |
|
|
|
| (510,429 | ) |
|
|
|
|
Dollars |
| (85,189 | ) |
|
|
|
| (30,459 | ) |
|
|
|
| (17,879 | ) |
|
|
|
|
Total |
| (1,146,508 | ) |
|
|
|
| (735,576 | ) |
|
|
|
| (528,308 | ) |
|
|
|
|
Other assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 4,987,001 |
|
|
|
|
| 2,929,059 |
|
|
|
|
| 1,635,717 |
|
|
|
|
|
Dollars |
| 667,947 |
|
|
|
|
| 353,385 |
|
|
|
|
| 109,725 |
|
|
|
|
|
Total |
| 5,654,948 |
|
|
|
|
| 3,282,444 |
|
|
|
|
| 1,745,442 |
|
|
|
|
|
Total non interest-earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 11,730,541 |
|
|
|
|
| 8,059,026 |
|
|
|
|
| 5,349,245 |
|
|
|
|
|
Dollars |
| 5,192,252 |
|
|
|
|
| 2,472,016 |
|
|
|
|
| 1,092,075 |
|
|
|
|
|
Total |
| 16,922,793 |
|
|
|
|
| 10,531,042 |
|
|
|
|
| 6,441,320 |
|
|
|
|
|
Total Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 54,731,760 |
|
|
|
|
| 35,734,156 |
|
|
|
|
| 24,672,217 |
|
|
|
|
|
Dollars |
| 14,867,382 |
|
|
|
|
| 5,732,937 |
|
|
|
|
| 2,288,948 |
|
|
|
|
|
Total |
| 69,599,142 |
|
|
|
|
| 41,467,093 |
|
|
|
|
| 26,961,165 |
|
|
|
|
|
|
| Year ended December 31, |
| ||||||||||||||||
|
| 2017 |
| 2016 |
| 2015 |
| ||||||||||||
|
| Average Balance |
| Interest Earned/ |
| Average Nominal |
| Average Balance |
| Interest Earned/ |
| Average Nominal |
| Average Balance |
| Interest Earned/ |
| Average Nominal |
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special checking accounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 4,139,446 |
| 633,945 |
| 15.3 | % | — |
| — |
| 0.0 | % | — |
| — |
| 0.0 | % |
Dollars |
| 1,178,635 |
| 3,751 |
| 0.3 | % | — |
| — |
| 0.0 | % | — |
| — |
| 0.0 | % |
Total |
| 5,318,081 |
| 637,696 |
| 12.0 | % | — |
| — |
| 0.0 | % | — |
| — |
| 0.0 | % |
Time deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 12,567,904 |
| 2,299,676 |
| 18.3 | % | 11,646,092 |
| 3,071,579 |
| 26.4 | % | 8,950,016 |
| 2,221,941 |
| 24.8 | % |
Dollars |
| 1,325,298 |
| 8,382 |
| 0.6 | % | 806,650 |
| 10,282 |
| 1.3 | % | 337,459 |
| 2,807 |
| 0.8 | % |
Total |
| 13,893,202 |
| 2,308,058 |
| 16.6 | % | 12,452,742 |
| 3,081,861 |
| 24.7 | % | 9,287,475 |
| 2,224,748 |
| 24.0 | % |
Borrowings from other financial institutions and unsubordinated negotiable obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 7,262,083 |
| 1,835,753 |
| 25.3 | % | 2,332,394 |
| 734,321 |
| 31.5 | % | 1,530,080 |
| 420,682 |
| 27.5 | % |
Dollars |
| 701,896 |
| 24,345 |
| 3.5 | % | 217,832 |
| 7,390 |
| 3.4 | % | 121,831 |
| 2,994 |
| 2.5 | % |
Total |
| 7,963,979 |
| 1,860,098 |
| 23.4 | % | 2,550,226 |
| 741,711 |
| 29.1 | % | 1,651,911 |
| 423,676 |
| 25.6 | % |
Subordinated Loans and negotiable obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| — |
| — |
| 0.0 | % | — |
| — |
| 0.0 | % | — |
| — |
| 0.0 | % |
Dollars |
| 1,319,046 |
| 128,237 |
| 9.7 | % | 1,285,162 |
| 128,027 |
| 10.0 | % | 800,088 |
| 81,282 |
| 10.2 | % |
Total |
| 1,319,046 |
| 128,237 |
| 9.7 | % | 1,285,162 |
| 128,027 |
| 10.0 | % | 800,088 |
| 81,282 |
| 10.2 | % |
Total interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 23,969,433 |
| 4,769,374 |
| 19.9 | % | 13,973,486 |
| 3,805,899 |
| 27.2 | % | 10,480,095 |
| 2,642,623 |
| 25.2 | % |
Dollars |
| 4,524,875 |
| 164,715 |
| 3.6 | % | 2,309,644 |
| 145,699 |
| 6.3 | % | 1,259,378 |
| 87,083 |
| 6.9 | % |
Total |
| 28,494,308 |
| 4,934,089 |
| 17.3 | % | 16,288,130 |
| 3,951,598 |
| 24.3 | % | 11,739,473 |
| 2,729,706 |
| 23.3 | % |
Low and non-interest bearing liabilities and stockholders’ equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Savings accounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 8,991,324 |
| 2,569 |
| 0.0 | % | 6,192,384 |
| 740 |
| 0.1 | % | 4,616,801 |
| 4,556 |
| 0.1 | % |
Dollars |
| 3,848,201 |
| 1,133 |
| 0.0 | % | 1,238,934 |
| 3,899 |
| 0.1 | % | 286,894 |
| 274 |
| 0.1 | % |
Total |
| 12,839,525 |
| 3,702 |
| 0.0 | % | 7,431,318 |
| 4,639 |
| 0.1 | % | 4,903,695 |
| 4,830 |
| 0.1 | % |
Demand deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 6,721,340 |
|
|
|
|
| 6,541,618 |
|
|
|
|
| 4,766,900 |
|
|
|
|
|
Dollars |
| 2,762,491 |
|
|
|
|
| 601,764 |
|
|
|
|
| 99,828 |
|
|
|
|
|
Total |
| 9,483,831 |
|
|
|
|
| 7,143,382 |
|
|
|
|
| 4,866,728 |
|
|
|
|
|
Special checking accounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| — |
|
|
|
|
| 1,749,023 |
|
|
|
|
| 1,117,708 |
|
|
|
|
|
Dollars |
| — |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
|
Total |
| — |
|
|
|
|
| 1,749,023 |
|
|
|
|
| 1,117,708 |
|
|
|
|
|
Other liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 7,024,815 |
|
|
|
|
| 4,618,267 |
|
|
|
|
| 3,117,904 |
|
|
|
|
|
Dollars |
| 2,154,935 |
|
|
|
|
| 878,693 |
|
|
|
|
| 171,114 |
|
|
|
|
|
Total |
| 9,179,750 |
|
|
|
|
| 5,496,961 |
|
|
|
|
| 3,289,018 |
|
|
|
|
|
Non-controlling interest result |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 20,944 |
|
|
|
|
| 120,803 |
|
|
|
|
| 67,500 |
|
|
|
|
|
Dollars |
| — |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
|
Total |
| 20,944 |
|
|
|
|
| 120,803 |
|
|
|
|
| 67,500 |
|
|
|
|
|
Stockholders’ equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 9,580,785 |
|
|
|
|
| 4,986,499 |
|
|
|
|
| 2,094,750 |
|
|
|
|
|
Dollars |
| — |
|
|
|
|
| — |
|
|
|
|
| — |
|
|
|
|
|
Total |
| 9,580,785 |
|
|
|
|
| 4,986,499 |
|
|
|
|
| 2,094,750 |
|
|
|
|
|
Total low and non-interest- Bearing Deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 32,339,208 |
|
|
|
|
| 22,459,572 |
|
|
|
|
| 14,663,855 |
|
|
|
|
|
Dollars |
| 8,765,627 |
|
|
|
|
| 2,719,391 |
|
|
|
|
| 557,836 |
|
|
|
|
|
Total |
| 41,104,835 |
|
|
|
|
| 25,178,963 |
|
|
|
|
| 15,221,691 |
|
|
|
|
|
|
| Year ended December 31, |
| Year ended December 31, | ||||||||||||||||||||||||||||||||||||||||||
|
| 2017 |
| 2016 |
| 2015 |
| 2019 | 2018 | 2017 | ||||||||||||||||||||||||||||||||||||
|
| Average Balance |
| Interest Earned/ |
| Average Nominal |
| Average Balance |
| Interest Earned/ |
| Average Nominal |
| Average Balance |
| Interest Earned/ |
| Average Nominal |
| Average Balance | Interest (Paid) | Average Nominal Rate | Average Balance | Interest (Paid) | Average Nominal Rate | Average Balance | Interest (Paid) | Average Nominal Rate | ||||||||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
(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% | |||||||||||||||||||||||||||||||||||||
Pesos |
| 56,308,640 |
|
|
|
|
| 36,438,058 |
|
|
|
|
| 25,143,950 |
|
|
|
|
| — | — | 0.0% | — | — | 0.0% | — | — | 0.0% | ||||||||||||||||||
Dollars |
| 13,290,502 |
|
|
|
|
| 5,029,035 |
|
|
|
|
| 1,817,214 |
|
|
|
|
| 25,486,397 | 1,730,633 | 6.8% | 33,096,074 | 1,798,461 | 5.4% | 20,074,843 | 899,193 | 4.5% | ||||||||||||||||||
Total |
| 69,599,142 |
|
|
|
|
| 41,467,093 |
|
|
|
|
| 26,961,165 |
|
|
|
|
| |||||||||||||||||||||||||||
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% | |||||||||||||||||||||||||||||||||||||
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 | 28,975,688 | 1,972,373 | 6.8% | 36,632,285 | 2,002,564 | 5.5% | 21,930,641 | 967,681 | 4.4% | |||||||||||||||||||||||||||||||||||||
Repo transactions | 981,998 | 596,797 | 60.8% | 252,162 | 78,349 | 31.1% | — | — | 0.0% | |||||||||||||||||||||||||||||||||||||
Pesos | 981,998 | 596,797 | 60.8% | 252,162 | 73,349 | 31.1% | — | — | 0.0% | |||||||||||||||||||||||||||||||||||||
Dollars | — | — | 0.0% | — | — | 0.0% | — | — | 0.0% | |||||||||||||||||||||||||||||||||||||
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% | |||||||||||||||||||||||||||||||||||||
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% | |||||||||||||||||||||||||||||||||||||
Dollars | 33,198,797 | 946,416 | 2.9% | 42,301,114 | 4,451,890 | 10.5% | 26,836,605 | 2,036,006 | 7.6% | |||||||||||||||||||||||||||||||||||||
Non Interest-Earning Assets | ||||||||||||||||||||||||||||||||||||||||||||||
Cash and due from banks | 40,084,120 | 42,489,403 | 30,192,607 | |||||||||||||||||||||||||||||||||||||||||||
Pesos | 19,151,085 | 23,105,066 | 17,688,924 | |||||||||||||||||||||||||||||||||||||||||||
Dollars | 20,933,035 | 19,384,337 | 12,503,683 | |||||||||||||||||||||||||||||||||||||||||||
Unlisted equity investments | 40 | — | 4,394 | |||||||||||||||||||||||||||||||||||||||||||
Pesos | — | — | 4,394 | |||||||||||||||||||||||||||||||||||||||||||
Dollars | 40 | — | — | |||||||||||||||||||||||||||||||||||||||||||
Premises and equipment and miscellaneous and intangible assets and unallocated items | 8,038,882 | 5,776,552 | 4,069,732 | |||||||||||||||||||||||||||||||||||||||||||
Pesos | 8,038,882 | 5,776,552 | 4,069,732 | |||||||||||||||||||||||||||||||||||||||||||
Dollars | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
Allowance for loan losses | (6,351,235 | ) | (8,250,210 | ) | (6,569,557 | ) | ||||||||||||||||||||||||||||||||||||||||
Pesos | (5,442,708 | ) | (7,809,354 | ) | (6,332,636 | ) | ||||||||||||||||||||||||||||||||||||||||
Dollars | (908,527 | ) | (440,856 | ) | (236,921 | ) | ||||||||||||||||||||||||||||||||||||||||
Other assets | 13,028,974 | 14,372,811 | 17,675,942 | |||||||||||||||||||||||||||||||||||||||||||
Pesos | 11,412,769 | 12,755,495 | 15,789,742 | |||||||||||||||||||||||||||||||||||||||||||
Dollars | 1,616,205 | 1,617,316 | 1,886,200 | |||||||||||||||||||||||||||||||||||||||||||
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 |
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% | ||||||||||||||||||
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% | ||||||||||||||||||
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% | ||||||||||||||||||
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% | ||||||||||||||||||
Dollars | 7,993,302 | 424,065 | 5.3% | 10,144,289 | 393,789 | 3.9% | 1,952,062 | 60,021 | 3.1% | ||||||||||||||||||
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% | ||||||||||||||||||
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% | ||||||||||||||||||
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% | ||||||||||||||||||
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% | ||||||||||||||||||
Dollars | 15,988,068 | 637,181 | 4.0% | 19,110,020 | 612,208 | 3.2% | 9,306,316 | 405,937 | 4.4% | ||||||||||||||||||
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% | ||||||||||||||||||
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% | ||||||||||||||||||
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% | ||||||||||||||||||
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% | ||||||||||||||||||
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 |
(1) Includes senior and subordinated bonds and participation certificates.
(2) Consists of unsecured checks and accounts receivable deriving from factoring transactions.
(3) Includes overnight deposit and unlisted corporate bonds.
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, 20172019 compared to the year ended December 31, 20162018, and for the year ended December 31, 20162018 compared to the year ended December 31, 2015.2017. 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 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.
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
|
| Year ended |
| ||||||||||
|
| 2017/2016 |
| 2016/2015 |
| ||||||||
|
| Increase (Decrease) Due to Changes in |
| 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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 38,281 |
| 9,596 |
| 47,877 |
| (6,506 | ) | 25,834 |
| 19,328 |
|
Dollars |
| 291,144 |
| 1,007 |
| 292,152 |
| 70,873 |
| (44,904 | ) | 25,969 |
|
Total |
| 329,425 |
| 10,603 |
| 340,029 |
| 64,367 |
| (19,070 | ) | 45,297 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Participation in our securitization trusts(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| (83,523 | ) | (130,091 | ) | (213,614 | ) | (20,392 | ) | 99,206 |
| 78,813 |
|
Dollars |
| — |
| — |
| — |
| — |
| — |
| — |
|
Total |
| (83,523 | ) | (130,091 | ) | (213,614 | ) | (20,392 | ) | 99,206 |
| 78,813 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities issued by the Central Bank |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 857,663 |
| (213,234 | ) | 644,429 |
| 415,715 |
| 1,004 |
| 416,719 |
|
Dollars |
| — |
| (49,838 | ) | (49,838 | ) | 49,036 |
| 802 |
| 49,838 |
|
Total |
| 857,663 |
| (263,072 | ) | 594,591 |
| 464,751 |
| 1,806 |
| 466,557 |
|
Total Investment Portflolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 754,320 |
| (275,628 | ) | 478,692 |
| 336,424 |
| 178,437 |
| 514,860 |
|
Dollars |
| 265,128 |
| (22,814 | ) | 242,314 |
| 109,848 |
| (34,041 | ) | 75,807 |
|
Total |
| 1,019,447 |
| (298,442 | ) | 721,005 |
| 446,272 |
| 144,396 |
| 590,668 |
|
Loans and financings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Promissory notes(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 536,222 |
| (227,042 | ) | 309,180 |
| 184,363 |
| 64,290 |
| 248,653 |
|
Dollars |
| 7,124 |
| 57 |
| 7,181 |
| 453 |
| (246 | ) | 207 |
|
Total |
| 543,347 |
| (226,986 | ) | 316,361 |
| 184,816 |
| 64,044 |
| 248,860 |
|
Overdrafts |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 268,324 |
| (101,984 | ) | 166,340 |
| 345,816 |
| 56,440 |
| 402,256 |
|
Dollars |
| — |
| — |
| — |
| — |
| — |
|
|
|
Total |
| 268,324 |
| (101,984 | ) | 166,340 |
| 345,816 |
| 56,440 |
| 402,256 |
|
Loans to the financial sector |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 46,168 |
| (30,077 | ) | 16,091 |
| 64,872 |
| (291 | ) | 64,581 |
|
Dollars |
| 306 |
| — |
| 306 |
| — |
| — |
| — |
|
Total |
| 46,474 |
| (30,077 | ) | 16,397 |
| 64,872 |
| (291 | ) | 64,581 |
|
Mortgage Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 100,014 |
| 788 |
| 100,802 |
| (4,101 | ) | 3,086 |
| (1,015 | ) |
Dollars |
| — |
| — |
| — |
| — |
| — |
| — |
|
Total |
| 100,014 |
| 788 |
| 100,802 |
| (4,101 | ) | 3,086 |
| (1,015 | ) |
Automobile and other secured loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 15,457 |
| (1,812 | ) | 13,645 |
| (11,975 | ) | (3,432 | ) | (15,407 | ) |
Dollars |
| — |
| — |
| — |
| — |
| — |
| — |
|
Total |
| 15,457 |
| (1,812 | ) | 13,645 |
| (11,975 | ) | (3,432 | ) | (15,407 | ) |
Corporate unsecured loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 432,233 |
| (175,274 | ) | 256,959 |
| 219,653 |
| 37,809 |
| 257,462 |
|
Dollars |
| — |
| — |
| — |
| — |
| — |
| — |
|
Total |
| 432,233 |
| (175,274 | ) | 256,959 |
| 219,653 |
| 37,809 |
| 257,462 |
|
Personal loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 2,236,572 |
| 235,795 |
| 2,472,367 |
| 1,250,348 |
| 237,221 |
| 1,487,569 |
|
Dollars |
| — |
| — |
| — |
| — |
| — |
| — |
|
Total |
| 2,236,572 |
| 235,795 |
| 2,472,367 |
| 1,250,348 |
| 237,221 |
| 1,487,569 |
|
Credit card Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pesos |
| 213,395 |
| (144,284 | ) | 69,112 |
| 414,259 |
| 30,119 |
| 444,377 |
|
Dollars |
| 25 |
| (30 | ) | (5 | ) | 28 |
| (185 | ) | (157 | ) |
Total |
| 213,420 |
| (144,313 | ) | 69,107 |
| 414,287 |
| 29,933 |
| 444,220 |
|
|
| Year ended |
| Year ended December 31, | |||||||||||||||||||||||||||
|
| 2017/2016 |
| 2016/2015 |
| 2019/2018 | 2018/2017 | ||||||||||||||||||||||||
|
| Increase (Decrease) Due to Changes in |
| Increase (Decrease) Due to Changes in |
| Increase (Decrease) Due to Changes in | |||||||||||||||||||||||||
|
| Volume |
| Rate |
| Net Change |
| Volume |
| Rate |
| Net Change |
| Volume | Rate | Net Change | Volume | Rate | Net Change | ||||||||||||
Receivables from financial leases |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
(in thousands of Pesos) | |||||||||||||||||||||||||||||||
Dollars | - | - | - | - | - | - | |||||||||||||||||||||||||
Credit Card Loans | (1,935,990 | ) | 1,501,191 | (434,799 | ) | (55,271 | ) | 251,372 | 196,101 | ||||||||||||||||||||||
Pesos |
| 114,948 |
| (33,253 | ) | 81,695 |
| 130,449 |
| 21,370 |
| 151,820 |
| (1,935,973 | ) | 1,501,063 | (434,910 | ) | (55,253 | ) | 251,429 | 196,176 | |||||||||
Dollars |
| 13,483 |
| 86 |
| 13,569 |
| 288 |
| 68 |
| 356 |
| (17 | ) | 128 | 111 | (18 | ) | (57 | ) | (75 | ) | ||||||||
Total |
| 128,430 |
| (33,167 | ) | 95,264 |
| 130,737 |
| 21,438 |
| 152,176 |
| ||||||||||||||||||
Total Loans excl. Foreign Trade and U$S loans |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Receivables from Financial Leases | (834,326 | ) | 546,906 | (287,420 | ) | 25,659 | 249,753 | 275,412 | |||||||||||||||||||||||
Pesos |
| 3,932,119 |
| (445,929 | ) | 3,486,190 |
| 2,498,981 |
| 541,315 |
| 3,040,296 |
| (860,224 | ) | 554,136 | (306,088 | ) | (65,393 | ) | 254,019 | 188,626 | |||||||||
Dollars |
| 16,449 |
| 4,602 |
| 21,051 |
| 630 |
| (224 | ) | 406 |
| 25,898 | (7,230 | ) | 18,668 | 91,052 | (4,266 | ) | 86,786 | ||||||||||
Total |
| 3,948,568 |
| (441,327 | ) | 3,507,241 |
| 2,499,611 |
| 541,091 |
| 3,040,702 |
| ||||||||||||||||||
Foreign Trade Loans and U$S Loans |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Total Loans excl. Foreign trade and U.S.$.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 |
| 242,255 |
| (11,190 | ) | 231,065 |
| 94,696 |
| (7,624 | ) | 87,072 |
| (1,145 | ) | 38,782 | 37,637 | 128,635 | 6,980 | 135,615 | |||||||||||
Total |
| 242,255 |
| (11,190 | ) | 231,065 |
| 94,696 |
| (7,624 | ) | 87,072 |
| ||||||||||||||||||
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 |
| 3,932,119 |
| (445,929 | ) | 3,486,190 |
| 2,498,981 |
| 541,315 |
| 3,040,296 |
| (21,379,119 | ) | 17,892,422 | (3,486,697 | ) | 3,804,564 | 6,750,629 | 10,555,193 | ||||||||||
Dollars |
| 259,317 |
| (7,201 | ) | 252,116 |
| 93,107 |
| (5,629 | ) | 87,478 |
| (517,874 | ) | 487,683 | (30,191 | ) | 836,217 | 198,666 | 1,034,883 | ||||||||||
Total |
| 4,191,437 |
| (453,130 | ) | 3,738,306 |
| 2,592,088 |
| 535,686 |
| 3,127,774 |
| ||||||||||||||||||
Other receivables from financial transactions(3) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Repo transactions | 443,549 | 74,899 | 518,448 | 78,349 | — | 78,349 | |||||||||||||||||||||||||
Pesos |
| 226,720 |
| (53,542 | ) | 173,178 |
| 168,287 |
| 15,304 |
| 183,591 |
| 443,549 | 74,899 | 518,448 | 78,349 | — | 78,349 | ||||||||||||
Dollars |
| (75 | ) | 127 |
| 52 |
| (16,303 | ) | (1,918 | ) | (18,221 | ) | — | — | — | — | — | — | ||||||||||||
Total |
| 226,645 |
| (53,415 | ) | 173,230 |
| 151,984 |
| 13,386 |
| 165,370 |
| ||||||||||||||||||
Total interest-earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Total Interest-Earning Assets | (21,453,444 | ) | 18,455,004 | (2,998,440 | ) | 4,719,130 | 6,949,295 | 11,668,425 | |||||||||||||||||||||||
Pesos |
| 5,044,306 |
| (906,246 | ) | 4,138,060 |
| 3,022,461 |
| 716,285 |
| 3,738,747 |
| (20,935,570 | ) | 17,967,321 | (2,968,249 | ) | 3,882,913 | 6,750,629 | 10,633,542 | ||||||||||
Dollars |
| 544,543 |
| (50,061 | ) | 494,482 |
| 206,917 |
| (61,853 | ) | 145,064 |
| (517,874 | ) | 487,683 | (30,191 | ) | 836,217 | 198,666 | 1,034,883 | ||||||||||
Total |
| 5,588,849 |
| (956,307 | ) | 4,632,542 |
| 3,229,378 |
| 654,433 |
| 3,883,811 |
| ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Special checking accounts |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Interest-Bearing Liabilities | |||||||||||||||||||||||||||||||
Time Deposits | 2,315,163 | 7,548,352 | 9,863,515 | 400,486 | 3,805,063 | 4,205,549 | |||||||||||||||||||||||||
Pesos |
| 633,945 |
| — |
| 633,945 |
| — |
| — |
| — |
| 2,329,390 | 7,542,575 | 9,871,965 | 361,154 | 3,780,175 | 4,141,329 | ||||||||||||
Dollars |
| 3,751 |
| — |
| 3,751 |
| — |
| — |
| — |
| (14,227 | ) | 5,777 | (8,450 | ) | 39,332 | 24,888 | 64,220 | ||||||||||
Total |
| 637,696 |
| — |
| 637,696 |
| — |
| — |
| — |
| ||||||||||||||||||
Time deposits |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
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 |
| 168,673 |
| (940,576 | ) | (771,903 | ) | 711,072 |
| 138,566 |
| 849,638 |
| (7,337,562 | ) | 6,839,912 | (497,650 | ) | 1,184,905 | 2,071,764 | 3,256,669 | ||||||||||
Dollars |
| 3,280 |
| (5,180 | ) | (1,900 | ) | 5,981 |
| 1,494 |
| 7,475 |
| (114,115 | ) | 144,391 | 30,276 | 318,012 | 15,756 | 333,768 | |||||||||||
Total |
| 171,953 |
| (945,756 | ) | (773,803 | ) | 717,052 |
| 140,060 |
| 857,113 |
| ||||||||||||||||||
Borrowings from other financial institutions and unsubordinated negotiable obligations |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Subordinated Loans and Negotiable Obligations | 6,632 | (3,485 | ) | 3,147 | (100,067 | ) | (91,650 | ) | (191,717 | ) | |||||||||||||||||||||
Pesos |
| 1,246,156 |
| (144,724 | ) | 1,101,432 |
| 252,597 |
| 61,042 |
| 313,639 |
| — | — | — | — | — | — | ||||||||||||
Dollars |
| 16,790 |
| 165 |
| 16,955 |
| 3,257 |
| 1,139 |
| 4,396 |
| 6,632 | (3,485 | ) | 3,147 | (100,067 | ) | (91,650 | ) | (191,717 | ) | ||||||||
Total |
| 1,262,946 |
| (144,559 | ) | 1,118,387 |
| 255,854 |
| 62,181 |
| 318,035 |
| ||||||||||||||||||
Subordinated Loan |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
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 |
| 3,294 |
| (3,084 | ) | 210 |
| 48,323 |
| (1,578 | ) | 46,745 |
| (121,710 | ) | 146,683 | 24,973 | 257,277 | (51,006 | ) | 206,271 | ||||||||||
Total |
| 3,294 |
| (3,084 | ) | 210 |
| 48,323 |
| (1,578 | ) | 46,745 |
| ||||||||||||||||||
Total interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Low and Non-Interest Bearing Deposits | |||||||||||||||||||||||||||||||
Savings Accounts | (19,911 | ) | 21,717 | 1,806 | (6,320 | ) | 60,587 | 54,267 | |||||||||||||||||||||||
Pesos |
| 1,987,972 |
| (1,024,497 | ) | 963,475 |
| 952,501 |
| 210,775 |
| 1,163,276 |
| (19,322 | ) | 21,322 | 2,000 | (8,136 | ) | 60,560 | 52,424 | ||||||||||
Dollars |
| 80,639 |
| (61,623 | ) | 19,016 |
| 66,254 |
| (7,638 | ) | 58,616 |
| (589 | ) | 395 | (194 | ) | 1,816 | 27 | 1,843 | ||||||||||
Total |
| 2,068,611 |
| (1,086,120 | ) | 982,491 |
| 1,018,755 |
| 203,137 |
| 1,221,892 |
| ||||||||||||||||||
Low & Non-Interest Bearing Deposits and Saving accounts |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Special Checking Accounts | (4,443,168 | ) | 2,626,667 | (1,816,501 | ) | 4,364,062 | 1,907,511 | 6,271,573 | |||||||||||||||||||||||
Pesos |
| 800 |
| (2,130 | ) | (1,330 | ) | 992 |
| (1,649 | ) | (657 | ) | (4,451,151 | ) | 2,629,647 | (1,821,504 | ) | 4,342,190 | 1,906,367 | 6,248,557 | ||||||||||
Dollars |
| 768 |
| (375 | ) | 393 |
| 569 |
| (103 | ) | 466 |
| 7,983 | (2,980 | ) | 5,003 | 21,872 | 1,144 | 23,016 | |||||||||||
Total |
| 1,568 |
| (2,505 | ) | (937 | ) | 1,561 |
| (1,752 | ) | (191 | ) |
(1) Includes senior and subordinated bonds and participation certificates.
(2) Consists of unsecured checks and accounts receivable deriving from factoring transactions.
(3) Includes overnight deposits and unlisted corporate bonds.
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% |
(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. |
|
| Year ended |
| ||||
|
| 2017 |
| 2016 |
| 2015 |
|
|
| (in thousands of Pesos, except percentages) |
| ||||
Average interest-earning assets(1)(2) |
|
|
|
|
|
|
|
Pesos |
| 43,001,219 |
| 27,675,131 |
| 19,322,972 |
|
Dollars |
| 9,675,130 |
| 3,260,920 |
| 1,196,874 |
|
Total |
| 52,676,349 |
| 30,936,051 |
| 20,519,846 |
|
Net interest earned |
|
|
|
|
|
|
|
Pesos |
| 9,381,135 |
| 6,205,220 |
| 3,629,092 |
|
Dollars |
| 655,535 |
| 180,462 |
| 94,480 |
|
Total |
| 10,036,670 |
| 6,385,682 |
| 3,723,572 |
|
Net Interest Margin |
|
|
|
|
|
|
|
Pesos |
| 21.8 | % | 22.4 | % | 18.8 | % |
Dollars |
| 6.8 | % | 5.5 | % | 7.9 | % |
Weighted average yield(3) |
| 19.1 | % | 20.6 | % | 18.1 | % |
Yield Spread |
|
|
|
|
|
|
|
Pesos |
| 18.4 | % | 17.3 | % | 14.9 | % |
Dollars |
| 6.5 | % | 5.9 | % | 9.5 | % |
Weighted interest spread(4) |
| 16.5 | % | 16.8 | % | 15.0 | % |
Gross Yield |
|
|
|
|
|
|
|
Pesos |
| 32.9 | % | 36.2 | % | 32.5 | % |
Dollars |
| 8.5 | % | 10.0 | % | 15.2 | % |
(1) Includes all loans, leasing agreements and investments (including public and private bonds, Central Bank notes and securitization securities) 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.
Investment Portfolio
We own, manage and trade a portfolio of securities issued by the Argentine government and other public sector and corporate issuers. We also hold senior and subordinated bonds and participation certificates in financial trusts created in connection with our securitization transactions. The following table sets out our investments in Argentine and other governments and corporate securities, including holdings in senior and subordinated bonds and participation certificates in financial trusts as of December 31, 2017, 20162019, 2018 and 20152017 by type and currency of denomination.
|
| Year ended December 31, |
| ||||
|
| 2017 |
| 2016 |
| 2015 |
|
|
| (in thousands of Pesos) |
| ||||
LISTED GOVERNMENT SECURITIES |
|
|
|
|
|
|
|
Holdings of Trading Securities |
|
|
|
|
|
|
|
LOCAL |
|
|
|
|
|
|
|
In Pesos: |
|
|
|
|
|
|
|
Argentine sovereign bonds in Pesos maturity 2020 |
| 7,288 |
| — |
| — |
|
Argentine sovereign bonds in Pesos maturity 2019 |
| — |
| 33,161 |
| — |
|
Argentine sovereign bonds in Pesos maturity 2018 |
| — |
| 20,511 |
| — |
|
Argentine sovereign bonds in Pesos maturity 2017 |
| — |
| 3,270 |
| — |
|
National Treasury Bonds maturity 09/30/2016 (BONAC) |
| — |
| — |
| 6,345 |
|
National Treasury Bonds maturity 05/09/2016 (BONAC) |
| — |
| — |
| 10,145 |
|
National Treasury Bonds maturity 2016 (BONAR) |
| — |
| — |
| 6,150 |
|
Consolidated bonds |
| — |
| — |
| 1,027 |
|
Securities denominated in Pesos discount |
| — |
| 158 |
| — |
|
Secured government bonds in Pesos (Decree 1579/02) 2018 |
| 4 |
| — |
| 7 |
|
Others |
| — |
| — |
| — |
|
In Foreign Currency: |
|
|
|
|
|
|
|
Treasury Bills in dollars |
| 1,051,554 |
| — |
| — |
|
|
| Year ended December 31, |
| ||||
|
| 2017 |
| 2016 |
| 2015 |
|
|
| (in thousands of Pesos) |
| ||||
Argentine sovereign bonds in dollars 8.28% maturity 2033 |
| — |
| — |
| 8,446 |
|
Argentine sovereign bonds in dollars 8.75% maturity 2024 |
| 53,571 |
| — |
| 183 |
|
Argentine sovereign bonds in dollars 8% maturity 2020 BONAR XX |
| 65,915 |
| 14 |
| — |
|
Argentine sovereign bonds in dollars 7% maturity 2017 |
| — |
| 20 |
| — |
|
Argentine sovereign bonds in dollars 7.5% maturity 04 2026 |
| 8,636 |
| — |
| — |
|
Securities denominated in dollars discount maturity 2033 |
| — |
| 155 |
| — |
|
Argentine sovereign bonds in dollars 0.75%, maturity 2017 (BONAD) |
| — |
| — |
| 56,505 |
|
Argentine sovereing bonds in dollars 1.75% maturity 2016 (BONAD) |
| — |
| — |
| 13 |
|
Argentine sovereign bonds in dollars 7% maturity 2017 (BONAR X) |
| — |
| — |
| 54,025 |
|
Argentine sovereign bonds in dollars 2.40% maturity 2018 |
| — |
| 42,815 |
| 79,203 |
|
Argentine sovereign bonds in dollars 4% maturity 2016 (BAADE) |
| — |
| — |
| 7,579 |
|
Argentine sovereign bonds in dollars 0.75% maturity 2017 |
| — |
| 25,137 |
| — |
|
Others |
| 228 |
| 2 |
| — |
|
Total listed government securities |
| 1,187,196 |
| 125,243 |
| 229,628 |
|
UNLISTED GOVERNMENT SECURITIES |
|
|
|
|
|
|
|
In Forign Currency: |
|
|
|
|
|
|
|
Treasury Bills in dollars, maturity 2017 |
| 505,149 |
| 818,853 |
| — |
|
Argentine sovereign bonds in U.S. dollars 9% maturity 2018 |
| 437 |
| — |
| — |
|
Others |
| 3,003 |
| — |
| — |
|
Total unlisted government securities |
| 508,589 |
| 818,853 |
| — |
|
SECURITIES ISSUED BY THE ARGENTINE CENTRAL BANK |
|
|
|
|
|
|
|
Listed |
|
|
|
|
|
|
|
Central Bank Bills in Pesos |
| 13,611,524 |
| 336,785 |
| 645,218 |
|
Unlisted |
|
|
|
|
|
|
|
Central Bank Bills in Pesos |
| 103 |
| 1,077,268 |
| 46,028 |
|
Total securities issued by the Argentine Central Bank |
| 13,611,627 |
| 1,414,053 |
| 691,246 |
|
INVESTMENTS IN LISTED CORPORATE SECURITIES |
|
|
|
|
|
|
|
LOCAL |
|
|
|
|
|
|
|
Others |
| 38,624 |
| 1,895 |
| 11,008 |
|
Total investments in listed corporate securities |
| 38,624 |
| 1,895 |
| 11,008 |
|
Total government and corporate securities |
| 15,346,036 |
| 2,360,044 |
| 931,881 |
|
PARTICIPATION IN SECURITIZATION TRUSTS(1) |
|
|
|
|
|
|
|
Financial trusts debt securities — senior |
| 99,969 |
| 100,644 |
| 664,933 |
|
Financial trusts debt securities — subordinated |
| — |
| — |
| 167 |
|
Financial trusts participation certificates |
| 470,238 |
| 530,607 |
| 706,956 |
|
Total |
| 570,207 |
| 631,251 |
| 1,372,056 |
|
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 | — |
(1) Included within “other receivables from financial transactions”. Consists mainly of participations in financial trusts created pursuant to our own securitization transactions.
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) | The market value is the same as the book value for the issuer than exceeds ten percent of stockholder’s equity attributable to owners of the parent company. |
As of December 31, 2017, we held securities issued by the Central Bank for a total of approximately Ps.13.6 billion, in terms of market value and book value. These amounts exceeded 10% of our shareholders’ equity as of such dates and represented 14.5% of our total assets.
Remaining Maturity of Investment Portfolio
The following table analyzes the remaining maturities of our investment portfolio (including our holdings in senior and subordinated bonds and participation certificates in financial trusts) as of December 31, 20172019 based on their terms when issued.issued.
|
| Maturing |
| ||||||||
|
| Within |
| After 1 |
| After 5 |
| After 10 |
| Total |
|
|
| (Book value in thousands of Peso, except percentages) |
| ||||||||
LISTED GOVERNMENT SECURITIES |
|
|
|
|
|
|
|
|
|
|
|
Holdings of Trading Securities |
|
|
|
|
|
|
|
|
|
|
|
LOCAL |
|
|
|
|
|
|
|
|
|
|
|
In Pesos: |
|
|
|
|
|
|
|
|
|
|
|
Argentine sovereign bonds in Pesos maturity 2020 |
| — |
| 7,288 |
|
|
|
|
| 7,288 |
|
Secured government bonds in Pesos (Decree 1579/02) 2018 |
| 4 |
| — |
| — |
| — |
| 4 |
|
Others |
| — |
| — |
| — |
| — |
| — |
|
In Foreign Currency: |
|
|
|
|
|
|
|
|
|
|
|
Treasury Bills in dollars |
| 1,051,554 |
| — |
| — |
| — |
| 1,051,554 |
|
Argentine sovereign bonds in dollars 8.75%, maturity 2024 |
| — |
| — |
| 53,571 |
| — |
| 53,571 |
|
Argentine sovereign bonds in dollars 8%, maturity 2020 BONAR XX |
| — |
| 65,915 |
| — |
| — |
| 65,915 |
|
Argentine sovereign bonds in dollars 7,5% maturity 04 2026 |
| — |
| 8,636 |
| — |
| — |
| 8,636 |
|
Others |
| — |
| 101 |
| — |
| 127 |
| 228 |
|
Total listed government securities |
| 1,051,558 |
| 81,940 |
| 53,571 |
| 127 |
| 1,187,196 |
|
UNLISTED GOVERNMENT SECURITIES |
|
|
|
|
|
|
|
|
|
|
|
In Pesos: |
|
|
|
|
|
|
|
|
|
|
|
Social Security Consolidation Bonds |
| — |
| — |
| — |
| — |
| — |
|
GDP Bonds Linked Securities in Pesos 2035 |
| — |
| — |
| — |
| — |
| — |
|
Consolidation bonds in dollars 5th Series |
| — |
| — |
| — |
| — |
| — |
|
In Foreign Currency: |
|
|
|
|
|
|
|
|
|
|
|
GDP Bonds linked securities USD 2035 |
| — |
| — |
| — |
| — |
| — |
|
Treasure letters in dollars |
| 505,149 |
| — |
| — |
| — |
| 505,149 |
|
Argentine sovereign bonds in dollars 9 % maturity 2018 |
| 437 |
| — |
| — |
| — |
| 437 |
|
Others |
| 3,003 |
| — |
| — |
| — |
| 3,003 |
|
Total unlisted government securities |
| 508,589 |
| — |
| — |
| — |
| 508,589 |
|
SECURITIES ISSUED BY THE ARGENTINE CENTRAL BANK |
|
|
|
|
|
|
|
|
|
|
|
Listed |
|
|
|
|
|
|
|
|
|
|
|
Central Bank Bills in Pesos |
| 13,611,524 |
| — |
| — |
| — |
| 13,611,524 |
|
Central Bank Notes in Pesos |
| — |
| — |
| — |
| — |
| — |
|
Unlisted |
|
|
|
|
|
|
|
|
|
|
|
Central Bank Bills in Pesos |
| 103 |
| — |
| — |
| — |
| 103 |
|
Central Bank Notes in Pesos |
| — |
| — |
| — |
| — |
| — |
|
Total securities issued by the Argentine Central Bank |
| 13,611,627 |
| — |
| — |
| — |
| 13,611,627 |
|
INVESTMENTS IN LISTED CORPORATE SECURITIES |
|
|
|
|
|
|
|
|
|
|
|
LOCAL |
|
|
|
|
|
|
|
|
|
|
|
Others |
| 38,624 |
| — |
| — |
| — |
| 38,624 |
|
Total investments in listed corporate securities |
| 38,624 |
| — |
| — |
| — |
| 38,624 |
|
Total government and corporate securities |
| 15,210,398 |
| 81,940 |
| 53,571 |
| 127 |
| 15,346,036 |
|
|
|
|
|
|
|
|
|
|
|
|
|
PARTICIPATION IN SECURITIZATION TRUSTS(1) |
|
|
|
|
|
|
|
|
|
|
|
Financial trusts debt securities — senior |
| 97,890 |
| 2,079 |
| — |
| — |
| 99,969 |
|
Financial trusts debt securities — subordinated |
| — |
| — |
| — |
| — |
| — |
|
Financial trusts participation certificates |
| — |
| 470,238 |
| — |
| — |
| 470,238 |
|
Total |
| 97,890 |
| 472,317 |
| — |
| — |
| 570,207 |
|
Weighted average yield |
| 29.3 | % | 42.1 | % | 83.2 | % | 76.0 | % |
|
|
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 |
(1) Included within “other receivables from financial transactions”. Consists mainly of participations in financial trusts created pursuant to our own securitization transactions.
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 Portfolio
The following table analyzes our loan and other financing portfolio by type as of December 31, 2017, 2016, 2015, 20142019, 2018 and 2013.2017:
|
| Grupo Supervielle S.A. |
| ||||||||
|
| As of |
| ||||||||
|
| 2017 |
| 2016 |
| 2015 |
| 2014 |
| 2013 |
|
|
| (in thousands of Pesos) |
| ||||||||
Loans and financings |
|
|
|
|
|
|
|
|
|
|
|
To the non-financial public sector |
| 32,607 |
| 4,306 |
| 8,778 |
| 12,666 |
| 15,699 |
|
To the financial sector |
| 419,366 |
| 473,414 |
| 181,734 |
| 3,514 |
| 36,029 |
|
To the non-financial private sector and foreign residents: |
|
|
|
|
|
|
|
|
|
|
|
Overdrafts |
| 3,616,843 |
| 3,110,097 |
| 1,634,870 |
| 993,284 |
| 679,085 |
|
Promissory notes(1)(2) |
| 14,665,561 |
| 9,101,773 |
| 5,707,289 |
| 5,296,100 |
| 4,272,286 |
|
Mortgage loans |
| 1,549,765 |
| 78,057 |
| 50,032 |
| 69,554 |
| 83,660 |
|
Automobile and other secured loans |
| 313,724 |
| 65,076 |
| 104,469 |
| 168,603 |
| 225,901 |
|
Personal loans |
| 14,818,163 |
| 9,916,776 |
| 6,018,601 |
| 3,631,840 |
| 2,970,622 |
|
Credit card loans |
| 7,966,037 |
| 6,678,578 |
| 5,677,922 |
| 3,688,328 |
| 2,410,111 |
|
Foreign trade loans and U.S. dollar loans |
| 11,215,752 |
| 5,311,475 |
| 618,410 |
| 591,887 |
| 530,186 |
|
Others |
| 1,890,153 |
| 1,056,104 |
| 763,469 |
| 557,827 |
| 410,710 |
|
Less: allowance for loan losses |
| (1,533,598 | ) | (899,147 | ) | (617,313 | ) | (417,023 | ) | (342,000 | ) |
Total loans |
| 54,954,373 |
| 34,896,509 |
| 20,148,261 |
| 14,596,580 |
| 11,292,289 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other receivables from financial transactions(3) |
|
|
|
|
|
|
|
|
|
|
|
Unlisted corporate bonds |
| 66,619 |
| 29,166 |
| 14,243 |
| 191,372 |
| 145,718 |
|
Others |
| 955,649 |
| 669,119 |
| 423,640 |
| 243,246 |
| 107,028 |
|
Plus: accrued interest and adjustment receivables |
| — |
| 1 |
| 1 |
| 1 |
| 1 |
|
Less: allowances |
| (10,326 | ) | (5,807 | ) | (5,944 | ) | (5,221 | ) | (4,439 | ) |
Total other receivables from financial transactions |
| 1,011,942 |
| 692,479 |
| 431,940 |
| 429,398 |
| 248,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables from financial leases |
| 2,544,557 |
| 1,543,109 |
| 1,090,368 |
| 590,960 |
| 519,197 |
|
Less: Allowances for receivables from financial leases |
| (25,356 | ) | (15,254 | ) | (15,391 | ) | (7,114 | ) | (7,317 | ) |
Total receivables from financial leases |
| 2,519,201 |
| 1,527,855 |
| 1,074,977 |
| 583,846 |
| 511,880 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financing |
| 58,485,516 |
| 37,116,843 |
| 21,655,178 |
| 15,609,824 |
| 12,052,477 |
|
(1) Consists of unsecured checks and accounts receivable deriving from factoring transactions, and unsecured corporate loans that totaled Ps.5,238.4 million, Ps.3,102.8 million, Ps.2,399.3 million, Ps.1,547.5 million and Ps.979.9 million as of December 31, 2017, 2016, 2015, 2014 and 2013, respectively.
(2) The Bank purchases promissory notes at less than face value. Documented interest is the difference between face value and the price paid for the promissory notes, plus accrued interest, and represents the income that will accrue during the life of the promissory note. The face value of the promissory note is listed under the item “Promissory notes.”
(3) Includes only line-items within other receivables from financial transactions that are considered financings under Argentine Banking GAAP.
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 December 31,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 loan and financing portfolio (net of allowances for loan losses) amounted to Ps.58.5 billion, a 57.6% increase when compared to December 31, 2016, driven by a 58.4% increase in loans to the non financial private sector compared to a 51.7% increase of theprior accounting framework, Argentine financial system as a whole (which includes private banks, public banks and other financial institutions). If we also consider the loan portfolio outstanding in each of the financial trusts created in connectionBanking GAAP, which is not comparable with our securitizations, the annual increase in our loan and financing portfolio was 55.3%. Loans to the financial and non financial public sector as of December 31, 2017 amounted to Ps.452.0 million, Ps.25.4 million lower than the Ps.477.7 million outstanding as of December 31, 2016.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 |
(1) | Consists of unsecured checks and accounts receivable deriving from factoring transactions, and unsecured corporate loans that totaled, Ps.3,102.8 million and Ps.2,399.3 million as of December 31, 2016 and 2015, respectively. |
(2) | The Bank purchases promissory notes at less than face value. Documented interest is the difference between face value and the price paid for the promissory notes, plus accrued interest, and represents the income that will accrue during the life of the promissory note. The face value of the promissory note is listed under the item “Promissory notes.” |
(3) | Includes only line-items within other receivables from financial transactions that are considered financings under Central Bank rules. |
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.1.3 billion, Ps.1.4 billion and Ps.2.7 billion as of December 31, 2017, 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 variations in our loan and financing portfolio taking into account the impact of transfers to financial trusts created in connection with our securitizations as of the dates indicated below:
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 |
(1) | Net of allowances for loan losses and allowances for receivables from financial leases, which together totaled Ps.70.4 million and Ps.74.1 million for the years ended December 31, 2016 and 2015. |
|
| Grupo Supervielle S.A. |
| ||||||||
|
| As of December 31, |
| ||||||||
|
| 2017 |
| 2016 |
| 2015 |
| 2014 |
| 2013 |
|
|
| (in thousands of Pesos) |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Total loan and financing portfolio (net of allowances for loan losses) |
| 58,485,516 |
| 37,116,843 |
| 21,655,178 |
| 15,609,824 |
| 12,052,477 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal loan portfolio outstanding in each of the financial trusts (net of allowances for loan losses)(1) |
| 1,423,852 |
| 1,367,117 |
| 2,465,621 |
| 2,613,915 |
| 2,176,414 |
|
Receivables from financial leases outstanding in each of the financial trusts (net of allowances for receivables from financial leases)(1) |
| (128,530 | ) | 46,310 |
| 244,922 |
| 444,341 |
| 304,145 |
|
Total financing including loan and financing portfolio outstanding in each of our financial trusts |
| 59,780,838 |
| 38,530,270 |
| 24,365,721 |
| 18,668,080 |
| 14,533,036 |
|
(1) Net of allowances for loan losses and allowances for receivables from financial leases, which together totaled Ps.128.5, Ps.70.4 million, Ps.74.1 million, Ps.68.1 million and Ps.83.0 million for the years ended December 31, 2017, 2016, 2015, 2014 and 2013, respectively.
Maturity Composition of the Loan and Other Financing Portfolio
The following table analyzes our loan and other financing as of December 31, 2019 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 |
Interest Rate Sensitivity
The following table analyzes our loan and other financing portfolio as of December 31, 2017 by type and by the time remaining to maturity. Loans and financings are stated before deduction of allowances for loan losses.
|
| Maturing |
| ||||||
|
| Within 1 year |
| After 1 year |
| After 5 years |
| Total |
|
|
| (in thousands of Pesos except percentages) |
| ||||||
Loans |
|
|
|
|
|
|
|
|
|
To the non-financial public sector |
| 5,976 |
| 26,631 |
| — |
| 32,607 |
|
To the financial sector |
| 341,685 |
| 77,681 |
| — |
| 419,366 |
|
To the non-financial private sector and foreign residents: |
| — |
| — |
| — |
|
|
|
Promissory notes(1) |
| 12,985,730 |
| 1,679,831 |
| — |
| 14,665,561 |
|
Overdrafts |
| 3,616,843 |
| — |
| — |
| 3,616,843 |
|
Mortgage loans |
| 3,867 |
| 6,402 |
| 1,539,496 |
| 1,549,765 |
|
Automobile and other secured loans |
| 284,083 |
| 29,641 |
| — |
| 313,724 |
|
Personal loans |
| 6,399,231 |
| 8,317,398 |
| 101,534 |
| 14,818,163 |
|
Credit card loans |
| 7,580,914 |
| 385,123 |
| — |
| 7,966,037 |
|
Foreign trade loans and U.S. dollar loans |
| 6,479,097 |
| 4,678,069 |
| 58,586 |
| 11,215,752 |
|
Other loans |
| 1,466,291 |
| 417,342 |
| 6,520 |
| 1,890,153 |
|
Total loans |
| 39,163,717 |
| 15,618,118 |
| 1,706,136 |
| 56,487,971 |
|
Percentage of total loan portfolio |
| 69.3 | % | 27.7 | % | 3.0 | % | 100.0 | % |
|
|
|
|
|
|
|
|
|
|
Other receivables from financial transactions |
|
|
|
|
|
|
|
|
|
Unlisted corporate bonds |
| 1,150 |
| 65,469 |
| — |
| 66,619 |
|
Others |
| 316,984 |
| 638,665 |
| — |
| 955,649 |
|
Plus: accrued interests and adjustments receivable included in the debtor classification regulation |
| — |
| — |
| — |
| — |
|
Total other receivables from financial transactions |
| 318,134 |
| 704,134 |
| — |
| 1,022,268 |
|
Percentage of total loan portfolio |
| 31.1 | % | 68.9 | % | 0.0 | % | 100.0 | % |
|
|
|
|
|
|
|
|
|
|
Total receivables from financial leases |
| 929,260 |
| 1,609,311 |
| 5,986 |
| 2,544,557 |
|
Percentage of total portfolio of receivables from financial leases |
| 36.5 | % | 63.3 | % | 0.2 | % | 100.0 | % |
(1) Consists of unsecured checks and accounts receivable deriving from factoring transactions.
Interest Rate Sensitivity
The following table analyzes our loan and other financing portfolio as of December 31, 20172019 by type of interest rate. Loans and financings are stated before deduction of allowances for loan losses.
|
| As of December 31, 2017 |
| ||||||||
|
| Loans |
| Other receivables from |
| Receivables from |
| Total |
| ||
|
| (in thousands of Pesos) |
| ||||||||
Variable rate |
|
|
|
|
|
|
|
|
| ||
Ps. |
| 2,420,476 |
| 17,314 |
| 401,359 |
| 2,839,149 |
| ||
Foreign currency |
| — |
| — |
| 6,168 |
| 6,168 |
| ||
Sub Total |
| 2,420,476 |
| 17,314 |
| 407,527 |
| 2,845,317 |
| ||
Fixed rate |
|
|
|
|
|
|
|
|
| ||
Ps. |
| 41,759,893 |
| 991,222 |
| 1,825,797 |
| 44,576,912 |
| ||
Foreign currency |
| 12,307,602 |
| 13,732 |
| 311,233 |
| 12,632,567 |
| ||
Sub Total |
| 54,067,495 |
| 1,004,954 |
| 2,137,030 |
| 57,209,479 |
| ||
Total |
| 56,487,971 |
| 1,022,268 |
| 2,544,557 |
| 60,054,796 |
| ||
(1) Includes only line-items within other receivables from financial transactions that are considered financings under Argentine Banking GAAP.
Grupo Supervielle S.A. | ||||
As of December 31, 2019 | ||||
Loans and other financing | ||||
Variable rate | ||||
Ps. | 7,527,459 | |||
Foreign currency | 21,725 | |||
Sub Total | 7,549,184 | |||
Fixed rate | ||||
Ps. | 65,716,751 | |||
Foreign currency | 21,496,015 | |||
Sub Total | 87,212,766 | |||
Total | 94,761,950 |
Loans and Financingsother financings — Portfolio Classification
The following table presents our loan and other financing, portfolio, before the deduction for allowances for loan losses, using the classification system of the Central Bank in effect at the end of each year indicated: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 S.A. |
| ||||||||||||||||||
|
| Year ended December 31, |
| ||||||||||||||||||
|
| 2017 |
| % |
| 2016 |
| % |
| 2015 |
| % |
| 2014 |
| % |
| 2013 |
| % |
|
|
| (in thousands of Pesos, except percentages) |
| ||||||||||||||||||
Loan portfolio categories |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normal situation (1) |
| 53,804,419 |
| 95.2 | % | 34,057,394 |
| 95.1 | % | 19,613,596 |
| 94.5 | % | 14,192,413 |
| 94.5 | % | 11,038,865 |
| 94.9 | % |
Subject to special monitoring-under observation- in negotiation or subject to refinancing agreements/low risk (2) |
| 1,062,117 |
| 1.9 | % | 726,232 |
| 2.0 | % | 470,003 |
| 2.3 | % | 357,393 |
| 2.4 | % | 233,641 |
| 2.0 | % |
With problems/ medium risk (3) |
| 772,064 |
| 1.4 | % | 498,572 |
| 1.4 | % | 264,492 |
| 1.3 | % | 176,231 |
| 1.2 | % | 152,207 |
| 1.3 | % |
High risk of insolvency/ high risk (4) |
| 816,289 |
| 1.4 | % | 494,126 |
| 1.4 | % | 364,649 |
| 1.8 | % | 256,510 |
| 1.7 | % | 187,607 |
| 1.6 | % |
Uncollectible (5) |
| 31,536 |
| 0.1 | % | 18,533 |
| 0.1 | % | 52,533 |
| 0.3 | % | 30,668 |
| 0.2 | % | 21,729 |
| 0.2 | % |
Uncollectible, classified as such under regulatory requirements (6) |
| 1,546 |
| 0.0 | % | 799 |
| 0.0 | % | 301 |
| 0.0 | % | 387 |
| 0.0 | % | 242 |
| 0.0 | % |
Total loans |
| 56,487,971 |
| 100 | % | 35,795,656 |
| 100.0 | % | 20,765,574 |
| 100.0 | % | 15,013,603 |
| 100.0 | % | 11,634,289 |
| 100.0 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other receivables from financial transactions portfolio categories |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normal situation (1) |
| 910,419 |
| 89.1 | % | 648,582 |
| 92,9 | % | 407,884 |
| 93.1 | % | 422,043 |
| 97.1 | % | 243,131 |
| 96.2 | % |
Subject to special monitoring-under observation- in negotiation or subject to refinancing agreements/low risk (2) |
| 44,922 |
| 4.4 | % | 20,568 |
| 2.9 | % | 13,022 |
| 3.0 | % | 4,587 |
| 1.1 | % | 3,718 |
| 1.5 | % |
With problems/ medium risk (3) |
| 25,321 |
| 2.4 | % | 12,822 |
| 1.8 | % | 6,048 |
| 1.4 | % | 2,532 |
| 0.6 | % | 1,980 |
| 0.8 | % |
High risk of insolvency/ high risk (4) |
| 37,862 |
| 3.7 | % | 14,746 |
| 2.1 | % | 7,902 |
| 1.8 | % | 3,822 |
| 0.9 | % | 3,066 |
| 1.2 | % |
Uncollectible (5) |
| 3,720 |
| 0.4 | % | 1,562 |
| 0.2 | % | 3,028 |
| 0.7 | % | 1,633 |
| 0.4 | % | 850 |
| 0.3 | % |
Uncollectible, classified as such under regulatory requirements (6) |
| 24 |
| 0.0 | % | 6 |
| 0.0 | % | — |
| 0.0 | % | 1 |
| 0.0 | % | 2 |
| 0.0 | % |
Total Other receivables from financial transactions |
| 1,022,268 |
| 100 | % | 698,286 |
| 100.0 | % | 437,884 |
| 100.0 | % | 434,619 |
| 100.0 | % | 252,747 |
| 100.0 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Categories of receivables from financial leases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normal situation (1) |
| 2,486,954 |
| 97.7 | % | 1,510,245 |
| 97.9 | % | 1,065,057 |
| 97.7 | % | 567,063 |
| 96.0 | % | 489,224 |
| 94.2 | % |
Subject to special monitoring-under observation- in negotiation or subject to refinancing agreements/low risk (2) |
| 36,687 |
| 1.4 | % | 18,114 |
| 1.2 | % | 12,113 |
| 1.1 | % | 12,715 |
| 2.6 | % | 20,285 |
| 3.9 | % |
With problems/ medium risk (3) |
| 6,125 |
| 0.1 | % | 5,331 |
| 0.3 | % | 1,674 |
| 0.2 | % | 6,010 |
| 1.0 | % | 3,099 |
| 0.6 | % |
High risk of insolvency/ high risk (4) |
| 13,767 |
| 0.5 | % | 9,386 |
| 0.6 | % | 10,987 |
| 1.0 | % | 1,098 |
| 0.2 | % | 6,045 |
| 1.2 | % |
Uncollectible (5) |
| 1,024 |
| 0.0 | % | 33 |
| 0.0 | % | 537 |
| — |
| 4,074 |
| 0.7 | % | 544 |
| 0.1 | % |
Uncollectible, classified as such under regulatory requirements |
| — |
| 0.0 | % | — |
| 0.0 | % | — |
| 0.0 | % | — |
| 0.0 | % | — |
| 0.0 | % |
Total receivables from financial leases |
| 2,544,557 |
| 100 | % | 1,543,109 |
| 100.0 | % | 1,090,368 |
| 100.0 | % | 590,960 |
| 100.0 | % | 519,197 |
| 100.0 | % |
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 |
(1)Current loans and loans up to 31 days past due on principal or interest. Borrower can readily service all financial obligations: shows strong cash flow, liquid current financial situation, adequate financial structure, punctual payment record, capable management, timely and precise available information and satisfactory internal controls. Borrower is determined to be in the top 50.0% of an industry that is performing well and has a good outlook.
(2)Debt payment is occasionally delinquent, with arrears from 31 to 90 days. Under observation: cash flow analysis indicates that, at the time made, the customer is able to honor all financial commitments. However, there are potential situations that, unless timely controlled or corrected, may affect the customer’s future payment capacity. Under negotiation or with refinancing agreements includes customers that, upon their inability to pay their obligations on agreed upon conditions, state their intention to refinance their debts within 60 days computed from the date of their default in payment.
(3)Debt is in arrears at least 91 days and up to 180 days. Cash flow analysis evidences difficulties in servicing of debt on agreed terms, such that if the problems are not solved, they may result in some loss.
(4)Judicial proceedings demanding payment have been initiated against the borrower, or the borrower is delinquent with arrears greater than 180 days and up to one year. Cash flow analysis demonstrates that full repayment of the borrower’s obligations is highly improbable.
(5)Loans to insolvent or bankrupt borrowers, or borrowers subject to judicial proceedings, with little or no possibility of collection, or in arrears in excess of one year. Loans in this category are considered total losses. Although these assets could have a possibility of recovery under certain future circumstances, lack of collectability is evident as of the date of analysis.
(6)Loans to borrowers indicated by the Central Bank to be more than 180 days in arrears to any liquidated or bankrupt financial entity.
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% |
(1) | Current loans and loans up to 31 days past due on principal or interest. Borrower can readily service all financial obligations: shows strong cash flow, liquid current financial situation, adequate financial structure, punctual payment record, capable management, timely and precise available information and satisfactory internal controls. Borrower is determined to be in the top 50.0% of an industry that is performing well and has a good outlook. |
(2) | Debt payment is occasionally delinquent, with arrears from 31 to 90 days. Under observation: cash flow analysis indicates that, at the time made, the customer is able to honor all financial commitments. However, there are potential situations that, unless timely controlled or corrected, may affect the customer’s future payment capacity. Under negotiation or with refinancing agreements includes customers that, upon their inability to pay their obligations on agreed upon conditions, state their intention to refinance their debts within 60 days computed from the date of their default in payment. |
(3) | Debt is in arrears at least 91 days and up to 180 days. Cash flow analysis evidences difficulties in servicing of debt on agreed terms, such that if the problems are not solved, they may result in some loss. |
(4) | Judicial proceedings demanding payment have been initiated against the borrower, or the borrower is delinquent with arrears greater than 180 days and up to one year. Cash flow analysis demonstrates that full repayment of the borrower’s obligations is highly improbable. |
(5) | Loans to insolvent or bankrupt borrowers, or borrowers subject to judicial proceedings, with little or no possibility of collection, or in arrears in excess of one year. Loans in this category are considered total losses. Although these assets could have a possibility of recovery under certain future circumstances, lack of collectability is evident as of the date of analysis. |
(6) | Loans to borrowers indicated by the Central Bank to be more than 180 days in arrears to any liquidated or bankrupt financial entity. |
Amounts Past Due and Non-accrual Loans and Other Financing
The following table analyzes our non-accrual loan and other financing portfolio, by type of loan as of the dates indicated, as well as 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, CCF and CCFMILA past due more than 90 days and Cordial Microfinanzas loans past due more than 30 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 |
Our policyAs stated above under “Presentation of Financial and Other Information”, we have prepared our audited consolidated financial statements for placing Bank2019, 2018 and CCF loans on non-accrual status2017 under IFRS. Data for past years has been prepared under our prior accounting framework, Argentine Banking GAAP, which is prescribed by Central Bank regulations, which consider both quantitative and qualitative factors. Loans are deemed either “With problems/Medium risk,” “High risk of insolvency/High risk” or “Uncollectible.” Loans deemed “With problems/Medium risk” are those loans to individuals that are in arrears at least 91 days and up to 180 days, or those loans to businesses for which cash flow analysis suggests problems in normal servicing of existing debt, such that if the problems are not resolved, we may incur some loss. Loans deemed “High risk of insolvency/High risk” are (i) those of borrowers against whom judicial proceedings have been initiated for payment, (ii) those whose borrowers are delinquentcomparable with arrears greater than 180 days and up to one year, and (iii) those for which cash flow analysis suggests that full repayment of the borrower’s obligations is highly improbable. Lastly, loans deemed “Uncollectible” are those (i) to insolvent or bankrupt borrowers, or borrowers subject to judicial proceedings, with little or no possibility of collection, or (ii) those in arrears in excess of one year. Loans in the “Uncollectible” category are considered total losses.data prepared under IFRS.
156
|
| Grupo Supervielle S.A. |
| ||||||||
|
| Year ended December 31, |
| ||||||||
|
| 2017 |
| 2016 |
| 2015 |
| 2014 |
| 2013 |
|
|
| (in thousands of Pesos) |
| ||||||||
Non-Accrual Loans |
|
|
|
|
|
|
|
|
|
|
|
To the non-financial private sector and foreign residents |
|
|
|
|
|
|
|
|
|
|
|
Overdrafts |
| 53,285 |
| 32,840 |
| 35,388 |
| 28,044 |
| 25,936 |
|
Promissory notes(1) |
| 20,266 |
| 20,423 |
| 17,709 |
| 22,349 |
| 4,903 |
|
Unsecured corporate loans |
| 34,389 |
| 24,313 |
| 36,125 |
| 10,159 |
| 13,472 |
|
Mortgage loans |
| — |
| 4,473 |
| 207 |
| 403 |
| 1,018 |
|
Automobile and other secured loans |
| 675 |
| 888 |
| 3,237 |
| 7,228 |
| 7,480 |
|
Personal loans |
| 1,022,771 |
| 658,513 |
| 336,448 |
| 241,946 |
| 189,309 |
|
Credit card loans |
| 458,846 |
| 282,414 |
| 244,396 |
| 152,331 |
| 119,772 |
|
Foreign Trade Loans |
| 767 |
| — |
| 3,810 |
| — |
| 2,627 |
|
Other Loans |
| 30,436 |
| 17,400 |
| 13,530 |
| 8,840 |
| 6,129 |
|
Total Non-Accrual Loans |
| 1,621,435 |
| 1,041,264 |
| 690,850 |
| 471,300 |
| 370,645 |
|
Other receivables from financial transactions |
|
|
|
|
|
|
|
|
|
|
|
Others |
| 66,927 |
| 9,597 |
| 8,103 |
| 4,762 |
| 3,344 |
|
Total Non-Accrual Other receivables from financial transactions |
| 66,927 |
| 9,597 |
| 8,103 |
| 4,762 |
| 3,344 |
|
Receivables from financial leases |
| 20,916 |
| 14,750 |
| 13,198 |
| 11,182 |
| 9,688 |
|
Total Non-Accrual receivables from financial leases |
| 20,916 |
| 14,750 |
| 13,198 |
| 11,182 |
| 9,688 |
|
Total Non-Accrual Financings |
| 1,709,278 |
| 1,065,611 |
| 712,151 |
| 487,244 |
| 383,677 |
|
Non-Accrual Financings |
|
|
|
|
|
|
|
|
|
|
|
With Preferred Guarantees |
| 25,006 |
| 25,747 |
| 17,698 |
| 23,849 |
| 25,488 |
|
With Other Guarantees |
| — |
| — |
| — |
| — |
| — |
|
Without Guarantees |
| 1,684,272 |
| 1,039,864 |
| 694,352 |
| 463,299 |
| 358,172 |
|
Total Non-Accrual Financings |
| 1,709,278 |
| 1,065,611 |
| 712,151 |
| 487,244 |
| 383,677 |
|
|
| Grupo Supervielle S.A. |
| Grupo Supervielle S.A. | |||||||||||||||
|
| Year ended December31, |
| Year ended December 31, | |||||||||||||||
|
| 2017 |
| 2016 |
| 2015 |
| 2014 |
| 2013 |
| 2016 | 2015 | ||||||
|
| (in thousands of Pesos) |
| (in thousands of Pesos) | |||||||||||||||
Past Due Loans |
|
|
|
|
|
|
|
|
|
|
| ||||||||
To the non-financial private sector and foreign residents |
|
|
|
|
|
|
|
|
|
|
| ||||||||
Overdrafts |
| 44,700 |
| 51,259 |
| 4,413 |
| 34,044 |
| 13,048 |
| 51,259 | 4,413 | ||||||
Promissory notes(1) |
| 19,204 |
| 23,695 |
| 50,026 |
| 23,128 |
| 6,793 |
| ||||||||
Promissory notes(1) | 23,695 | 50,026 | |||||||||||||||||
Unsecured corporate loans |
| 51,364 |
| 46,789 |
| 141,557 |
| 36,397 |
| 15,476 |
| 46,789 | 141,557 | ||||||
Mortgage loans |
| — |
| 6,141 |
| 47 |
| 5,685 |
| 957 |
| 6,141 | 47 | ||||||
Automobile and other secured loans |
| 80 |
| 857 |
| 1,060 |
| 6,309 |
| 6,207 |
| 857 | 1,060 | ||||||
Personal loans |
| 994,693 |
| 558,722 |
| 123,072 |
| 204,569 |
| 166,708 |
| 558,722 | 123,072 | ||||||
Credit card loans |
| 309,950 |
| 202,698 |
| 256,475 |
| 115,312 |
| 95,504 |
| 202,698 | 256,475 | ||||||
Foreign trade loans |
| 1,307 |
| 2,562 |
| 47,476 |
| 25,461 |
| 5,476 |
| 2,562 | 47,476 | ||||||
Other loans |
| 32,941 |
| 13,102 |
| 36,629 |
| 8,434 |
| 5,088 |
| 13,102 | 36,629 | ||||||
Past Due Loans | |||||||||||||||||||
Total Past Due Loans |
| 1,454,238 |
| 905,825 |
| 660,755 |
| 459,339 |
| 315,257 |
| 905,825 | 660,755 | ||||||
Other receivables from financial transactions |
|
|
|
|
|
|
|
|
|
|
| ||||||||
Others |
| 3,456 |
| 8,322 |
| 1,946 |
| 2,870 |
| 1,857 |
| 8,322 | 1,946 | ||||||
Total Past Due Other receivables from financial transactions |
| 3,456 |
| 8,322 |
| 1,946 |
| 2,870 |
| 1,857 |
| 8,322 | 1,946 | ||||||
Receivables from financial leases |
| 42,312 |
| 21,602 |
| 113,375 |
| 19,168 |
| 9,593 |
| 21,602 | 113,375 | ||||||
Total Past Due Financings |
| 1,500,006 |
| 935,749 |
| 776,076 |
| 481,377 |
| 326,707 |
| 935,749 | 776,076 | ||||||
Past Due Financings |
|
|
|
|
|
|
|
|
|
|
| ||||||||
With Preferred Guarantees |
| 65,418 |
| 70,901 |
| 119,075 |
| 70,821 |
| 24,792 |
| 70,901 | 119,075 | ||||||
Without Guarantees |
| 1,434,588 |
| 864,848 |
| 657,001 |
| 410,556 |
| 301,915 |
| 864,848 | 657,001 | ||||||
Total Past Due Financings |
| 1,500,006 |
| 935,749 |
| 776,076 |
| 481,377 |
| 326,707 |
| 935,749 | 776,076 |
(1)
Section | NYSE corporate governance rule for | Our approach | |||
C. (i) the director is a current partner or employee of a firm that is the listed company’s internal or external auditor; (ii) the director has an immediate family member who is a current partner of such firm; (iii) the director has an immediate family member who is a current employee of such firm and personally works on the company’s audit; or (iv) the director or an immediate family member was within the last three years a partner or employee of such firm and personally worked on the company’s audit within that time; D. the director, or an immediate family member is, or has been with the last three years, employed as an executive officer of another company where any of the listed company’s present executive officers at the same time serves or served on that company’s compensation committee; E. the director is a current employee, or an immediate family member is a current executive officer, of a company that has made payments to, or received payments from the listed company its parent or a consolidated subsidiary for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of U.S.$1 million, or 2% of such other company’s consolidated gross revenues. | (g) receives any payment, including the participation in plans or stock option schemes, from the company or companies of the same economic group, other than the compensation paid to him or her as a director, except dividends paid as a shareholder of the company in the terms of section d) and the corresponding to the
(i) is the 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, 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 Pursuant to the |
285
Section | NYSE corporate governance rule for | Our approach | ||
303A.03 | ||||
| The non-management directors of a listed company must meet at regularly scheduled executive sessions without management. | Neither Argentine law nor our bylaws require the holding of such meetings and we do not hold non-management directors meetings. The | ||
303A.04 | ||||
| A listed company must have a nominating/corporate governance committee composed entirely of independent directors, with a written charter that covers certain minimum specified duties. “Controlled companies” are not required to comply with this requirement. | Pursuant to applicable local rules, we have an | ||
303A.05 | ||||
| A listed company must have a compensation committee composed entirely of independent directors, with a written |
|
|
|
| ||
charter that covers certain minimum specified duties. “Controlled companies” are not required to comply with this requirement. | Neither Argentine law nor our bylaws require the establishment of a compensation committee. However, we have a | |||
on: (a) the nomination of directors and senior officers and their succession plans, (b) the remuneration polices for the Board of Directors, senior officers and the personnel, and (c) Human Resources policies, training and evaluation of the staff performance. | ||||
303A.06 303A.07 | A listed company must have an audit committee with a minimum of three independent directors who satisfy the independence requirements of Rule 10A-3, subject to certain specified exceptions, with a written charter that covers certain minimum specified duties. | (a) The audit committee must have a minimum of three members. All of its members shall be financially literate or must acquire such financial knowledge within a reasonable period of time after the appointment and at least one of its members shall have experience in accounting or financial management. In addition to meeting any requirement of Rule 10A-3 (b) (1), all audit committee members must satisfy the independence requirements set out in Section 303A.02. (b) The audit committee must have a written charter that establishes the duties and responsibilities of its members, including, at a minimum, some of the duties and responsibilities required by Rule 10A-3 of the Exchange Act and the following responsibilities set forth in NYSE Sections 303A.07(b)(iii)(A)-H) of the NYSE Manual.
| The responsibilities of an audit committee, as provided in the Argentine Capital Markets Law Argentine law requires the audit committee be composed of three or more members from the Board of Directors (with a majority of independent directors), all of whom must be well-versed in business, financial or accounting matters. Our Audit Committee is composed of three independent directors and one of the members is well-versed in business, financial and accounting matters, in accordance with the requirements of the Exchange Act. The responsibilities of a)
|
286
Section | NYSE corporate governance rule for | Our approach |
A. at least annually, obtain and review a report by the independent auditor describing: the firm’s internal quality-control procedures; any material issues raised in the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, with respect to one or more independent audits carried out by the firm, and any steps taken to deal with any such issues; and (to assess the B. meet with management and the independent auditor to review and discuss the listed company’s annual audited financial statements and quarterly financial statements, including a review of C. discuss the listed company’s earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies; D. discuss risk assessment and risk management policies; E. hold separate regular meetings with management, the internal auditors (or other F. review any issue or difficulty arising from the audit or management’s response with the G. set clear policies for the recruitment of employees or former employees of the independent auditors; and H. report regularly to
|
c) advises on the Board of Directors’ proposal for the designation of external independent accountants and ensure their independence; d) ensures that the Code of Ethics and Internal Conduct Code comply with current rules and regulations; e) f) takes knowledge of Grupo Supervielle’s financial, reputational, legal and operative risks, and oversees compliance with policies designed to mitigate these such risks; g) advises on the reasonableness of fees or stock option plans for our directors and managers proposed by the Board of Directors; h) issues grounded opinions on related-party transactions under certain circumstances and file such opinions with regulatory agencies as required by the CNV;
j) oversees the maintenance of adequate internal controls by each of Grupo Supervielle’s subsidiaries to minimize risk through the consolidation of best practices with respect to each of the businesses; and k) advises on our fulfillment of legal requirements and the reasonableness of the terms of the issuance of shares or other instruments that are convertible into shares in cases of capital increase in which pre-emptive rights are excluded or Our Audit Committee is ruled by its internal charter. |
287
| NYSE corporate governance rule for | Our approach | ||
If a member of the
| ||||
303A.08 | ||||
| Shareholders must be given the opportunity to vote on all equity-compensation plans and material revisions thereto, with limited exemptions set forth in the NYSE rules. | We do not currently offer equity-based compensation to our directors, executive officers or employees, and have no policy on this matter. | ||
303A.09 | ||||
| A listed company must adopt and disclose corporate governance guidelines that cover certain minimum specified |
|
|
| guidelines. Our | ||
303A.10 | A listed company must adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers. | Each listed company may determine its own policies, which should address conflicts of interest, corporate opportunities, confidentiality, fair dealing, protection and proper use of listed company assets, compliance with laws, rules and regulations, and encouraging the reporting of any illegal or unethical behavior. | Neither Argentine law nor our bylaws require the adoption or disclosure of a code of business conduct. We, however, have adopted a code of business conduct and ethics that applies to all of our employees. | |
303A.12 | a) Each listed company CEO must certify to the NYSE each year that he or she is not aware of any violation by the company of NYSE corporate governance listing standards. b) Each listed company CEO must promptly notify the NYSE in writing after any executive officer of the listed company becomes aware of any non-compliance with any applicable provisions of this Section 303A. c) Each listed company must submit an executed Written Affirmation annually to the NYSE. In addition, each listed company must submit an interim Written Affirmation as and when required by the interim Written Affirmation form specified by the NYSE. | Comparable provisions do not exist under Argentine law and CNV |
Item 16.H.Mine Safety Disclosure
Item 16.H | Mine Safety Disclosure |
Not applicable.
Item 17 | Financial Statements |
Not applicable.
Item 18 | Financial Statements |
Our audited consolidated financial statements are included in this annual report beginning at Page F-1.
Item 19 | Exhibits |
EXHIBIT INDEX
Exhibit | Description | ||
1.1 | |||
| |||
2.1 | |||
| |||
2.2 | |||
| Argentina (incorporated by reference to Exhibit 2.2 to our Annual Report on Form 20-F (File 001-37777) filed on April 27, 2018). | ||
2.3 | |||
| Argentina (incorporated by reference to Exhibit 2.3 to our Annual Report on Form 20-F (File 001-37777) filed on April 27, 2018). | ||
2.4 | |||
| Argentina (incorporated by reference to Exhibit 2.4 to our Annual Report on Form 20-F (File 001-37777) filed on April 27, 2018). | ||
2.(d) | Description of SecuritiesRegistered under Section 12(b) of the Exchange Act (filed herein). | ||
Exhibit | Description | ||
12.1 | |||
| |||
12.2 | |||
| |||
13.1 | |||
| |||
101. INS | XBRL Instance Document. | ||
101. SCH | XBRL Taxonomy Extension Schema Document. | ||
101. CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | ||
101. LAB | XBRL Taxonomy Extension Label Linkbase Document. | ||
101. PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | ||
101. DEF | XBRL Taxonomy Extension Definition Document. |
The amount of long-term debt securities of Grupo Supervielle authorized under any given instrument does not exceed 10% of its total assets on a consolidated basis. Grupo Supervielle hereby agrees to furnish to the SEC, upon its request, a copy of any instrument defining the rights of holders of its long-term debt or of its subsidiaries for which consolidated or unconsolidated financial statements are required to be filed.
290
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
GRUPO SUPERVIELLE S.A. | ||
By: | /s/ Jorge Oscar Ramírez | |
| Name: Jorge Oscar Ramírez | |
Title: Chief Executive Officer | ||
By: | /s/ Alejandra Naughton | |
Name: Alejandra Naughton | ||
Title: Chief Financial Officer | ||
|
GRUPO SUPERVIELLE S.A. AND SUBSIDIARIESDate: April 30, 2020
INDEX TO CONSOLIDATED FINANCIAL STATEMENTSContents
| ||
Report of the Independent Registered Public Accounting |
| |
Consolidated | F-4 |
|
Consolidated Income Statement for the years ended December 31, 2019, 2018 and 2017 | F-6 | |
Consolidated Statement of Comprehensive Income for the years ended December 31, | F-7 |
|
F-8 |
| |
F-9 |
| |
|
[PwC Office Letterhead]
F-1 |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Grupo Supervielle S.A.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheetsstatements of financial position of Grupo Supervielle S.A. and its subsidiaries (the “Company”) as of December 31, 20172019 and 2016,December 31, 2018, and the related consolidated statementsincome statement, consolidated statement of comprehensive income, consolidated statement of changes in shareholders’ equity and consolidated statement of cash flowsflow for each of the three years in the period ended December 31, 2017,2019, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’sCompany's internal control over financial reporting as of December 31, 2017,2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 20172019 and 2016,2018, and the results of theirits operations and theirits cash flows for each of the three years in the period ended December 31, 20172019 in conformity with accounting rules prescribedInternational Financial Reporting Standards as issued by the Banco Central de la República Argentina (the “BCRA”).International Accounting Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company’sCompany's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing onunder Item 15. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’sCompany's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Emphasis of Matter
F-2 |
Accounting rules prescribed by the BCRA vary in certain significant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in Note 35 to the consolidated financial statements.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ PRICE WATERHOUSE & Co. S.R.L. | ||
By | /s/ | |
Santiago José Mignone |
Diego Luis Sisto
Buenos Aires, Argentina
April 27, 201830, 2020
We have served as the Company’s auditor since 2008.
F-3 |
GRUPO SUPERVIELLE S.A.
Grupo Supervielle S.A. and SubsidiariesConsolidated Statements of Financial Position
As of December 31, 20172019 and 20162018
(Expressed in thousands of Argentine pesos)
|
| December 31, |
| ||||
|
| 2017 |
| 2016 |
| ||
ASSETS |
|
|
|
|
| ||
Cash and due from banks |
|
|
|
|
| ||
Cash |
| Ps. | 3,039,001 |
| Ps. | 1,879,885 |
|
Financial institutions and correspondents |
|
|
|
|
| ||
Argentine Central Bank (Note 17) |
| 7,083,631 |
| 5,736,955 |
| ||
Other local financial institutions (Note 17) |
| 32,582 |
| 151,252 |
| ||
Foreign (Note 17) |
| 924,137 |
| 378,633 |
| ||
Other |
| 50,124 |
| 19,407 |
| ||
|
| Ps. | 11,129,475 |
| Ps. | 8,166,132 |
|
Government and corporate securities (Note 5) |
|
|
|
|
| ||
Holdings of trading securities |
| 1,187,196 |
| 125,243 |
| ||
Unlisted Government securities |
| 508,589 |
| 818,853 |
| ||
Investments in listed corporate securities |
| 38,624 |
| 1,895 |
| ||
Securities issued by the Argentine Central Bank |
| 13,611,627 |
| 1,414,053 |
| ||
|
| Ps. | 15,346,036 |
| Ps. | 2,360,044 |
|
Loans (Note 6) |
|
|
|
|
| ||
To the non-financial public sector |
| 32,607 |
| 4,306 |
| ||
To the financial sector |
|
|
|
|
| ||
Interbank loans (Call money loans granted) |
| 30,000 |
| 25,000 |
| ||
Other loans to domestic financial institutions (Note 17) |
| 379,466 |
| 419,456 |
| ||
Accrued interest, adjustments and exchange rate differences receivable |
| 9,900 |
| 28,958 |
| ||
|
|
|
|
|
| ||
To the non-financial private sector and foreign residents |
|
|
|
|
| ||
Overdrafts |
| 3,616,843 |
| 3,110,097 |
| ||
Promissory notes |
| 15,494,647 |
| 9,426,568 |
| ||
Mortgage loans |
| 1,549,765 |
| 78,057 |
| ||
Automobile and other secured loans |
| 313,724 |
| 65,076 |
| ||
Personal loans |
| 14,818,163 |
| 9,916,776 |
| ||
Credit card loans |
| 7,966,037 |
| 6,678,578 |
| ||
Foreign trade loans |
| 11,215,752 |
| 5,311,475 |
| ||
Other loans |
| 492,496 |
| 283,881 |
| ||
Accrued interest, adjustments and exchange rate differences receivable |
| 1,397,740 |
| 773,961 |
| ||
Documented interest |
| (829,086 | ) | (324,795 | ) | ||
Other |
| (83 | ) | (1,738 | ) | ||
Less: Allowances (Note 7) |
| (1,533,598 | ) | (899,147 | ) | ||
|
| Ps. | 54,954,373 |
| Ps. | 34,896,509 |
|
Other receivables from financial transactions (Note 8) |
|
|
|
|
| ||
Argentine Central Bank |
| 855,261 |
| 535,351 |
| ||
Amounts receivable for spot and forward sales pending settlement (Note 8) |
| 3,374,940 |
| 4,745 |
| ||
Securities receivable under spot and forward purchases pending settlement (Note 8) |
| 56,781 |
| 594,730 |
| ||
Unlisted corporate bonds |
| 66,619 |
| 29,166 |
| ||
Balances from forward transactions without delivery of underlying asset pending settlement |
| 26,916 |
| 28,304 |
| ||
Other (Note 8) |
| 2,191,205 |
| 2,586,247 |
| ||
Less: Allowances (Note 7) |
| (10,326 | ) | (5,807 | ) | ||
|
| Ps. | 6,561,396 |
| Ps. | 3,772,736 |
|
ASSETS | 12/31/2019 | 12/31/2018 | ||||||
Cash and due from banks (Note 1.7) | 26,403,099 | 51,822,372 | ||||||
Cash | 8,751,111 | 7,368,112 | ||||||
Financial institutions and correspondents | ||||||||
Argentine Central Bank | 15,927,336 | 42,132,824 | ||||||
Other local financial institutions | 1,694,742 | 2,305,439 | ||||||
Others | 29,910 | 15,997 | ||||||
Debt Securities at fair value through profit or loss (Note 1.7, 5, 6 and 16) | 568,501 | 23,247,329 | ||||||
Derivatives (Note 6 and 11) | 257,587 | 24,496 | ||||||
Other financial assets (Note 1.7, 5, 6 and 16) | 2,096,866 | 2,612,157 | ||||||
Loans and other financing (Note 6 and 26) | 88,010,011 | 118,771,635 | ||||||
To the non-financial public sector | 28,872 | 50,460 | ||||||
To the financial sector | 64,522 | 613,101 | ||||||
To the Non-Financial Private Sector and Foreign residents | 87,916,617 | 118,108,074 | ||||||
Other debt securities (Note 1.8, 6 and 16) | 10,458,556 | 6,631,861 | ||||||
Financial assets in guarantee (Note 6 and 16) | 5,333,704 | 3,087,750 | ||||||
Current income tax assets | 102,458 | 910,777 | ||||||
Inventories (Note 16) | 44,455 | 107,557 | ||||||
Investments in equity instruments (Note 6 and 16) | 14,579 | 16,005 | ||||||
Property, plant and equipment (Note 13) | 4,002,078 | 3,359,290 | ||||||
Investment Property (Note 14) | 4,054,737 | 635,877 | ||||||
Intangible assets (Note 15) | 4,372,514 | 4,170,146 | ||||||
Deferred income tax assets (Note 5) | 1,671,195 | 1,264,222 | ||||||
Non-current assets held for sale | - | 4,307 | ||||||
Other non-financial assets (Nota 16) | 1,294,351 | 1,367,029 | ||||||
TOTAL ASSETS | 148,684,691 | 218,032,810 |
The accompanying notesNotes are an integral part of these consolidated financial statementsConsolidated Financial Statements.
F-4 |
Grupo SupervielleGRUPO SUPERVIELLE S.A. and Subsidiaries
Consolidated Balance Sheet — ContinuedStatements of Financial Position
As of December 31, 20172019 and 20162018
(Expressed in thousands of Argentine pesos)
|
| December 31, |
| ||||
|
| 2017 |
| 2016 |
| ||
ASSETS (Continued) |
|
|
|
|
| ||
Receivables from financial leases |
|
|
|
|
| ||
Receivables from financial leases |
| Ps. | 2,507,649 |
| Ps. | 1,516,227 |
|
Accrued interest and adjustments pending collection |
| 36,908 |
| 26,882 |
| ||
Less: Allowances (Note 7) |
| (25,356 | ) | (15,254 | ) | ||
|
| 2,519,201 |
| Ps. | 1,527,855 |
| |
Unlisted equity investments (Note 9) |
|
|
|
|
| ||
Other |
| 1,003 |
| 3,732 |
| ||
Less: Allowances (Note 13) |
| (269 | ) | (231 | ) | ||
|
| Ps. | 734 |
| Ps. | 3,501 |
|
Miscellaneous receivables |
|
|
|
|
| ||
Minimum presumed income tax — Tax credit (Note 20) |
| 26,183 |
| 8,408 |
| ||
Other (Note 8) |
| 1,801,253 |
| 1,139,203 |
| ||
Less: Allowances (Note 13) |
| (50,492 | ) | (37,295 | ) | ||
|
| Ps. | 1,776,944 |
| Ps. | 1,110,316 |
|
|
|
|
|
|
| ||
Premises and equipment, net (Note 10) |
| Ps. | 694,431 |
| Ps. | 621,575 |
|
|
|
|
|
|
| ||
Miscellaneous assets, net (Note 11) |
| Ps. | 612,264 |
| Ps. | 425,501 |
|
|
|
|
|
|
| ||
Intangible assets |
|
|
|
|
| ||
Goodwill (Note 12.1) |
| 22,043 |
| 31,475 |
| ||
Other intangibles (Note 12.2) |
| 302,458 |
| 253,987 |
| ||
|
| Ps. | 324,501 |
| Ps. | 285,462 |
|
|
|
|
|
|
| ||
Unallocated items |
| 51,923 |
| 36,411 |
| ||
|
|
|
|
|
| ||
Total Assets |
| Ps. | 93,971,278 |
| Ps. | 53,206,042 |
|
|
|
|
|
|
|
12/31/2019 | 12/31/2018 | |||||||
LIABILITIES | ||||||||
Deposits (Note 16) | 89,008,177 | 145,996,201 | ||||||
Non-financial public sector | 5,470,177 | 17,083,822 | ||||||
Financial sector | 28,098 | 38,821 | ||||||
Non-financial private sector and foreign residents | 83,509,902 | 128,873,558 | ||||||
Liabilities at fair value through profit or loss (Note 5 and 16) | 189,554 | 412,403 | ||||||
Derivatives (Note 5 and 10) | - | 144,944 | ||||||
Repo transactions (Note 9) | 319,817 | - | ||||||
Other financial liabilities (Note 5 and 16) | 9,115,565 | 6,564,396 | ||||||
Financing received from the Argentine Central Bank and other financial institutions (Note 5 and 16) | 9,017,597 | 12,357,106 | ||||||
Unsubordinated negotiable Obligations (Note 5 and 24) | 6,086,475 | 14,317,445 | ||||||
Current income tax liability | - | 1,217,233 | ||||||
Subordinated negotiable obligations (Note 5 and 24) | 2,119,888 | 2,128,759 | ||||||
Provisions (Note 17) | 677,018 | 133,703 | ||||||
Deferred income tax liabilities (Note 4) | 506,291 | 343,586 | ||||||
Other non-financial liabilities (Note 16) | 8,208,914 | 8,314,639 | ||||||
TOTAL LIABILITIES | 125,249,296 | 191,930,415 | ||||||
SHAREHOLDERS' EQUITY | ||||||||
Shareholders' Equity attributable to owners of the parent company | 23,415,797 | 26,080,725 | ||||||
Shareholders' Equity attributable to non-controlling interests | 19,598 | 21,670 | ||||||
TOTAL SHAREHOLDERS' EQUITY | 23,435,395 | 26,102,395 |
The accompanying notesNotes are an integral part of these consolidated financial statementsConsolidated Financial Statements.
F-5 |
GRUPO SUPERVIELLE S.A.
Grupo Supervielle S.A. and Subsidiaries
Consolidated Balance Sheet — Continued
As ofFor the financial years ended December 31, 20172019, 2018 and 20162017
(Expressed in thousands of Argentine pesos)
|
| December 31, |
| ||||
|
| 2017 |
| 2016 |
| ||
LIABILITIES |
|
|
|
|
| ||
|
|
|
|
|
| ||
Deposits |
|
|
|
|
| ||
Non-financial public sector |
| Ps. | 6,171,661 |
| Ps. | 2,587,253 |
|
Financial sector |
| 15,702 |
| 9,326 |
| ||
Non-financial private sector and foreign residents |
|
|
|
|
| ||
Current accounts |
| 5,679,805 |
| 4,361,405 |
| ||
Savings accounts |
| 29,578,994 |
| 13,205,937 |
| ||
Time deposits |
| 13,014,886 |
| 11,677,322 |
| ||
Investment accounts |
| 255,000 |
| 375,000 |
| ||
Other |
| 1,328,837 |
| 3,510,701 |
| ||
Accrued interest and exchange rate differences payable |
| 442,142 |
| 170,920 |
| ||
|
| Ps. | 56,487,027 |
| Ps. | 35,897,864 |
|
Other liabilities from financial transactions |
|
|
|
|
| ||
Argentine Central Bank — Other |
| 6,514 |
| 4,966 |
| ||
Banks and international institutions (Note 14) |
| 2,783,270 |
| 703,010 |
| ||
Unsubordinated negotiable obligations (Note 15.1) |
| 8,307,202 |
| 1,966,936 |
| ||
Amounts payable for spot and forward purchases pending settlement (Note 8) |
| 25,275 |
| 592,386 |
| ||
Securities to be delivered under spot and forward sales pending settlement (Note 8) |
| 3,788,545 |
| 29,979 |
| ||
Loans from domestic financial institutions (Note 14) |
| 620,800 |
| 983,823 |
| ||
Other (Note 8) |
| 2,602,566 |
| 2,132,925 |
| ||
Accrued interest and exchange rate differences payable |
| 309,182 |
| 100,809 |
| ||
|
| Ps. | 18,443,354 |
| Ps. | 6,514,834 |
|
Miscellaneous liabilities |
|
|
|
|
| ||
Directors’ and Statutory Auditors’ fees |
| 1,743 |
| 1,534 |
| ||
Other (Note 8) |
| 3,056,310 |
| 2,180,694 |
| ||
|
| Ps. | 3,058,053 |
| Ps. | 2,182,228 |
|
|
|
|
|
|
| ||
Provisions (Note 13) |
| 80,163 |
| 63,252 |
| ||
Subordinated negotiable obligations (Note 15.2) |
| 685,873 |
| 1,378,758 |
| ||
Unallocated items |
| 60,513 |
| 134,158 |
| ||
Non-controlling interests (Note 28) |
| 11,497 |
| 103,397 |
| ||
Total Liabilities |
| Ps. | 78,826,480 |
| Ps. | 46,274,491 |
|
|
|
|
|
|
| ||
SHAREHOLDERS’ EQUITY |
| 15,144,798 |
| 6,931,551 |
| ||
Total Liabilities and Shareholders’ Equity |
| Ps. | 93,971,278 |
| Ps. | 53,206,042 |
|
12/31/2019 | 12/31/2018 | 12/31/2017 | ||||||||||
Interest income (Note 16.13) | 44,794,595 | 46,790,036 | 34,250,524 | |||||||||
Interest expenses (Note 16.14) | (34,913,451 | ) | (26,787,390 | ) | (12,782,957 | ) | ||||||
Net interest income | 9,881,144 | 20,002,646 | 21,467,567 | |||||||||
Net income from financial instruments (NIFFI) at fair value through profit or loss (Note 16.15) | 20,960,966 | 9,707,395 | 5,454,354 | |||||||||
Exchange rate differences on gold and foreign currency | (324,070 | ) | 1,733,237 | 604,734 | ||||||||
NIFFI And Exchange Rate Differences | 20,636,896 | 11,440,632 | 6,059,088 | |||||||||
Net Financial Income | 30,518,040 | 31,443,278 | 27,526,655 | |||||||||
Services Fee Income (Note 16.16) | 8,599,607 | 9,118,706 | 9,327,965 | |||||||||
Services Fee Expense (Note 16.17) | (2,243,970 | ) | (2,181,620 | ) | (1,877,412 | ) | ||||||
Income from insurance activities (Note 16.18) | 1,393,356 | 1,305,522 | 1,383,709 | |||||||||
Net Service Fee Income | 7,748,993 | 8,242,608 | 8,834,262 | |||||||||
Subtotal | 38,267,033 | 39,685,886 | 36,360,917 | |||||||||
Results from exposure to changes in the purchasing power of money | (5,359,565 | ) | (9,253,021 | ) | (3,986,190 | ) | ||||||
Other operating income (Note 16.19) | 2,755,267 | 3,805,134 | 2,827,476 | |||||||||
Loan loss provisions | (7,736,868 | ) | (7,967,031 | ) | (6,204,348 | ) | ||||||
Net operating income | 27,925,867 | 26,270,968 | 28,997,855 | |||||||||
Personnel expenses (Note 16.20) | 14,164,289 | 13,504,300 | 13,439,165 | |||||||||
Administration expenses (Note 16.21) | 7,573,543 | 8,615,396 | 7,566,294 | |||||||||
Depreciation and impairment of non-financial assets (Note 16.22) | 1,814,671 | 665,154 | 956,819 | |||||||||
Other operating expenses (Note 16.23) | 6,358,291 | 6,633,161 | 6,394,542 | |||||||||
(Loss) / Income before taxes | (1,984,927 | ) | (3,147,043 | ) | 641,035 | |||||||
Income tax (Note 4) | (168,695 | ) | (1,555,074 | ) | (1,802,869 | ) | ||||||
Net loss for the year | (2,153,622 | ) | (4,702,117 | ) | (1,161,834 | ) | ||||||
Net loss for the year attributable to owners of the parent company | (2,151,600 | ) | (4,658,050 | ) | (1,160,465 | ) | ||||||
Net loss for the year attributable to non-controlling interests | (2,022 | ) | (44,067 | ) | (1,369 | ) |
The accompanying notesNotes are an integral part of these consolidated financial statementsConsolidated Financial Statements.
F-6 |
GRUPO SUPERVIELLE S.A.
Grupo Supervielle S.A. and Subsidiaries
Consolidated Statement of Comprehensive Income
As ofFor the years ended December 31, 2017, 20162019, 2018 and 20152017
(Expressed in thousands of Argentine pesos)
|
| December 31, |
| |||||||
|
| 2017 |
| 2016 |
| 2015 |
| |||
Financial income |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
Interest on cash and due from banks |
| 191 |
| — |
| — |
| |||
Interest on loans granted to the financial sector |
| 90,151 |
| 73,754 |
| 9,173 |
| |||
Interest on overdrafts |
| 1,162,923 |
| 996,571 |
| 594,315 |
| |||
Interest on promissory notes |
| 2,479,741 |
| 1,906,421 |
| 1,400,099 |
| |||
Interest on mortgage loans |
| 24,184 |
| 7,275 |
| 10,014 |
| |||
Interest on automobile and other secured loans |
| 30,916 |
| 17,271 |
| 32,678 |
| |||
Interest on credit card loans |
| 1,802,522 |
| 1,733,606 |
| 1,289,386 |
| |||
Interest on financial leases |
| 413,029 |
| 329,550 |
| 178,219 |
| |||
Interest on other loans |
| 6,281,543 |
| 3,715,110 |
| 2,186,064 |
| |||
Income from government and corporate securities |
| 2,373,060 |
| 1,241,554 |
| 689,472 |
| |||
Interest on other receivables from financial transactions |
| 192 |
| 217,662 |
| 38,066 |
| |||
Income from options |
| — |
| — |
| 483 |
| |||
Consumer price index adjustment (“CER”) |
| 85,617 |
| 1,724 |
| 374 |
| |||
Exchange rate differences on gold and foreign currency |
| 250,758 |
| 367,436 |
| 44,735 |
| |||
Other (Note 19) |
| 499,844 |
| 186,645 |
| 268,666 |
| |||
|
| Ps. | 15,494,671 |
| Ps. | 10,794,579 |
| Ps. | 6,741,744 |
|
|
|
|
|
|
|
|
| |||
Financial expenses |
|
|
|
|
|
|
| |||
Interest on current account deposits |
| 637,696 |
| — |
| — |
| |||
Interest on savings account deposits |
| 3,702 |
| 4,639 |
| 4,830 |
| |||
Interest on time deposits |
| 1,982,098 |
| 2,803,306 |
| 2,168,344 |
| |||
Interest on interbank loans (call money loans) |
| 28,720 |
| 31,173 |
| 18,933 |
| |||
Interest on other loans from the financial sector |
| 180,160 |
| 309,462 |
| 137,982 |
| |||
Interest on other liabilities from financial transactions |
| 128,237 |
| 128,027 |
| 266,760 |
| |||
Interest on subordinated obligations |
| 325,961 |
| 267,542 |
| 81,282 |
| |||
Other interest |
| 1,651,228 |
| 401,079 |
| 56,404 |
| |||
Consumer price index adjustment (CER) |
| 11,001 |
| 920 |
| 276 |
| |||
Contributions made to Deposit Insurance Fund |
| 82,721 |
| 87,619 |
| 180,704 |
| |||
Other (Note 19) |
| 1,162,764 |
| 832,758 |
| 470,535 |
| |||
|
| Ps. | 6,194,288 |
| Ps. | 4,866,525 |
| Ps. | 3,386,050 |
|
|
|
|
|
|
|
|
| |||
Gross financial margin - gain |
| 9,300,383 |
| 5,928,054 |
| 3,355,694 |
| |||
|
|
|
|
|
|
|
| |||
Loan loss provisions (Note 7) |
| 1,820,169 |
| 1,057,637 |
| 543,844 |
| |||
|
|
|
|
|
|
|
| |||
Services fee income |
|
|
|
|
|
|
| |||
In relation to lending transactions |
| 765,006 |
| 515,353 |
| 384,047 |
| |||
In relation to deposits transactions |
| 1,429,671 |
| 922,403 |
| 678,531 |
| |||
Other commissions |
| 198,136 |
| 136,362 |
| 77,071 |
| |||
Other (Note 19) |
| 2,580,459 |
| 1,953,398 |
| 1,696,059 |
| |||
|
| Ps. | 4,973,272 |
| Ps. | 3,527,516 |
| Ps. | 2,835,708 |
|
|
|
|
|
|
|
|
| |||
Services fee expense |
|
|
|
|
|
|
| |||
Commissions |
| 787,425 |
| 544,044 |
| 365,847 |
| |||
Other (Note 19) |
| 708,423 |
| 536,616 |
| 412,645 |
| |||
|
| Ps. | 1,495,848 |
| Ps. | 1,080,660 |
| Ps. | 778,492 |
|
12/31/2019 | 12/31/2018 | 12/31/2017 | ||||||||||
Net loss for the year | (2,153,622 | ) | (4,702,117 | ) | (1,161,834 | ) | ||||||
Components of Other Comprehensive Income not to be reclassified to profit or loss | ||||||||||||
Revaluation surplus of property, plant and equipment | (62,080 | ) | 474,704 | 82,736 | ||||||||
Income tax (Note 4) | 9,674 | (117,426 | ) | (24,821 | ) | |||||||
Net revaluation surplus of property, plant and equipment | (52,406 | ) | 357,278 | 57,915 | ||||||||
(Loss) / income from equity instruments at fair value through other comprehensive income | (4,756 | ) | 1,603 | 18,731 | ||||||||
Income tax (Note 4) | 1,428 | (481 | ) | (6,555 | ) | |||||||
Net (loss) / income from equity instruments at fair value through other comprehensive income | (3,328 | ) | 1,122 | 12,176 | ||||||||
Total Other Comprehensive Income not to be reclassified to profit or loss | (55,734 | ) | 358,400 | 70,091 | ||||||||
Components of Other Comprehensive Income to be reclassified to profit or loss | ||||||||||||
Income from financial instruments at fair value through other comprehensive income | 11,287 | 18,352 | 3,087 | |||||||||
Income tax (Note 4) | (3,386 | ) | (5,135 | ) | (1,058 | ) | ||||||
Net income from financial instruments at fair value through other comprehensive income | 7,901 | 13,217 | 2,029 | |||||||||
Other Comprehensive Income to be reclassified to profit or loss | 7,901 | 13,217 | 2,029 | |||||||||
Other Comprehensive (loss) / income | (47,833 | ) | 371,617 | 72,120 | ||||||||
Other comprehensive (loss) / income attributable to parent company | (47,701 | ) | 371,231 | 72,100 | ||||||||
Other comprehensive (loss) / income attributable to non-controlling interest | (132 | ) | 386 | 20 | ||||||||
Comprehensive loss | (2,201,455 | ) | (4,330,500 | ) | (1,089,714 | ) | ||||||
Comprehensive loss for the year attributable to owners of the parent company | (2,199,301 | ) | (4,286,819 | ) | (1,088,365 | ) | ||||||
Comprehensive loss for the year attributable to non-controlling interest | (2,154 | ) | (43,681 | ) | (1,349 | ) |
The accompanying notes are an integral part of these consolidated financial statementsConsolidated Financial Statements.
F-7 |
GRUPO SUPERVIELLE S.A.
Grupo Supervielle S.A. and Subsidiaries
Consolidated Statement of Income - ContinuedChanges in Shareholders´ Equity
For the financial years ended on December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
Items | Capital stock | Capital Adjustment | Paid in capital | Legal reserve | Other reserves | Retained earnings | Other comprehensive income | Total Shareholders´ equity | Total Shareholders´ | Total shareholders´ equity | ||||||||||||||||||||||||||||||
Balance at December 31, 2016 | 363,777 | 2,009,251 | 10,481,557 | 76,599 | 3,012,409 | 2,084,760 | - | 18,028,353 | 509,774 | 18,538,127 | ||||||||||||||||||||||||||||||
Contributions from shareholders | 92,945 | 131,726 | 13,879,067 | - | - | - | - | 14,103,738 | - | 14,103,738 | ||||||||||||||||||||||||||||||
Distribution of retained earnings by the shareholders’ meeting on April 27, 2017: | ||||||||||||||||||||||||||||||||||||||||
- Other reserves | - | - | - | 35,322 | 1,881,129 | (1,916,451 | ) | - | - | - | - | |||||||||||||||||||||||||||||
- Dividend distribution | - | - | - | - | - | (170,382 | ) | - | (170,382 | ) | - | (170,382 | ) | |||||||||||||||||||||||||||
Other movements | - | - | - | - | - | - | - | - | (166,454 | ) | (166,454 | ) | ||||||||||||||||||||||||||||
Net loss for the year | - | - | - | - | - | (1,160,465 | ) | - | (1,160,465 | ) | (1,369 | ) | (1,161,834 | ) | ||||||||||||||||||||||||||
Other comprehensive income for the year | - | - | - | - | - | - | 72,100 | 72,100 | 20 | 72,120 | ||||||||||||||||||||||||||||||
Balance at December 31, 2017 | 456,722 | 2,140,977 | 24,360,624 | 111,921 | 4,893,538 | -1,162,538 | 72,100 | 30,873,344 | 341,971 | 31,215,315 | ||||||||||||||||||||||||||||||
Distribution of retained earnings by the shareholders’ meeting on April 24, 2018: | ||||||||||||||||||||||||||||||||||||||||
- Other reserves | - | - | - | 28,596 | 3,345,492 | (3,374,088 | ) | - | - | - | - | |||||||||||||||||||||||||||||
- Dividend distribution | - | - | - | - | - | (505,129 | ) | - | (505,129 | ) | - | (505,129 | ) | |||||||||||||||||||||||||||
Purchase of subsidiaries ‘shares | - | - | (671 | ) | - | - | - | - | (671 | ) | (248 | ) | (919 | ) | ||||||||||||||||||||||||||
Other movements | - | - | - | - | - | - | - | - | (276,372 | ) | (276,372 | ) | ||||||||||||||||||||||||||||
Net loss for the year | - | - | - | - | - | (4,658,050 | ) | - | (4,658,050 | ) | (44,067 | ) | (4,702,117 | ) | ||||||||||||||||||||||||||
Other comprehensive income for the year | - | - | - | - | - | - | 371,231 | 371,231 | 386 | 371,617 | ||||||||||||||||||||||||||||||
Balance at December 31, 2018 | 456,722 | 2,140,977 | 24,359,953 | 140,517 | 8,239,030 | (9,699,805 | ) | 443,331 | 26,080,725 | 21,670 | 26,102,395 | |||||||||||||||||||||||||||||
Distribution of retained earnings by the shareholders’ meeting on April 26, 2019: | ||||||||||||||||||||||||||||||||||||||||
- Other reserves | - | - | - | - | 2,081,294 | (2,081,294 | ) | - | - | - | - | |||||||||||||||||||||||||||||
- Dividend distribution | - | - | - | - | - | (466,112 | ) | - | (466,112 | ) | - | (466,112 | ) | |||||||||||||||||||||||||||
Purchase of subsidiaries ‘shares | - | - | 485 | - | - | - | - | 485 | 82 | 567 | ||||||||||||||||||||||||||||||
Net loss for the year | - | - | - | - | - | (2,151,600 | ) | - | (2,151,600 | ) | (2,022 | ) | (2,153,622 | ) | ||||||||||||||||||||||||||
Other comprehensive (loss) / income for the year | - | - | - | - | - | - | (47,701 | ) | (47,701 | ) | (132 | ) | (47,833 | ) | ||||||||||||||||||||||||||
Balance at December 31, 2019 | 456,722 | 2,140,977 | 24,360,438 | 140,517 | 10,320,324 | (14,398,811 | ) | 395,630 | 23,415,797 | 19,598 | 23,435,395 |
The accompanying Notes are an integral part of these Consolidated Financial Statements.
F-8 |
GRUPO SUPERVIELLE S.A.
Consolidated Statement of Cash Flow
For the years ended December 31, 2016, 20152019, 2018 and 20142017
(Expressed in thousands of Argentine pesos)
|
| December 31, |
| |||||||
|
| 2017 |
| 2016 |
| 2015 |
| |||
Administrative expenses |
|
|
|
|
|
|
| |||
Personnel expenses |
| Ps. | 5,475,680 |
| Ps. | 3,859,525 |
| Ps. | 2,767,111 |
|
Directors’ and statutory auditors’ fees |
| 80,862 |
| 73,894 |
| 59,475 |
| |||
Other professional fees |
| 426,204 |
| 286,507 |
| 186,586 |
| |||
Advertising and publicity |
| 272,769 |
| 226,350 |
| 165,413 |
| |||
Taxes |
| 615,896 |
| 452,081 |
| 268,520 |
| |||
Depreciation of premises and equipment (Note 10) |
| 118,594 |
| 81,558 |
| 56,637 |
| |||
Amortization of other intangibles (Note 12.2) |
| 128,875 |
| 111,284 |
| 92,431 |
| |||
Other operating expenses |
| 1,034,532 |
| 847,218 |
| 584,341 |
| |||
Other |
| 237,210 |
| 121,864 |
| 80,889 |
| |||
|
| Ps. | 8,390,622 |
| Ps. | 6,060,281 |
| Ps. | 4,261,403 |
|
|
|
|
|
|
|
|
| |||
Subtotal - Income from financial transactions |
| Ps. | 2,567,016 |
| Ps. | 1,256,992 |
| Ps. | 607,664 |
|
|
|
|
|
|
|
|
| |||
Income from insurance activities |
| 479,061 |
| 606,143 |
| 175,947 |
| |||
Miscellaneous income |
|
|
|
|
|
|
| |||
Results from equity investments |
| 26,099 |
| — |
| 3 |
| |||
Default interests |
| 92,739 |
| 82,142 |
| 51,907 |
| |||
Loans recovered and allowances reversed |
| 167,844 |
| 130,987 |
| 60,199 |
| |||
Other (Note 19) |
| 257,611 |
| 216,755 |
| 255,056 |
| |||
Result from discontinued operations |
| 1,549 |
| — |
| — |
| |||
|
| Ps. | 545,842 |
| Ps. | 429,884 |
| Ps. | 367,165 |
|
Miscellaneous losses |
|
|
|
|
|
|
| |||
Results from equity investments |
| — |
| 4,996 |
| — |
| |||
Default interests and charges paid to the Argentine Central Bank |
| 4,164 |
| 1,598 |
| 176 |
| |||
Loan loss provisions for miscellaneous receivables and other provisions |
| 44,796 |
| 76,627 |
| 23,863 |
| |||
Depreciation and losses from miscellaneous assets (Note 11) |
| 11,184 |
| 7,740 |
| 7,311 |
| |||
Amortization of goodwill (Note 12.2) |
| 9,222 |
| 9,295 |
| 9,302 |
| |||
Other (Note 19) |
| 307,114 |
| 358,690 |
| 172,775 |
| |||
|
| Ps. | 376,480 |
| Ps. | 458,946 |
| Ps. | 213,427 |
|
|
|
|
|
|
|
|
| |||
Non-controlling interests result |
| Ps. | (5,897 | ) | Ps. | (22,166 | ) | Ps. | (16,080 | ) |
|
|
|
|
|
|
|
| |||
Income before tax |
| 3,209,542 |
| 1,811,907 |
| 921,270 |
| |||
|
|
|
|
|
|
|
| |||
Income tax (Note 20) |
| Ps. | (772,483 | ) | Ps. | (500,603 | ) | Ps. | (247,161 | ) |
|
|
|
|
|
|
|
| |||
Net Income for the fiscal year |
| Ps. | 2,437,059 |
| Ps. | 1,311,304 |
| Ps. | 674,109 |
|
|
|
|
|
|
|
|
| |||
Basic earnings per share |
| 6.20 |
| 4.10 |
| 4.42 |
| |||
|
|
|
|
|
|
|
| |||
Diluted earnings per share |
| 6.20 |
| 4.10 |
| 4.42 |
|
12/31/2019 | 12/31/2018 | 12/31/2017 | ||||||||||
Cash flow from operating activities | ||||||||||||
Net loss for the year | (2,153,622 | ) | (4,702,117 | ) | (1,161,834 | ) | ||||||
Adjustments to obtain flows from operating activities: | ||||||||||||
Income tax | 168,695 | 1,555,074 | 1,802,869 | |||||||||
Depreciation and Impairment of Property, plant and equipment | 1,814,671 | 665,154 | 956,819 | |||||||||
Loan loss provisions | 7,736,868 | 7,967,031 | 6,204,348 | |||||||||
Other adjustments: | ||||||||||||
Exchange rate difference on gold and foreign currency | 324,070 | (1,733,237 | ) | (604,734 | ) | |||||||
Interest from loans and other financings | (44,794,595 | ) | (46,790,036 | ) | (34,250,524 | ) | ||||||
Interest from deposits and financing received | 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 measurement of investment properties | 127,130 | (221,408 | ) | 27,653 | ||||||||
Results from exposure to changes in the purchasing power of money | 30,290,502 | (14,349,403 | ) | (17,600,790 | ) | |||||||
Interest on liabilities for financial leases | 212,492 | - | - | |||||||||
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 | ||||||||
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 transactions | 319,817 | - | - | |||||||||
Liabilities at fair value through profit or loss | (222,849 | ) | 412,403 | - | ||||||||
Other liabilities | 524,046 | 731,334 | 1,715,045 | |||||||||
Income Tax paid | (809,974 | ) | (2,154,355 | ) | (2,020,426 | ) | ||||||
Net cash (used in) / provided by operating activities (A) | (2,407,296 | ) | 8,196,460 | (27,815,906 | ) | |||||||
Cash flows from investing activities | ||||||||||||
Payments related to: | ||||||||||||
Purchase of PPE, intangible assets and other assets | (1,113,875 | ) | (4,391,549 | ) | (1,506,579 | ) | ||||||
Purchase of liabilities and equity instruments issued by other entities | - | (276,375 | ) | (167,803 | ) | |||||||
Adquisition of subsidiaries, net of cash adquired | (197,954 | ) | (2,827,563 | ) | - | |||||||
Collections: | ||||||||||||
Disposals related to PPE, intangible assets and other assets | 8,021 | 667,263 | 1,061,324 | |||||||||
Net cash used in investing activities (B) | (1,303,808 | ) | (6,828,224 | ) | (613,058 | ) |
The accompanying Notes are an integral part of these Consolidated Financial Statements.
F-9 |
GRUPO SUPERVIELLE S.A.
Consolidated Statement of Cash Flow
For the years ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
12/31/2019 | 12/31/2018 | 12/31/2017 | ||||||||||
Cash flows from financing activities | ||||||||||||
Payments: | ||||||||||||
Repurchase of non-controlling interest in subsidiaries | 567 | (919 | ) | - | ||||||||
Lease liabilities | (1,251,601 | ) | - | - | ||||||||
Financing received from Argentine Financial Institutions | (113,905,868 | ) | (105,180,217 | ) | (98,253,226 | ) | ||||||
Unsubordinated negotiable obligations | (17,365,599 | ) | (11,619,542 | ) | (2,663,582 | ) | ||||||
Subordinated negotiable obligations | (842,966 | ) | (19,976 | ) | (2,350,208 | ) | ||||||
Dividends | (466,112 | ) | (505,129 | ) | (170,382 | ) | ||||||
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 (decrease) / 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 | |||||||||
The accompanying notes are an integral part of these consolidated financial statementsConsolidated Financial Statements.
F-10 |
GRUPO SUPERVIELLE S.A.
Grupo Supervielle S.A.Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and Subsidiaries2017,
Consolidated Statement of Changes in Shareholders’ Equity
Forand for the years ended December 31, 2017, 20162019, 2018 and 20152017
(Expressed in thousands of Argentine pesos)
|
| Contribution from shareholders |
| Reserves |
|
|
| Total |
| |||||||||||
|
| Capital Stock |
| Paid-in Capital |
| Legal |
| Other |
| Retained earnings |
| Equity |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Balance at December 31, 2014 |
| Ps. | 124,485 |
| Ps. | 91,543 |
| Ps. | 24,897 |
| Ps. | 1,103,141 |
| Ps. | 362,920 |
| Ps. | 1,706,986 |
| |
Distribution of retained earnings by the shareholders’ meeting on April 30,2015 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Other Reserves |
| — |
| — |
| — |
| 355,535 |
| (355,535 | ) | — |
| |||||||
Dividend distribution |
| — |
| — |
| — |
| — |
| (7,385 | ) | (7,385 | ) | |||||||
Capitalization of retained earnings |
| 124,485 |
| — |
| — |
| (124,485 | ) | — |
| — |
| |||||||
Net Income for the year |
| — |
| — |
| — |
| — |
| 674,109 |
| 674,109 |
| |||||||
Balance at December 31, 2015 |
| Ps. | 248,970 |
| Ps. | 91,543 |
| Ps. | 24,897 |
| Ps. | 1,334,191 |
| Ps. | 674,109 |
| Ps. | 2,373,710 |
| |
Distribution of retained earnings by the shareholders’ meeting on April 19, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Legal Reserves |
| — |
| — |
| 24,897 |
| — |
| (24,897 | ) | — |
| |||||||
Other Reserve |
| — |
| — |
| — |
| 624,050 |
| (624,050 | ) | — |
| |||||||
Dividend distribution |
| — |
| — |
| — |
| — |
| (25,162 | ) | (25,162 | ) | |||||||
Contribution from shareholders |
| 114,807 |
| 3,156,892 |
| — |
| — |
| — |
| 3,271,699 |
| |||||||
Net Income for the year |
| — |
| — |
| — |
| — |
| 1,311,304 |
| 1,311,304 |
| |||||||
Balance at December 31, 2016 |
| Ps. | 363,777 |
| 3,248,435 |
| 49,794 |
| 1,958,241 |
| 1,311,304 |
| 6,931,551 |
| ||||||
Distribution of retained earnings by the shareholders’ meeting on April 27, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Legal Reserves |
| — |
| — |
| 22,961 |
| — |
| (22,961 | ) | — |
| |||||||
Other Reserve |
| — |
| — |
| — |
| 1,222,843 |
| (1,222,843 | ) | — |
| |||||||
Dividend distribution |
| — |
| — |
| — |
| — |
| (65,500 | ) | (65,500 | ) | |||||||
Contribution from shareholders |
| 92,945 |
| 5,748,743 |
| — |
| — |
| — |
| 5,841,688 |
| |||||||
Net Income for the year |
| — |
| — |
| — |
| — |
| 2,437,059 |
| 2,437,059 |
| |||||||
Balance at December 31, 2017 |
| Ps. | 456,722 |
| 8,997,178 |
| 72,755 |
| 3,181,084 |
| 2,437,059 |
| 15,144,798 |
| ||||||
The accompanying notes are an integral part of these consolidated financial statements
Grupo Supervielle S.A. and Subsidiaries
Consolidated Statement of Cash Flows
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos)
|
| December 31, |
| ||||||||
|
| 2017 |
| 2016 |
| 2015 |
| ||||
Changes in cash and cash equivalents |
|
|
|
|
|
|
| ||||
Cash and cash equivalents at the beginning of the year |
| Ps. | 9,688,554 |
| Ps. | 7,616,502 |
| Ps. | 4,046,180 |
| |
Cash and cash equivalents at the end of the year |
| 25,421,865 |
| 9,688,554 |
| 7,616,502 |
| ||||
Net increase in cash and cash equivalents |
| Ps. | 15,733,311 |
| Ps. | 2,072,052 |
| Ps. | 3,570,322 |
| |
Causes of changes in cash and cash equivalents |
|
|
|
|
|
|
| ||||
Cash Flow from operating activities |
|
|
|
|
|
|
| ||||
Net (payments)/collections related to: |
|
|
|
|
|
|
| ||||
Government and corporate securities |
| Ps. | 2,140,023 |
| Ps. | (947,998 | ) | Ps. | 744,287 |
| |
Loans |
|
|
|
|
|
|
| ||||
To the financial sector |
| 144,199 |
| (217,926 | ) | (169,047 | ) | ||||
To the non-financial public sector |
| (25,002 | ) | 5,951 |
| 5,747 |
| ||||
To the non-financial private sector and foreign residents |
| (9,702,001 | ) | (4,863,859 | ) | (184,866 | ) | ||||
Other receivables from financial transactions |
| (1,880,356 | ) | (67,871 | ) | 76,259 |
| ||||
Receivables from financial leases |
| (551,434 | ) | (60,992 | ) | (219,970 | ) | ||||
Deposits |
|
|
|
|
|
|
| ||||
To the financial sector |
| 6,376 |
| (241,655 | ) | 100,164 |
| ||||
To the non-financial public sector |
| 3,244,458 |
| 1,352,419 |
| (314,813 | ) | ||||
To the non-financial private sector and foreign residents |
| 14,371,284 |
| 7,994,649 |
| 4,827,512 |
| ||||
Other liabilities from financial transactions |
|
|
|
|
|
|
| ||||
Interbank loans (call money loans received) |
| (178,925 | ) | 119,032 |
| (139,115 | ) | ||||
Other (except for liabilities included in Financing Activities) |
| 727,743 |
| (589,851 | ) | (417,149 | ) | ||||
Collections related to income from services |
| 5,789,970 |
| 4,436,397 |
| 3,040,982 |
| ||||
Payments related to expenses for services |
| (1,775,300 | ) | (1,279,764 | ) | (902,340 | ) | ||||
Administrative expenses paid |
| (7,537,254 | ) | (5,340,482 | ) | (3,608,264 | ) | ||||
Payment of organization and development expenses |
| (156,309 | ) | (97,184 | ) | (100,886 | ) | ||||
Net collections of penalty interest |
| 92,739 |
| 82,142 |
| 51,907 |
| ||||
Differences deriving from court resolutions paid |
| (4,918 | ) | (1,480 | ) | — |
| ||||
Other (payments) / collections related to miscellaneous income and losses |
| (10,269 | ) | (100,958 | ) | 23,913 |
| ||||
Net payments related to other operating activities |
| (1,088,322 | ) | (163,934 | ) | (73,512 | ) | ||||
Income tax/Minimum Presumed Income Tax paid |
| (461,678 | ) | (310,983 | ) | (290,971 | ) | ||||
Net cash provided by / (used in) operating activities |
| Ps. | 3,145,024 |
| Ps. | (294,347 | ) | Ps. | 2,449,838 |
| |
Cash Flow from investing activities |
|
|
|
|
|
|
| ||||
Net (payments) / collections related to bank premises and equipment |
| (175,841 | ) | (494,253 | ) | 35,742 |
| ||||
Net (payments) / collections related to miscellaneous assets |
| (145,140 | ) | 35,520 |
| (220,287 | ) | ||||
Payments for sales of equity investments |
| 33,112 |
| (21 | ) | — |
| ||||
Other collections / (payments) for investing activities |
| 5,053 |
| (18,510 | ) | (4,289 | ) | ||||
Net cash used in investing activities |
| Ps. | (282,816 | ) | Ps. | (477,264 | ) | Ps. | (188,834 | ) | |
Grupo Supervielle S.A. and Subsidiaries
Consolidated Statement of Cash Flows
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos)
|
| December 31, |
| ||||||||
|
| 2017 |
| 2016 |
| 2015 |
| ||||
Cash Flow from financing activities |
|
|
|
|
|
|
| ||||
Net collections / (payments) related to: |
|
|
|
|
|
|
| ||||
Unsubordinated negotiable obligations |
| Ps. | 5,288,294 |
| Ps. | 371,069 |
| Ps. | 638,722 |
| |
Argentine Central Bank |
| 1,548 |
| 1,843 |
| 2,092 |
| ||||
International banks and institutions |
| 2,098,285 |
| 568,385 |
| 74,445 |
| ||||
Subordinated negotiable obligations |
| (1,058,813 | ) | (123,811 | ) | (74,684 | ) | ||||
Financing received from Argentine financial institutions |
| (228,665 | ) | (1,686,277 | ) | 254,113 |
| ||||
Contributions from shareholders |
| 5,841,688 |
| 3,301,137 |
| — |
| ||||
Payment of dividends |
| (65,500 | ) | (25,503 | ) | (7,385 | ) | ||||
Other payments from Financing Activities |
| (7,256 | ) | (19,757 | ) | (16,616 | ) | ||||
Net cash provided by financing activities |
| Ps. | 11,869,581 |
| Ps. | 2,387,086 |
| Ps. | 870,687 |
| |
Financial income on cash and cash equivalents (including interest and monetary results) |
| 1,001,522 |
| 456,577 |
| 438,631 |
| ||||
Net increase in cash and cash equivalents |
| Ps. | 15,733,311 |
| Ps. | 2,072,052 |
| Ps. | 3,570,322 |
| |
The accompanying notes are an integral part of these consolidated financial statements
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
1.Business of the Company
1. | ACCOUNTING STANDARDS AND BASIS OF PREPARATION |
Grupo Supervielle S.A. (“Grupo(individually referred to as “Grupo Supervielle”, the “Company” or “the Company” and jointly with its subsidiaries as the “Group”), is a financial services holding company organized under the laws of Argentina that conducts its business through its subsidiaries, providing banking services, proprietary brand credit card services, personal loans, insurance and other services. The detail subsidiaries of the Company and respective ownership is included in Note 2.
2.Basis of Consolidation
Grupo Supervielle’s consolidated financial statementsSupervielle´s Consolidated Financial Statements as of December 31, 20172019, 2018 and 20162017 and for the years ended December 31, 2017, 20162019 and 20152018 include the assets, liabilities and results of the controlled companies detailed below. The percentages directly or indirectly held by Grupo Supervielle in each of those companies’ capital stock are as follows:Note 1.2.
|
| December 31, |
| December 31, |
| December 31, |
|
Issuing Company |
| 2017 |
| 2016 |
| 2015 |
|
Grupo Supervielle S.A. |
|
|
|
|
|
|
|
Banco Supervielle S.A. (“Banco”) |
| 99.88 | % | 98.23 | % | 97.39 | % |
Cordial Compañía Financiera S.A. (“CCF”) |
| 99.89 | % | 98.32 | % | 97.52 | % |
Cordial Microfinanzas S.A. (“Cordial”) |
| — |
| 99.77 | % | 99.67 | % |
Sofital S.A.F. e II (“Sofital”) |
| 100.00 | % | 100.00 | % | 95.03 | % |
Tarjeta Automática S.A. (“Tarjeta”) |
| 99.99 | % | 99.78 | % | 99.68 | % |
Supervielle Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión (“SAM”) |
| 100.00 | % | 100.00 | % | 99.75 | % |
Espacio Cordial de Servicios S.A. (“ECS”) |
| 100.00 | % | 100.00 | % | 99.75 | % |
Supervielle Seguros S.A. (“SS”) |
| 100.00 | % | 100.00 | % | 99.75 | % |
1.1. | Basis of preparation |
Intercompany balances and transactionsThese Consolidated Financial Statements have been eliminatedprepared in consolidation.accordance with IFRS as adopted by the IASB.
The preparation of Financial Statements at a certain date requires Management to make estimations and evaluations affecting the amount of assets and liabilities recorded and contingent assets and liabilities disclosed at such date, as well as income and expenses recorded during the year. Actual results might differ from the estimates and evaluations made at the date of preparation of these Consolidated Financial Statements. The most significant judgments made by Management in applying the Group’s accounting policies and the major estimations and significant judgments are described in Note 2.
These consolidated financial statements as of December 31, 2019, were approved by resolution of the Board of
Directors’ meeting held on April 30, 2020.
3.Significant Accounting Policies(a) Going concern
The consolidated financial statements as of December 31, 2019, 2018 and 2017 have been prepared on a going concern basis as there is a reasonable expectation that the Group will continue its operational activities in accordancethe foreseeable future (and in any event with a time horizon of more than twelve months from the rulesend of the Argentine Central Bank (“BCRA”) which prescribes the generally accepted accounting principles for all banks in Argentina (“Argentine Banking GAAP”), which differs in certain significant respects from generally accepted accounting principles in Argentina applicable to enterprises in general (“Argentine GAAP”)reporting period).
For purpose of these consolidated financial statements, certain disclosures related to formal legal requirements for(b) Measuring Unit – IAS 29 (Financial reporting in Argentina have been omitted since they are not required for Securities and Exchange Commission (“SEC”) reporting purposes.hyperinflationary economies)
The followingConsolidated Financial Statements of the Entity are expressed in Argentine pesos which is a summarythe 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 significant policies followed by the Groupan entity that reports in the preparationcurrency of a highly inflationary economy shall be stated in terms of the consolidatedmeasuring 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.
3.1 PresentationTo determine the existence of Financial Statements in Constant Argentine Pesosa highly inflationary economy under the terms of IAS 29, the standard details a series of factors to consider, including a cumulative inflation rate over three years that is close to or exceeds 100%.
The consolidated financial statementsIt is important to highlight that the three-year accumulated inflation rate as of December 31, 2019 reached 183.4%. On the other hand, the macroeconomic events that have been preparedtaken place in constant monetary units, reflecting the overall effects ofcountry during the year show that the country is complying with the qualitative factors provided for in IAS 29 to consider Argentina as a highly inflationary economy for accounting purposes. All this, consequently, originates the need to apply the restatement for inflation through August 31, 1995. As from that date, in accordance with Argentine Banking GAAP and the requirements of the control authorities, restatement of the financial statements was discontinued untilin the terms of IAS 29 for the year ended December 31, 2001. As2019.
The Group determined to use the Internal Wholesale Price Index (IWPI) to restate balances and transactions until the year 2016, for the months of November and December 2015 the average variation of the Consumer Price Index (CPI) of the City of Buenos Aires was used, due to the fact that during those two months there were no IWPI measurements at national level. Then, from January 1, 2002,2017 omwards, the Group used the National Consumer Price Index (National CPI). The tables below show the evolution of these indexes in accordance with Argentine Banking GAAP recognitionthe last four years and as of the effects of inflation has been resumed. In accordance with BCRA Communication “A” 3,921, inflation accounting was discontinued as from March 1, 2003.December 31, 2019 according to official statistics (INDEC):
F-11 |
Grupo Supervielle
GRUPO SUPERVIELLE S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
ForAs of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2017, 20162019, 2018 and 20152017
(Expressed in thousands of Argentine pesos — unless otherwise stated)pesos)
Argentine GAAP requires financial statements shall be prepared in constant monetary units. The application of inflation adjustments shall become effective within an inflation context, which is featured, among other things, by the existence of an accrued inflation rate over a three-year period or exceeding the 100%. Once such rate is reached, all relevant financial statements shall be re-expressed as from the moment in which such adjustment was interrupted.
As of December 31, | ||||||||||||||||
2016 | 2017 | 2018 | 2019 | |||||||||||||
Variation in Prices | ||||||||||||||||
Annual | 34.6 | % | 24.8 | % | 47.6 | % | 53.8 | % | ||||||||
Accumulated 3 years | 102.3 | % | 96.8 | % | 148.0 | % | 183.4 | % |
As a consequence of the aforementioned, these Consolidated Financial Statements as of December 31, 2019 were restated in accordance with the provisions of IAS 29.
Restatement of the Financial Position
The Group restated all the non-monetary items in order to reflect the impact of the inflation in terms of the measuring unit current as of December 31, 2019. Consequently, the main items restated were Property, Plant and Equipment, Intangible assets, Goodwill, Inventories and the Equity items. Each item must be restated since the date of the initial recognition in the Group's accounts or since the date of the last revaluation. Monetary items have not been restated because they are stated in terms of the measuring unit current as of December 31, 2019.
Comparative figures must also be presented in the measuring unit current as of December 31, 2019. Therefore, comparative figures for the previous reporting periods have been restated by applying a general price index, so that the resulting comparative financial statements are presented in terms of the current unit of measurement as of the closing date of the reporting period.
Restatement of the Income Statement and the Statement of Cash Flows
In the Income Statement, items shall be restated from the dates when the items of income and expense were originally recorded. To this end, the Group applied the variations in a general price index.
The effect of inflation on the monetary position is included in the Income Statement under Results from exposure to changes in the purchasing power of money.
The items of the Statement of Cash Flows must also be restated in terms of the measuring unit current at the closing date of the Statement of Financial Position. IAS 29 para 33 states that all items in the statement of cash flows are expressed in terms of the measuring unit current at the end of the reporting period. The loss arising from the restatement has an impact on the Income Statement and must be eliminated from the Statement of Cash Flows because it is not considered cash or cash equivalent.
Restatement of the Statement of Changes in Shareholder’s Equity
All components of the Statement of Changes in Shareholder’s Equity, except reserves and retained earnings, must be restated from the dates on which the items were contributed or otherwise arose.
(c) New Standards and Interpretations issued by the IASB adopted by the Group
In January 2016, the IASB issued IFRS 16 “Leases” which establishes the criteria for recognition and valuation of leases for lessees and lessors. IFRS 16 affect primarily the accounting by lessees and requires recognition of an asset (the right to use the leased item) and a financial liability for those contracts that meet the definition of leases under the standard. An optional exemption exists for short-term leases that do not contain a purchase option and low-value leases.
The group has adopted IFRS 16 Leases retrospectively from 1January 2019, but has not restated comparatives for the 2018 reporting period, as permitted under the specific transition provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet date, management evaluated that within this environment,on 1 January 2019 and are also explained in Note 7. The new accounting policies are disclosed in 1.12.
F-12 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the inflation threshold set by Argentine professional accounting standards,years ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
On adoption of IFRS 16, the group recognised lease liabilities in relation to leases which had notpreviously been reached, and in consequence, no inflation adjustment has beenclassified as ‘operating leases’ under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of 1 January 2019. The weighted average lessee’s incremental borrowing rate applied to the lease liabilities on 1 January 2019 was 44.26% for leases denominated in Argentinian Pesos and 14.36% for leases denominated in US Dollar.
(i) Practical expedients applied
In applying IFRS 16 for the first time, the group has used the following practical expedients permitted by the standard:
· applying a single discount rate to a portfolio of leases with reasonably similar characteristics;
· relying on previous assessments on whether leases are onerous as an alternative to performing an impairment review – there were no onerous contracts as at January 1, 2019;
· accounting for operating leases with a remaining lease term of less than 12 months as at 1 January 2019 as short-term leases;
· excluding initial direct costs for the measurement of the right-of-use asset at the date of initial application; and
· using hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
The group has also elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date the group relied on its assessment made applying IAS 17 and Interpretation 4 Determining whether an Arrangement contains a Lease.
(ii) Measurement of lease liabilities
Operating lease commitments disclosed as at December 31, 2018 | 1,933,167 | |||
Discounted using the lessee’s incremental borrowing rate of at the date of initial application | 1,354,278 | |||
Lease liability recognised as at January 1, 2019 | 1,354,278 | |||
Of which are: | ||||
Current lease liabilities | 596,813 | |||
Non-current lease liabilities | 757,465 |
(iii) Measurement of right-of-use assets
The associated right-of-use assets were measured at the amount equal to the lease liability.
(iv) Adjustments recognised in the balance sheet on 1 January 2019
The change in accounting policy affected the following items in the balance sheet on January 1, 2019:
· | property, plant and equipment –> increase by $1,354,278 | |
· | other financial liabilities –> increase by $1,354,278 |
(ii) Lessor accounting
The group did not need to make any adjustments to the accounting for assets held as lessor under operating leases as a result of the adoption of IFRS 16.
(d) New Standards and Interpretations issued by the IASB not in force
IFRS 17 “Insurance contracts”: In May 18, 2017, the IASB issued IFRS 17 “Insurance contracts” as replacement for IFRS 4. It requires a current measurement model where estimates are re-measured each reporting period. Contracts are measured using the building blocks of discounted probability-weighted cash flows, an explicit risk adjustment, and a contractual service margin representing the unearned profit of the contract which is recognized as revenue over the coverage period. This standardis effective for fiscal years beginning on or after January 1, 2021. The Group is evaluating the impact of the adoption of this new standard.
F-13 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
1.2. | Consolidation |
A subsidiary is an entity, including structured entities, over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity.
The subsidiaries are consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
The following chart details the subsidiaries included in the consolidation process:
Percentage of direct or indirect investment in capital stock | ||||||||||||||
Company | Main Activity | 12/31/2019 | 12/31/2018 | 12/31/2017 | ||||||||||
Banco Supervielle S.A. | Commercial Bank | 99.90% | (1) | 99.89% | (1) | 99.88% | (1) | |||||||
Cordial Compañía Financiera S.A. | Financial Company | 99.90 | % | 99.90 | % | 99.89 | % | |||||||
Tarjeta Automática S.A. | Credit Card | 99.99 | % | 99.99 | % | 99.99 | % | |||||||
Supervielle Asset Management S.A. | Mutual Fund | 100.00 | % | 100.00 | % | 100.00 | % | |||||||
Sofital S.A.F. e I.I. | Real State | 100.00 | % | 100.00 | % | 100.00 | % | |||||||
Espacio Cordial de Servicios S.A. | Retail Services | 100.00 | % | 100.00 | % | 100.00 | % | |||||||
Supervielle Seguros S.A. | Insurance | 100.00 | % | 100.00 | % | 100.00 | % | |||||||
Micro Lending S.A.U. | Financial Company | 100.00 | % | 100.00 | % | - | ||||||||
InvertirOnline S.A.U. | Financial Broker | 100.00 | % | 100.00 | % | - | ||||||||
InvertirOnline.Com Argentina S.A.U. | Representations | 100.00 | % | 100.00 | % | - | ||||||||
Supervielle Productores Asesores de Seguros S.A. | Insurance Broker | 100.00 | % | - | - | |||||||||
Bolsillo Digital S.A.U. | Fintech | 100.00 | % | - | - | |||||||||
Futuros del Sur S.A. | Financial Broker | 100.00 | % | - | - |
(1) | Grupo Supervielle S.A.’s direct and indirect interest in Banco Supervielle S.A votes amounts to 99,87%, 99,87% and 99,86% as of 12/31/2019, 12/31/2018 and 12/31/2017 respectively. |
Financial Statements of controlled companies are for the same period of the Group´s Financial Statements.
Intercompany transactions, balances and unrealized gains on transactions between group companies are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of income, statement of comprehensive income, statement of changes in shareholder’s equity and statement of financial position, respectively.
Supervielle Productores Asesores de Seguros S.A., Bolsillo Digital S.A.U. and Futuros del Sur S.A. are consolidated from the date of their acquisition (See Note 29).
The lackacquisition method of objective data throughoutaccounting is used to account for business combinations by the historical series, during 2015Group. The consideration transferred for the acquisition of a subsidiary comprises the fair value of the assets transferred, the liabilities incurred to the former owners of the acquired business, the equity interests issued by the Group, the fair value of any asset or liability resulting from a contingent consideration arrangement and the first four monthsfair value of 2016, regardingany pre-existing equity interest in the Consumer Price Index (“CPI”)subsidiary. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.
F-14 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
The Group recognizes any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net assets.
Acquisition-related costs are expensed as incurred.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquired entity and the Wholesale Price Index (“WPI”)acquisition-date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognized directly in the Consolidated Income Statement as a “bargain purchase”.
1.3. | Consolidated Structured Entities |
Banco Supervielle S.A., the existence of other qualitativeCordial Compañía Financiera S.A. and quantitative indicators, such as the program established by the BCRA to foster monetary stabilityMicro Lending S.A.U have securitized certain financial instruments, mainly consumer loans, through financial trusts that aims to induceissue debt securities and participation certificates.
The Group controls a systematic and sustainable low inflation rate, and, the fact that in 2017, the market has evidenced a strong downward trend of inflation rate. All in all, this data allowstructured entity when the Group is exposed to, estimate thator has rights to, variable returns from its involvement with the preparationentity and has the ability to affect those returns through its power to direct the activities of the entity. Structured entities are consolidated from the date on which the control is transferred to the Group. They are deconsolidated from the date that control ceases.
As for financial statements intrusts, the Group has evaluated the following:
• The purpose and design of the trust
• Identification of relevant activities of the trust
• Decision-making process on these activities
• If the Group has the power to direct the relevant activities of the trust
• If the Group is exposed to, or has rights to, variable returns from its involvement with the trust
• If the Group has ability to affect those returns through its power over the trust
In accordance with the applicable criteria under a hyperinflationary economy is not required. Theaforementioned, the Group considers that this conclusion is consistent whit that of most companies with operations in Argentina reporting under Argentine GAAP. The Group reassesses inflation data periodically to determine whether this conclusion continues to be reasonable.controls such financial trusts and, therefore, such structured entities have been consolidated.
However,The following chart details the assets and liabilities of Structured Entities that have been consolidated by the Group as of December 31, 2019 and 2018:
12/31/2019 | 12/31/2018 | |||||||
Assets | ||||||||
Loans | 1,594,664 | 1,584,904 | ||||||
Financial assets | 108,839 | 215,164 | ||||||
Other assets | 291,691 | 194,075 | ||||||
Total Assets | 1,995,194 | 1,994,143 | ||||||
Liabilities | ||||||||
Financial liabilities | 1,424,480 | 1,374,000 | ||||||
Other liabilities | 41,630 | 228,518 | ||||||
Total Liabilities | 1,466,110 | 1,602,518 |
1.4. | Transactions with non-controlling interest |
The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the recent pastsubsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognized in a separate reserve within equity attributable to owners of the Group.
1.5. | Segment Reporting |
An operating segment is defined as a component of an entity or a Group that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity), and whose financial information is evaluated on a regular basis by the chief operating decision maker.
F-15 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the years certain macroeconomic indicators have suffered significant fluctuations,ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
Operating segments are reported in a factmanner consistent with the internal reporting provided to:
(i) | Key personnel of the senior management who account for the main authority in operating decision-making processes and is responsible for allocating resources and assessing the performance of operating segments; and |
(ii) | The Board, who is in charge of making strategic decisions of the Group. |
1.6. | Foreign currency translation |
(a) Functional and presentation currency
Figures included in the Consolidated Financial Statements of each of the Group’s entities are measured using the functional currency, that must be considered when assessingis, the currency of the primary economic environment in which the entity operates. Consolidated Financial Statements are presented in Argentine pesos, which is the functional and interpretingpresentation currency of the financial condition and performance as shown in these Financial Statements.Group.
3.2 Foreign Currency(b) Transactions and balances
AssetsTransactions in foreign currency are translated into the functional currency using the exchange rates released by the Argentine Central Bank at the dates of the transactions. Gains and losses in foreign currency resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are converted into pesos using the year-end exchange rates. Transactions denominated in foreign currencies are translated into local currency at the prevailingyear end exchange on the date of transaction settlement. Foreign exchange differences were recordedrates, are recognized in the income statement, of income for each year in the captionunder “Exchange rate differences on gold and foreign currency”.
1.7. | Cash and due from banks |
Cash and due from Banks item includes available cash and unrestricted deposits held in Banks, which are short-term liquid instruments and have original maturities of less than three months.
3.3 Gold
Gold has been valued at its market price at the year-endAssets disclosed under cash and converted into pesos using the year-end exchange rates.
3.4 Government and Corporate Securities
Government securities mainly represent obligations of the Argentine government. Corporate securities included in this caption consist of listed corporate equity securities and listed debt securities. Corporate equity and debt securitiesdue from Banks are considered to be held for trading purposes as defined under Argentine Banking GAAP.
Realized gains and losses on sales and interest income on government and corporate securities are included as “Income from government and corporate securities” in the accompanying statement of income.
Government Securities
Argentine Banking GAAP establishes two categories in which banks should classify Argentine government securities, according to the purpose of the relevant assets. The Group recognizes the securities as follows:
a)Securities measured at fair value: These securities, that have an active market in accordance with Central Bank rules, have been valued at their market price at year-end and converted into pesos
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
following the procedure described in Note 3.2. Realized and unrealized exchange gains and losses are recorded in financial income for each year. Changes in fair value of these securities are recorded as financial income.
b)Securities measured at cost plus accrued interest: These securities, that do not have an active market in accordance with Central Bank rules, are valued at acquisition cost plus financial results accrued, exponentially applying the internal rate of return as per their issuance terms and conditions. The accruals of the internal rate of return mentioned above were recorded in the related consolidated statements of income. This category includes securities recorded under the caption “Unlisted Government securities”.
Investments in listed corporate securities
These securities have been valued at their market price at each year-end. Changes in valuation of these securities are recorded as financial income for each year.
3.5 Interest Income (Expense)
Interest income and expense has been accrued according to a compound interest formula in the period in which it was generated, except those whose maturity does not exceed 92 days, on which interest has been accrued according to a simple interest formula.
The Bank suspends the accrual of interest when the related loan is 90 days past due and the collection of interest and principal is in doubt. The suspension of interest corresponds to the loans classified as “with problems” and “medium risk” or below, under Argentine Central Bank´s classification rules. Accrued interest remains on the Bank´s books and is considered to be part of the loan balance when determining the allowance for loan losses. Regarding impaired loans, interest is recognized on a cash basis after reducing the balance of accrued interest, if applicable.
3.6 Loans
Loans are valued at amortized cost plus interest accrued at each balance sheet date, net of allowances for loan losses, as described in note 3.7.
3.7 Allowances for Loan Losses
Allowances for loan losses are recognized considering the evaluation of the debt repayment capacity, the degree of debtors’ compliance and the guarantees securing the respective transactions, following the regulations on Debtor Classification and Minimum Loan Loss Risk Allowances issued by the BCRA.
3.8 Other receivables and liabilities from financial transactions
·Amounts receivable for spot and forward sales pending settlement: These receivables have been valued at their agreed settlementwhich is close to its fair value. The difference between the market value of the securities and/or the foreign currency exchanged at the time of execution of the sale contracts and the agreed forward exchange value (premium) was accreted into income during the period held. The securities and/or foreign currency to be delivered were valued as stated on note 3.4, and recorded as Securities to be delivered under spot and forward sales pending settlement within “Other liabilities from financial transactions”.
·Securities receivable and to be delivered for spot and forward sales pending settlement: Securities and/or foreign currency to be received for purchases and to be delivered for sales are valued following the procedure described in Note 3.2.
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
·Unlisted corporate bonds: Have been valued at acquisition cost plus accrued interest at year-end.
·Other receivables not included in the Debtor Classification Regulations: This caption includes participation certificates issued by trusts and investments in mutual funds Participation certificates issued by trusts have been accounted for under the equity method, and debt securities issued by trusts in pesos and in foreign currency been accounted for at cost plus accrued interest. Investments in mutual funds have been accounted for at fair value, using net asset values at each balance sheet date. Changes in valuation are recognized in the statement of income.
·Banks and international institutions and subordinated negotiable obligations: Valued on the basis of the cash received, net of transaction costs, plus the financial results accrued on the basis of the internal rate of return estimated upon initial recognition.
3.9 Receivables from financial leases
The receivable from financial leases were valued at the discounted value of the sum of minimum installments pending collection (excluding any contingent installments), the residual value and the purchase options. Interests earned on these receivables are recognized as financial income.
3.10 Provisions for Contingencies
The Group has certain contingent liabilities with respect to existing or potential claims, lawsuits and other proceedings, including those involving labor and other matters. The Group accrues liabilities when it is probable that future costs will be incurred and such costs can be reasonably estimated.
3.11Unlisted equity investments
Under Argentine Banking GAAP, the equity method is used to account for investments where a significant influence in the corporate decision making process exists. Investments in which the Group does not exercise significant influence are accounted for at cost, adjusted for inflation where applicable, as indicated in Note 3.1, with the limit of their respective equity value calculated based on the latest financial statements of the issuers available at the year-end.
3.12 Premises and Equipment, net
Have been valued at cost and adjusted for inflation, where applicable, as indicated in Note 3.1., less the corresponding accumulated depreciation.
Depreciation is calculated following the straight-line method over the following estimated useful lives:
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The cost of maintenance and repairs is charged to expense as incurred. The cost of significant renewals and improvements are added to the carrying amount of the respective assets. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in the consolidated statement of income.
The recorded value of these assets does not exceed their estimated recoverable value.
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
3.13 Miscellaneous Assets
Have been valued at cost and adjusted for inflation, where applicable, as indicated in Note 3.1, less accumulated depreciation, where applicable, calculated following the straight-line method over the estimated useful lives of the assets. The recorded value of these assets does not exceed their estimated recoverable value. Depreciable assets are those recorded under the captions “Assets taken as guarantee for loans” and “Other miscellaneous assets” (See note 11).
3.14 Intangible Assets
Other intangibles
Other intangibles consist of computer software costs and leasehold improvements and have been valued at cost, less accumulated amortization.
Amortization of leasehold improvements is calculated following the straight-line method over the shorter of the life of the improvement or the remaining lease term. Amortization of computer software cost is calculated following the straight-line method over a 5 years period.
Goodwill
Represents the excess of the acquisition cost over the value assigned to businesses acquired. Goodwill is amortized following the straight-line method over estimated useful lives, not exceeding 10 years.
3.15 Severance and vacation
Severance costs are expensed in the year in which the termination terms are agreed with the employees.
Vacations are expensed as paid.
3.16 Deposits
Deposits are valued at amortized cost. For deposits denominated in foreign currency, the procedure described in Note 3.2 is applied.
3.17 Subordinated Negotiable Obligations
Subordinated Negotiable Obligations are valued at amortized cost plus accrued interest using the internal rate of return.
3.18 Shareholders’ Equity
Shareholders’ Equity accounts have been adjusted for inflation following the procedure described in Note 3.1, except for the “Capital Stock” account, which has been stated at their original values. The adjustment stemming from the restatement of these accounts has been capitalized.
3.19 Minimum Presumed Income Tax and Income Tax
Income tax is calculated at the rate of 35% on the tax result for all the years presented. Argentine Banking GAAP does not require the recognition of the effects of temporary differences between the carrying amounts of existing assets and liabilities and their respective tax basis and, therefore, income taxes for Banco Supervielle and Cordial Compañía Financiera are recognized on the basis of amounts due in accordance with Argentine tax regulations.
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
Minimum presumed income tax, established by Law No. 25,063, complements income tax since while the latter is assessable on the taxable profit for the fiscal year, minimum presumed income tax is a minimum tax levied on potential income provided by certain productive assets at the rate of 1%; the Entity’s tax obligation for each fiscal year being the higher of the two taxes. However, if in any fiscal year minimum presumed income tax exceeds income tax, that amount in excess will be computable as payment on account of income tax in excess of minimum presumed income tax arising in any of the following ten fiscal years.
The abovementioned law establishes that, the entities regulated by the Financial Institutions Law must consider 20% of their taxable assets as the taxable basis for calculation of the minimum presumed income tax, after deducting those defined as non-computable assets.
On December 27, 2017, the Argentine Congress approved a comprehensive income tax reform that will become effective as 2018. This tax reform, among other things, reduces the 35% income tax rate to 30% for 2018 and 2019, and to 25% from 2020 onwards, and imposes a withholding income tax on dividends paid by an Argentine entity of 7% for 2018 and 2019 increasing this percentage to 13% from 2020 onwards.
3.20Cash and Cash Equivalents
Cash and cashCash equivalents include cash and due from banks and highly liquid investmentsshort-term securities with an original maturity of less than three monthsthree-months according to the following detail:
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| |||||||||||||||
Item | 12/31/2019 | 12/31/2018 | 12/31/2017 | |||||||||||||||||||
Cash and due from banks |
| Ps. | 11,129,475 |
| Ps. | 8,166,132 |
| Ps. | 6,808,591 |
| 26,403,099 | 51,822,372 | 25,205,323 | |||||||||
Securities issued by the BCRA — listed |
| 13,611,524 |
| 336,785 |
| 645,218 |
| |||||||||||||||
Investments in money market funds |
| 680,866 |
| 1,185,637 |
| 162,693 |
| |||||||||||||||
Debt securities at fair value through profit or loss | 568,501 | 19,434,329 | 21,910,236 | |||||||||||||||||||
Money Market Funds | 964,884 | 1,008,466 | 1,546,426 | |||||||||||||||||||
Cash and cash equivalents |
| Ps. | 25,421,865 |
| Ps | 9,688,554 |
| Ps | 7,616,502 |
| 27,936,484 | 72,265,167 | 48,661,985 |
The Group invests in money market funds (MMF) whose investments qualify individually as cash and cash equivalents. An MMF is an open-ended mutual fund that invests in short-term debt instruments (typically one day to one year) such as treasury bills, certificates of deposit, bonds, government gilts and commercial papers. These MMF have to comply with strict fund policies such as:
- controls ensuring constant net asset value or linear performance to limit volatility supported by actual performance;
- returns benchmarked to short-term money market interest rates;
- investment in high-quality instruments with high liquidity and a maximum weighted average maturity of a few weeks; and
- highly diversified portfolio.
Reconciliation between balances as appearing on the Balance sheetStatement of Financial Position and the items considered asin the Statement of Cash and cash equivalents:Flow:
|
| December 31, |
| |||||||
|
| 2017 |
| 2016 |
| 2015 |
| |||
Cash and due from banks |
|
|
|
|
|
|
| |||
As per the Balance sheet |
| Ps. | 11,129,475 |
| Ps. | 8,166,132 |
| Ps. | 6,808,591 |
|
As per the Statement of cash flows |
| Ps. | 11,129,475 |
| Ps. | 8,166,132 |
| Ps. | 6,808,591 |
|
Government and corporate securities |
|
|
|
|
|
|
| |||
Securities issued by the BCRA |
|
|
|
|
|
|
| |||
As per the Balance sheet |
| Ps. | 13,611,627 |
| Ps. | 1,414,053 |
| Ps. | 691,246 |
|
BCRA bills and notes — unlisted |
| Ps. | (103 | ) | (1,077,268 | ) | (46,028 | ) | ||
As per the Statement of cash flows |
| Ps. | 13,611,524 |
| Ps. | 336,785 |
| Ps. | 645,218 |
|
Other receivables from financial transactions |
|
|
|
|
|
|
| |||
Other receivables not included in the debtor classification regulations |
|
|
|
|
|
|
| |||
Financial trust Participation Certificates, Financial trust debt securities and other (Note 8) |
| Ps. | 1,251,073 |
| Ps. | 1,928,212 |
| Ps . | 1,543,389 |
|
Other assets |
| Ps. | (570,207 | ) | (742,575 | ) | (1,380,696 | ) | ||
As per the Statement of cash flows |
| Ps. | 680,866 |
| Ps. | 1,185,637 |
| Ps. | 162,693 |
|
Items | 12/31/2019 | 12/31/2018 | 12/31/2017 | |||||||||
Cash and due from Banks | ||||||||||||
As per Statement of Financial Position | 26,403,099 | 51,822,372 | 25,205,323 | |||||||||
As per the Statement of Cash Flows | 26,403,099 | 51,822,372 | 25,205,323 |
F-16 |
GRUPO SUPERVIELLE S.A.
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
ForAs of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2017, 20162019, 2018 and 20152017
(Expressed in thousands of Argentine pesos — unless otherwise stated)pesos)
Debt securities at fair value through profit or loss | ||||||||||||
As per Statement of Financial Position | 568,501 | 23,247,329 | 25,902,184 | |||||||||
Securities not considered as cash equivalents | - | (3,813,000 | ) | (3,991,948 | ) | |||||||
As per the Statement of Cash Flows | 568,501 | 19,434,329 | 21,910,236 | |||||||||
Money Market Funds | ||||||||||||
As per Statement of Financial Position – Other financial assets | 2,096,866 | 2,612,157 | 3,674,741 | |||||||||
Other financial assets not considered as cash equivalents | (1,131,982 | ) | (1,603,691 | ) | (2,128,315 | ) | ||||||
As per the Statement of Cash Flow | 964,884 | 1,008,466 | 1,546,426 |
Reconciliation of liabilities from financing activities at December 31, 2019 and 2018 is as follows:
Items | 12/31/2018 | Cash Flows | Other non-cash movements | 12/31/2019 | ||||||||||||||||
Inflows | Outflows | |||||||||||||||||||
Unsubordinated Negotiable Obligations | 14,317,445 | 8,412,283 | (17,365,599 | ) | 722,346 | 6,086,475 | ||||||||||||||
Subordinated Negotiable Obligations | 2,128,759 | - | (842,966 | ) | 834,095 | 2,119,888 | ||||||||||||||
Financing received from the Argentine Central Bank and other financial institutions | 12,357,106 | 110,569,136 | (113,905,868 | ) | (2,777 | ) | 9,017,597 | |||||||||||||
Lease Liabilities | - | - | (1,251,601 | ) | 2,197,990 | 946,389 | ||||||||||||||
Total | 28,803,310 | 118,981,419 | (133,366,034 | ) | 3,751,654 | 18,170,349 |
1.8. | Financial Instruments |
Initial Recognition and measurement
3.21UseFinancial assets and financial liabilities are recognized when the entity becomes a party to the contractual provisions of Estimatesthe instrument. Purchases and sales of financial assets are recognized on trade-date, the date on which the Group commits to purchase or sell the asset.
At initial recognition, the Group measures a financial asset or liability at its fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are incremental and directly attributable to the acquisition or issue of the financial asset or financial liability, such as fees and commissions. Transaction costs of financial assets and financial liabilities carried at fair value through profit or loss are expensed in profit or loss. Immediately after initial recognition, an expected credit loss allowance (ECL) is recognized for financial assets measured at amortized cost and investments in debt instruments measured at fair value through other comprehensive income, as described in note 1.12, which results in an impariment loss being recognized in profit or loss when an asset is newly originated.
When the fair value of financial assets and liabilities differs from the transaction price on initial recognition, the Group recognizes the difference as follows:
- | When the fair value is evidenced by a quoted price in an active market for an identical asset or liability or based on a valuation technique that only uses data from observable markets, the difference is recognized as a gain or loss. |
- | In all other cases, the difference is deferred and the timing of recognition of deferred day one profit or loss is determined individually. It is either amortized over the life of the instrument until its fair value can be determined using market observable inputs, or realized through settlement. |
Financial Assets
a – Debt Instruments
Debt instruments are those instruments that meet the definition of a financial liability from the issuer’s perspective, such as loans, government and corporate bonds and, accounts receivables purchased from clients in non-recourse factoring transactions.
F-17 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
Classification
Pursuant to IFRS 9, the Entity classifies financial assets depending on whether these are subsequently measured at amortized cost, fair value through other comprehensive income or fair value through profit or loss, on the basis of:
a) | the Group’s business model for managing financial assets, and; |
b) | the cash-flows characteristics of the financial asset |
Business Model
The preparationbusiness model reflects how the Group manages a group of financial statementsassets in conformityorder to generate cash flows. That is, whether the Group’s objective is solely to collect the contractual cash flows from the assets (measured at amortized cost) or is to collect both the contractual cash flows and cash flows arising from the sale of assets (measured at fair value through other comprehensive income). If neither of these is applicable, then the financial assets are classified as part of other business model and measured at fair value through profit or loss.
The business model of the Group does not depend on the management’s intentions for an individual instrument. Consequently, such business model is not assessed instrument by instrument, but at a higher aggregated level.
The Group reclassifies an instrument when and only when its business model for managing those assets has changed.
Contractual Cash Flow Characteristics
Where the business model is to hold assets to collect contractual cash flows or to collect contractual cash flows and sell, the Group assesses whether the financial instruments’ cash flows represent solely payments of principal and interest. Where the contractual terms introduce exposure to risk or volatility that are inconsistent with Argentine Banking GAAP requiresa basic lending arrangement, the related financial asset shall be classified and measured at fair value through profit or loss.
Based on the aforementioned, there are three different categories of Financial Assets:
i) Financial assets at amortized cost.
Financial assets shall be measured at amortized cost if both of the following conditions are met:
(a) | the financial asset is held for collection of contractual cash flows, and |
(b) | the assets’s cash flows represent solely payments of principal and interest. |
The amortized cost is the amount at which it is measured at initial recognition minus the principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount and, for financial assets, adjusted for any loss allowance.
ii) Financial assets at fair value through other comprehensive income:
Financial assets shall be measured at fair value through other comprehensive income when:
(a) | the financial asset is held for collection of contractual cash flows and for selling financial assets and |
(b) | the asset’s cash flows represent solely payments of principal and interest. |
These instruments shall be initially recognized at fair value plus or minus transaction costs that are incremental and directly attributable to the acquisition or issue of the instrument, and subsequently measured at fair value through other comprehensive income. Gains and losses arising out of changes in fair value shall be included in other comprehensive income within a separate component of equity. Impairment gains or losses or reversal, interest revenue and foreign exchange gains and losses on the instrument’s amortized cost shall be recognized in profit or loss. At the time of sale or disposal, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to the income statement. Interest income from these financial assets is determined using the effective interest rate method.
F-18 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
iii) Financial assets at fair value through profit or loss:
Financial assets at fair value through profit or loss comprise:
- | Instruments held for trading |
- | Instruments specifically designated at fair value through profit or loss |
- | Instruments with contractual cash-flows that do not represent solely payments of principal and interest |
These financial instruments are initially recognized at fair value and any change in fair value measurement is charged to the income statement.
The Group classifies a financial instrument as held for trading if such instrument is acquired or incurred for the main purpose of selling or repurchasing it in the short term, or it is part of a portfolio of financial instruments which are managed together and for which there is evidence of short-term profits or if it is a derivative financial instrument not designated as a hedging instrument. Derivatives and trading securities are classified as held for trading and are measured at fair value.
b – Equity Instruments
Equity instruments are instruments that do not contain a contractual obligation to pay and that evidence a residual interest in the issuer’s net assets.
Such instruments are measured at fair value through profit and loss, except where the Group’s senior management has elected, at initial recognition, to irrevocably designate an equity investment at fair value through other comprehensive income. This option is available when instruments are not held for trading. The gains or losses of these instruments are recognized in other comprehensive income and are not subsequently reclassified to profit or loss, including on disposal. Dividends that result from such instrument will be charged to income when the Group’s right to receive payments is established.
Derecognition of Financial Assets
The Group recognizes the write-off of financial assets only when any of the following conditions are met:
1. | The rights on the financial asset cash flows have expired; or | |
2. | The financial asset is transferred pursuant to the requirements in 3.2.4 of IFRS 9. |
The Group derecognizes financial assets that have been transferred only when the following characteristics are met:
1. | The contractual rights to receive the cashflows from the assets have expired or when they have been transferred and the Group transfers substantially all the risks and rewards of ownership. | |
2. | The Entity retains the contractual rights to receive cash flows from assets but assumes a contractual obligation to pay those cash flows to oher entities and transfers subtantially all of the risks and rewards. These transactions result in derecognition if the Group: |
a. Has no obligation to make estimatespayments unless it collects amounts from the assets;
b. Is prohibited from selling or pledging the financial assets;
c. Has an obligation to remit any cash it collects from the assets without material delay.
Write Off of Financial Assets
The Group reduces the gross carrying amount of a financial asset when it has no reasonable expectations of recovering a financial asset in its entirety of a portion thereof. A write-off constitues a derecognition event.
Financial Liabilities
Classification
The Group classifies its financial liabilities as subsequently measured at amortized cost using the effective rate method, except for:
F-19 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and assumptions that affect2017,
and for the reported amountsyears ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
- | Financial liabilities at fair value through profit or loss. | |
- | Financial liabilities arising from the transfer of financial assets which did not qualify for derecognition. | |
- | Financial guarantee contracts and loan commitments. |
Financial Liabilities valued at fair value through profit or loss: At initial recognition, the Group can designate a liability at fair value through profit or loss if it reflects more appropriately the financial information because:
- | The Group eliminates or substantially reduces an accounting mismatch in measurement or recognition inconsistency; or |
- | if financial assets and financial liabilities are managed and their performances assessed on a fair value basis according to an investment strategy or a documented risk management; or |
- | if a host contract contains one or more embedded derivatives and the Group has opted for designating the entire contract at fair value through profit or loss. |
Financial guarantee contract: A guarantee contract is a contract which requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument.
Financial guarantee contracts and loan commitments are initially measured at fair value and subsequently measured at the higher of the amount of the loss allowance and the unaccrued premium at year end.
Derecognition of financial liabilities
The Entity derecognizes financial liabilities when they are extinguished; this is, when the obligation specified in the contract is discharged, cancelled or expires.
1.9 Derivatives
Derivatives are initially recognized at their fair value on the date on which the derivative contract is entered into and are subsequently remeasured at fair value.
All derivative instruments are recognised as assets when their fair value is positive, and as liabilities when their fair value is negative. Any change in the fair value of derivative instruments is included in the income statement.
The Group has not applied hedge accounting in these consolidated financial statements.
1.10 Repo Transactions
i) | Reverse Repo Transactions |
According to the derecognition principles set out in IFRS 9, these transactions are treated as secured loans for the risk has not been transferred to the counterparty.
Loans granted in the form of reverse repo agreements are accounted for under “Repo Transactions”, classified by counterparty and also by the type of assets received as collateral.
At the end of each month, accrued interest income is charged against “Repo Transactions” with its corresponding offsetting entry in “Interest Income.”
The assets received and liabilitiessold by the Group are derecognized at the end of the repo transaction, and an in-kind liability is recorded to reflect the obligation of delivering the security disposed of.
ii) | Repo Transactions |
Loans granted in the form of repo agreements are accounted for under “Repo Transactions”, classified by counterparty and also by the type of asset pledged as collateral.
F-20 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
In these transactions, when the recipient of the underlying asset becomes entitled to sell it or pledge it as collateral, it is reclassified to “Financial assets in guarantee”. At the end of each month, these assets are measured according to the category they had before they were subject to the repo transaction, and results are charged against the applicable accounts, depending on the type of asset.
At the end of each month, accrued interest expense is charged against “Repo Transactions” with its corresponding offsetting entry in “Interest-Expenses”.
1.11 Allowance for Loan Losses
a) | Definition |
The Group assesses on a forward-looking basis the expected credit losses (“ECL”) associated to its 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 through 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, other movements in the fair value of the instrument are reflected 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 disclosureexpected cash flows discounted using the original effective interest rate. In the case of contingentpurchased or originated credit-impaired assets, and liabilities atthis difference is discounted using the dateeffective 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:
- | 12-month expected credit losses: arising from the potential default events, as defined in the following sections that are estimated to be likely to occur within the 12 months following the reporting date. These losses will be associated with financial assets classified in Stage 1. |
- | Lifetime Expected credit losses are those arising from the potential default events that are likely to occur throughout the life of the financial instruments. These losses are associated with financial assets classified in Stage 2 or Stage 3. |
With the purpose of estimating the expected life of the financial instrument all the contractual terms have been taken into account (e.g. duration, purchase options, etc.), for most financial instruments the contractual period (including extension options) is the maximum period considered to measure expected credit losses. In the case of revolving credit facilities (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, taking into account the effectiveness of management procedures that mitigate such exposure (e.g. the ability to unilaterally cancel such financial instruments, etc.).
b) | Financial instruments presentation |
For the purposes of estimating ECL, and in accordance with its internal policies, the Group classifies its financial instruments (financial assets, loan 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 have not experienced a significant increase in credit risk since initial recognition and is not purchased or originated credit impaired. |
- | Normal risk under watchlist ("Stage 2"): includes all instruments that, have experienced significant increases in credit risk since initial recognition but are not yet deemed credit-impaired. |
- | Doubtful Risk (“Stage 3"): includes financial instruments, overdue or not, which are considered to be credit impaired. Likewise, loan commitmennts or financial guarantees whose payment is probable and their recovery doubtful are considered to be in Stage 3. |
c) | Significant increase in credit risk |
The Group considers a financial instrument to have experienced a significant increase in credit risk when any of the following conditions exist:
F-21 |
F-22 |
Retail Banking
· | Portfolios between 31 and 90 days past due | |
· | Portfolios whose classification under Argentine Central Bank regulation is higher than 1 (except for Senior Cityzens Portfolio) |
· | Score of behavior less than cut off |
Corporate Banking
· | Portfolios whose classification under Argentine Central Bank regulation is higher than 1 (except Senior Cityzens) |
· | Credit Ratings C (Probability of default higher than 30%) |
Consumer Finance:Portfolios between 31 and 90 days past due.
d) | Impairment valuation assessment |
The impairment model in IFRS 9 applies to financial assets measured at amortized cost, debt instruments at fair value through other comprehensive income, lease receivables and loan commitments and financial guarantees that are not measured at fair value.
ECL represents the best estimation of the financial assets´ expected credit losses at the balance sheet date, assessed both individually and collectively.
- | Individually: the Group individually assesses impairment on those financial instruments that are considered to be significant and with sufficient information to make such an estimate |
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 discounted using the original effective interest rate. The estimate of these cash flows takes into account all available information on the financial asset and the guarantees associated with that asset.
- | Collectively: the Group also assesses impairment collectively in cases where they are not assessed on an individual basis. This includes, for example, loans to individuals, sole proprietors or businesses in retail banking subject to a standardized risk management. |
For expected credit loss provisions modelled on a collective basis, the Group has developed internal models. The grouping of exposures is preformed on the basis of shared characteristics, such that risk exposures within group are homogeneous. In performing the grouping there must be sufficient information for the group to be statistically reliable .
The Group has identified three groupings: Retail Banking, Corporate Banking and Consumer Finance, amongst these three segments the Group estimates parameters in a more granular way based on the shared risk characteristics. Below are detailed the groupings by shared risk characteristics:
Group | Parameter | Grouping |
Retail Banking | Probability of Default | Personal loans (1) |
Credit card loans (1) | ||
Overdrafts | ||
Documents | ||
Mortgage loans and leasing | ||
Refinancing | ||
Other financings | ||
Loss Given Default | Personal loans | |
Credit card loans | ||
Overdrafts | ||
Mortgage loans and leasing | ||
Refinancing | ||
Other financings |
F-23 |
Corporate Banking | Probability of Default (2) | Small companies |
Medium companies | ||
Big companies | ||
Financial Area | ||
Loss Given Default | Overdrafts | |
Documents | ||
Leasing | ||
Unsecured loans | ||
Other financings | ||
Other receivables from financial transactions | ||
Consumer Finance | Probability of Default | Closed credit cards |
Open credit cards | ||
Cash loans | ||
Cash consumptions and directed loans | ||
Refinancing | ||
Tarjeta Automatica Personal loans | ||
Loss Given Default | Credit cards | |
Personal loans | ||
Refinancing |
(1) For credit cards and personal loans, the breakdown per segment was added because there was enough materiality. The segments are: senior citizens, high income open market, high income payroll, non- high income open market, non-high income payroll, bussiness in retail banking, former senior cityzens and former payroll
(2) | Groups made to calculate the probability of default are carried out by company size, occasionally classified by economic activity in Stage 1. For Stage 2 and Stage 3, the Probability of default is calculated including all segments of Corporate Banking due to the lack of materiality to perform a larger group. |
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.
The Group performs backtesting analysis to evaluate the reasonableness of the collective models.
Expected credit loss impairment allowance in the financial statements reflects a range of possible outcomes, calculated on a probability weighted basis based on three possible future scenarios, 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 reported amountsevolution of revenues and expenses during the reporting years. Significant estimates include those requiredmacroeconomic factors that are considered to be relevant for the accountingestimation 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), the recoverable valueGroup based the calculation in its experience in developing internal models for the estimation of assetsparameters both in the regulatory area and for management purposes, adapting the provisionsdevelopment of the impairment models under IFRS 9.
- | Exposure at default: it is based on the amounts the Group expects to be owed at the time of default, over the next 12 months or over the remaining life of the instrument. For example, for revolving credit facilities, the Group includes the current draw down balance plus any further amount that it is expected to be drawn up to the contractual limit by the time of default. |
- | Probability of default: it represents the likelihood of a borrower defaulting on its financial obligation over the next 12 months or over the remaining life of the instrument depending on the stage. |
- | Loss given default: represents the Group´s expectation of the extent of loss on a defaulted exposure. LGD varies by type of counterparty, seniority of claim, availability of collateral or other type of credit support. LGD is expressed as a percentage per unit of exposure at the time of default. |
F-24 |
The definition of default implemented by the Group for contingencies, among others. Actual results could differ from those estimates.the purpose of calculating ECL is based on the requirements of IFRS 9, which considers that a financial asset is in "default" when a payment is more than 90 days past due or if the Group considers the payment will not be reimbursed.
3.22ImpairmentIFRS 9 includes a rebuttable presumption that the credit risk on a financial instrument has increased significantly, when payments are more than 30 days past due. For comercial loans, this threshold is used as an additional, but not primary, indicator of long-lived assetssignificant 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 .
The Group has not used the low credit risk exemption for any financial instrument.
For the estimation of the expected credit losses, prospective information is taken into account. Specifically, the Group considers three prospective macroeconomic scenarios, which are updated periodically, evaluatesduring a time horizon of 12 months. The projected evolution for next year of the main macroeconomic indicators used by the Group for estimating expected credit losses is presented below:
Parameter | Segment | Macroeconomic Indicator | Scenario 1 | Scenario 2 | Scenario 3 |
Probability of Default | Retail | Real Wage | 0.21% | 2.37% | (1.67%) |
Corporate | Interest Rate | 32.48% | 32.41% | 40.55% | |
Consumer Finance | Monthly Economic Activiy Estimator | 140.85 | 151.52 | 135.86 | |
Loss Given Default | Retail | Private sector real wage | 50.28% | 41.39% | 51.63% |
Each one of the macroeconomic scenarios has its corresponding weighting the Group associates the Base scenario with the highest probability of occurrence and therefore this scenario is the one with the highest weighting:
Scenario 1 | 80% |
Scenario 2 | 10% |
Scenario 3 | 10% |
The sensitivity analysis for the macroeconomic scenarios’ probability of occurrence was based on a 5% increase/decrease in the probability of occurrence of Scenario 1. The ECL allowance sensitivity to future macroeconomic conditions is as follows:
December 31, 2019 | |
Reported ECL Allowance | 6,751,939 |
Gross carrying amount | 94,761,950 |
Reported ECL Coverage | 7.13% |
ECL amount by scenarios | |
Favorable scenario | 6,702,980 |
Unfavorable scenario | 6,779,811 |
Coverage ratio by scenarios | |
Favorable scenario | 7.07% |
Unfavorable scenario | 7.15% |
F-25 |
1.12 Leases
For leases where the Group acts as lessee the accounting policy is described in note 1.1.(c).
The group as lessor:
Operating leases
Leases where the lessor retains a substantial portion of the risks and rewards of ownership are classified as operating leases. Payments made under operating leases (net of lease incentives) are recognized in profit or loss on a straight-line basis over the term of the lease. In addition, the Group recognizes the associated costs such as amortization and expenses.
The historical cost includes expenditures that are directly attributable to the acquisition of these items and those expenses are charged to profit or loss during the lease term.
The depreciation applied to the leased underlying assets is consistent with the one applied to similar assets’ group. In addition, the Group utilizes the criteria described in Note 1.18 to determine whether there is objective evidence that an impairment loss has occurred.
Finance leases
Finance leases are measured at the present value of on the future lease payments using a discount rate determined at inception.
The difference between the gross receivable and the present value represents unearned finance income and is recognized during the lease term using the net investment method, which reflects a constant periodic rate of return.
Incremental costs directly attributable to negotiating and arranging the lease are included in the initial measurement of the lease and reduce the amount of income recognized during the lease term.
The Group utilizes the criteria described in Note 1.11 to determine whether there is objective evidence that an impairment loss has occurred, as for loans carried at amortized cost.
1.13 Property, plant and equipment
Property, plant and equipment is measured at historical cost less depreciation, except for land and buildings, where the Group adopted the revaluation model. The historical cost includes expenditure that is directly attributable to the acquisition or building of these items.
The subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group, and the cost of the item can be measured reliably. The carrying amount of an asset is derecognized when replaced.
Repairs and maintenance expenses are charged to profit or loss when they are incurred.
The depreciation is calculated using the straight-line method, applying annual rates sufficient to extinguish the values of assets at the end of their estimated useful lives. In those cases in which an asset includes significant components with different useful lives, such components are recognized and depreciated as separate items.
The following chart presents the useful life for each item included in property, plant and equipment:
Property, plant and equipment | Estimated useful life |
Buildings | 50 Years |
Furniture | 10 Years |
Machines and equipment | 5 Years |
Vehicles | 5 Years |
Others | 5 Years |
The asset’s residual values and useful lives are reviewed and adjusted if appropriate, at the end of each reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.
F-26 |
Increases in the carrying amounts arising on revaluation of land and buildings are recognized in other comprehensive income. Decreases that reverse previous increases of the same asset are first recognized in other comprehensive income to the extent of the remaining surplus attributable to the asset. All other decreases are charged to profit or loss.
Gains and losses on disposals are determined by comparing proceeds with carrying amount.
1.14 Investment properties
Investment properties are composed of buildings held for obtaining a rent or for capital appreciation or both, but is never occupied by the Group.
Investment properties are measured at its fair value, and any gain or loss arising from a change in the fair value is recognized in profit or loss when arises. Investment properties are never depreciated. The fair value is determined using sales comparison approach prepared by the Group’s management considering a report of an independent expert.
Gain and losses on disposals are determined by comparing proceeds with the carrying amount.
1.15 Inventories
Inventories are valued at the lower of cost and net realizable value. The cost includes the acquisition costs (net of discounts, rebates and similar), as well as other costs that have been incurred to give the inventories their location and conditions to be commercialized. The net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of sale.
The inventories’ net realizable values are reviewed and adjusted if carrying amount is greater than its net realizable value at the end of each reporting period.
The Group establishes an allowance for obsolete inventory and low turnover rate products at the end of each year.
1.16 Intangible Assets
(a) Goodwill
Goodwill resulting from the acquisition of subsidiaries, associates or joint ventures account for the excess of the:
(i) | consideration transferred, valued at fair value as of acquisition date |
(ii) | amount of any non-controlling interest in the acquired entity; and |
(iii) | acquisition-date fair value of any previous equity interest in the acquired entity |
(iv) | over the fair value of the net identifiable assets acquired. |
Goodwill is included in the intangible assets item in the consolidated financial statement.
Goodwill is not subject to amortization, but it is annually tested for impairment. Impairment losses are not reverted once recorded. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. Goodwill impairment is recognized when the carrying amount exceeds its recoverable amount which derives from the fair value of its long-livedthe cash-generating unit. The fair value of the reporting unit is estimated using discounted cash flows techniques.
(b) Trademarks and licenses
Trademarks and licenses acquired separately are initially valued at historical cost, while those acquired through a business combination are recognized at their estimated fair value at the acquisition date..
F-27 |
Intangible assets with a finite useful life are subsequently carried at cost less accumulated depreciation and / impairment losses, if any. These assets are tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired.
Trademarks acquired by the Group have been classified as intangible assets with an indefinite useful life. The main factors considered for this classification include the years in which they have been in service and their recognition among industry customers.
Intangible assets with an indefinite useful life are those that arise from contracts or other legal rights that can be renewed without a significant cost and for which, based on an analysis of all the relevant factors, there is no foreseeable limit of the period over which the asset is expected to generate net cash flows for the Group. These intangible assets are not amortized, but are tested for impairment annually or more frequently if events or changes in circumstances indicate that they might be impaired, either individually or at the level of the cash generating unit. The categorization of the indefinite useful life is reviewed annually to confirm if it is still sustainable.
(c) Software
Costs related to software maintenance are recognized as an expense as incurred. Development, acquisition or implementation costs which are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognized as intangible assets when the following criteria are met:.
· | it is technically feasible to complete the software so that it will be available for use |
· | management intends to complete the software and use or sell it |
· | there is an ability to use or sell the software |
· | it can be demonstrated how the software will generate probable future economic benefits |
· | adequate technical, financial and other resources to complete the development and to use or sell the software are available, and |
· | the expenditure attributable to the software during its development can be reliably measured. |
These intangible assets are amortized on a straight-line basis during their estimated useful life, over a term not exceeding five years.
1.17 Assets held for sale
The assets, or groups of assets, with some directly associated liabilities, classified as held for sale in accordance with the provisions of IFRS 5 "Non-current assets held for sale and discontinued operations" will be disclosed separately from the rest of assets and certain intangibleliabilities.
An asset may be classified as held for sale if its carrying amount will be recovered primarily through a sale transaction, rather than through its continued use, and a sale is considered highly probable.
To apply the above classification, an asset must meet the following conditions:
- it must be available for immediate sale in its current conditions;
- Management must be committed to a plan to sell the asset and have started an active program to locate a buyer and complete the plan;
- the asset must be actively marketed for sale at a reasonable price, in relation to its current fair value;
- the sale must be expected to be completed within 12 months from the reclassification date;
- it is unlikely that the plan will be significantly changed or withdrawn.
The assets, or groups of assets, possibly with some directly associated liabilities, classified as held for sale in accordance with the provisions of IFRS 5 "Non-current assets held for sale and discontinued operations", are measured at the lower of their carrying amount and fair value less costs to sell.
The Group will not depreciate the asset while classified as held for sale.
F-28 |
The balances of financial instruments, deferred taxes and investment properties classified as held for sale are not subject to the valuation methods detailed above.
1.18 Impairment of non-financial assets
Assets with an indefinite useful life are not subject to amortization but are tested annually for impairment whenor more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable or, at least, on an annual basis.
Impairment losses are recognized when the carrying amount exceeds its recoverable amount. The recoverable amount of an asset is the higher of an asset’s fair value less costs of disposal and value in use. For purposes of assessing impairment, assets are grouped at the lowest level for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or group of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
1.19 Trust Assets
Assets held by the Group in its Trustee role, are not included in the Consolidated Financial Statements. Commissions and fees earned from trust activities are included in Service fee income.
1.20 Offsetting
Financial assets and liabilities are offset and the net amount reported in the consolidated financial statement where the Group has a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the assets and settle the liability simultaneously.
1.21 Financing received from the Argentine Central Bank and other Financial Institutions
The amounts owed to other financial institutions are recorded at the time the bank disburses the proceeds to the economic group. Non-derivative financial liabilities are measured at amortized cost.
1.22 Provisions / Contingencies
A provision will be recognized when:
a- | an entity has a present obligation (legal or implicit) as a result of past event; | |
b- | it is probable that an outflow of resources embodying future economic benefits will be required to settle the obligation; and | |
c- | the amount can be reliably estimated. |
An Entity will be deemed to have an implicit obligation where (a) the Group has assumed certain responsibilities as a consequence of past practices or public policies and (b) as a result, the Group has created an expectation that it will discharge those responsibilities
The Group recognizes the following provisions:
For labor, civil and commercial lawsuits: provisions are calculated based on lawyers’ reports about the status of the proceedings and the estimate about the potential losses to be afforded by the Group, as well as on the basis of past experience in this type of claims.
For miscellaneous risks: These provisions are set up to address contingencies that may trigger obligations for the Group. In estimating the provision amounts, the Group evaluates the likelihood of occurrence taking into consideration the opinion of its legal and professional advisors.
Other contingent liabilities are: i) possible obligations that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future events not wholly within the control of the Group; or ii) present obligations that arise from past events but it is not probable that an outflow of resources will be required to its settlement; or whose amount cannot be measured with sufficient reliability. Other contingent liabilities are not recognized. Contingent liabilities, whose possibility of any outflow in settlement is remote, are not disclosed unless they involve guarantees, in which case the nature of the guarantee is disclosed.
F-29 |
The Group does not account for positive contingencies, other than those arising from deferred taxes and those contingencies whose occurrence is virtually certain.
As of the date of these consolidated financial statements, the Group's management believes there are no elements leading to determine the existence of contingencies that might be materialized and have a negative impact on these consolidated financial statements other than those disclosed in Note 17.
1.23 Other non-financial liabilities
Non-financial accounts payable are accrued when the counterparty has fulfilled its contractual obligations and are measured at amortized cost.
1.23.1 Employee benefits
The Group’s short-term obligations includes liabilities for wages and salaries, including annual leave, that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as Other Non-Financial Liabilities in the Consolidated Financial Position.
During 2018, the Group had in place a retirement plan based on incentives for members of senior management and the Board of Directors, who will be entitled to receive cash payments over time if certain performance objectives are met. This retirement plan was ceased in 2019.
In addition, provisions related to pre-retirement plans and seniority awards benefits are recognized. Liabilities related to this plan are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. These obligations are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period, using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period of high-quality corporate bonds with terms and currencies that match, as closely as possible, the estimated future cash outflows. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss.
These provisions are measured at the present value of the disbursements that are expected to be required to settle the obligation using a pre-tax interest rate that reflects prevailing market conditions the time value of money and the specific risks for that obligation.
Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or when an employee accepts voluntary redundancy in exchange for these benefits. The group recognises termination benefits at the earlier of the following dates: (a) when the group can no longer withdraw the offer of those benefits; and (b) when the entity recognises costs for a restructuring that is within the scope of IAS 37 and involves the payment of terminations benefits. In the case of an offer made to encourage voluntary redundancy, the termination benefits are measured based on the number of employees expected to accept the offer. Benefits falling due more than 12 months after the end of the reporting period are discounted to present value
1.24 Negotiable Obligations
Subordinated and unsubordinated negotiable obligations issued by the Group are measured at amortized cost. Where the group buys back its own negotiable obligations, such obligations will be derecognized from the Consolidated Financial Statements and the difference between the residual value of the financial liability and the amount paid will be recognized as financial income or expenses.
F-30 |
1.25 Assets and liabilities derived from insurance contracts
The Group applies IFRS 4 “Insurance Contracts” in order to recognize and measure the assets and liabilities derived from insurance contracts.
Assets derived from insurance contracts
An insurance contract is a contract under which the Group (the insurer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder.
Once a contract has been classified as an insurance contract, it remains an insurance contract for the rest of its term, even if the insurance risk is significantly reduced during this period, unless all rights and obligations are extinguished or expired.
The insurance contracts offered by the Group include property insurance that covers combined family insurance, theft and similar risks, property damage, personal accidents, among other risks. They also include temporary life insurance contracts.
Total premiums are recognized on the date of issuance of the policy as an account receivable. At the same time, a reserve for unearned premiums representing premiums for risks that have not yet expired is recorded as a liability. Unearned premiums are recognized as income during the contract period, which is also the coverage and risk period. The book value of insurance accounts receivable is reviewed for impairment whenever events or circumstances indicate that the book value may not be recoverable. The carrying valueimpairment loss is recorded in the income statement.
Liabilities derived from insurance contracts
Debt with insured
The insurance claims reserves represent debts with insured people for claims reported to the company and an estimate of a long-lived asset is considered impaired bythe claims that have already been incurred but that have not yet been reported to the company (IBNR). The reported claims are adjusted on the basis of technical reports received from independent appraisers.
Debts with reinsurers and co-insurers
The Group mitigates the risk for some of its insurance businesses through co-insurance or reinsurance contracts in other companies. In the case of co-insurance, the Group whenassociates with another company to cover a risk assuming only a percentage of it and also the expected cash flows, discountedpremium. In reinsurance, the risk is transferred to another insurance company both proportionally (as a percentage of the risk) and without interest cost,not proportionally (excess loss is covered above a certain limit). The reinsurance agreements assigned do not exempt the Group from such an asset, is less than its carrying value. Inobligations to the insured.
Coinsurance and reinsurance liabilities represent balances owed under the same conditions and the amounts payable are estimated in a manner consistent with the contract that event, a loss wouldgave rise to them.
Debts with producers
They represent liabilities with insurance agents originated in the commissions for the insurance operations that they originate for the Group companies. The balances of the current accounts with these entities are also included.
Technical commitments
The current risk reserve regularizes the premiums to be recognizedcollected based on the amount by which the carrying value exceeds the fair market valueincurred but not reported risks.
1.26 Capital Stock and Capital Adjustments
Accounts included in this item are expressed in terms of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Previously recognized impairment loss is only reversed when there is a subsequent change in estimates used to compute the fair value of the asset. In that event, the new carrying amount of the asset should be the lower of its fair value or the net carrying amount the asset would have had if no impairment had been recognized.
4.Restricted Assets
At December 31, 2017 and 2016, the following Group’s assets are restricted:
|
| December 31, |
| |||||
Item |
| 2017 |
| 2016 |
| |||
Loans |
|
|
|
|
| |||
In guarantee of secured borrowings |
| Ps. | 28,075 |
| Ps. | 178,862 |
| |
|
| Ps. | 28,075 |
| Ps. | 178,862 |
| |
|
|
|
|
|
| |||
Other receivables from financial transactions |
|
|
|
|
| |||
Special guarantee accounts in BCRA (a) |
| Ps. | 855,261 |
| Ps. | 535,351 |
| |
Others |
| — |
| 620 |
| |||
|
| Ps. | 855,261 |
| Ps. | 535,971 |
| |
|
|
|
|
|
| |||
Miscellaneous receivables |
|
|
|
|
| |||
Trust guarantee deposits |
| Ps. | 15,057 |
| Ps. | 7,893 |
| |
Guarantee deposits for forward transactions |
| 245,550 |
| 114,820 |
| |||
Guarantee deposits for repurchase agreements |
| — |
| 59,014 |
| |||
Guarantee deposits for credit cards |
| 161,079 |
| 135,297 |
| |||
Other guarantee deposits |
| 26,295 |
| 21,316 |
| |||
Total |
| Ps. | 447,781 |
| Ps. | 338,340 |
| |
(a) Includes the special accounts balances as security for activities related to automated clearing house
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
5.Government and Corporate Securities
Government and corporate securities consist of the following:
|
| December 31, |
| ||||
|
| 2017 |
| 2016 |
| ||
Holding of Government Securities |
|
|
|
|
| ||
Measured at fair value |
| Ps. | 1,187,196 |
| Ps. | 125,243 |
|
Measured at amortized cost |
| 508,589 |
| 818,853 |
| ||
Total |
| Ps. | 1,695,785 |
| Ps. | 944,096 |
|
|
|
|
|
|
| ||
Securities issued by the BCRA |
|
|
|
|
| ||
Measured at fair value |
| 13,611,524 |
| 336,785 |
| ||
Measured at amortized cost |
| 103 |
| 1,077,268 |
| ||
Total |
| Ps. | 13,611,627 |
| Ps. | 1,414,053 |
|
|
|
|
|
|
| ||
Investment in listed corporate securities |
|
|
|
|
| ||
Argentine shares |
| 38,624 |
| 1,895 |
| ||
Total |
| Ps. | 38,624 |
| Ps. | 1,895 |
|
|
|
|
|
|
| ||
Total government and corporate securities |
| Ps. | 15,346,036 |
| Ps. | 2,360,044 |
|
The maturitiesmeasuring unit current as of December 31, 2017, of government and corporate securities were2019 as follows:
|
| Maturing within |
| ||||||||||
|
| Carrying value |
| 1 year |
| 1 to 5 years |
| 5 to 10 years |
| After |
| ||
|
|
|
|
|
|
|
|
|
|
|
| ||
Listed Government Securities |
| Ps. | 1,187,196 |
| 1,051,558 |
| 81,940 |
| 53,571 |
| 127 |
| |
Unlisted Government Securities |
| 508,589 |
| 508,589 |
| — |
| — |
| — |
| ||
Securities issued by the BCRA |
| 13,611,627 |
| 13,611,627 |
| — |
| — |
| — |
| ||
Investment in listed corporate securities |
| 38,624 |
| 38,624 |
| — |
| — |
| — |
| ||
|
| Ps. | 15,346,036 |
| 15,210,398 |
| 81,940 |
| 53,571 |
| 127 |
| |
6.Loansdescribed in Note 1.1.b, except from the item “Capital Stock”, which has been held at nominal value.
The Group’s lending activities consistCommon shares are recognized in shareholders´ equity and carried at nominal value. When any subsidiary of the following:Group buys shares of the Group (treasury stock), the effective payment, including any cost directly attributable to the transaction (net of taxes), is deducted from shareholders´ equity until the shares are either canceled or disposed.
· Loans to the non-financial public sector: loans to the federal and provincial governments of Argentina.
F-31 |
· Loans to the financial sector: loans to local banks and financial entities.
· Loans to the non-financial private sector and foreign residents:
Overdrafts — short-term obligations drawn on by customers through overdrafts of current accounts.
Promissory Notes — endorsed promissory notes, discounted and purchased bills and factored loans.
Mortgage loans — loans to purchase or improve real estate and collateralized by such real estate or commercial loans secured by real estate.
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
Automobile and other secured loans — loans where collateral is pledged as an integral part of the loan document.
Personal loans — loans to individuals.
Credit card loans — loans to credit card holders.
Foreign Trade loans — loans to exporters / importers.
Government securities loans — loans where government securities are exchanged.
Other — includes mainly short-term loans for export prefinancing and financing.
As of December 31, 2017 and 2016, the classification of the Group’s loan portfolio pursuant to BCRA regulations was as follows:
|
| December 31, |
| ||||
|
| 2017 |
| 2016 |
| ||
|
|
|
|
|
| ||
Non-financial public sector |
| Ps. | 32,607 |
| Ps. | 4,306 |
|
Financial sector (Argentine) |
| 419,366 |
| 473,414 |
| ||
Non-financial private sector and foreign residents |
| 56,035,998 |
| 35,317,936 |
| ||
Commercial |
|
|
|
|
| ||
- With self-liquidating preferred guarantees |
| 821,715 |
| 538,046 |
| ||
- With other preferred guarantees |
| 4,205,026 |
| 1,891,658 |
| ||
- Without preferred guarantees |
| 21,544,937 |
| 14,312,177 |
| ||
Consumer |
|
|
|
|
| ||
- With self-liquidating preferred guarantees |
| 132,542 |
| 90,109 |
| ||
- With other preferred guarantees |
| 1,636,559 |
| 108,021 |
| ||
- Without preferred guarantees |
| 27,695,219 |
| 18,377,925 |
| ||
Subtotal |
| 56,487,971 |
| 35,795,656 |
| ||
Less: Allowance (Note 7) |
| (1,533,598 | ) | (899,147 | ) | ||
Total |
| Ps. | 54,954,373 |
| Ps. | 34,896,509 |
|
Loans with “Self-liquidating preferred guarantees” consist mainly of loans secured by cash collateral, gold collateral, warrants over primary products and other forms of collateral of self-liquidation.
Loans with “Other preferred guarantees” consist, in general, of loans secured by mortgages and other forms of collateral pledged to secure the loan amount.
Loans “Without preferred guarantees” consist, in general, of unsecured loans.
The following industry segments comprised the most significant loan concentrations as of December 31, 2017 and 2016:
|
| December 31, |
| ||
|
| 2017 |
| 2016 |
|
Financial Sector |
| 3.2 | % | 3.4 | % |
Services |
| 5.3 | % | 3.6 | % |
Primary Products |
| 10.5 | % | 8.1 | % |
Consumer |
| 56.2 | % | 58.2 | % |
Retail Trade |
| 2.7 | % | 3.7 | % |
Construction |
| 8.0 | % | 8.8 | % |
Manufacturing |
| 7.2 | % | 4.4 | % |
Other |
| 6.9 | % | 9.8 | % |
Table of Contents1.27 Reserves and Dividend distribution
Grupo Supervielle S.A. and Subsidiaries
NotesPursuant to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
Substantially all of Group´s operations, property and customers are located in Argentina. Therefore, the performance of loan portfolio, financial condition and the results of its operations depend primarily on the macroeconomic and political conditions prevailing in Argentina.
7.Allowance for Loan Losses
The activity in the allowance for loan losses (which includes the allowances for loans, for other receivables from financial transactions and for receivables from financial leases) for the years ended December 31, 2017, 2016 and 2015, was as follows:
|
| December 31, |
| |||||||
|
| 2017 |
| 2016 |
| 2015 |
| |||
|
|
|
|
|
|
|
| |||
Balance at beginning of year |
| Ps. | (920,208 | ) | Ps. | (638,648 | ) | Ps. | (429,358 | ) |
Provision charged to income |
| (1,820,169 | ) | (1,057,637 | ) | (543,844 | ) | |||
Write-offs and reversals |
| 1,171,097 |
| 776,077 |
| 334,554 |
| |||
Balance at end of year |
| Ps. | (1,569,280 | ) | Ps. | (920,208 | ) | Ps. | (638,648 | ) |
The Group has entered into certain renegotiations with customers. The Group has eliminated any differences between the principal and accrued interest due under the original loan and the new loan amount through a charge against the allowance for loan losses.
8.Other Receivables and Liabilities from Financial Transactions, Miscellaneous Receivables and Miscellaneous Liabilities
The composition of other receivables from financial transactions, by type of guarantee, as of December 31, 2017 and 2016 was as follows:
|
| December 31, |
| ||||
|
| 2017 |
| 2016 |
| ||
|
|
|
|
|
| ||
Preferred guarantees, including deposits with BCRA |
| Ps. | 855,261 |
| Ps. | 535,351 |
|
Unsecured |
| 5,716,461 |
| 3,243,192 |
| ||
Allowance (Note 7) |
| (10,326 | ) | (5,807 | ) | ||
|
| Ps. | 6,561,396 |
| Ps. | 3,772,736 |
|
The breakdown of the caption “other” included in “Other receivables from financial transactions” in the balance sheet was as follows:
|
| December 31, |
| ||||
|
| 2017 |
| 2016 |
| ||
Other receivables not included in the debtor classification regulations |
|
|
|
|
| ||
Financial Trust Participation Certificates |
| Ps. | 470,238 |
| Ps. | 530,607 |
|
Financial Trust Debt Securities |
| 99,969 |
| 100,644 |
| ||
Money Market Funds |
| 680,866 |
| 1,185,637 |
| ||
Other Mutual Funds |
| — |
| 110,951 |
| ||
Other |
| — |
| 373 |
| ||
Other payments by third parties |
| 15,966 |
| 11,979 |
| ||
Other financing |
| 681,476 |
| 376,601 |
| ||
Accrued commissions receivable |
| 77,497 |
| 113,371 |
| ||
Other |
| 165,193 |
| 156,084 |
| ||
|
| Ps. | 2,191,205 |
| Ps. | 2,586,247 |
|
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
The breakdown of the caption “other” included in “Other liabilities from financial transactions” in the balance sheet was as follows:
|
| December 31, |
| ||||
|
| 2017 |
| 2016 |
| ||
|
|
|
|
|
| ||
Collections and other operations on behalf of third parties |
| Ps. | 1,465,674 |
| Ps. | 953,743 |
|
Sundry (payment orders abroad) |
| 342,877 |
| 464,070 |
| ||
Other withholdings and collection |
| 452,209 |
| 455,663 |
| ||
Social security payment orders pending settlement |
| 123,538 |
| 82,761 |
| ||
Liabilities for financing of purchases |
| 19,799 |
| 29,845 |
| ||
Other |
| 198,469 |
| 146,843 |
| ||
|
| Ps. | 2,602,566 |
| Ps. | 2,132,925 |
|
The breakdown of the caption “other” included in “Miscellaneous receivables” in the balance sheet was as follows:
|
| December 31, |
| ||||
|
| 2017 |
| 2016 |
| ||
|
|
|
|
|
| ||
Guarantee deposits |
| Ps. | 448,979 |
| Ps. | 339,340 |
|
Sundry debtors |
| 821,205 |
| 397,399 |
| ||
Payments in advance |
| 134,962 |
| 109,568 |
| ||
Tax advances |
| 136,959 |
| 95,116 |
| ||
Loans to employees |
| 179,300 |
| 190,925 |
| ||
Receivables from sale of assets |
| 65,650 |
| 998 |
| ||
Other |
| 14,198 |
| 5,857 |
| ||
|
| Ps. | 1,801,253 |
| Ps. | 1,139,203 |
|
The breakdown of the caption “other” included in “Miscellaneous liabilities” in the balance sheet was as follows:
|
| December 31, |
| ||||
|
| 2017 |
| 2016 |
| ||
|
|
|
|
|
| ||
Tax payable |
| Ps. | 944,982 |
| Ps. | 727,218 |
|
Payroll and social security |
| 788,046 |
| 583,317 |
| ||
Sundry creditors |
| 1,152,847 |
| 678,246 |
| ||
Collections in advance |
| 166,772 |
| 156,382 |
| ||
Other |
| 3,663 |
| 35,531 |
| ||
|
| Ps. | 3,056,310 |
| Ps. | 2,180,694 |
|
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
The Group enters into forward transactions related to government securities and foreign currencies. The Group recognizes cash, security or currency amount to be exchanged in the future as a receivable and payable at the original transaction date. The assets and liabilities related to such transactions are as follows:
|
| December 31, |
| ||
|
| 2017 |
| 2016 |
|
Amounts receivable from spot and forward sales pending settlement |
| 3,374,940 |
| 4,745 |
|
Receivables from repo transactions of government securities |
| 3,352,271 |
| — |
|
Receivable from spot sales of government and private securities pending settlement |
| 17,151 |
| 3,501 |
|
Receivables from spot sales of foreign currency pending settlement |
| 1,967 |
| 1,091 |
|
Receivables from other spot sales pending settlement |
| 3,551 |
| 153 |
|
Securities and foreign currency receivable from spot and forward purchases pending settlement |
| 56,781 |
| 594,730 |
|
Spot purchases of government and private securities pending settlement |
| 22,411 |
| 980 |
|
Spot purchases of foreign currency pending settlement |
| 31,411 |
| 3,322 |
|
Forward purchases of securities under repo transactions |
| — |
| 590,266 |
|
Other spot purchases pending settlement |
| 2,959 |
| 162 |
|
Amounts payable for spot and forward purchases pending settlement |
| 25,275 |
| 592,386 |
|
Payables for spot purchases of government securities pending Settlement |
| 22,352 |
| 970 |
|
Payables for spot purchases of foreign currency pending settlement |
| 5 |
| — |
|
Payables for forward purchases of securities under repo transactions |
| — |
| 591,264 |
|
Other payables for spot purchase pending settlement |
| 2,918 |
| 152 |
|
Securities and foreign currency to be delivered under spot and forward sales pending settlement |
| 3,788,545 |
| 29,979 |
|
Forward sales of government securities under repo transactions |
| 3,758,266 |
| 3,500 |
|
Spot sales of foreign currency pending settlement |
| 26,696 |
| 26,317 |
|
Other forward sales pending settlement |
| 3,583 |
| 162 |
|
These instruments consist of foreign currency and securities contracts (spot and forward purchases and sales), whose valuation method is disclosed in Note 3.8).
Premiums on these instruments have been included in the “Financial income” and “Financial expense” captions of the consolidated statements of income of each year.
9.Unlisted equity Investments
Equity investments in other companies consisted of the following as of December 31, 2017 and 2016:
|
| December 31, |
| ||||
|
| 2017 |
| 2016 |
| ||
In Complementary and authorized activities |
|
|
|
|
| ||
Mercado Abierto Electrónico S.A. |
| Ps. | 61 |
| Ps. | 61 |
|
SEDESA S.A. |
| 37 |
| 39 |
| ||
Argencontrol S.A. |
| 25 |
| 25 |
| ||
Compensadora Electrónica S.A. |
| 56 |
| 54 |
| ||
Provincanje S.A. |
| 684 |
| 684 |
| ||
Total equity investments in Complementary and authorized activities |
| Ps. | 863 |
| Ps. | 863 |
|
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
|
| December 31, |
| ||||
|
| 2017 |
| 2016 |
| ||
In Non-financial Institutions |
|
|
|
|
| ||
Viñas del Monte S.A. |
| Ps. | — |
| Ps. | 2,730 |
|
San Luis Trading S.A. |
| 51 |
| 51 |
| ||
SWIFT S.A. |
| 1 |
| 1 |
| ||
Other |
| 88 |
| 87 |
| ||
Total equity investments in non-financial institutions |
| Ps. | 140 |
| Ps. | 2,869 |
|
Less: Allowances (Note 13) |
| Ps. | (269 | ) | Ps. | (231 | ) |
Total Equity investments |
| Ps. | 734 |
| Ps. | 3,501 |
|
The interests in mutual guarantee companies are not above detailed, as their aggregated amount is lower than Ps. 1.
10.Premises and Equipment, net
The major categories of premises and equipment as December 31, 2017 and 2016 were as follows:
|
| December 31, |
| ||||
|
| 2017 |
| 2016 |
| ||
|
|
|
|
|
| ||
Land and buildings |
| Ps. | 351,587 |
| Ps. | 368,400 |
|
Furniture and fittings |
| 64,386 |
| 61,009 |
| ||
Machinery and equipment |
| 251,365 |
| 169,028 |
| ||
Vehicles |
| 27,093 |
| 23,138 |
| ||
|
| Ps. | 694,431 |
| Ps. | 621,575 |
|
Accumulated depreciation included in the above categories was Ps. 474,654 and Ps. 356,060 as of December 31, 2017 and 2016, respectively. Depreciation expense was Ps. 118,594, Ps. 81,558 and Ps. 56,637 as of December 31, 2017, 2016 and 2015, respectively.
11.Miscellaneous Assets
Miscellaneous assets consisted of the following as of December 31, 2017 and 2016:
|
| December 31, |
| ||||
|
| 2017 |
| 2016 |
| ||
|
|
|
|
|
| ||
Construction in progress |
| Ps. | 279,659 |
| Ps. | 22,267 |
|
Advances for purchase of assets |
| 832 |
| 249 |
| ||
Stationery and office supplies |
| 35,364 |
| 20,449 |
| ||
Works of art |
| 3,739 |
| 3,455 |
| ||
Assets taken as guarantee for loans |
| 325 |
| 331 |
| ||
Others miscellaneous assets |
| 292,345 |
| 378,750 |
| ||
|
| Ps. | 612,264 |
| Ps. | 425,501 |
|
Depreciation expense was Ps. 11,184, Ps. 7,740 and Ps 7,311 as of December 31, 2017, 2016 and 2015, respectively.
12.Intangible Assets
12.1 Goodwill
As of December 31, 2017 and 2016 goodwill breakdown is as follows:
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
|
|
|
| December 31, |
| ||||
|
| Estimated Useful |
| 2017 |
| 2016 |
| ||
Goodwill for the purchase of Banco Regional de Cuyo S.A., net of accumulated amortization |
| 10 |
| Ps. | 2,556 |
| Ps. | 6,391 |
|
Goodwill for the purchase of Cordial Compañía Financiera, net of accumulated amortization |
| 10 |
| 18,526 |
| 23,697 |
| ||
Goodwill for the purchase of Supervielle Seguros S.A., net of accumulated amortization |
| 10 |
| 954 |
| 1,130 |
| ||
Others |
|
|
| 7 |
| 257 |
| ||
Total |
|
|
| Ps. | 22,043 |
| Ps. | 31,475 |
|
12.2 Other Intangible Assets
As of December 31, 2017 and 2016, the organization and development costs breakdown is as follows:
|
|
|
| December 31, |
| |||
|
| Estimated useful |
| 2017 |
| 2016 |
| |
Cost from information technology projects (a) |
| 5 |
| 208,752 |
| Ps. | 142,946 |
|
Other capitalized cost (b) |
| 5 |
| 93,706 |
| 111,041 |
| |
Total |
|
|
| 302,458 |
| Ps. | 253,987 |
|
(a) Under Central Bank rules, the Bank capitalizes software cost relating to preliminary application development and post implementation stages of software development.
(b) Under Central Bank rules, the Bank records cost inherent to the improvements in leased building.
Amortization expense of goodwill and other intangible assets was Ps. 138,097, Ps. 120,579 and Ps. 101,733 as of December 31, 2017, 2016 and 2015, respectively, which was recorded in Administrative expenses and Miscellaneous Losses.
13.Allowances and Provisions
Allowances on other assets and provisions as of December 31, 2017 and 2016 were as follows:
|
| December 31, |
| ||||
|
| 2017 |
| 2016 |
| ||
|
|
|
|
|
| ||
Allowances against asset accounts: |
|
|
|
|
| ||
Unlisted equity investments (a) |
| Ps. | 269 |
| Ps. | 231 |
|
Miscellaneous receivables, for collection risk (b) |
| 50,492 |
| 37,295 |
| ||
|
| Ps. | 50,761 |
| Ps. | 37,526 |
|
Provisions: |
|
|
|
|
| ||
For contingent commitments |
| 3,985 |
| 2,347 |
| ||
Other contingencies (c) |
| 76,178 |
| 60,905 |
| ||
Total Provisions |
| Ps. | 80,163 |
| Ps. | 63,252 |
|
(a) Includes the estimated losses due to the excess of the cost over the equity method in equity investments.
(b) Based upon an assessment of debtors’ performance, the economic and financial situation and the collateral securing their respective obligations.
(c) Includes the estimated amounts payable under lawsuits against the Group and other contingences.
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
14.Other Liabilities from Financial Transactions - Banks and International Institutions, and Loans from Domestic Financial Institutions
The Group borrows funds under different credit arrangements from local and foreign banks and international lending agencies as follows:
|
| December 31, |
| ||||
Description |
| 2017 |
| 2016 |
| ||
Banks and International Institutions |
|
|
|
|
|
| |
Contractual long-term liabilities |
| Ps. | 5,168 |
| Ps. | 31,342 |
|
Contractual short-term liabilities |
| Ps. | 2,778,102 |
| Ps. | 671,668 |
|
|
|
|
|
|
|
|
|
Total Banks and International Institutions |
| Ps. | 2,783,270 |
| Ps. | 703,010 |
|
|
|
|
|
|
|
|
|
Loans from Domestic Financial Institutions |
|
|
|
|
|
|
|
Contractual long-term liabilities |
| Ps. | 387,944 |
| Ps. | 43,564 |
|
Contractual short-term liabilities |
| Ps. | 232,856 |
| Ps. | 940,259 |
|
|
|
|
|
|
|
|
|
Total Loans from Domestic Financial Institutions |
| Ps. | 620,800 |
| Ps. | 983,823 |
|
Total |
| Ps. | 3,404,070 |
| Ps. | 1,686,833 |
|
As of December 31, 2017 maturities of the above long-term loans for each of the fiscal years 2019 through 2021 and thereafter were as follows:
Contractual long-term Liabilities |
|
|
| |
2020 |
| Ps. | 116,323 |
|
2021 |
| 104,207 |
| |
Thereafter |
| 172,582 |
| |
|
| Ps. | 393,112 |
|
15.Other Liabilities from Financial Transactions - Unsubordinated and Subordinated Negotiable Obligations
15.1 Unsubordinated Negotiable Obligations
The amounts outstanding and the terms corresponding to outstanding unsubordinated negotiable obligations were as follows:
|
|
|
|
|
| Annual |
| December 31, |
| |||
|
| Issue date |
| Maturity date |
| interest rate |
| 2017 |
| 2016 |
| |
Short-Term |
|
|
|
|
|
|
|
|
|
|
|
|
Grupo Supervielle Class XX |
| 07/28/2015 |
| 01/28/2017 |
| Mixed |
| Ps. | — |
| 129,389 |
|
Cordial Compañía Financiera Class IX |
| 10/06/2015 |
| 10/06/2017 |
| Badlar + Spread 5.95% |
| Ps. | — |
| 83,750 |
|
Cordial Compañía Financiera Class X |
| 05/19/2016 |
| 11/19/2017 |
| Badlar + Spread 5.50% |
| Ps. | — |
| 197,000 |
|
Cordial Compañía Financiera Class XII |
| 12/23/2016 |
| 12/23/2017 |
| 24.90% |
| Ps. | — |
| 154,214 |
|
Cordial Compañía Financiera Class XIII |
| 12/16/2016 |
| 06/23/2018 |
| Badlar + Spread 4,00% |
| Ps. | 151,429 |
| — |
|
Cordial Compañía Financiera Class XI |
| 10/25/2016 |
| 04/24/2018 |
| Badlar + Spread 3.57% |
| Ps. | 200,000 |
| — |
|
Banco Supervielle Class V |
| 11/19/2015 |
| 05/20/2017 |
| Badlar + Spread 4.50% |
| Ps. | — |
| 339,715 |
|
Banco Supervielle Class VI |
| 10/12/2016 |
| 10/12/2018 |
| Badlar + Spread 3,50% |
| Ps. | 421,347 |
| — |
|
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
|
|
|
|
|
| Annual |
| December 31, |
| |||
|
| Issue date |
| Maturity date |
| interest rate |
| 2017 |
| 2016 |
| |
Banco Supervielle Class VII |
| 11/15/2016 |
| 11/17/2017 |
| Badlar + Spread 3.50% |
| Ps. | — |
| 268,273 |
|
Total short-term liabilities |
|
|
|
|
|
|
| Ps. | 772,776 |
| 1,172,341 |
|
Long-Term |
|
|
|
|
|
|
|
|
|
|
|
|
Grupo Supervielle Class XIII |
| 01/31/2014 |
| 01/31/2019 |
| Badlar +Spread 6.25% |
| Ps. | 22,870 |
| 22,659 |
|
Banco Supervielle Class VI |
| 10/07/2016 |
| 10/12/2018 |
| Badlar + Spread 3.50% |
| Ps. | — |
| 420,507 |
|
Cordial Compañía Financiera Class XI |
| 10/25/2016 |
| 04/24/2018 |
| Badlar + Spread 3.57% |
| Ps. | — |
| 200,000 |
|
Cordial Compañía Financiera Class XIII |
| 12/23/2016 |
| 06/23/2018 |
| Badlar + Spread 4.00% |
| Ps. | — |
| 151,429 |
|
Cordial Compañía Financiera Class XIV |
| 05/11/2017 |
| 05/11/2019 |
| Badlar + Spread 3,50% |
| Ps. | 555,396 |
| — |
|
Cordial Compañía Financiera Class XV |
| 08/24/2017 |
| 02/23/2019 |
| Badlar + Spread 3,75% |
| Ps. | 411,410 |
| — |
|
Cordial Compañía Financiera Class XVI |
| 11/22/2017 |
| 11/21/2019 |
| Spread 4,25% + TM20 |
| Ps. | 532,308 |
| — |
|
Banco Supervielle Class A |
| 02/09/2017 |
| 08/09/2020 |
| Badlar + Spread 4,50% |
| Ps. | 4,731,379 |
| — |
|
Banco Supervielle Class B |
| 12/22/2017 |
| 12/22/2019 |
| TM20 + Spread 3,25% |
| Ps. | 625,271 |
| — |
|
Banco Supervielle Class C |
| 12/22/2017 |
| 12/22/2021 |
| Badlar + Spread 4,25% |
| Ps. | 655,792 |
| — |
|
Total long-term liabilities |
|
|
|
|
|
|
| Ps. | 7,534,426 |
| 794,595 |
|
|
|
|
|
|
|
|
| Ps. | 8,307,202 |
| 1,966,936 |
|
As of December 31, 2017 and 2016, interest and principal on all of the above debt securities were payable in Pesos.
Accrued interest on the above liabilities for Ps. 282,183 and Ps. 74,749 as of December 31, 2017 and 2016 is included under the caption “Other Liabilities from Financial Transactions” in the accompanying balance sheet.
15.2 Subordinated Negotiable Obligations
The amounts outstanding and the terms corresponding to outstanding subordinated negotiable obligations at the dates indicated were as follows:
|
|
|
|
|
|
|
| December 31, |
| ||||
|
| Issue date |
| Maturity date |
| Annual |
| 2017 |
| 2016 |
| ||
Subordinated Negotiable obligations |
|
|
|
|
|
|
|
|
|
|
| ||
Banco Supervielle Class I |
| 11/08/10 |
| 11/11/17 |
| 11.375 | % | — |
| 800,674 |
| ||
Banco Supervielle Class III |
| 8/15/13 |
| 8/20/20 |
| 7.00 | % | 431,701 |
| 363,623 |
| ||
Banco Supervielle Clas IV |
| 11/14/14 |
| 11/18/21 |
| 7.00 | % | 254,172 |
| 214,461 |
| ||
Total long-term liabilities |
|
|
|
|
|
|
| Ps. | 685,873 |
| Ps. | 1,378,758 |
|
As of December 31, 2017, interest and principal on all of the above subordinated negotiable obligations were payable in US Dollars.
Each line of the “Subordinated Negotiable Obligations” includes accrued interest for a total amount of Ps. 12,985 and Ps. 23,485 as of December 31, 2017 and 2016.
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
Subordinated long-term negotiable obligations as of December 31, 2017 mature as follows:
2018 |
| Ps. | 12,985 |
|
2019 |
|
| — |
|
2020 |
|
| 420,845 |
|
2021 |
|
| 252,043 |
|
Total |
| Ps. | 685,873 |
|
16.Balances in Foreign Currency
The balances of assets and liabilities denominated in foreign currencies (principally in U.S. dollars) were as follows:
|
| December 31, |
| ||||
|
| 2017 |
| 2016 |
| ||
Assets: |
|
|
|
|
| ||
Cash and due from banks |
| Ps. | 6,090,701 |
| Ps. | 3,736,333 |
|
Government and corporate securities |
| 1,685,490 |
| 886,997 |
| ||
Loans |
| 12,307,602 |
| 5,539,631 |
| ||
Other receivables from financial transactions |
| 101,856 |
| 158,894 |
| ||
Receivables from financial leases |
| 317,401 |
| 50,023 |
| ||
Equity investments in other companies |
| 1 |
| 1 |
| ||
Miscellaneous receivables |
| 724,457 |
| 125,785 |
| ||
Unallocated items |
| 4,605 |
| 3,597 |
| ||
Total |
| Ps. | 21,232,113 |
| Ps. | 10,501,261 |
|
Liabilities: |
|
|
|
|
| ||
Deposits |
| Ps. | 14,085,744 |
| Ps. | 7,402,682 |
|
Other liabilities from financial transactions |
| 3,255,107 |
| 1,180,392 |
| ||
Miscellaneous liabilities |
| 89,396 |
| 35,313 |
| ||
Subordinated Negotiable Obligations |
| 685,873 |
| 1,378,757 |
| ||
Unallocated items |
| 7,378 |
| 12,134 |
| ||
Total |
| Ps. | 18,123,498 |
| Ps. | 10,009,278 |
|
17.Deposits and Interest-bearing Deposits with Other Banks
Interest-bearing Deposits with Other Banks:
a) Included in “Cash and Due from Banks” there are: (1) interest-bearing deposits with the BCRA totaling 7,083,631 and 5,736,955 as of December 31, 2017 and 2016, respectively; and (2) interest-bearing deposits in local and foreign banks totaling 956,719 and 529,885 as of December 31, 2017 and 2016, respectively.
b) Included in “Loans” there are: overnight bank interest-bearing deposits totaling 379,466 and 419,456 as of December 31, 2017 and 2016, respectively.
Deposits
The following table sets forth information regarding the maturity of deposits exceeding Ps.100,000 at December 31, 2017:
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
| ||||
| ||||
|
|
| ||
|
| |||
|
| |||
|
| |||
|
|
|
(1) Only principal.
18.Transactions with Related Parties
The Group has granted loans to certain related parties including officers, equity-method investees and consolidated companies. Total loans outstanding as of December 31, 2017 and 2016, amounted to Ps. 351,217 and Ps. 133,600, respectively.
Such loans were made in the ordinary course of business at normal credit terms, including interest rates and collateral requirements, and, in management’s opinion, such loans represent normal credit risk.
19.Breakdown of Captions Included in the Income Statement
|
| December 31, |
| |||||||
|
| 2017 |
| 2016 |
| 2015 |
| |||
Financial Income |
|
|
|
|
|
|
| |||
Other |
|
|
|
|
|
|
| |||
Interest on foreign trade loans |
| Ps. | 228,131 |
| Ps. | 84,597 |
| Ps. | 33,558 |
|
Premium on repo transactions |
| 180,153 |
| 13,556 |
| 5,283 |
| |||
Forward transactions |
| — |
| — |
| 228,152 |
| |||
Income from sales of equity investments |
| — |
| — |
| 1,089 |
| |||
Mutual guarantee companies income |
| 63,131 |
| 51,463 |
| — |
| |||
Other |
| 28,429 |
| 37,029 |
| 584 |
| |||
|
| Ps. | 499,844 |
| Ps. | 186,645 |
| Ps. | 268,666 |
|
|
| December 31, |
| |||||||
|
| 2017 |
| 2016 |
| 2015 |
| |||
Financial Expenses |
|
|
|
|
|
|
| |||
Other |
|
|
|
|
|
|
| |||
Turnover Tax |
| Ps. | 980,563 |
| Ps. | 698,526 |
| Ps. | 431,929 |
|
Premium on repo transactions |
| 108,712 |
| 94,143 |
| 38,085 |
| |||
Forward transactions |
| 71,830 |
| 39,016 |
| — |
| |||
Other |
| 1,659 |
| 1,073 |
| 521 |
| |||
|
| Ps. | 1,162,764 |
| Ps. | 832,758 |
| Ps. | 470,535 |
|
|
| December 31, |
| |||||||
|
| 2017 |
| 2016 |
| 2015 |
| |||
Services fee income |
|
|
|
|
|
|
| |||
Other |
|
|
|
|
|
|
| |||
Commissions |
| Ps. | 2,187,068 |
| Ps. | 1.684.792 |
| Ps. | 1,527,169 |
|
Income from Mutual Funds administration services |
| 204,818 |
| 140,118 |
| 80,234 |
| |||
Rentals from safety boxes |
| 128,431 |
| 90,938 |
| 74,684 |
| |||
Other |
| 60,142 |
| 37,550 |
| 13,972 |
| |||
|
| Ps. | 2,580,459 |
| Ps. | 1,953,398 |
| Ps. | 1,696,059 |
|
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
Service fee expense |
|
|
|
|
|
|
| |||
Other |
|
|
|
|
|
|
| |||
Expenses and promotions related to credit cards |
| Ps. | 256,119 |
| Ps. | 205,265 |
| Ps. | 158,474 |
|
Turnover tax |
| 375,447 |
| 263,615 |
| 208,140 |
| |||
Other |
| 76,857 |
| 67,736 |
| 46,031 |
| |||
|
| Ps. | 708,423 |
| Ps. | 536,616 |
| Ps. | 412,645 |
|
|
| December 31, |
| |||||||
|
| 2017 |
| 2016 |
| 2015 |
| |||
|
|
|
|
|
|
|
| |||
Miscellaneous income |
|
|
|
|
|
|
| |||
Other |
|
|
|
|
|
|
| |||
Sales of products |
| Ps. | 568 |
| Ps. | 92,755 |
| Ps. | 73,919 |
|
Other adjustments and interest of miscellaneous credits |
| 117,686 |
| 42,327 |
| 14,055 |
| |||
Rentals |
| 26,709 |
| 42,256 |
| 24,900 |
| |||
Gains on premises and equipment and miscellaneous assets disposals |
| 3,147 |
| 5,568 |
| 101,079 |
| |||
Charge of couriers |
| 7,939 |
| 5,274 |
| 4,174 |
| |||
Recoveries from National Social Security Administration (ANSES) |
| 36,926 |
| — |
| — |
| |||
Other |
| 64,636 |
| 28,575 |
| 36,929 |
| |||
|
| Ps. | 257,611 |
| Ps. | 216,755 |
| Ps. | 255,056 |
|
|
| December 31, |
| |||||||
|
| 2017 |
| 2016 |
| 2015 |
| |||
Miscellaneous losses |
|
|
|
|
|
|
| |||
Other |
|
|
|
|
|
|
| |||
Charges paid to National Social Security Administration (ANSES) |
| Ps. | 113,341 |
| Ps. | 229,669 |
| Ps. | 12,309 |
|
Unrecoverable VAT and other tax credits |
| 13,092 |
| 19,296 |
| 9,429 |
| |||
Grants paid |
| 22,439 |
| 15,115 |
| 6,540 |
| |||
Turnover tax |
| 23,585 |
| 13,819 |
| 10,964 |
| |||
Losses on quota refund |
| 61,836 |
| 12,744 |
| 12,762 |
| |||
Losses related to fiduciary services |
| 3,801 |
| 2,244 |
| — |
| |||
Court resolutions paid |
| 4,918 |
| 1,480 |
| 1,322 |
| |||
Other adjustments and interest of miscellaneous liabilities |
| 6,622 |
| 1,432 |
| — |
| |||
Other |
| 57,480 |
| 62,891 |
| 119,449 |
| |||
|
| Ps. | 307,114 |
| Ps. | 358,690 |
| Ps. | 172,775 |
|
20.Income Taxes
Income tax charge for the fiscal years ended December 31, 2017, 2016 and 2015 amounted to Ps. 772,483, Ps. 500,603 and Ps. 247,161 respectively.
As of December 31, 2017 and 2016, the consolidated Group’s Minimum Presumed Income Tax (MPIT) available to credit against future income tax amounts to Ps. 26,183 and Ps 8,408, respectively. Such MPIT expire over the following ten years.
21.Restrictions Imposed on the Distribution of Dividends
The distribution of retained earnings in the form of dividends is governedset by the Argentine Corporations Law. These rules require Grupo Supervielle to transfer 5% oflaw, the Group and its net income to a legal reserve until the reserve equals to 20% of the company’s outstanding capital stock.
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
In addition, with regard tosubsidiaries, other than Banco Supervielle and Cordial Compañía Financiera, the regulations in force at December 31, 2017 provide as follows:
a) 20%are required to appropriate 5% of the profits shown by thenet income statement for the fiscal year to the legal reserve until such reserve is equal to 20% of Capital stock, plus - minus the adjustments to prior year results, minus the accumulated loss, if any, at the endbalance of the preceding year, must be transferred to the Bank´s legal reserve.
b) No profits may be distributed or remitted prior to the approval of the results for the year and of the publication of the Bank´s annual financial statements.
c) All profit distributions must have the prior authorization of the Superintendency of Financial and Exchange Institutions of the BCRA, the intervention of which will be aimed at verifying the correct application of the procedures described in the regulations in force on this matter, issued by the BCRA.
d) The amount to be distributed, shall not compromise the Company’s liquidity and solvency, which can be verified by not recording insufficiencies in the capital adequacy requirements at the end of the fiscal year from which dividends are to be paid out. In regards to minimum liquidity requirements, the average balance of liquid assets (in pesos, foreign currency or government securities) must exceed the liquidity requirement of the last closed period, or the projected period considering the dividend payment.
22.Capital StockAdjustment account.
As of December 31, 2017 the Group has outstanding 126,738,188 Ordinary Class “A”, nominated, non-endorsable shares, which are entitled to five votes per share and 329,984,134 Ordinary Class “B”, nominated and non-endorsable shares, which are entitled to one vote per share.
On October 7, 2015, the Company’s shareholders approved the capitalization of retained earnings for an amount of 124,485, by issuing 63,369,094 Class A ordinary shares, 59,516,170 Class B ordinary shares and 1,600,000 preferred shares. At the same time, shareholders approved an amendment to preferred shares terms, giving their holders the right to convert the preferred into an equal number of Class B ordinary shares. Such option was exercised by the preferred shares holders on January 5, 2016 and in consequence the 3,200,000 outstanding preferred shares were cancelled and an equal number of new Class B ordinary shares were issued.
On April 14, 2016, the National Securities Commission authorized the public offering by the Resolution No. 18,023 and amended by Resolution No. 18,033 dated April 21, 2016. The public bid of ordinary shares ended on May 18, 2016. 127,500,077 ordinary shares were assigned, and delivered by issuing 95,682,077 new class B shares and by 31,818,000 shares sold by existing shareholders of the Company, all shares with a nominal value of Ps. 1.00 and one vote per share. The price was set at USD 2.20 per share, or USD 11.00 per American Depositary Share (ADS), whith each ADS representing 5 shares. Moreover, as of May 26, 2016, the international underwriters excersiced the overallotment option for 19,125,010 class B ordinary shares of nominal value Ps. 1.00 each and one vote per share, which were issued on May 27, 2016.
The issuance of new class B ordinary shares for 95,682,077 and 19,125,010 makes a total capital increase of 114,807,087.
As of March 28, 2017, the shareholder Julio Patricio Supervielle promised to make a contribution in kind of 7,672,412 shares of Sofital S.A.F. e I.I. On April 27, 2017, the General Shareholders’ Meeting resolved to capitalize the said contribution, increasing the capital stock by up to 8,032, through the issuance of 8,032,032 Class B common shares entitled to one vote per share. On July 12, 2017, the Subscription Period ended in relation to the issuance of up to 8,032,032 new ordinary class B shares. As a result, Grupo Supervielle S.A. increased its share capital by 7,494,710 new shares.
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
As of July 7, 2017, the Ordinary and Extraordinary General Shareholders’ Meeting approved an increase in the share capital of Grupo Supervielle S.A. for the sum of up to Ps.145,000,000 (Pesos one hundred and forty-five million pesos), to be offered by public subscription in the country or abroad.
The public bid of ordinary shares ended on September 12, 2017. 103,000,000 ordinary shares were assigned, and delivered by issuing 70,000,000 new class B shares and by 33,000,000 shares sold by existing shareholders of the Company, all shares with a nominal value of Ps. 1.00 and one vote per share. The price was set at USD 4.00 per share, or USD 20.00 per American Depositary Share (ADS), whith each ADS representing 5 shares. Moreover, as of September 15, 2017, the international underwriters excersiced the overallotment option for 15,449,997 class B ordinary shares of nominal value Ps. 1.00 each and one vote per share, which were issued on September 19, 2017.
The issuance of new class B ordinary shares for 70,000,000 and 15,449,997 makes a total capital increase of 85,449,997.
The Company is not subject to the minimum capital requirements established by the BCRA.
Pursuant to BCRA regulations,concerns Banco Supervielle and Cordial Compañía Financiera, must maintainaccording to the regulations set forth by the Argentine Central Bank, 20% of net income for the fiscal year, net of previous years’ adjustments, if any, is required to be appropriated to the legal reserve. Notwithstanding the aforementioned, in appropriating amounts to other reserves, Financial Institutions are required to comply with the provisions laid down by the Argentine Central Bank in the revised text on distribution of dividends described in Note 25.
The distribution of dividends to the Group’s shareholders is recognized as a liability in the consolidated financial statements for the fiscal year in which dividends are approved by the Group’s Shareholders.
1.28 Revenue Recognition
Financial income and expense is recognized in respect of all debt instruments in accordance with the effective interest rate method, pursuant to which all gains and losses which are an integral part of the transaction effective interest rate are deferred.
Gains or losses included in the effective interest rate embrace disbursements or receipts relating to the creation or acquisition of a financial asset or liability, such as preparation and processing of the documents required to consummate the transactions, and payments received for the extension of credit arrangements.
Fees and commissions earned by the Group on the origination of syndicated loans are not part of the product effective interest rate, and are recognized in the income statement at the time the service is delivered. Commissions and fees earned by the Group on negotiations in third parties’ transactions are not part of the effective interest rate either, and are recognized at the time the transactions are executed.
The Group's income from services is recognized in the income statement as performance obligations are fulfilled, part of the consideration received is allocated to the customer loyalty programs described below. Consideration is allocated based on the relative standalone selling prices for services rendered and points granted. .
Below is a summary of the main commissions earned by the Bank:
Commission | Frecuency of revenue recognition |
Account maintenance | Monthly |
Safe deposit boxes | Semi-annual |
Issuing Bank | Event driven |
Credit Card renewal | Annual |
Check management | Event driven |
Customer loyalty programs
The Group offers reward programs that allow its cardholders to earn points that can be redeemed for a broad range of rewards, including goods and travels among others. This constitutes a performance obligation. The Group establishes a liability based on the fair value of the points issued that are expected to be exchanged by customers. Points to be redeemed are estimated based on the historical redemption behavior of each program. The liability is reduced and the revenue is recognized as performance obligations relating to the points are satisfied, which normally is when the points are exchanged by customers or at their due dates.
Revenue recognized during the year is adjusted as explained in Note 1.1.b.
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
1.29 Income tax and minimum capital, whichpresumed income tax
Income Tax
Income tax expense for the year includes current and deferred tax. Income tax is recognized in the consolidated statements of income, except for items required to be recognized directly in other comprehensive income. In this case, the income tax liability related to such items is also recognized in such statement.
Current income tax expense is calculated by weightingon the risksbasis of the tax laws enacted or substantially enacted as of the date of the Statement of Financial Position in the countries where the Company and its subsidiaries operate and generate taxable income. The Group periodically assesses the position assumed in tax returns in connection with circumstances in which the tax regulation is subject to interpretation. The Group sets up provisions in respect of the amounts expected to be required to pay to the tax authorities.
Deferred income tax is recognized, using the deferred tax liability method, on temporary differences arising from the carrying amount of assets and liabilities and their tax base. However, the deferred tax arising from the initial recognition of an asset or liability in a transaction other than a business combination which, at the time of the transaction does not affect income or loss for accounting or tax purposes, is not recorded. Deferred income tax is determined using tax rates (and laws) enacted as of the date of the Financial Statements and that are expected to be applicable when the deferred tax assets are realized or the deferred tax liabilities are settled.
Deferred income tax assets are recognized only to the extent future tax benefits are likely to arise against which the temporary differences can be offset.
The Group recognizes a deferred tax liability for taxable temporary differences related to investments in subsidiaries and affiliates, except that the following two conditions are met:
i) | the Group controls the timing on which temporary differences will be reversed; and |
ii) | such temporary differences are not likely to be reversed in the foreseeable future. |
Deferred income tax assets bank premisesand liabilities are offset when a legal right exists to offset current tax assets against current tax liabilities and to the extent such balances are related to the same tax authority of the Group or its subsidiaries, where tax balances are intended to be, and may be, settled on a net basis..
Minimum Presumed Income Tax
The Group determines the minimum presumed income tax at the effective rate of 1% of the computable assets at each fiscal year-end. This tax is supplementary to income tax. The Group’s tax liability is equal to the higher of the two taxes. However, if the minimum presumed income tax were to exceed income tax in a given fiscal year, such excess may be computed as a payment on account of the income tax that could be generated in any of the next ten fiscal years.
The minimum presumed income tax credit disclosed under "Current Income Tax Assets" is the portion the Group expects to offset against the income tax in excess of minimum presumed income tax to be generated in the following ten fiscal years.
1.30 Earnings per share
Basic earnings per share are calculated by dividing net income attributable to the Group’s shareholders by the weighted average number of common shares outstanding during the period.
Diluted earnings per share are calculated by dividing the net income for the year by the weighted average number of common shares issued and dilutive potential common shares at year end. Since the Company has no dilutive potential common shares outstanding, there are no dilutive earnings per share amounts.
2. CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of these Consolidated Financial Statements in accordance with IFRS requires the use of certain critical accounting estimates. It also requires Senior Management to make judgements in applying the accounting standards to define the Group’s accounting policies.
The Group has identified the following areas which involve a higher degree of judgement or complexity, or areas where assumptions and estimates are material for these Consolidated Financial Statements which are essential to understand the underlying accounting/financial reporting risks:
F-32 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
a- | Fair value of derivatives and other instruments |
The fair value of financial instruments not listed in active markets is determined using valuation techniques. Such techniques are validated and reviewed periodically by qualified personnel independent from the area which developed them. All models are assessed and adjusted before being put into use in order to ensure that results reflect current information and comparable market prices. As long as possible, models rely on observable inputs only; however, certain factors such as the Group's own and the counterparty's credit risk, volatilities and correlations, require the use of estimates. Changes in the assumptions of these factors may affect the reported fair value of financial instruments.
b- | Allowances for loan losses |
The Group recognizes 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.
Note 1.12 provides more detail of how the expected credit loss allowance is measured.
c- | Impairment of Non-Financial Assets |
Intangible assets with definite useful life and property, plant and equipment miscellaneousare 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.
Identifying the indicators of impairment of property, plant and equipment and intangible assets.assets requires the use of judgment. The Group has concluded that there were no indicators of impairment for any of the years reported in its consolidated financial statements.
Under BCRA regulations,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, the Group use estimates and significant judgments and assumptions.
Although the Group believes 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.
d- | Structured Entities |
Assessing whether the Group controls a structured entity requires Management to make, judgments.
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 the Group are subject to consolidation. The following elements were used to determine if the Group controls a structured entity:
If Structured Entities were not consolidated by the Group, the consolidated income statement would record a loss of 13,234, 91,227 and 59,155 as of December 31, 2019, 2018 and 2017 respectively. See Note 1.3 for further information on the Group´s exposure to structured entities.
F-33 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
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.
A deferred tax asset is recognized when future taxable income is expected to exist to offset such temporary differences, based on Management's assumptions about the amounts and timing of such future taxable income. Then, management needs to determine whether deferred tax assets are likely to be used and offset against future taxable income. Actual results may differ from these estimates, for instance, changes in the applicable tax laws or the outcome of the final review of the tax returns by the 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.
3. SEGMENT REPORTING
The Group determines operating segments based on performance reports which are reviewed by the Board and key personnel of Senior Management and updated upon changes.
The Group considers the business for the type of products and services offered, identifying the following operating segments:
a- | Retail Banking – Includes both the granting of loans and other credit products such as deposits from individuals. |
b- | Corporate Banking – Includes advisory services at a corporate and financial level, as well as the administration of assets and loans targeted to big clients. |
c- | Treasury – Includes operations with Government Securities of the Group, syndicated loans and financial lease. |
d- | Consumer – Includes loans and other credit products targeted to middle and lower-middle income sectors and non-financial products and services. |
e- | Insurance: Includes insurance products, with a focus on life insurance, to targeted customers segments |
f- | Mutual Fund Administration and Other Segments – Includes MFs administered by the Group. Includes also assets, liabilities and results of Micro Lending S.A.U., Invertir Online.Com Argentina S.A.U.. and InvertirOnline S.A.U |
Operating results of the different operating segments of the Group are reviewed individually with the purpose of taking decisions over the allocation of resources and the performance appraisal of each segment. The performance of such segments will be evaluated based on operating earnings and losses and is measured consistently with operating earnings and losses of the consolidated earnings and losses statement.
When a transaction is carried out, transfer prices between segments are taken in an independent and equitative manner, as in cases of transactions with third parties. Later, income, expenses and results from transfers between operating segments are removed from the consolidation.
The following chart includes information by segment measured in accordance with IAS 29, as of December 31, 2019, 2018 and 2017:
Asset by segments | Retail Banking | Corporate Banking | Treasury | Consumer | Insurance | Adm, MF and other segments | Adjustments | Total as of 12.31.2019 | ||||||||||||||||||||||||
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 |
F-34 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
Liabilities by segments | Retail Banking | Corporate Banking | Treasury | Consumer | Insurance | Adm, MF and other segments | Adjustments | Total as of 12.31.2019 | ||||||||||||||||||||||||
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 others | 12,605 | - | 8,998,732 | 949,764 | - | 46,020 | (989,524 | ) | 9,017,597 | |||||||||||||||||||||||
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 |
Result by segments | Retail Banking | Corporate Banking | Treasury | Consumer | Insurance | Adm. MF and other segments | Adjustments | For the year ended 12.31.2019 | ||||||||||||||||||||||||
Interests income | 19,943,285 | 16,620,870 | 4,504,500 | 5,020,100 | - | 223,067 | (1,517,227 | ) | 44,794,595 | |||||||||||||||||||||||
Interest Expense | (9,330,992 | ) | (2,914,797 | ) | (21,148,187 | ) | (3,140,068 | ) | - | (133,753 | ) | 1,754,346 | (34,913,451 | ) | ||||||||||||||||||
Distribution of results by the Treasury | 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 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 differences 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 Expenses | (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 | ) | ||||||||||||||||
Operating (loss) / income | (1,473,705 | ) | (1,158,800 | ) | 1,342,390 | (1,633,089 | ) | 243,969 | -15,531 | 709,839 | (1,984,927 | ) | ||||||||||||||||||||
Income from associates and joint ventures | - | - | - | 3,357 | - | - | (3,357 | ) | - | |||||||||||||||||||||||
Result 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) / income | (1,463,278 | ) | (1,157,277 | ) | 1,359,906 | (1,088,408 | ) | 22,377 | (101,689 | ) | 274,747 | (2,153,622 | ) | |||||||||||||||||||
Net (loss) / income 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 loss for the year attributable to non-controlling interest | - | - | - | - | - | - | (2,022 | ) | (2,022 | ) | ||||||||||||||||||||||
Other comprehensive (loss) / income | (37,056 | ) | (26,149 | ) | (65,995 | ) | - | 81,366 | - | 1 | (47,833 | ) | ||||||||||||||||||||
Other comprehensive (loss) / income attributable to owners of the parent company | (37,056 | ) | (26,149 | ) | (65,995 | ) | - | 81,366 | - | 133 | (47,701 | ) | ||||||||||||||||||||
Other comprehensive loss attributable to non-controlling interest | - | - | - | - | - | - | (132 | ) | (132 | ) | ||||||||||||||||||||||
Comprehensive (loss) / income for the year | (1,500,334 | ) | (1,183,426 | ) | 1,293,911 | (1,088,408 | ) | 103,743 | (101,689 | ) | 274,748 | (2,201,455 | ) | |||||||||||||||||||
Comprehensive (loss) / income 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 | ) | |||||||||||||||||||
Comprehensive loss attributable to non-controlling interest | - | - | - | - | - | - | (2,154 | ) | (2,154 | ) |
F-35 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
Asset by segments | Retail Banking | Corporate Banking | Treasury | Consumer | Insurance | Adm. MF and other segments | Adjustments | Total as of 12.31.2018 | ||||||||||||||||||||||||
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 by segments | Retail Banking | Corporate Banking | Treasury | Consumer | Insurance | Adm. MF and other segments | Adjustments | Total as of 12.31.2018 | ||||||||||||||||||||||||
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 others | 16,657 | 11,095,730 | 1,209,680 | 3,911,307 | - | 283,892 | (4,160,160 | ) | 12,357,106 | |||||||||||||||||||||||
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 |
Result by segments | Retail Banking | Corporate Banking | Treasury | Consumer | Insurance | Adm. MF and other segments | Adjustments | For the year ended 12.31.2018 | ||||||||||||||||||||||||
Interests income | 20,200,645 | 16,516,702 | 2,777,378 | 8,099,756 | 60,224 | 457,730 | (1,322,399 | ) | 46,790,036 | |||||||||||||||||||||||
Interest Expense | (5,994,400 | ) | (2,040,304 | ) | (16,754,056 | ) | (2,996,575 | ) | - | (348,189 | ) | 1,346,134 | (26,787,390 | ) | ||||||||||||||||||
Distribution of results by Treasury | 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 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 differences 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 Expenses | (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 / (loss) | 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 | ) | ||||||||||||||||
Operating (loss) / income | (436,500 | ) | 2,447,857 | (2,383,417 | ) | (2,601,942 | ) | 544,457 | 32,457 | (749,955 | ) | (3,147,043 | ) | |||||||||||||||||||
Income from associates and joint ventures | - | - | - | (6,881 | ) | - | - | 6,881 | - | |||||||||||||||||||||||
Result 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 (loss) / income | (773,942 | ) | 1,811,891 | (2,522,200 | ) | (2,246,935 | ) | 308,386 | (26,233 | ) | (1,253,084 | ) | (4,702,117 | ) | ||||||||||||||||||
Net (loss) / income 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 loss for the year attributable to non-controlling interest | (40,718 | ) | - | - | - | - | - | (3,349 | ) | (44,067 | ) | |||||||||||||||||||||
Other comprehensive (loss) / income | (24,855 | ) | 189,655 | 186,199 | 318 | (1,658 | ) | - | 21,958 | 371,617 | ||||||||||||||||||||||
Other comprehensive (loss) / income attributable to owners of the 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 (loss) / income for the year | (798,797 | ) | 2,001,546 | (2,336,001 | ) | (2,246,617 | ) | 306,728 | (26,233 | ) | (1,231,126 | ) | (4,330,500 | ) | ||||||||||||||||||
Comprehensive (loss) / income 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 loss attributable to non-controlling interest | (40,718 | ) | - | - | - | - | - | (2,963 | ) | (43,681 | ) |
F-36 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
Asset by segments | Retail Banking | Corporate Banking | Treasury | Consumer | Insurance | Adm. MF and other segments | Adjustments | Total as of 12.31.2017 | ||||||||||||||||||||||||
Cash and due from banks | 6,357,430 | 590,773 | 18,104,666 | 165,664 | 6,841 | 541 | (20,592 | ) | 25,205,323 | |||||||||||||||||||||||
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 | 216,278 | 39,326 | (4,347,840 | ) | 134,001,360 | |||||||||||||||||||||||
Other Assets | 958,922 | 27,501 | 11,909,500 | 3,251,455 | 1,155,018 | 435,670 | 5,180,855 | 22,918,921 | ||||||||||||||||||||||||
Total Assets | 56,243,664 | 69,537,471 | 60,200,078 | 18,703,108 | 1,378,137 | 475,537 | 1,489,793 | 208,027,788 |
Liabilities by segments | Retail Banking | Corporate Banking | Treasury | Consumer | Insurance | Adm. MF and other segments | Adjustments | Total as of 12.31.2017 | ||||||||||||||||||||||||
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 others | 14,796 | 6,253,027 | 1,398,610 | 439,402 | - | - | (97,680 | ) | 8,008,155 | |||||||||||||||||||||||
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 | (10,242,223 | ) | 21,177,177 | |||||||||||||||||||||||
Total Liabilities | 87,814,913 | 18,683,830 | 63,814,869 | 15,916,850 | 554,777 | 203,894 | (10,176,660 | ) | 176,812,473 |
Result by segments | Retail Banking | Corporate Banking | Treasury | Consumer | Insurance | Adm. MF and other segments | Adjustments | For the year ended 12.31.2017 | ||||||||||||||||||||||||
Interest Income | 15.485.230 | 9.193.774 | 2.150.111 | 8.389.548 | - | - | (968.139 | ) | 34.250.524 | |||||||||||||||||||||||
Interest Expense | (3.737.355 | ) | (451.503 | ) | (6.995.270 | ) | (2.648.088 | ) | - | (29 | ) | 1.049.288 | (12.782.957 | ) | ||||||||||||||||||
Distribution of results by Treasury | 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 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 differences 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 | ||||||||||||||||||||||||
Services Fee Income | 5.722.307 | 1.130.057 | 41.992 | 1.721.223 | - | 513.216 | 199.170 | 9.327.965 | ||||||||||||||||||||||||
Services Fee Expenses | (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 / (loss) | 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 | ) | ||||||||||||||||
Operating (loss) / income | (1.006.662 | ) | (36.093 | ) | 721.435 | (450.091 | ) | 613.181 | 396.963 | 402.302 | 641.035 | |||||||||||||||||||||
Income from associates and joint ventures | - | - | - | 10.411 | - | - | (10.411 | ) | - | |||||||||||||||||||||||
Result 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 (loss) / income | (1.191.597 | ) | (258.970 | ) | 138.344 | (837.960 | ) | 368.221 | 246.138 | 373.990 | (1.161.834 | ) | ||||||||||||||||||||
Net (loss) / income 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 income / (loss) for the year attributable to non-controlling interest | 1.299 | - | - | - | - | - | (2.668 | ) | (1.369 | ) | ||||||||||||||||||||||
Other comprehensive income / (loss) | 6.998 | 7.879 | 2.889 | (111 | ) | 57.915 | - | (3.450 | ) | 72.120 | ||||||||||||||||||||||
Other comprehensive income / (loss) attributable to owners of 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 (loss) / income for the year | (1.184.599 | ) | (251.091 | ) | 141.233 | (838.071 | ) | 426.136 | 246.138 | 370.540 | (1.089.714 | ) | ||||||||||||||||||||
Comprehensive (loss) / income 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) attributable to non-controlling interest | 1.299 | - | - | - | - | - | (2.648 | ) | (1.349 | ) |
F-37 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
4. INCOME TAX
On December 21, 2019, the National Executive enacted Income Tax Law 27,541. This law has introduced several changes to the previous income tax treatment. Some of the key changes involved in the reform include:
Article 27 of the Law stipulates that the inflation adjustment, positive or negative, corresponding to the first and second fiscal year beginning on January 1, 2019, should allocate a sixth (1/6) in that fiscal period and the remaining five sixth (5/6), in equal parts, in the next five (5) immediate fiscal periods.
In turn, it is clarified that said provision does not preclude the allocation of the remaining thirds corresponding to previous periods, calculated in accordance with the previous version of article 194 of the Income Tax Law.
Article 48 of the Law 27,541 establishes that until the fiscal years beginning as of January 1, 2021 inclusive, the tax rate will be thirty percent (30%) -Dividends or distributed profits will be 7%.
The following table reconciles the statutory income tax rate in Argentina to the Group´s effective tax rate as of December 31, 2019, 2018 and 2017:
12/31/2019 | 12/31/2018 | 12/31/2017 | ||||||||||
Current income tax | (412,963 | ) | (741,754 | ) | (2,043,564 | ) | ||||||
Income tax – deferred method | 244,268 | (813,320 | ) | 240,695 | ||||||||
Income tax allotted in the Income Statement | (168,695 | ) | (1,555,074 | ) | (1,802,869 | ) | ||||||
Income tax allotted in Other comprehensive income | 7,716 | (123,042 | ) | (32,434 | ) | |||||||
Total Income Tax Charge | (160,979 | ) | (1,678,115 | ) | (1,835,303 | ) |
The following is a reconciliation between the income tax charged to income as of December 31, 2019, 2018 and 2017, and 2016,that which would result from applying the minimum capital requirements as appliedcurrent tax rate on the accounting profit
12/31/2019 | 12/31/2018 | 12/31/2017 | ||||||||||
Income before taxes | (1,984,927 | ) | (3,147,043 | ) | 641,035 | |||||||
Tax rate | 30 | % | 30 | % | 35 | % | ||||||
Income for the year at tax rate | 595,478 | 944,113 | (224,362 | ) | ||||||||
Permanent differences at tax rate: | ||||||||||||
Result from exposure to changes in the purchasing power of money | (1,607,870 | ) | (2,818,203 | ) | (1,395,167 | ) | ||||||
Deductible investments | 57,216 | 323,526 | 41,307 | |||||||||
Tax inflation adjustment | 1,775,525 | - | (397,406 | ) | ||||||||
Others | (989,044 | ) | (4,510 | ) | 172,759 | |||||||
Income tax | (168,695 | ) | (1,555,074 | ) | (1,802,869 | ) |
F-38 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the Bank wereyears ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
4.1 | Deferred tax |
The net position of the deferred tax is as follows:
|
| Minimum Capital |
| Computable Capital |
| Computable Capital as a % |
| ||
December 31, 2017 |
| Ps. | 6,170,705 |
| Ps. | 10,430,163 |
| 169,0 |
|
December 31, 2016 |
| Ps. | 4,187,509 |
| Ps. | 6,146,853 |
| 146,8 |
|
12/31/2019 | 12/31/2018 | |||||||
Deferred tax assets | 1,671,195 | 1,264,222 | ||||||
Deferred tax liability | (506,291 | ) | (343,586 | ) | ||||
Net assets by deferred tax | 1,164,904 | 920,636 | ||||||
Deferred taxes to be recovered in more than 12 months | 1,515,532 | 1,154,710 | ||||||
Deferred taxes to be recovered in 12 months | 155,663 | 109,512 | ||||||
Subtotal – Deferred tax assets | 1,671,195 | 1,264,222 | ||||||
Deferred taxes to be paid in more than 12 months | - | (237,571 | ) | |||||
Deferred taxes to be paid in 12 months | (506,291 | ) | (106,015 | ) | ||||
Subtotal – Deferred tax liabilities | (506,291 | ) | (343,586 | ) | ||||
Total Net Assets by deferred Tax | 1,164,904 | 920,636 |
Deferred tax assets / (liabilities) are summarized as follows:
Balance at 12/31/2018 | (Charge)/Credit to Income | Balance at 12/31/2019 | ||||||||||
Intangible assets | (384,706 | ) | (317,274 | ) | (701,980 | ) | ||||||
Retirement plans | 88,468 | (4,003 | ) | 84,465 | ||||||||
Loan Loss Reserves | 1,609,515 | (688,632 | ) | 920,883 | ||||||||
Property, plant and equipment | (517,564 | ) | (389,819 | ) | (907,383 | ) | ||||||
Foreign Currency | (126,045 | ) | 64,558 | (61,487 | ) | |||||||
Loss Carry Forward | 247,083 | (82,059 | ) | 165,024 | ||||||||
Inflation adjustment credit | - | 1,492,842 | 1,492,842 | |||||||||
Provisions | - | 196,064 | 196,064 | |||||||||
Others | 3,885 | (27,409 | ) | (23,524 | ) | |||||||
Total | 920,636 | 244,268 | 1,164,904 |
Balance at 12/31/2017 | (Charge)/Credit to Income | Balance at 12/31/2018 | ||||||||||
Intangible assets | (74,203 | ) | (310,503 | ) | (384,706 | ) | ||||||
Retirement plans | 407,656 | (319,188 | ) | 88,468 | ||||||||
Loan Loss Reserves | 1,311,637 | 297,878 | 1,609,515 | |||||||||
Property, plant and equipment | (273,683 | ) | (243,881 | ) | (517,564 | ) | ||||||
Foreign Currency | (121,998 | ) | (4,047 | ) | (126,045 | ) | ||||||
Loss Carry Forward | - | 247,083 | 247,083 | |||||||||
Others | 484,547 | (480,662 | ) | 3,885 | ||||||||
Total | 1,733,956 | (813,320 | ) | 920,636 |
5. FINANCIAL INSTRUMENTS
Financial instruments held by the Group as of December 31, 2019 and 2018:
Financial Instruments as of 12/31/2019 | Fair value - PL | Amortized Cost | Fair value - OCI | Total | ||||||||||||
Assets | ||||||||||||||||
- Cash and due from banks | 29,910 | 26,373,189 | - | 26,403,099 | ||||||||||||
- Debt securities at fair value through profit or loss | 568,501 | - | - | 568,501 | ||||||||||||
- Derivatives | 257,587 | - | - | 257,587 | ||||||||||||
- Other financial assets | 1,101,531 | 995,335 | - | 2,096,866 | ||||||||||||
- Loans and other financing | - | 88,010,011 | - | 88,010,011 | ||||||||||||
- Other debt securities | - | 3,287,385 | 7,171,171 | 10,458,556 | ||||||||||||
- Financial assets in guarantee | 4,924,540 | 409,164 | - | 5,333,704 | ||||||||||||
- Investments in Equity Instruments | 5,796 | - | 8,783 | 14,579 | ||||||||||||
Total Assets | 6,887,865 | 119,075,084 | 7,179,954 | 133,142,903 | ||||||||||||
Liabilities | ||||||||||||||||
- Deposits | 89,008,177 | - | 89,008,177 | |||||||||||||
- Liabilities at fair value through profit or loss | 189,554 | - | - | 189,554 | ||||||||||||
- Derivates | 319,817 | - | 319,817 | |||||||||||||
- Other financial liabilities | 5,996,738 | 3,118,827 | - | 9,115,565 | ||||||||||||
- Financing received from the Argentine Central Bank and other financial institutions | - | 9,017,597 | - | 9,017,597 | ||||||||||||
- Unsubordinated Negotiable obligations | - | 6,086,475 | - | 6,086,475 | ||||||||||||
-Subordinated Negotiable Obligations | - | 2,119,888 | - | 2,119,888 | ||||||||||||
Total Liabilities | 6,186,292 | 109,670,781 | - | 115,857,073 |
F-39 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
Financial Instruments as of 12/31/2018 | Fair value - PL | Amortized Cost | Fair value - OCI | Total | ||||||||||||
Assets | ||||||||||||||||
- Cash and due from banks | 15,997 | 51,806,375 | - | 51,822,372 | ||||||||||||
- Debt securities at fair value through profit or loss | 23,247,329 | - | - | 23,247,329 | ||||||||||||
- Derivatives | 24,496 | - | - | 24,496 | ||||||||||||
- Other financial assets | 23,181 | 2,588,976 | - | 2,612,157 | ||||||||||||
- Loans and other financing | - | 118,771,635 | - | 118,771,635 | ||||||||||||
- Other debt securities | - | 6,458,727 | 173,134 | 6,631,861 | ||||||||||||
- Financial assets in guarantee | 2,896,049 | 191,701 | - | 3,087,750 | ||||||||||||
- Investments in Equity Instruments | 2,466 | - | 13,539 | 16,005 | ||||||||||||
Total Assets | 26,209,518 | 179,817,414 | 186,673 | 206,213,605 | ||||||||||||
Liabilities | ||||||||||||||||
- Deposits | - | 145,996,201 | - | 145,996,201 | ||||||||||||
- Liabilities at fair value through profit or loss | 412,403 | - | - | 412,403 | ||||||||||||
- Derivates | 144,944 | - | - | 144,944 | ||||||||||||
- Other financial liabilities | 4,472,991 | 2,091,405 | - | 6,564,396 | ||||||||||||
- Financing received from the Argentine Central Bank and other financial institutions | 23,023 | 12,334,083 | - | 12,357,106 | ||||||||||||
- Unsubordinated Negotiable obligations | - | 14,317,445 | - | 14,317,445 | ||||||||||||
-Subordinated Negotiable Obligations | - | 2,128,759 | - | 2,128,759 | ||||||||||||
Total Liabilities | 5,053,361 | 176,867,893 | - | 181,921,254 |
6. FAIR VALUES
6.1 | Fair Value of Financial Instruments |
The Group classifies fair values of financial instruments in a three level hierarchy according to the reliability of the inputs used to determine them.
Fair Value level 1: The fair value of financial instruments traded in active markets (such as publicly-traded derivatives, debt securities or available for sale) is based on market quoted prices as of the date of the reporting period. If the quoted price is available and there is an active market for the instrument, it will be included in Level 1. Otherwise, it will be included in Level 2.
Fair Value level 2: The fair value of financial instruments which are not traded in active markets, such as over-the-counter derivatives, is determined using valuation techniques that maximize the use of observable market data and rely the least possible on the Group’s specific estimates. If all significant inputs required to determine fair value a financial instrument are observable, such instrument is included in level 2. If the inputs used to determine the price are not observable, the instrument will be included in Level 3.
Fair Value level 3: If one or more significant inputs are not based on observable market data, the instrument is included in level 3.
F-40 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
The Group’s financial instruments measured at fair value as of December 31, 2019 and 2018 are detailed below:
Financial Instruments as of 12/31/2019 | FV level 1 | FV level 2 | FV level 3 | Total | ||||||||||||
Assets | ||||||||||||||||
- Cash and due from banks | 29,910 | - | - | 29,910 | ||||||||||||
- Debt securities at fair value through profit or loss | 564,830 | - | 3,671 | 568,501 | ||||||||||||
- Derivatives | 257,587 | - | - | 257,587 | ||||||||||||
- Other financial assets | 1,101,531 | - | - | 1,101,531 | ||||||||||||
- Other debt securities | 7,171,171 | - | - | 7,171,171 | ||||||||||||
- Financial assets in guarantee | 4,924,540 | - | - | 4,924,540 | ||||||||||||
- Investments in Equity Instruments | 5,796 | 8,783 | - | 14,579 | ||||||||||||
Total Assets | 14,055,365 | 8,783 | 3,671 | 14,067,819 | ||||||||||||
Liabilities | ||||||||||||||||
- Liabilities at fair value through profit or loss | 189,554 | - | - | 189,554 | ||||||||||||
- Other financial liabilities | 5,996,738 | - | - | 5,996,738 | ||||||||||||
Total Liabilities | 6,186,292 | - | - | 6,186,292 |
Financial Instruments as of 12/31/2018 | FV level 1 | FV level 2 | FV level 3 | Total | ||||||||||||
Assets | ||||||||||||||||
- Cash and due from banks | 15,997 | - | - | 15,997 | ||||||||||||
- Debt securities at fair value through profit or loss | 5,761,365 | 17,485,964 | - | 23,247,329 | ||||||||||||
- Derivatives | 24,496 | - | - | 24,496 | ||||||||||||
- Other financial assets | 23,181 | - | - | 23,181 | ||||||||||||
- Other debt securities | 173,134 | - | - | 173,134 | ||||||||||||
- Financial assets in guarantee | 2,896,049 | - | - | 2,896,049 | ||||||||||||
- Investments in Equity Instruments | 2,466 | 13,539 | - | 16,005 | ||||||||||||
Total Assets | 8,896,688 | 17,499,503 | - | 26,396,191 | ||||||||||||
Liabilities | ||||||||||||||||
- Liabilities at fair value through profit or loss | 412,403 | - | - | 412,403 | ||||||||||||
- Derivative instruments | - | 144,944 | - | 144,944 | ||||||||||||
- Other financial liabilities | 4,472,991 | - | - | 4,472,991 | ||||||||||||
- Financing received from the Argentine Central Bank and other financial institutions | 23,023 | - | - | 23,023 | ||||||||||||
Total Liabilities | 4,908,417 | 144,944 | - | 5,053,361 |
Below is shown the reconcilation of the financial instruments classiffied as Fair Value Level 3:
FV level 3 | 12/31/2018 | Transfers(*) | Additions | Disposals | P/L | 12/31/2019 | ||||||||||||||||||
Assets | ||||||||||||||||||||||||
- Debt securities at fair value through profit or loss | - | 3,671 | - | - | - | 3,671 |
(*) The transfer was due to the lack of observable prices, directly or indirectly, for the measurement of this Financial Instruments
The Group’s policy is to recognize transfers between fair value levels only at end of period. The transfers were produced by the classification as Level 3 of the financial instruments with lack of observable prices.
Valuation Techniques
Valuation techniques to determine fair values Level 2 and Level 3 include the following:
- | Market or quoted prices for similar instruments. |
- | The estimated present value of instruments. |
F-41 |
F-42 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
The valuation technique to determine fair value Level 2 is based on inputs other than the quoted price included in Level 1 that are readily observable for the asset or liability (i.e., prices).
For Level 3, the Group uses valuation techniques through spot rate curves which calculate the yield upon market prices.
These valuation techniques are detailed below:
- Interpolation model: It consists of the determination of the value of financial instruments that do not have a market price at the closing date, based on quoted prices for similar assets (both in terms of issue, currency, and duration) in the active markets ( MAE, Bolsar or secondary) through the linear interpolation of them. This technique has been used by the Entity to determine the fair value of the instruments issued by the BCRA and Treasury Bills without quotation at the end of this period.
- Performance Curve Model under Nelson Siegel: This model proposes a continuous function to model the trajectory of the instant forward interest rate considering as a domain the term comprised until the next interest and / or capital payment. It consists in the determination of the instrument’s price estimating for this the volatility through market curves. The Entity has used this model to estimate prices in negotiable obligations or financial instruments with variable interest rate.
The principal inputs considered by the Group for its determination of fair values under the linear interpolation model are:
- Instrument prices that were quoted between the date the curve is estimated and the settlement date of the latest payment available.
- Implicit rates in the last available tender.
- Only instruments that have been traded with a 24-hour settlement are considered.
- If the same instrument has been listed on MAE (“Mercado Abierto Electrónico”) and Bolsar, only the market price that has been traded in the market with higher volume is considered
- The yield curve is standardized based on a set of nodes, each of which has an associated expiration date.
- Instruments denominated in US dollars are converted at the exchange rate on the date the instrument is negotiated.
Likewise, for the determination of fair values under the Nelson Siegel model, the main data and aspects considered by the Entity were:
- The Spot rate curves in pesos + BADLAR and the Spot rate curve in US dollars are established based on bonds predefined by Financial Risk Management.
- The main source of prices for Bonds is MAE, without considering those corresponding to operations for own portfolio.
- The portfolio of bonds used as input is changed with every issuance.
The Group periodically evaluates the performance of the models based on indicators which have defined tolerance thresholds.
Under IFRS, the estimated residual value of an instrument at inception is generally the transaction price.
In the event that the transaction price differs from the determined fair value, the difference will be recognized in the statement of results proportionally for the duration of the instrument.
6.2 Fair Value of other Financial Instruments
The following describes the methodologies and assumptions used to determine the fair values of financial instruments not recorded at their fair value in these financial statements:
- Assets whose fair value is similar to book value: For financial assets and liabilities that are liquid or have short-term maturities (less than three months), the book value is considered to be similar to fair value.
- Fixed rate financial instruments: The fair value of financial assets was determined by discounting future cash flows at the current market rates offered, for each year, for financial instruments with similar characteristics. The estimated fair value of deposits with a fixed interest rate was determined by discounting future cash flows through the use of market interest rates for deposits with maturities similar to those of the Bank's portfolio.
- For listed assets and the quoted debt, fair value was determined based on market prices.
F-43 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
Below is the difference between the carrying amount and the fair value of the main assets and liabilities recorded at amortized cost as of December 31, 2019 and 2018, respectively:
Other Financial Instruments as of 12/31/2019 | Book value | Fair value | FV Level 1 | FV Level 2 | FV Level 3 | |||||||||||||||
Financial Assets | ||||||||||||||||||||
-Cash and due from Banks | 26,373,189 | 26,373,189 | 26,373,189 | - | - | |||||||||||||||
-Other financial assets | 995,335 | 995,335 | 995,335 | - | - | |||||||||||||||
-Loans and other financing | 88,010,011 | 91,637,500 | - | - | 91,637,500 | |||||||||||||||
- Other Debt Securities | 3,287,385 | 3,370,171 | 3,370,171 | - | - | |||||||||||||||
-Financial assets in guarantee | 409,164 | 409,164 | 409,164 | - | - | |||||||||||||||
119,075,084 | 122,785,359 | 31,147,859 | - | 91,637,500 | ||||||||||||||||
Financial Liabilities | ||||||||||||||||||||
-Deposits | 89,008,177 | 89,009,817 | - | - | 89,009,817 | |||||||||||||||
-Repo transactions | 319,817 | 319,817 | 319,817 | - | - | |||||||||||||||
-Other financial liabilities | 3,118,827 | 3,174,432 | 3,174,432 | - | - | |||||||||||||||
-Financing received from the BCRA and other financial institutions | 9,017,597 | 8,778,079 | - | - | 8,778,079 | |||||||||||||||
- Unsubordinated Negotiable obligations | 6,086,475 | 6,086,475 | 6,086,475 | - | - | |||||||||||||||
- Subordinated Negotiable Obligations | 2,119,888 | 2,368,114 | 2,368,114 | - | - | |||||||||||||||
109,670,781 | 109,736,734 | 11,948,838 | - | 97,787,896 |
Other Financial Instruments as of 12/31/2018 | Book value | Fair value | FV Level 1 | FV Level 2 | FV Level 3 | |||||||||||||||
Financial Assets | ||||||||||||||||||||
-Cash and due from Banks | 51,806,375 | 51,806,375 | 51,806,375 | - | - | |||||||||||||||
-Other financial assets | 2,588,976 | 2,588,976 | 2,588,976 | - | - | |||||||||||||||
-Loans and other financing | 118,771,635 | 138,529,292 | - | - | 138,529,292 | |||||||||||||||
- Other Debt Securities | 6,458,727 | 6,466,670 | 6,466,670 | - | - | |||||||||||||||
-Financial assets in guarantee | 191,701 | 191,701 | 191,701 | - | - | |||||||||||||||
179,817,414 | 199,583,014 | 61,053,722 | - | 138,529,292 | ||||||||||||||||
Financial Liabilities | ||||||||||||||||||||
-Deposits | 145,996,201 | 145,629,417 | - | - | 145,629,417 | |||||||||||||||
-Other financial liabilities | 2,091,405 | 2,091,405 | 2,091,405 | - | - | |||||||||||||||
-Financing received from the BCRA and other financial institutions | 12,334,083 | 10,134,114 | 53,055 | - | 10,081,059 | |||||||||||||||
- Unsubordinated Negotiable obligations | 14,317,445 | 12,232,833 | 12,232,833 | - | - | |||||||||||||||
- Subordinated Negotiable Obligations | 2,128,759 | 2,109,793 | 2,109,793 | - | - | |||||||||||||||
176,867,893 | 172,197,562 | 16,487,086 | - | 155,710,476 |
6.3 Fair Value of Equity instruments
The following are the equity instruments measured at Fair Value with changes in profit or loss as of December 31, 2019 and 2018:
12/31/2019 | 12/31/2018 | |||||||
YPF S.A. | - | 1,665 | ||||||
Grupo Financiero Galicia S.A. | 5,796 | 801 | ||||||
Loma Negra S.A. | - | - | ||||||
Tenaris SA | - | - | ||||||
Pampa Energía S.A. | - | - | ||||||
Total | 5,796 | 2,466 |
F-44 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
The following are the equity instruments measured at Fair Value with changes in Other Comprehensive Income as of December 31, 2019 and 2018:
FV at 12/31/2018 | Loss through OCI | FV at 12/31/2019 | ||||||||||
MAE | 7,092 | (2.482 | ) | 4,610 | ||||||||
SEDESA | 2,483 | (869 | ) | 1,614 | ||||||||
COELSA | 1,414 | (495 | ) | 919 | ||||||||
PROVINCANJE | 417 | (145 | ) | 272 | ||||||||
CUYO AVAL SGR | 1,383 | (334 | ) | 1,049 | ||||||||
ARGENCONTROL | 193 | (68 | ) | 125 | ||||||||
LOS GROBO SGR | 321 | (251 | ) | 70 | ||||||||
IEBA SA | 93 | (32 | ) | 61 | ||||||||
Others | 143 | (80 | ) | 63 | ||||||||
Total | 13,539 | (4,756 | ) | 8,783 |
FV at 12/31/2017 | Income through OCI | Exposure to changes in Purchasing Power | FV at 12/31/2018 | |||||||||||||
MAE | 10,470 | - | (3,378 | ) | 7,092 | |||||||||||
SEDESA | 3,666 | - | (1,183 | ) | 2,483 | |||||||||||
COELSA | 2,088 | - | (674 | ) | 1,414 | |||||||||||
PROVINCANJE | 615 | - | (198 | ) | 417 | |||||||||||
CUYO AVAL SGR | 505 | 1,229 | (351 | ) | 1,383 | |||||||||||
ARGENCONTROL | 285 | - | (92 | ) | 193 | |||||||||||
LOS GROBO SGR | 154 | 255 | (88 | ) | 321 | |||||||||||
IEBA SA | 138 | - | (45 | ) | 93 | |||||||||||
Others | 63 | 119 | (39 | ) | 143 | |||||||||||
Total | 17,984 | 1,603 | (6,048 | ) | 13,539 |
7. FINANCE LEASES
7.1 The Group as lessee
(i) | The following table shows the carrying amount in the financial position: |
12/31/2019 | 01/01/2019 | |||||||
Right-of-use asset | ||||||||
Land and buildings | 988,386 | 1,354,278 | ||||||
Lease liability | ||||||||
Current | 467,977 | 596,813 | ||||||
Non-current | 478,413 | 757,465 | ||||||
Total | 946,390 | 1,354,278 |
(ii) | The following table shows the amounts charged in the income statement: |
Items | 12/31/2019 | |||
Right-of-use assets – Depreciation | 567,192 | |||
Interest expenses on lease liabilities (Other operating expenses) | 212,492 |
(iii) | Lease activities: |
The Group leases several branches. Rental agreements are generally made for fixed periods of 1 to 10 years, but may have extension options as described in (iv) below.
F-45 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
Contracts may contain lease components or not. The Group assigns consideration in the contract to the lease and non-lease components based on their independent relative prices. However, for the leases of real estate for which the Group is a lessee, it has chosen not to separate the lease components and those that are not, and instead counts them as a single lease component.
Lease terms are negotiated individually and contain a wide range of different terms and conditions. Lease agreements do not impose other obligations to do or not do, other than the leased assets owned by the lessor. Leased assets cannot be used as collateral for obtaining loans.
Until 2018, Property, Plant and Equipment leases were classified as operating leases. As of January 1, 2019, leases are recognized as a right-of-use asset by registering a liability as a counterparty on the date on which the leased asset is available for use by the Entity.
Assets and liabilities arising from leases are initially measured based on the present value. Lease liabilities include the net present value of the following lease payments:
· | fixed payments (including fixed payments in substance), less any incentives receivable; |
· | variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; |
· | amounts expected to be payable by the Group under residual value guarantees; |
· | the exercise price of a purchase option if the Group is reasonably certain to exercise that option, and |
· | payments of penalties for terminating the lease, if the lease term reflects the Group exercising an option to terminate the lease. |
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
Lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be easily determined, which is generally the case with leases in the Group, the lessee's incremental borrowing rate is used, which is the rate that the individual lessee would have to pay to borrow the necessary funds to obtain an asset of similar value to the asset by right of use in a similar economic environment with similar terms, security and conditions.
To determine the incremental interest rate, the Group:
· | whenever possible, uses the external financing recently received as a starting point, adjusted to reflect changes in financing conditions since the external financing was received. |
· | uses a rate determination approach that begins with a risk-free interest rate adjusted for credit risk for leases that the Entity already has for those cases in which it does not have recent third-party financing, and |
· | makes specific adjustments for the lease, for example, term, currency and guarantee. |
The Group is exposed to possible future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they become effective. When adjustments to lease payments based on an index or rate become effective, the lease liability is reassessed and adjusted against the right-of-use asset.
Lease payments are allocated between capital and financial cost. The financial cost is charged to income during the lease period to produce a constant periodic interest rate on the remaining balance of the liability for each period.
The right-of-use assets are measured at cost comprising the following:
· | the amount of the initial measurement of the lease liability; |
· | any lease payment made at or before the commencement date, less any lease incentives received; |
· | any initial direct costs, and |
· | an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease. |
The right-of-use assets are generally depreciated during the shortest useful life of the asset and the lease term in a linear fashion.
F-46 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
Payments associated with short-term leases of equipment and all leases of low-value assets are recognized linearly as an expense in income. Short-term leases are leases with a lease term of 12 months or less and that does not contains a purchase option. Low-value assets include computer equipment and small items of office furniture.
(iv) Extension and termination options
Extension and termination options are included in several property leases. These are used to maximize operational flexibility in terms of managing the assets used in operations. Most of the extension and termination options maintained are exercisable only by the Group and not by the respective lessor.
7.2 The Group as lessor
The following is a breakdown of the maturities of the Group's financial and operating leases receivables and of the current values as of December 31, 2019 and 2018:
Financial Lease Receivables | 12/31/2019 | 12/31/2018 | ||||||
Up to 1 year | 1,783,106 | 2,627,616 | ||||||
More than a year up to two years | 1,167,248 | 2,032,214 | ||||||
From two to three years | 665,603 | 1,147,353 | ||||||
From three to five years | 421,983 | 681,233 | ||||||
More than five years | 20,379 | 14,454 | ||||||
Total | 4,058,319 | 6,502,870 | ||||||
Unearned financial income | -871,630 | (1,355,568 | ) | |||||
Net investment in the lease | 3,186,689 | 5,147,302 |
The balance of allowance for loan losses related to finance leases amounts to 82,052 and 97,130 as of December 31, 2019 and 2018.
Operating Lease Receivables | 12/31/2019 | 12/31/2018 | ||||||
Up to 1 year | 16,706 | 3,695 | ||||||
More than a year up to two years | 15,732 | 3,695 | ||||||
From two to three years | 13,543 | 2,175 | ||||||
From three to five years | 9,202 | 0 | ||||||
Total | 55,183 | 9,565 |
8. TRANSFER OF FINANCIAL ASSETS
When the Group transfers financial assets under an agreement that meets all requirements to derecognize such assets, the difference between the carrying amount of those assets and the amount received as consideration is charged to income.
(a) | Transfers that do not qualify for derecognition |
The following is a detail of the financial assets transferred by the Group that continue to be recognized in its consolidated financial statements as of December 31, 2019 and 2018:
12/31/2019 | 12/31/2018 | |||||||
Securitized Personal Loans | ||||||||
Asset | 1,614,099 | 1,184,669 | ||||||
Liabilities | 849,775 | 827,152 | ||||||
Transfers of receivables with recourse | ||||||||
Asset | 30,201 | 217,277 | ||||||
Liabilities | - | 113,948 |
F-47 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
(b) | Transfers of financial assets that qualify for derecognition |
The Group makes, in certain opportunities, non-recourse portfolio sales. In these cases, the Group has not retained any substantial risk or reward regarding the transferred portfolio, and therefore, such portfolio meets derecognition requirements.
9. REPO AND REVERSE REPO TRANSACTIONS
The Group carries out repo transactions in which it performs the spot sale of a security with the related forward purchase thereof, thus substantially retaining all the risks and rewards associated with the instruments and recognizing them in "Financial Assets Pledged as Collateral" at year-end, as the provisions set out in point 3.4.2 (Derecognition of Assets) of IFRS 9 "Financial Instruments") are not met.
The residual values of assets transferred under repo transactions as of December 31, 2019 and 2018 are detailed below:
Repo Transactions:
Book Value | ||||
December 31, 2019 | 319,817 | |||
December 31, 2018 | - |
10. DERIVATIVE FINANCIAL INSTRUMENTS
In the normal course of business, the Group enters into a variety of transactions principally in the foreign exchange stock markets. Most counterparties in the derivative transactions are banks and other financial institutions.
These instruments include:
- | Forwards and futures: they are agreements to deliver or take delivery at a specified rate, price or index applied against the underlying asset or financial instrument, at a specific date. Futures are exchange traded at standardized amounts of the underlying asset or financial instrument. |
Forwards contracts are OTC agreements and are principally dealt in by the Group in foreign exchange as forward agreements. |
- | Swaps: they are agreements between two parties with the intention to exchange cash flows and risks at specific date and for a period in the future. |
- | Options: they confer the right to the buyer, but no obligation, to receive or pay a specific quantity of an asset or financial instrument for a specified price at or before a specified date. |
As of December 31, 2019 and 2018, the following amounts were recorded for operations related to derivatives:
12/31/2019 | 12/31/2018 | |||||||
Amounts receivable for spot and forward transactions pending settlement | 257,587 | 24,496 | ||||||
Amounts payable for spot and forward transactions pending settlement | - | (144,944 | ) | |||||
257,587 | (120,448 | ) |
The following table shows, the notional value of options and outstanding forward and futures contracts as of December 31, 2019 and 2018:
12/31/2019 | 12/31/2018 | |||||||
Forward sales of foreign exchange without delivery of underlying assets | 279,833 | 230,253 | ||||||
Forward purchases of foreign exchange without delivery of underlying assets | - | 1,560,382 |
The incomes/(expenses) generated by derivative financial instruments during the years ended December 31, 2019, 2018 and 2017 amounted to 713,616, (2,605,689) and 2016, the Bank and CCF, met all capital adequacy requirements to which are subject.(166,485) respectively.
23.Earnings per Share
F-48 |
GRUPO SUPERVIELLE S.A.
BasicNotes to Consolidated Financial Statements
As of December 31, 2019, 2018 and diluted earnings per share are based upon the weighted average of common shares outstanding of Grupo Supervielle. Average shares outstanding were 392,831,769, 319,827,519 2017,
and 151,839,052, for the years ended December 31, 2017, 20162019, 2018 and 2015,2017
(Expressed in thousands of pesos)
11. EARNINGS PER SHARE
Earnings per share are calculated by dividing income attributable to the Group´s shareholders by the weighted average number of outstanding common shares during the period. As the Group does not have preferred shares or debt convertible into shares, basic earnings are equal to diluted earnings per share.
12/31/2019 | 12/31/2018 | 12/31/2017 | ||||||||||
Income attributable to shareholders of the group | (2,151,600 | ) | (4,658,050 | ) | (1,160,465 | ) | ||||||
Weighted average of ordinary shares (thousands) | 456,722 | 456,722 | 392,832 | |||||||||
Income per share | (4.71 | ) | (10.20 | ) | (2.95 | ) |
12. SPECIAL TERMINATION ARRANGEMENTS
Special termination arrangements are principally termination benefits payable to employees who accepted a pre-retirement offer. These benefits are payable during the period between their effective termination date and their retirement age, when they voluntarily accept an irrevocable termination arrangement.
As of December 31, 2019 and 2018, special termination arrangements amounted to Ps. 947,536 and Ps. 609,302, respectively. The amounts charged to profit or loss regarding these benefits as of December 31, 2019 and 2018 were Ps. 527,901 and Ps. 125,547, respectively.
The evolution during each period is detailed below:
12/31/2019 | 12/31/2018 | |||||||
Balances at the beginning | 609,302 | 1,025,488 | ||||||
Charged to profit or loss | 527,901 | 125,547 | ||||||
Benefits paid to participants | (189,667 | ) | (541,733 | ) | ||||
Balances at closing | 947,536 | 609,302 |
F-49 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
13. PROPERTY, PLANT AND EQUIPMENT
Changes in property, plant and equipment for financial years ended on December 31, 2019 and 2018 are as follows:
Gross carrying amount | Depreciation | Net | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Item | At the beginning of the year | Useful Life | Revaluation | Additions | Additions by business combinations | Disposals | At the end of the year | At the beginning of the year | Disposals | Additions by business combinations | Of the Year | Other Movements | At the end of the year | carrying amount 12/31/2019 | ||||||||||||||||||||||||||||||||||||||||||
Cost model | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Furniture and facilities | 1,008,692 | 10 | - | - | - | - | 1,008,692 | (693,705 | ) | - | - | (3,434 | ) | - | (697,139 | ) | 311,553 | |||||||||||||||||||||||||||||||||||||||
Machinery and equipment | 3,104,196 | 5 | - | 192,354 | - | (140,581 | ) | 3,155,969 | (2,495,971 | ) | 312,750 | - | (624,196 | ) | - | (2,807,417 | ) | 348,552 | ||||||||||||||||||||||||||||||||||||||
Vehicles | 173,783 | 5 | - | 34,806 | - | (35,494 | ) | 173,095 | (58,803 | ) | 15,658 | - | (31,073 | ) | - | (74,218 | ) | 98,877 | ||||||||||||||||||||||||||||||||||||||
Right of use assets | - | - | - | 1,503,784 | - | - | 1,503,784 | - | 644 | - | (567,192 | ) | - | (566,548 | ) | 937,236 | ||||||||||||||||||||||||||||||||||||||||
Construction in progress | 548,023 | - | - | 113,370 | - | (181,216 | ) | 480,177 | - | - | - | - | - | - | 480,177 | |||||||||||||||||||||||||||||||||||||||||
Revaluation model | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Land and Buildings | 1,863,622 | 50 | (62,080 | ) | 108,422 | - | (92 | ) | 1,909,872 | (90,547 | ) | 29,791 | - | (23,433 | ) | - | (84,189 | ) | 1,825,683 | |||||||||||||||||||||||||||||||||||||
Total | 6,698,316 | (62,080 | ) | 1,952,736 | - | (357,383 | ) | 8,231,589 | (3,339,026 | ) | 358,843 | - | (1,249,328 | ) | - | (4,229,511 | ) | 4,002,078 |
Gross carrying amount | Depreciation | Net | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Item | At the beginning of the year | Useful Life | Revaluation | Additions | Additions by business combinations | Disposals | At the end of the year | At the beginning of the year | Disposals | Additions by business combinations | Of the Year | Other Movements | At the end of the year | carrying amount 12/31/2018 | ||||||||||||||||||||||||||||||||||||||||||
Cost model | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Furniture and facilities | 930,958 | 10 | - | 69,318 | 9,136 | (720 | ) | 1,008,692 | (624,844 | ) | - | (6,443 | ) | (58,389 | ) | (4,029 | ) | (693,705 | ) | 314,987 | ||||||||||||||||||||||||||||||||||||
Machinery and equipment | 2,925,963 | 5 | - | 183,808 | 19,777 | (25,352 | ) | 3,104,196 | (2,229,327 | ) | 20,283 | (17,485 | ) | (252,056 | ) | (17,386 | ) | (2,495,971 | ) | 608,225 | ||||||||||||||||||||||||||||||||||||
Vehicles | 143,263 | 5 | - | 54,561 | 2,769 | (26,810 | ) | 173,783 | (61,193 | ) | 15,702 | (395 | ) | (12,085 | ) | (832 | ) | (58,803 | ) | 114,980 | ||||||||||||||||||||||||||||||||||||
Construction in progress | 658,429 | - | - | 188,663 | - | (299,069 | ) | 548,023 | - | - | - | - | - | - | 548,023 | |||||||||||||||||||||||||||||||||||||||||
Revaluation model | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Land and Buildings | 1,581,142 | 50 | 474,704 | - | - | (192,224 | ) | 1,863,622 | (154,595 | ) | 64,048 | - | - | - | (90,547 | ) | 1,773,075 | |||||||||||||||||||||||||||||||||||||||
Total | 6,239,755 | 474,704 | 496,350 | 31,682 | (544,175 | ) | 6,698,316 | (3,069,959 | ) | 100,033 | (24,323 | ) | (322,530 | ) | (22,247 | ) | (3,339,026 | ) | 3,359,290 |
F-50 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
13.1 Revaluation of Property, Plant and Equipment
The Group´s properties, plant and equipment measured at revaluation model were valued at each reporting date by an independent expert. The frequency of revaluations ensures fair value of the revalued asset does not differ materially from its carrying amount.
The last revaluation was made on December 31, 2019.
The following are the book values that would have been recognized if the assets had been accounted under the cost model:
Class | Revaluation date | Revalued amount | Residual Value according to the cost model | Difference | ||||||||||
Land and buildings | 12/31/2019 | 1,825,683 | 1,887,763 | (62,080 | ) | |||||||||
Land and buildings | 12/31/2018 | 1,773,074 | 1,298,370 | 474,704 |
For all Land and Buildings with a total valuation of 1,825 million as of December 31, 2019, the valuation was determined using sales Comparison Approach prepared by the Group’s management considering a report of an independent expert. Sale prices of comparable properties are adjusted considering the specific aspects of each property, the most relevant premise being the price per meter (Level 3). The Group estimated that, other factors being constant, a 5% reduction on the Sales price per meter for the period ended December 31, 2019 would have reduced the value of the Land and Buildings on 91.2 million, which would impact, net of its tax effect on the "Net Revaluation surplus of property, plant and equipment" item in the statement of comprehensive income.
14. INVESTMENT PROPERTIES
The movements in investment properties for the years ended December 31, 2019 and 2018 were as follows:
Item | At the Beginning of the year | Total useful life | P/L for changes in the FV | Additions | Disposals | As of 12/31/2019 | ||||||||||||||||||
Measurement at fair value | ||||||||||||||||||||||||
Rented properties | 635,877 | 50 | (127,130 | ) | 3,551,323 | (5,333 | ) | 4,054,737 | ||||||||||||||||
TOTAL INVESTMENT PROPERTIES | 635,877 | (127,130 | ) | 3,551,323 | (5,333 | ) | 4,054,737 |
Item | At the Beginning of the year | Total useful life | P/L for changes in the FV | Additions | Disposals | As of 12/31/2018 | ||||||||||||||||||
Measurement at fair value | ||||||||||||||||||||||||
Rented properties | 441,610 | 50 | 221,408 | 16,103 | (43,244 | ) | 635,877 | |||||||||||||||||
TOTAL INVESTMENT PROPERTIES | 441,610 | 221,408 | 16,103 | (43,244 | ) | 635,877 |
Investment properties are measured at their fair value determined by24.professionally qualified valuersContribution.
For all Investment Properties with a total valuation of 3.878 million as of December 31, 2019, the valuation was determined using sales Comparison Approach prepared by the Group’s management considering a report of an independent expert. Sale prices of comparable properties are adjusted considering the specific aspects of each property, the most relevant premise being the price per meter (Level 3). The Group estimated that, other factors being constant, a 5% reduction on the Sales price per meter for the period ended December 31, 2019 would have reduced the value of the Investment Properties by 193.9 million, which would impact, net of its tax effect on the "Other Operating Income" item in the Income statement.
F-51 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
15. INTANGIBLE ASSETS
Intangible assets of the Group for fiscal years ended on December 31, 2019 and 2018 are as follows:
Gross carrying amount | Depreciation | Net | ||||||||||||||||||||||||||||||||||||||||||
Item | At the beginning of the year | Additions | Additions by business combinations | Disposals | At the End of the year | At the beginning of the year | Disposals | By business combinations | Of the year | At the End of the year | carrying amount at 12/31/2019 | |||||||||||||||||||||||||||||||||
Measurement at cost | ||||||||||||||||||||||||||||||||||||||||||||
Goodwill | 2,678,965 | 13,829 | - | - | 2,692,794 | - | - | - | - | - | 2,692,794 | |||||||||||||||||||||||||||||||||
Brands | 146,907 | - | - | - | 146,907 | - | - | - | - | - | 146,907 | |||||||||||||||||||||||||||||||||
Other intangible assets | 2,228,054 | 651,095 | - | (4,269 | ) | 2,874,880 | (883,780 | ) | 120 | - | (458,407 | ) | (1,342,067 | ) | 1,532,813 | |||||||||||||||||||||||||||||
TOTAL | 5,053,926 | 664,924 | - | (4,269 | ) | 5,714,581 | (883,780 | ) | 120 | - | (458,407 | ) | (1,342,067 | ) | 4,372,514 |
Gross carrying amount | Depreciation | Net | ||||||||||||||||||||||||||||||||||||||||||
Item | At the beginning of the year | Additions | Additions by business combinations | Disposals | At the End of the year | At the beginning of the year | Disposals | By business combinations | Of the year | At the End of the year | carrying amount at 12/31/2018 | |||||||||||||||||||||||||||||||||
Measurement at cost | ||||||||||||||||||||||||||||||||||||||||||||
Goodwill | 255,323 | 2,423,642 | - | - | 2,678,965 | - | - | - | - | - | 2,678,965 | |||||||||||||||||||||||||||||||||
Brands | - | 146,907 | - | - | 146,907 | - | - | - | - | - | 146,907 | |||||||||||||||||||||||||||||||||
Other intangible assets | 1,723,407 | 1,300,811 | 2,520 | (798,684 | ) | 2,228,054 | (1,271,996 | ) | 618,809 | (2,143 | ) | (228,450 | ) | (883,780 | ) | 1,344,274 | ||||||||||||||||||||||||||||
TOTAL | 1,978,730 | 3,871,360 | 2,520 | (798,684 | ) | 5,053,926 | (1,271,996 | ) | 618,809 | (2,143 | ) | (228,450 | ) | (883,780 | ) | 4,170,146 |
F-52 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
15.1 Goodwill impairment
Goodwill is assigned to the Deposit Insurance SystemGroup's cash generating units on the basis of the operating segments.
12/31/2019 | 12/31/2018 | |||||||
Supervielle Seguros S.A. | 7,115 | 7,115 | ||||||
Cordial Compañía Financiera S.A. | 177,578 | 177,578 | ||||||
Banco Regional de Cuyo S.A. | 63,419 | 63,419 | ||||||
InvertirOnline S.A.U. / InvertirOnline.Com Argentina S.A.U. | 1,355,982 | 1,355,982 | ||||||
Micro Lending S.A.U. | 1,067,660 | 1,067,660 | ||||||
Others | 21,040 | 7,211 | ||||||
TOTAL | 2,692,794 | 2,678,965 |
The recoverable amount of a cash generating unit is determined on the basis of its value in use. These method uses cash flow projections based on approved financial budgets covering a period of five years.
The key assumptions are related to marginal contribution margins. These were determined on the basis of historic performances, other external sources of information and the expectations of market development.
The discount rates used are the respective average cost of capital ("WACC"), which is considered a good indicator of the cost of capital. For each cash generating unit, where the assets are assigned, a specific WACC was determined considering the industry, the country and the size of the business.
The main macroeconomic premises used are detailed below:
Real | Forecast | Forecast | Forecast | Forecast | Forecast | |||||||||||||||||||
2019 | 2020 | 2021 | 2022 | 2023 | 2024 | |||||||||||||||||||
Inflation (end of period) | 54.3 | % | 44.2 | % | 25.3 | % | 17.2 | % | 10.0 | % | 8.5 | % | ||||||||||||
Inflation (average) | 53.3 | % | 54.6 | % | 29.3 | % | 20.6 | % | 13.1 | % | 9.1 | % | ||||||||||||
Cost of funding (end of period) | 61.4 | % | 36.8 | % | 25.9 | % | 15.4 | % | 11.5 | % | 11.5 | % | ||||||||||||
Cost of funding (average) | 65.0 | % | 45.2 | % | 31.4 | % | 19.9 | % | 13.2 | % | 11.5 | % | ||||||||||||
Loan’s interest rate (average) | 78.3 | % | 61.0 | % | 50.0 | % | 41.8 | % | 39.2 | % | 39.0 | % |
Goodwill has been tested annually for impairment. No impairment adjustments have been determined over these assets as a result of the tests performed.
The sensitivity analysis for the cash-generating unit to which the Goodwill was allocated was based on a 5% increase in the weighted average cost of capital. The Group concluded that no impairment loss would need to be recognized on the Goodwill in the segment under these conditions.
F-53 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
16. COMPOSITION OF THE MAIN ITEMS OF THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION AND CONSOLIDATED INCOME STATEMENT
16.1 Debt securities at fair value through profit or loss
12/31/2019 | 12/31/2018 | |||||||
Government securities | 564,833 | 5,741,430 | ||||||
Corporate securities | 3,668 | 114,648 | ||||||
Securities issued by the BCRA | - | 17,391,251 | ||||||
568,501 | 23,247,329 |
16. 2 Other financial assets
12/31/2019 | 12/31/2018 | |||||||
Participation Certificates in Financial Trusts | 30,592 | 16,840 | ||||||
Investments in Mutual Funds | 865,872 | 1,008,467 | ||||||
Other investments | 59,608 | 12,211 | ||||||
Receivable from spot sales pending settlement | 138,591 | 6,341 | ||||||
Several debtors | 623,070 | 994,919 | ||||||
Miscellaneous debtors for credit card operations | 379,133 | 573,379 | ||||||
2,096,866 | 2,612,157 |
16.3 Other debt securities
12/31/2019 | 12/31/2018 | |||||||
Negotiable obligations | - | 3,938 | ||||||
Debt securities from Financial trusts | - | 1,863 | ||||||
Government securities | 10,449,499 | 6,626,011 | ||||||
Others | 9,057 | 49 | ||||||
10,458,556 | 6,631,861 |
16.4 Financial assets in guarantee
12/31/2019 | 12/31/2018 | |||||||
Special guarantees accounts in the Argentine Central Bank | 2,120,732 | 2,088,896 | ||||||
Deposits in guarantee | 3,212,972 | 998,854 | ||||||
5,333,704 | 3,087,750 |
16.5 Inventories
12/31/2019 | 12/31/2018 | |||||||
Electronics | 21,752 | 92,429 | ||||||
Home and Health care | 7,734 | 16,574 | ||||||
Tools and Workshop Equipment | 16,249 | 365 | ||||||
Obsolescence Reserve | (1,280 | ) | (1,811 | ) | ||||
44,455 | 107,557 |
F-54 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
16.6 Other non-financial assets
12/31/2019 | 12/31/2018 | |||||||
Other Miscellaneous assets | 831,142 | 912,352 | ||||||
Loans to employees | 263,922 | 202,414 | ||||||
Payments in advance | 13,570 | 48,568 | ||||||
Retirement Plan | 151,171 | 196,799 | ||||||
Works of art and collector's pieces | 34,546 | 6,896 | ||||||
1,294,351 | 1,367,029 |
16.7 Deposits
12/31/2019 | 12/31/2018 | |||||||
Non-financial sector | 5,470,177 | 17,083,822 | ||||||
Financial sector | 28,098 | 38,821 | ||||||
Current accounts | 10,885,298 | 10,287,013 | ||||||
Savings accounts | 39,992,352 | 72,085,308 | ||||||
Time deposits and investments accounts | 29,717,376 | 41,818,262 | ||||||
Others | 2,914,876 | 4,682,975 | ||||||
89,008,177 | 145,996,201 |
16.8 Liabilities at fair value through profit or loss
12/31/2019 | 12/31/2018 | |||||||
Liabilities for transactions in local currency | 189,554 | 177,215 | ||||||
Liabilities for transactions in foreign currency | - | 235,188 | ||||||
189,554 | 412,403 |
16.9 Other financial liabilities
12/31/2019 | 12/31/2018 | |||||||
Amounts payable for spot transactions pending settlement | 2,193,818 | 850,096 | ||||||
Collections and other operations on behalf of third parties | 5,224,611 | 4,948,447 | ||||||
Fees accrued to pay | 269 | 56,087 | ||||||
Financial guarantee contracts | 15,268 | 56,260 | ||||||
Liabilities associated with the transfer of financial assets not derecognized | 713,177 | 593,093 | ||||||
Lease liability | 946,390 | - | ||||||
Others | 22,032 | 60,413 | ||||||
9,115,565 | 6,564,396 |
16.10 Financing received from the Argentine Central Bank and other financial institutions
12/31/2019 | 12/31/2018 | |||||||
Financing received from local financial institutions | 939,136 | 1,918,696 | ||||||
Financing received from international institutions | 8,078,461 | 10,438,410 | ||||||
9,017,597 | 12,357,106 |
F-55 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
16.11 Provisions
12/31/2019 | 12/31/2018 | |||||||
Legal issues | 33,049 | 47,176 | ||||||
Labor lawsuits | 28,023 | 26,391 | ||||||
Tax | 77,882 | 20,390 | ||||||
Restructuring Provision | 500,000 | - | ||||||
Others | 21,930 | 22,809 | ||||||
Judicial Deposits | 15,767 | 15,097 | ||||||
Eventual commitments | 367 | 1,840 | ||||||
677,018 | 133,703 |
16.12 Other non-financial liabilities
12/31/2019 | 12/31/2018 | |||||||
Payroll and social securities | 3,967,872 | 3,499,379 | ||||||
Sundry creditors | 2,357,646 | 2,302,636 | ||||||
Revenue from contracts with customers (1) | 192,499 | 191,378 | ||||||
Tax payable | 1,396,223 | 1,751,473 | ||||||
Social security payment orders pending settlement | 218,486 | 341,196 | ||||||
Other | 76,188 | 228,577 | ||||||
8,208,914 | 8,314,639 |
(1) | Deferred income resulting from contracts with customers includes the liability for the customers’ loyalty program. The Group estimates the value of the points assigned to customers through the application of a mathematical model that considers assumptions about redemption rates, the fair value of points redeemed based on the combination of available products, and customer preferences, as well as the expiration of not redeemed points. As of December 31, 2019 and 2018, the amounts of 192,499 and 191,378, respectively, have been recorded for the points not redeemed or expired. |
The following table shows the estimated use of the liability recorded as of December 31, 2019:
Maturity | ||||||||||||||||
Item | Up to 12 months | Up to 24 months | More than 24 months | Total | ||||||||||||
Revenue from contracts with customers | 93,466 | 47,952 | 51,081 | 192,499 |
16.13 Interest Income
12/31/2019 | 12/31/2018 | 12/31/2017 | ||||||||||
Interest on overdrafts | 4,566,729 | 5,000,550 | 2,901,607 | |||||||||
Interest on promissory notes | 5,878,441 | 6,272,282 | 3,767,219 | |||||||||
Interest on personal loans | 12,916,398 | 16,811,397 | 16,547,779 | |||||||||
Interest on corporate unsecured loans | 6,141,212 | 4,643,906 | 3,060,511 | |||||||||
Interest on credit card loans | 4,815,023 | 5,249,821 | 5,053,721 | |||||||||
Interest on mortgage loans | 3,781,641 | 3,028,718 | 263,172 | |||||||||
Interest on automobile and other secured loan | 693,000 | 757,191 | 75,662 | |||||||||
Interest on foreign trade loans | 1,730,633 | 1,798,461 | 899,192 | |||||||||
Interest on financial leases | 1,129,605 | 1,417,026 | 1,141,613 | |||||||||
Others | 3,141,913 | 1,810,684 | 540,048 | |||||||||
Total | 44,794,595 | 46,790,036 | 34,250,524 |
F-56 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
16.14 Interest Expenses
12/31/2019 | 12/31/2018 | 12/31/2017 | ||||||||||
Interest on current accounts deposits | 6,010,413 | 7,890,452 | 1,564,612 | |||||||||
Interest on time deposits | 19,855,152 | 9,991,638 | 5,786,089 | |||||||||
Interest on other financial liabilities | 7,692,607 | 7,296,529 | 4,460,915 | |||||||||
Interest from financing from financial sector | 274,101 | 1,137,554 | 382,729 | |||||||||
Others | 1,081,178 | 471,217 | 588,612 | |||||||||
Total | 34,913,451 | 26,787,390 | 12,782,957 |
16.15 Net income from financial instruments at fair value through profit or loss
12/31/2019 | 12/31/2018 | 12/31/2017 | ||||||||||
Income from corporate and government securities | 1,532,374 | 2,812,312 | 1,253,840 | |||||||||
Income from securities issued by the Argentine Central Bank | 18,714,976 | 9,500,772 | 4,366,999 | |||||||||
Derivatives | 713,616 | (2,605,689 | ) | (166,485 | ) | |||||||
Total | 20,960,966 | 9,707,395 | 5,454,354 |
16.16 Service fee income
12/31/2019 | 12/31/2018 | 12/31/2017 | ||||||||||
Commissions from deposits accounts | 3,509,557 | 3,398,652 | 3,591,081 | |||||||||
Commissions from credit and debit cards | 2,897,583 | 3,361,286 | 3,598,831 | |||||||||
Commissions from loans operations | 294,820 | 601,763 | 543,388 | |||||||||
Others | 1,897,647 | 1,757,005 | 1,594,665 | |||||||||
Total | 8,599,607 | 9,118,706 | 9,327,965 |
16.17 Service fee expenses
12/31/2019 | 12/31/2018 | 12/31/2017 | ||||||||||
Commissions paid | 2,171,167 | 2,099,326 | 1,813,673 | |||||||||
Export and foreign currency operations | 72,803 | 82,294 | 63,739 | |||||||||
Total | 2,243,970 | 2,181,620 | 1,877,412 |
16.18 Income from insurance activities
12/31/2019 | 12/31/2018 | 12/31/2017 | ||||||||||
Accrued premiums | 2,188,006 | 2,263,710 | 2,438,417 | |||||||||
Accrued losses | (346,018 | ) | (510,785 | ) | (623,792 | ) | ||||||
Production expenses | (448,632 | ) | (447,403 | ) | (430,916 | ) | ||||||
Total | 1,393,356 | 1,305,522 | 1,383,709 |
16.19 Other operating income
12/31/2019 | 12/31/2018 | 12/31/2017 | ||||||||||
Loans recovered and allowances reversed | 498,599 | 488,878 | 466,741 | |||||||||
Insurance commissions | 68,287 | 610,942 | 544,225 | |||||||||
Rental from safety boxes | 286,881 | 368,093 | 358,390 | |||||||||
Commissions from trust services | 26,280 | 11,722 | 244,890 | |||||||||
Returns of risk funds | 172,684 | 431,480 | 164,515 | |||||||||
Commissions from financial guarantees | 627,845 | 723,954 | 45,557 | |||||||||
Default interests | 420,933 | 371,439 | 232,584 | |||||||||
Others | 653,758 | 798,626 | 770,574 | |||||||||
Total | 2,755,267 | 3,805,134 | 2,827,476 |
F-57 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
16.20 Personnel expenses
12/31/2019 | 12/31/2018 | 12/31/2017 | ||||||||||
Payroll and social securities | 12,415,668 | 10,009,697 | 10,258,005 | |||||||||
Others expenses | 1,748,621 | 3,494,603 | 3,181,160 | |||||||||
Total | 14,164,289 | 13,504,300 | 13,439,165 |
16.21 Administration expenses
12/31/2019 | 12/31/2018 | 12/31/2017 | ||||||||||
Directors´ and statutory auditors’fees | 280,833 | 251,527 | 199,248 | |||||||||
Professional fees | 1,017,618 | 2,541,276 | 1,690,134 | |||||||||
Advertising and publicity | 542,054 | 633,316 | 673,128 | |||||||||
Taxes | 1,469,457 | 1,648,448 | 1,672,778 | |||||||||
Maintenance, security and services | 1,727,446 | 846,858 | 804,156 | |||||||||
Rent | 51,745 | 715,107 | 621,264 | |||||||||
Others | 2,484,390 | 1,978,864 | 1,905,586 | |||||||||
Total | 7,573,543 | 8,615,396 | 7,566,294 |
16.22 Depreciation and impairment of non-financial assets
12/31/2019 | 12/31/2018 | 12/31/2017 | ||||||||||
Depreciation of property, plant and equipment | 682,136 | 322,530 | 549,762 | |||||||||
Depreciation of other non-financial assets | 106,936 | 113,747 | 27,405 | |||||||||
Depreciation of intangible assets | 458,407 | 228,450 | 379,652 | |||||||||
Depreciation of right-of-use assets | 567,192 | - | - | |||||||||
Impairment of other-non financial assets | - | 427 | - | |||||||||
Total | 1,814,671 | 665,154 | 956,819 |
16.23 Other operating expenses
12/31/2019 | 12/31/2018 | 12/31/2017 | ||||||||||
Promotions related with credit cards | 510,582 | 651,017 | 651,859 | |||||||||
Turnover tax | 3,749,503 | 4,311,436 | 3,459,409 | |||||||||
Fair value on initial recognition of loans | 200,899 | 594,275 | 656,807 | |||||||||
Contributions made to deposit insurance system | 243,959 | 237,870 | 207,594 | |||||||||
Others | 1,653,348 | 838,563 | 1,418,873 | |||||||||
Total | 6,358,291 | 6,633,161 | 6,394,542 |
17. COMMITMENTS AND CONTINGENCIES
Capital Commitments
During the financial year ended on December 31, 2019, the Group did not assume any significant capital commitment.
Contingencies and Provisions
Provisions for other contingencies to cover labor, legal, tax and other eventual effectiveness miscellaneous risks commitments have been estimated based on the available information and in accordance with the provisions of IFRS.
As of December 31, 2019 and 2018, there were no contingent events entailing remote likelihood and which equity effects have not been recorded.
F-58 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
18. RELATED PARTY TRANSACTIONS
Related parties are those entities that directly, or indirectly through other entities, have control over another, are under the same controlling party or may have significant influence on another entity’s financial or operating decisions.
The Group controls another entity when it has power over other entities’ financial and operating decisions and also receives benefits from such entity. The subsidiaries that the Group has control are detailed in Note 1.2.
Furthermore, the key personnel of the Group's Management (Board of Directors members and Managers of the Group and its subsidiaries) are considered as related parties.
The aggregate compensation paid to our directors (including compensation paid to members of our Audit Committee, Anti-Money Laundering and Anti-Terrorist Financing Committee, Risk Management Committee, Credit House Limit Committee, Ethics, Compliance and Corporate Governance Committee, Human Resources Committee and Disclosure Committee), management and members of our Supervisory Committee in 2019 was approximately Ps. 218.5 million, 224.2 million and Ps.2.3 million, respectively.
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 December 31, 2019 and 2018:
As of December 31, 2019 | As of December 31, 2018 | |||||||
Aggregate total financial exposure | 963,016 | 1,204,789 | ||||||
Number of recipient related parties | 70 | 75 | ||||||
(a) Individuals | 63 | 68 | ||||||
(b) Companies | 7 | 7 | ||||||
Average total financial exposure | 13,757 | 21,378 | ||||||
Single largest exposure | 823,172 | 1,131,380 |
Controlling Interest
Mr. Julio Patricio Supervielle is the main shareholder of the Group. Julio Patricio Supervielle´s interest in the capital and votes of the Group as of December 31, 2019 and December 31, 2018 amounts to the 35.12% and 57.89%; and 35.86% and 69.40%, respectively.
F-59 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
19. | INSURANCE |
a. | Assets and liabilities related to insurances activities |
12/31/2019 | 12/31/2018 | |||||||
Assets related to insurance contracts (Loans and other financing) | ||||||||
Receivables premius | 453,978 | 63,380 | ||||||
Total | 453,978 | 63,380 | ||||||
Liabilities related to insurance contracts (Other non-financial liabilities) | ||||||||
Debt with insured | 136,168 | 203,946 | ||||||
Debt with reinsurers | 40,575 | 22,566 | ||||||
Debt with co-insurers | 1,702 | 26,024 | ||||||
Debt with producers | 150,384 | 44,451 | ||||||
Technical commitments | 173,994 | 18,258 | ||||||
Outstanding claims paid by re-insurance companies (regularizer) | (481 | ) | (723 | ) | ||||
Total | 502,342 | 314,522 | ||||||
Debt with insured | ||||||||
Property insurance | ||||||||
Direct administrative insurance | 11,242 | 12,976 | ||||||
Direct insurance in mediation | 800 | - | ||||||
Claims settled to pay | 881 | 306 | ||||||
Claims occurred and not reported - IBNR | 14,759 | 14,916 | ||||||
Life insurance | ||||||||
Direct administrative insurance | 41,267 | 48,377 | ||||||
Direct insurance in judgments | 1,240 | 1,088 | ||||||
Direct insurance in mediation | 1,837 | 1,151 | ||||||
Claims settled to pay | 20,218 | 20,974 | ||||||
Claims occurred and not reported - IBNR | 43,924 | 104,158 | ||||||
Total | 136,168 | 203,946 | ||||||
Debt with producers | ||||||||
Producers currenct account | 28,247 | 33,992 | ||||||
Commisions for premiums receivable | 122,137 | 10,459 | ||||||
Total | 150,384 | 44,451 | ||||||
Technical commitments | ||||||||
Course and similar risk | ||||||||
Premiums and surcharges | 173,955 | 18,258 | ||||||
Premium insufficiency | 39 | - | ||||||
Total | 173,994 | 18,258 |
b. | Income from insurances activities |
The composition of the item “Result for insurance activities” as of December 31, 2019 and 2018 is disclosed in Note 16.18.
20. | MUTUAL FUNDS |
As of December 31, 2019 and 2018, Banco Supervielle S.A. is the depository of the Mutual Funds managed by Supervielle Asset Management S.A.
Mutual Fund | Portfolio | Net Worth | Number of Units | |||||||||||||||||||||
12/31/2019 | 12/31/2018 | 12/31/2019 | 12/31/2018 | 12/31/2019 | 12/31/2018 | |||||||||||||||||||
Premier Renta C.P. Pesos | 14.031.863 | 8.281.012 | 14.010.386 | 8.266.083 | 3.958.398.573 | 1.475.029.312 | ||||||||||||||||||
Premier Renta Plus en Pesos | 109.147 | 573.083 | 107.200 | 554.760 | 10.250.999 | 49.671.811 | ||||||||||||||||||
Premier Renta Fija Ahorro | 465.427 | 5.156.205 | 459.494 | 5.038.765 | 12.851.475 | 136.640.472 | ||||||||||||||||||
Premier Renta Fija Crecimiento | 46.922 | 67.139 | 46.657 | 66.643 | 3.688.485 | 4.369.322 | ||||||||||||||||||
Premier Renta Variable | 166.391 | 245.226 | 163.998 | 226.060 | 6.982.580 | 8.130.311 | ||||||||||||||||||
Premier FCI Abierto Pymes | 560.360 | 631.380 | 559.099 | 630.259 | 91.559.624 | 99.122.237 | ||||||||||||||||||
Premier Commodities | 21.039 | 8.912 | 13.593 | 7.930 | 2.596.034 | 1.599.150 | ||||||||||||||||||
Premier Capital | 129.058 | 277.778 | 128.718 | 277.455 | 36.057.519 | 67.052.867 | ||||||||||||||||||
Premier Inversión | 135.360 | 275.771 | 135.291 | 275.395 | 442.160.447 | 888.100.323 | ||||||||||||||||||
Premier Balanceado | 623.862 | 942.774 | 623.293 | 942.030 | 249.317.925 | 359.887.367 | ||||||||||||||||||
Premier Renta Mixta | 133.255 | 90.124 | 133.147 | 90.080 | 76.562.093 | 44.863.120 | ||||||||||||||||||
Premier Renta Mixta en USD | 130.212 | 725.057 | 129.733 | 7.222.633 | 2.815.589 | 13.892.155 | ||||||||||||||||||
Premier Performance en USD | 453.884 | 3.649.334 | 452.866 | 3.630.806 | 9.312.208 | 62.805.294 | ||||||||||||||||||
Premier Global USD | 698.915 | - | 696.759 | - | 11.338.023 | - |
F-60 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2019, 2018 and 2017
(Expressed in thousands of pesos)
21. | CONTRIBUTION TO THE DEPOSIT INSURANCE SYSTEM |
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 National Executive Branch through Decree No. 1127/98 dated September 24, 1998, extendedestablished the maximum amount for this insurance system to demand deposits and time deposits of up to Ps. 30 denominated either in pesosPesos and/or in foreign currency. In May 2016, the amountSuch limit was updated to Ps. 450, through Communication “A” 5943.set at $1,000 as from March 1, 2019.
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 after July 1, 1995, at an interest rate exceeding the one established regularly by the BCRA based on a daily survey conducted by it.Argentine Central Bank. Those deposits whose ownership has been acquired through endorsement and
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
those deposits made as a result of incentives other than the interest rate are also excluded. This system has been implemented through the creation of the Deposit Insurance Fund (“FGD”), which is managed by a company called Seguros de Depósitos S.A. (“SEDESA”). The shareholders of SEDESA are the BCRAArgentine Central Bank and the financial institutions, in the proportion determined for each one by the BCRAArgentine Central Bank based on the contributions made to the fund.
25.Financial Instruments with Off-Balance Sheet Risk
22. | RESTRICTED ASSETS |
25.a. Credit-related financial instruments
The Group enters into various transactions involving off-balance sheet financial instruments. The instruments could be used in the normal course of its business in order to meet the financing needs of its customers. These instruments expose the Group to credit risk above and beyond the amounts recorded in the consolidated balance sheets. These financial instruments include commitments to extend credit, standby letters of credit, guarantees granted and acceptances.
The Group uses the same credit policies in making commitments, conditional obligations and guarantees as it does for granting loans.
The Group’s exposure to credit loss in the event of non-performance by the counterparty to the financial instrument for standby letters of credit, guarantees granted and acceptances is represented by the contractual notional amount of those investments.
A summary of the credit exposure related to these items is shown below:
|
| December 31, |
| ||||
|
| 2017 |
| 2016 |
| ||
|
|
|
|
|
| ||
Standby letters of credit |
| Ps. | 100,039 |
| Ps. | 19,458 |
|
Guarantees granted |
| Ps. | 724,953 |
| Ps. | 488,792 |
|
Acceptances |
| Ps. | 48,554 |
| Ps. | 41,961 |
|
Standby letters of credit and guarantees granted are conditional commitments issued by the Group to guarantee the performance of a customer to a third party.
Acceptances are conditional commitments for foreign trade transactions.
The credit risk involved in issuing letters of credit and granting guarantees is essentially the same as that involved in extending loan facilities to customers. In order to grant guarantees to its customers, the Group may require counter-guarantees. These counter-guarantees are classified by type, as follows:
|
| December 31, |
| ||||
|
| 2017 |
| 2016 |
| ||
Preferred counter-guarantees |
| Ps. | 12,590,730 |
| Ps. | 5,844,275 |
|
Other counter-guarantees |
| Ps. | 23,199,398 |
| Ps. | 10,341,973 |
|
The Group accounts for checks drawn on other banks, as well as other items in process of collection, such as notes, bills and miscellaneous items, in memorandum accounts until such time as the related item clears or is accepted. In management’s opinion, the risk of loss on these clearing transactions is not significant. The amounts of clearing items in process were as follows:
|
| December 31, |
| ||||
|
| 2017 |
| 2016 |
| ||
Checks drawn on other banks |
| Ps. | 1,045,459 |
| Ps. | 1,985,525 |
|
Bills and other items for collection |
| Ps. | 1,942,623 |
| Ps. | 3,445,586 |
|
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
25.b. Trust activities
See note 26
25.c. Derivative Financial Instruments
In the normal course of business, the Group enters into a variety of transactions principally in the foreign exchange stock markets. Most counterparties in the derivative transactions are banks and other financial institutions.
These instruments include:
· Forwards and Futures: they are agreements to deliver or take delivery at a specified rate, price or index applied against the underlying asset or financial instrument, at a specific date. Futures are exchange traded at standardized amounts of the underlying asset or financial instrument. Forwards contracts are OTC agreements and are principally dealt in by the Group in foreign exchange as forward agreements.
· Swaps: they are agreements between two parties with the intention to exchange cash flows and risks at a specific date and for a period in the future.
· Options: they confer the right to the buyer, but no obligation, to receive or pay a specific quantity of an asset or financial instrument for a specified price at or before a specified date.
Pursuant to BCRA´s rules, forward transactions with delivery of underlying assets, must be recorded under “Other receivables from financial intermediation” and “Other liabilities from financial transactions” in the accompanying consolidated balance sheet and they are valued as mentioned in Note 3.8.
The following table shows, the notional value of options and outstanding forward and futures contracts asAs of December 31, 20172019 and 2016:2018, the following Grupo Supervielle’s assets are restricted:
|
| December 31, |
| |||||
|
| 2017 |
| 2016 |
| |||
Forward sales of foreign exchange without delivery of underlying assets |
| Ps | 3,092,744 |
|
| Ps | 342,160 |
|
Forward purchases of foreign exchange without delivery of underlying assets |
| 568,290 |
| 448,223 |
| |||
Repurchase agreements |
| — |
| 590,266 |
| |||
Item | 12/31/2019 | 12/31/2018 | ||||||
Loans and other financing | ||||||||
In guarantee of secured borrowings | - | - | ||||||
Credit Line | - | - | ||||||
- | - | |||||||
Financial assets in guarantee | ||||||||
Special guarantee accounts in the Argentine Central Bank | 2,120,732 | 2,088,896 | ||||||
Trust guarantee deposits | 3,800 | 5,127 | ||||||
Guarantee deposits for currency forward transactions | 2,104,713 | 434,126 | ||||||
Guarantee deposits for credit cards transactions | 317,407 | 375,993 | ||||||
Other guarantee deposits | 158,562 | 183,608 | ||||||
Guarantee deposits for repo transactions | 23,880 | - | ||||||
4,729,094 | 3,087,750 |
The following table shows, the income / (expenses) generated by derivatives financial instruments during the years ended December 31, 2017 , 2016 and 2015:
|
| As of December 31, |
| ||||||||||
|
| 2017 |
| 2016 |
| 2015 |
| ||||||
Forward transactions results |
|
|
| Ps. | (71,830 | ) | Ps. | (39,016 | ) | Ps. | 228,050 |
|
|
Call options written on stock |
| — |
| — |
| 483 |
| ||||||
Reverse repurchase agreements |
| 180,153 |
| 13,556 |
| 5,391 |
| ||||||
Repurchase agreements |
| (108,712 | ) | (94,143 | ) | (38,084 | ) | ||||||
26.Financial Trusts and Mutual Funds
a) Financial Trusts
23. | FINANCIAL TRUSTS |
The Group acts as trustee or settler in financial trusts.trusts:
i) | As Trustee: |
Guarantee Management Trusts
F-32Trustee: Banco Supervielle.
Financial trust | Indenture executed on | Due of principal obligation | Original principal amount | Principal balance | Beneficiaries | Settlers | ||||||||||
Credimas | 01/11/2013 | 06/21/2019 | 16,000 | - | Banco Supervielle S.A. | Credimas S.A. | ||||||||||
Asministration trust Interconnection 500 KV ET Nueva San Juan - ET Rodeo Iglesia | 09/12/2018 | 09/12/2018, or until the termination of payment obligations through Disbursements (the “Extinction date”). | - | - | Diservel S.R.L., Ingenias S.R.L, Geotecnia (Inv. Calvente), Newen Ingenieria S.A., Ingiciap S.A., Mercados Energeticos, Diservel S.R.L.) and the suppliers of works, goods and services included in the Project. | Interconexion Electrica Rodeo S.A. |
F-61 |
Grupo SupervielleGRUPO SUPERVIELLE S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
ForAs of December 31, 2019, 2018 and 2017,
and for the years ended December 31, 2017, 20162019, 2018 and 20152017
(Expressed in thousands of Argentine pesos — unless otherwise stated)
I) As Trusteepesos)
The following are the financial trusts where the Group acts as trustee at year-end:
Financial trust Banex Créditos IV
Trustee: Banco Supervielle
· Banex Asset-Backed Securities Program
|
|
|
|
|
|
|
| |||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||
(1)VDFA means Senior Debt Securities, VDFB means Subordinated Debt Securities and CP means Certificates of Participation
Guarantee management trusts
Trustee: Banco Supervielle
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
The Groupgroup acts also as trustee in the following trusts:
·Mendoza Trust in: In liquidation phase,since it has fulfilled the contract period, but is pending the completion of several acts that derive from the trustee. The liabilities recorded as of December 31,2019,mainly originating from the exclusion of assets as of December 31, 2017 increased in the amounts of Ps. 17,343, amount to 21,018 and have been backed by assets in trust (loans, other miscellaneous receivablesloans, and other financial assets)non-financial assets, etc.) in the amount of Ps. 576.647. This trust will be liquidated following the procedures established by Law 24,441.
· LujanLuján Trust: the The term of the contract has expired and all documentation relating to the liquidation has been delivered. To date, onlyOn July 31, 2019 the Tax Authority approved the final deregistration in tax matters is still pending.matters.
II) As Settler
ii) | As Settler |
The Group transfers portions of their loan portfolio to special purpose trusts that fund the purchase by issuing securities that are sold to third parties, thereby creating an additional source of funding for operations.
In the case of the securitization transactions arranged by the Group, the trustee typically issues senior bonds, subordinated bond and participation certificates, and places the senior bonds and a portion of the subordinated bonds and participation certificates in the Argentine capital markets.
The following are the financial trusts where the Group acts as settler at year-end:
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
Publicly offered and listed financial trusts as of December 31, 2019 and December 31, 2018:
Supervielle Créditos Financial Trust
Assets assigned in trustTrust: Personal loans
Loans
Trustee: Equity TMF Trust Company (Argentina) S.A.
Financial trust |
| Set up on |
|
| Value initially |
| Securities issued and last maturity (5) |
| Holdings — book value as |
| ||||
Serie 88 (1),(3) |
| 07/23/2015 |
| $ | 220,004 |
| VDF TV A |
| VDF TV B |
|
|
| In liquidation |
|
Serie 91 (1),(3) |
| 11/19/2015 |
| $ | 300,003 |
| VDF TV A |
|
|
| CP |
| In liquidation |
|
Serie 93 (2),(3) |
| 03/28/2016 |
| $ | 300,009 |
| VDF TV A |
|
|
| CP |
| In liquidation |
|
Serie 93 (2),(3) |
| 09/19/2017 |
| $ | 236,867 |
| VDF TV A |
|
|
| CP |
| VDF TV 302 |
|
(1) Securities issued under the Supervielle Confiance 3 program
(2) Securities issued under the Supervielle Confiance 4 program
(3) Personal loans originated, or subsequently acquired, byThe following are financial trusts where Banco Supervielle and granted to ANSES retirees and pensions.S.A acts as settler as of December 31, 2019:
Securities issued | ||||||||||||||||||
Financial Trust | Set up on | Value initially assigned in trust | Type | Amount | Type | Amount | ||||||||||||
Serie 97 | 03/27/2018 | $ | 750,000 | VDF TV A Mat: 01/20/20 | VN$ 712,500 | CP Mat: 03/20/20 | VN$ 37,500 |
Cordial Compañía Financiera Crédito Financial Trust
Assets assigned in trustTrust: Personal Loans
Trustee: Equity TMF Trust Company (Argentina) S.A.
The following are financial trusts where Cordial Compañía Financiera S.A acts as settler as of December 31, 2019:
Financial trust |
| Set up on |
| Value initially |
| Value of Participation |
| Value of Debt |
|
Serie XIV |
| 10/04/2016 |
| 266,322 |
| 45,201 |
| — |
|
Serie XV |
| 03/07/2016 |
| 400,000 |
| 99,702 |
| — |
|
Serie XVI |
| 04/07/2017 |
| 398,000 |
| 96,254 |
| — |
|
Serie XVII |
| 05/17/2017 |
| 499,100 |
| 115,016 |
| 27,498 |
|
Serie XVIII |
| 06/13/2017 |
| 500,000 |
| 110,470 |
| 13,372 |
|
Total |
|
|
| 466,643 |
| 40,870 |
|
Securities issued | ||||||||||||||||
Financial Trust | Set up on | Value initially assigned in trust | Participation Certificates | Debt Instruments | ||||||||||||
20 | 04/08/2019 | $ | 600.000 | $ | 120.000 | $ | 480.000 | |||||||||
21 | 06/24/2019 | $ | 1.000.000 | $ | 780.000 | $ | 220.000 | |||||||||
22 | 11/13/2019 | $ | 571.560 | $ | 102.300 | $ | 469.260 |
b) Mutual Funds
F-62 |
GRUPO SUPERVIELLE S.A.
AtNotes to Consolidated Financial Statements
As of December 31, 2017 and 2016, Banco Supervielle is the depository of the following Mutual Funds managed by Supervielle Asset Management.
|
| Portfolio |
| Net worth |
| Number of units |
| ||||||
Mutual Fund |
| 12/31/2017 |
| 12/31/2016 |
| 12/31/2017 |
| 12/31/2016 |
| 12/31/2017 |
| 12/31/2016 |
|
Premier Renta C.P. Pesos |
| 1,908,881 |
| 1,419,212 |
| 1,906,561 |
| 1,417,419 |
| 310,154,313 |
| 274,406,695 |
|
Premier Renta Plus en Pesos |
| 2,376,919 |
| 1,952,173 |
| 2,364,513 |
| 1,940,593 |
| 388,251,454 |
| 396,802,512 |
|
Premier Renta Fija Ahorro |
| 5,570,513 |
| 3,887,918 |
| 5,466,840 |
| 3,875,616 |
| 304,239,464 |
| 269,631,898 |
|
Premier Renta Fija Crecimiento |
| 225,412 |
| 527,991 |
| 222,822 |
| 526,249 |
| 23,616,268 |
| 69,664,347 |
|
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 20152018 presented in comparative format
(Expressed in thousands of Argentine pesos — unless otherwise stated)
|
| Portfolio |
| Net worth |
| Number of units |
| ||||||
Mutual Fund |
| 12/31/2017 |
| 12/31/2016 |
| 12/31/2017 |
| 12/31/2016 |
| 12/31/2017 |
| 12/31/2016 |
|
Premier Renta Variable |
| 144,493 |
| 113,525 |
| 141,002 |
| 102,116 |
| 8,180,869 |
| 10,145,371 |
|
Premier FCI Abierto Pymes |
| 367,845 |
| 503,721 |
| 367,121 |
| 479,023 |
| 114,190,777 |
| 182,714,748 |
|
Premier Commodities Agrarios |
| 6,891 |
| 6,126 |
| 6,734 |
| 5,740 |
| 2,217,205 |
| 2,249,465 |
|
Premier Capital |
| 310,768 |
| 98,748 |
| 308,039 |
| 98,216 |
| 129,624,410 |
| 46,218,442 |
|
Premier Inversión |
| 603,393 |
| 997,897 |
| 602,213 |
| 996,654 |
| 3,590,757,014 |
| 7,564,905,911 |
|
Premier Balanceado |
| 319,771 |
| 167,233 |
| 318,628 |
| 166,996 |
| 238,318,110 |
| 163,256,582 |
|
Premier Renta Mixta en USD |
| 2,379,900 |
| 263,014 |
| 2,297,195 |
| 229,522 |
| 110,928,209 |
| 14,172,066 |
|
27.Loans and issuance of negotiable obligationspesos)
a. International financing programs
GlobalMicro Lending Financial Exchange Program
In April 2007, the Bank entered into an agreement under the IFC-World Bank Group global financial exchange program whereby the latter entity may issue a guarantee in favor of a correspondent bank, thus hedging the Bank’s payment obligations generated by import or export operations with its customers. This program amounts to USD 30,000,000 (USD thirty million).
As of December 31, 2017, in-force operations with coverage of the aforementioned agency pursuant to the agreement specified in the previous paragraph amounted to USD 19,287,000 (nineteen million two hundred eighty seven thousand). On December 31, 2016, this operations amounted to USD 12,956,956 (USD twelve million nine hundred fifty six thousand and nine hundred fifty six).
The agreement signed with the IFC is subject to compliance with certain covenants, the regular remittance of information and certain financial ratios regarding creditworthiness, credit risk, immobilization of assets, exposure to foreign currency and interest rate risk.
As of December 31, 2017 and 2016, the Bank is in compliance with the aforementioned commitments, requirements and obligations.
Foreign Trade Credit Facility Program
In May 2009, Banco Supervielle S.A. entered into agreement within the framework of IDB’s Trade Finance Facilitation Program. Banco Supervielle S.A. the line of credit granted to Banco Supervielle S.A. for USD 15,000,000 (United States dollars fifteen million) under this program shall be used to cover risks inherent in the confirmation of letters of credit, promissory notes, bid guarantees, and other similar instruments used in international business operations.
As of December 31, 2017, there were no current operations with coverage of said entity under the agreement mentioned in the previous paragraphs. As of December 31, 2016, coverage operations under the agreement referred to in the previous paragraph amounted to USD 13,500,000 (U$S thirteen million five hundred thousand).
The agreement entered into with the IDB is subject to compliance with certain financial covenants, certain positive and restrictive covenants, certain do and not do obligations and reporting requirements.
As of December 31, 2017 and 2016, the Bank is in compliance with the aforementioned commitments, requirements and obligations.
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
b. Program for the issuance of Negotiable Obligations denominated in USD
On April 30, 2007, the Ordinary and Extraordinary Shareholders’ Meeting No. 95 of Banco Supervielle resolved to approve the application for admission to the public offering regime through the creation of a Global Program for the issuance of Corporate Bonds for up to a maximum amount of US$ 200,000,000. The Program was authorized by the Argentine Securities Commission (Comisión Nacional de Valores) on August 10, 2007.
b.1. Issuance of Subordinated Corporate Bonds Class I
On October 13, 2010, the Board of Directors of Banco Supervielle approved the issuance of Class 1 Corporate Bonds. The subscription period ended on November 8, 2010.Trust
The following are the main terms and conditions of the issuance:financial trusts where Micro Lending S.A.U acts as settler:
Amount: US$ 50,000,000.
Rank: Class 1 Corporate Bonds are Banco Supervielle’s subordinated payment obligations in the terms of the BCRA regulations concerning Regulatory Capital [RPC] and Supplementary Shareholders’ Equity.
Maturity date: November 11, 2017
Interest rate: 11.375%
Interest Payment Date: The interest accrued by the Class 1 Corporate Bonds will be paid on a half-yearly basis on May 11 and on November 11 each year.
Amortization: Principal shall be repaid on the Maturity Date.
Applicable law and jurisdiction: The corporate bonds shall be governed by, and must be interpreted according to, the laws of the State of New York
Financial Trust | Set-up on | Securitized Amount | Issued Securities | |||||||||||||
Type | Amount | Amount | Type | Amount | ||||||||||||
III | 06/08/2011 | $ 39,779 | VDF TV A | VN$ 31,823 | VDF B | VN $ 6,364 | CP | VN $ 1,592 | ||||||||
Vto: 03/12/13 | Vto: 11/12/13 | Vto: 10/12/16 | ||||||||||||||
IV | 09/01/2011 | $ 40,652 | VDF TV A | VN$ 32,522 | VDF B | VN $ 6,504 | CP | VN $ 1,626 | ||||||||
Vto: 06/20/13 | Vto: 10/20/13 | Vto: 01/20/17 | ||||||||||||||
Vto: 01/15/19 | Vto: 04/15/19 | Vto: 07/22/22 | ||||||||||||||
XVIII | 06/16/2017 | $ 119,335 | VDF TV A | VN $ 89,501 | VDF TV B | VN $ 7,291 | CP | VN $ 22,543 | ||||||||
Vto: 05/15/19 | Vto: 08/15/19 | Vto: 10/15/22 |
As of November 12, 2017, Banco Supervielle S.A. made the last interest payment and capital payment of the Class I Negotiable Obligations, being fully amortized.
24. | ISSUANCE OF NEGOTIABLE OBLIGATIONS |
As of December 31, 2016, said obligation is registered in item Subordinated loans and Negotiable Obligations for 800,674.
On March 25, 2013, the Ordinary and Extraordinary Shareholders’ Meeting of Banco Supervielle resolved to approve the application for admission to the public offering regime through the creation of a Global Program for the issuance of Corporate Bonds for up to a maximum amount of $ 750,000,000. Additionally, on April 15, 2016 the Ordinary and Extraordinary Shareholder’s Meeting of Banco Supervielle resolved to increase the Global Program for up to a maximum amount of $ 2,000,000,000.
The Program was authorized by the Argentine Securities Commission (Comisión Nacional de Valores) on September 22, 2016.
a. | Unsubordinated Negotiable Obligations |
b.2. Issuance of Subordinated Corporate Bonds Class III
On May 16, 2013 the Board of Directors of Banco Supervielle approved the issuance of Class 3 Corporate Bonds. The subscription period ended on August 15, 2013.
The following are the main terms and conditions of the issuance:
Amount: US$ 22,500,000.
Rank: Class 3 Corporate Bonds are Banco Supervielle’s subordinated payment obligations in the terms of the BCRA regulations concerning Regulatory Capital [RPC] and Supplementary Shareholders’ Equity.
Maturity date: August 20, 2020
Interest rate: 7.00%
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
Interest Payment Date: The interest accrued by the Class 3 Corporate Bonds will be paid on a half-yearly basis on February 20 and on August 20 each year.
Amortization: Principal shall be repaid on the Maturity Date.
Applicable law and jurisdiction: The corporate bonds shall be governed by, and must be interpreted according to, the laws of Argentina.
As of August 21, 2017, Banco Supervielle S.A. made the eighth interest payment of the Class III Negotiable Obligations.
As of December 31, 2017 and 2016, said obligation is recorded in Subordinate’s Negotiable Obligations item for 431,701 and 363,623, respectively.
b.3. Issuance of Subordinated Corporate Bonds Class IV
On October 14, 2014 the Board of Directors of Banco Supervielle approved an increase of the total amount of the Program for up to Ps. 750,000 and the issuance of Class 4 Corporate Bonds for up to USD 30,000,000 within such Program. The subscription period ended on November 14, 2014.
The following are the main terms and conditions of the issuance:
Amount: US$ 13,441,000.
Rank: Class 4 Corporate Bonds are Banco Supervielle’s subordinated payment obligations in the terms of the BCRA regulations concerning Regulatory Capital [RPC] and Supplementary Shareholders’ Equity.
Maturity date: November 18, 2021
Interest rate: 7.00%
Interest Payment Date: The interest accrued by the Class 4 Corporate Bonds will be paid on a half-yearly basis on May 18 and on November 18 each year.
Amortization: Principal shall be repaid on the Maturity Date.
Applicable law and jurisdiction: The corporate bonds shall be governed by, and must be interpreted according to, the laws of Argentina.
As of November 20, 2017, Banco Supervielle S.A. made the sixth interest payment of the Class IV Negotiable Obligations.
As of December 31, 2017 and 2016, said obligation is recorded in Subordinated loans and Negotiable Obligations item for 254,172 and 214,461, respectively.
b.4. Issuance of Unsubordinated Corporate Bonds Class A
As of September 22, 2016, the Bank’s Extraordinary General shareholders’ meeting, passed the creation of a Global Program for the issuance of Negotiable Obligations for up to a maximum outstanding amount of US$ 800,000,000 (eight hundred million pesos).
As of November 23, 2016 the Board passed the issuance of Class A Negotiable Obligations for a maximum amount of V/N USD 300,000,000 (United State dollars three hundred millon). The bidding period closed on February 02, 2017.
The following describes the main terms and conditions of the aforementioned issuance of Class A:
Amount: Ps. 4,768,170
Rank: Class A Corporate Bonds are Banco Supervielle’s unsubordinated payment obligations
Maturity date: August 9, 2020
Interest Rate: Floating Badlar of Private Banks + 4.5%
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
Interest Payment Date: The interest accrued by the Class A Corporate Bonds will be paid on a quarterly basis
Amortization: Capital to be paid in two quotas, first 50% on February 9, 2020 and rest 50% on August 9, 2020.
Applicable Law and Jurisdiction: Negotiable Obligations shall be governed by and be interpreted pursuant to New York Laws from United States of America.
As of November 9, 2017, Banco Supervielle S.A. made the third interest payment of the Class A Negotiable Obligations.
As of December 31, 2017, said obligation is recorded in other liabilities for financial transactions - Unsubordinated Negotiable Obligations item for 4,731,379.
c. Program for the issuance of Negotiable Obligations denominated in Pesos
On March 25, 2013, the Extraordinary Meeting of Shareholders of Banco Supervielle approved the creation of a global program of Corporate Bonds denominated in Pesos for up to a maximum amount of Ps. 750,000.
c.1. Issuance of Unsubordinated Corporate Bonds Class V
On September 24, 2015 the Board of Directors of Banco Supervielle approved the issuance of Class V Corporate Bonds for up to Ps. 350,000 within of the Program. The subscription period ended on November 18, 2015.
The following are the main terms and conditions of the issuance:
Amount: Ps. 340,100.
Rank: Class 5 Corporate Bonds are Banco Supervielle’s unsubordinated payment obligations
Maturity date: May 20, 2017
Interest rate: Flotante Badlar of Private Banks + 4.50%
Interest Payment Date: The interest accrued by the Class 5 Corporate Bonds will be paid on a quarterly basis
Amortization: Principal shall be repaid on the Maturity Date.
Applicable law and jurisdiction: The corporate bonds shall be governed by, and must be interpreted according to, the laws of Argentina.
As of May 22, 2017, Banco Supervielle S.A. made the sixth and last interest and capital payment of the Class V Negotiable Obligations, being totally amortized.
As of December 31, 2016, said obligation is recorded in other liabilities for financial transactions - Unsubordinated Negotiable Obligations item for 339,715 .
c.2. Issuance of Unsubordinated Corporate Bonds Class VI
On July 13, 2016, the Board approved the issuance of Class VI Unsubordinated Negotiable Obligations for a maximum amount of V/N AR$ 600,000,000 (Argentine Pesos sixty million) within the Global Program of Negotiable Obligations. The bidding period closed on October 7, 2016, with a total amount of AR$ 422,000,000 (Argentine Pesos four hundred and twenty two millon) and maturity date October 12, 2018. The agreed rate is Badlar + 3.50%.
The following describes the main terms and conditions of the aforementioned issuance of Class VI:
Amount: Ps. 422,000
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
Rank: Class 6 Corporate Bonds are Banco Supervielle’s unsubordinated payment obligations
Maturity date: October 12, 2018
Interest Rate: Floating Badlar of Private Banks + 3.5%
Interest Payment Date: The interest accrued by the Class 6 Corporate Bonds will be paid on a quarterly basis
Amortization: Principal shall be paid on Maturity Date.
Applicable Law and Jurisdiction: The corporate bonds shall be governed by, and must be interpreted according to, the laws of Argentina.
As of October 12, 2017, Banco Supervielle S.A. made the fourth interest payment of the Class VI Negotiable Obligations.
As of December 31, 2017 and 2016, said obligation is recorded in other liabilities for financial transactions - Unsubordinated Negotiable Obligations item for 421,347 and 420,507, respectively.
c.3. Issuance of Unsubordinated Corporate Bonds Class B and C
As of November 29, 2017 the Board passed the issuance of Unsubordinated Class B and C Negotiable Obligations for a maximum amount of nominal value AR$ 3,500,000,000 (Pesos three thousand five hundred million). The bidding period closed on December 20, 2017.
The following describes the main terms and conditions of the aforementioned issuance of Class B:
Amount: $629,000,000 (Pesos six hundred twenty nine millon)
Type: Negotiable Obligations will be unsubordinated liabilities of the Bank
Maturity date: December 22, 2019
Interest Rate: Floating TM20 + 3.25%
Interest Payment Date: Interests accrued by Negotiable Obligations will be paid on a three-month basis making the first payment on March 22, 2018
Minimum interest rate: 29.25% applicable in first interest payment.
Amortization: Capital to be paid at maturity date.
Applicable Law and Jurisdiction: Negotiable Obligations shall be governed by and be interpreted pursuant to Argentina Laws.
As of December 31, 2017, said obligation is recorded in other liabilities for financial transactions - Unsubordinated Negotiable Obligations item for 625,271.
The following describes the main terms and conditions of the aforementioned issuance of Class C:
Amount: $659,750,000 (Pesos six hundred fifty-nine million seven hundred fifty thousand)
Type: Negotiable Obligations will be unsubordinated liabilities of the Bank
Maturity date: December 22, 2021
Interest Rate: Floating Badlar of Private Banks + 4.25%
Interest Payment Date: Interests accrued by Negotiable Obligations will be paid on a three-month basis making the first payment on March 22, 2018
Minimum interest rate: 29.25% applicable in first and second interest payment.
Amortization: Capital to be paid in three equal quotas, first 33.33% quota on December 22, 2020, second 33.33% quota on June 22, 2021 and rest 33.34% at Maturity Date.
Applicable Law and Jurisdiction: Negotiable Obligations shall be governed by and be interpreted pursuant to Argentina Laws.
As of December 31, 2017, said obligation is recorded in other liabilities for financial transactions - Unsubordinated Negotiable Obligations item for 655,792.
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
c.4. Issuance of Unsubordinated Corporate Bonds Class D and E
As of January 16, 2018 the Board passed the issuance of Unsubordinated Class D and E Negotiable Obligations for a maximum amount of nominal value $ 2,500,000,000 (Pesos two thousand five hundred million). The bidding period closed on February 7, 2018.
The following describes the main terms and conditions of the aforementioned issuance of Class D:
Amount: $748,888,888 (Pesos seven hundred forty eight million eight hundred eighty eight thousand eight hundred and eighty eight).
Type: Negotiable Obligations will be unsubordinated liabilities of the Bank
Maturity date: August 14, 2019
Interest Rate: Floating Badlar + 3.5%
Interest Payment Date: Interests accrued by Negotiable Obligations will be paid on a three-month basis making the first payment on May 14, 2018.
Minimum interest rate: 26.75% applicable at first interest payment.
Amortization: Capital to be paid at Maturity Date.
Applicable Law and Jurisdiction: Negotiable Obligations shall be governed by and be interpreted pursuant to Argentina Laws.
The following describes the main terms and conditions of the aforementioned issuance of Class E:
Amount: $1,607,666,666 (Pesos one thousand six hundred seven million six hundred sixty six thousand six hundred sixty six)
Type: Negotiable Obligations will be unsubordinated liabilities of the Bank
Maturity date: February 14, 2023
Interest Rate: Floating Badlar + 4.05%
Interest Payment Date: Interests accrued by Negotiable Obligations will be paid on a three-month basis making the first payment on May 14, 2018.
Minimum interest rate: 26.25% applicable in three initial interest payment.
Amortization: Capital to be paid in three equal quotas, first quota on February 14, 2021.
Applicable Law and Jurisdiction: Negotiable Obligations shall be governed by and be interpreted pursuant to Argentina Laws.
d. Negotiable Obligations and Short-term securities of Cordial Compañía Financiera
The following are the series of short-term securities and corporate bonds issued by Cordial Compañía Financiera, outstanding as of December 31, 2017 and 2016:
|
| Date of |
| Due date |
| Nominal value |
| Applicable Rate |
| December |
| December |
|
Class IX |
| 10/06/2015 |
| 04/06/2017 |
| 88,750 |
| Floating rate 5.95% + BADLAR |
| — |
| 88,750 |
|
Class X |
| 05/19/2016 |
| 11/19/2017 |
| 199,000 |
| Variable TNA 5.50% + BADLAR |
| — |
| 199,000 |
|
Class XI |
| 10/25/2016 |
| 04/24/2018 |
| 200,000 |
| Variable TNA 3.57% + BADLAR |
| 200,000 |
| 200,000 |
|
Class XII |
| 12/23/2016 |
| 12/23/2017 |
| 154,214 |
| Fixed 24.90% |
| — |
| 154,214 |
|
Class XIII |
| 12/23/2016 |
| 06/23/2018 |
| 151,429 |
| Variable TNA 4.00% + BADLAR |
| 151,429 |
| 151,429 |
|
Class XIV |
| 05/11/2017 |
| 05/11/2019 |
| 558,000 |
| Variable TNA 3.50% + BADLAR |
| 555,396 |
| — |
|
Class XV |
| 08/24/2017 |
| 02/23/2019 |
| 413,500 |
| Variable TNA 3.75% + BADLAR |
| 411,410 |
| — |
|
Class XVI |
| 11/22/2017 |
| 11/21/2019 |
| 535,500 |
| Variable TNA 4.25% + TM20 |
| 532,308 |
| — |
|
Total |
| 1,850,543 |
| 793,393 |
|
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
As of December 31, 2017 and 2016, Cordial Compañía Financiera’s Short Term Securities and Negotiable Obligations are recorded under Unsubordinated Negotiable Obligations for an amount of 1,850,543 and 793,393, respectively.
e. Global Program for the Issuance of Corporate Bonds
On September 22, 2010, Grupo Supervielle’s Shareholders’ General Meeting passed the adhesion to the public offering regime pursuant Law 17,811 and the creation of a Simple Negotiable Obligations Issuance Global Program, non-convertible into shares, which was passed by the National Securities Commission on November 11, 2010. Said negotiable obligations may be short, medium and/or long term, subordinated or not, with or without guarantee, in pesos, in US dollars or any other currency, for a maximum current amount that shall not exceed, at any time, 1,000,0001,000 (one billionthousand million pesos) or its equivalent in any other currency, pursuant to the last amendment of the Program on May, 7, 2015.
Likewise, negotiable obligations may be issued in several classes and/or series over the course of the program enforcement, relying on the possibility of re-issuing successive classes and/or series to be amortized.
As of April 19, 2016, since the aforementioned Program was no longer in effect, the Group’s Ordinary and Extraordinary shareholders’ meeting, passed the creation of a new Negotiable Obligations Issuance Global Program, for the issuance of simple, short and/or medium term, subordinated or not, with or without guarantees, securities for up to a maximum outstanding amount of 1,000,000 (one billionthousand million pesos), under which different classes and/or series of Negotiable Obligations denominated in pesos, dollar or other foreign currencies can be issued.
AtBanco Supervielle S.A.
On April 25, 2013, the Shareholders' meeting No. 39, resolved to approve the creation of a Global Program for the Issuance of Negotiable Obligations (the "Program") for up to a maximum outstanding amount of AR$ 500,000,000. The Program was authorized by the National Securities Commission through Resolution No. 17,165 dated August 15, 2013. On April 18, 2016, the Shareholders' meeting No. 43 approved the increase of the total amount of the Program to a nominal value of up to AR$ 1,000,000,000. That increase was authorized by the National Securities Commission Board through Resolution No. 18,296 dated October 27, 2016. On March 22, 2017 the Extraordinary General shareholders’ meeting No. 45 approved the issuance of the Program for a maximum amount of nominal value AR$ 2,500,000,000. The National Securities Commission´s Board approved the program´s increase up by Resolution No. 18,608 on April 12, 2017.
Global Program for the Issuance of Medium-Term Securities for up to V / N US $ 800,000,000
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 USD 800,000,000 (United States dollars eight hundred million). The Program was authorized by the National Securities Commission through Resolution No. 18,376 dated November 24, 2016.
On March 6, 2018, the Shareholders' meeting, resolved to approve the extension of the Program for up to a maximum outstanding amount of USD 2,300,000,000 (United States dollars two thousand and three hundred million). The Program was authorized by the National Securities Commission through Resolution No. 19,470 dated April 16, 2018.
F-63 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2017 and2018 presented in comparative format
(Expressed in thousands of pesos)
On August 6, 2018 the Shareholders’ meeting resolved to request the National Securities Commission the Bank’s registration as Frequent Issuer of Negotiable Obligations. The request was authorized by the National Securities Commission through Resolution No. 19,958 dated December 27, 2018.
Cordial Compañía Financiera S.A: Program for the Issuance of Negotiable Obligations
On April 25, 2013, the Shareholders' meeting No. 39, resolved to approve the creation of a Global Program for the Issuance of Negotiable Obligations (the "Program") for up to a maximum outstanding amount of AR$ 500,000,000. The Program was authorized by the National Securities Commission through Resolution No. 17,165 dated August 15, 2013. On April 18, 2016, the following seriesShareholders' meeting No. 43 approved the Increase of corporate bondsthe total amount of Grupo Supervielle issued under the above mentioned program were outstanding:Program to a nominal value of up to AR$ 1,000,000,000. That increase was authorized by the National Securities Commission Board through Resolution No. 18,296 dated October 27, 2016. On March 22, 2017 the Extraordinary General shareholders’ meeting No. 45 passed the issuance of the Program for a maximum amount of nominal value AR$ 2,500,000,000. The National Securities Commission´s Board approved the program´s grow up by Resolution No. 18,608 on April 12, 2017.
Class |
| Issuance |
| Currency |
| Amount (in |
| Rate |
| Maturity |
| 12/31/2017 |
| 12/31/2016 |
|
Class XIII |
| 01/31/2014 |
| AR$ |
| 23,100 |
| BADLAR + 6.25% |
| 01/31/2019 |
| 22,870 |
| 22,659 |
|
Class XX |
| 07/28/2015 |
| AR$ |
| 129,500 |
| Mixed: Fixed 27.5% until 6th month and BADLAR + 4.5% upon maturity. |
| 01/28/2017 |
| — |
| 129,389 |
|
|
|
|
|
|
| Total |
|
|
|
|
| 22,870 |
| 152,048 |
|
As of December 31, 2017 Class XX was fully amortized.2019 and 2018, the amounts outstanding and the terms corresponding to outstanding unsubordinated negotiable obligations were as follows:
Class | Issue Date | Maturity Date | Annual Interest Rate | 12/31/2019 | 12/31/2018 | |||||||||
Grupo Supervielle Class XIII | 01/31/2014 | 01/31/2019 | Badlar + Spread 6.25% | - | 43,108 | |||||||||
Banco Supervielle Class A | 02/09/2017 | 08/09/2020 | Badlar + Spread 4.5% | 3,804,338 | 6,461,888 | |||||||||
Banco Supervielle Class B | 12/22/2017 | 12/22/2019 | Floating TM20 + Spread 3.25% | - | 923,233 | |||||||||
Banco Supervielle Class C | 12/22/2017 | 12/22/2021 | Badlar + Spread 4.25% | 667,169 | 1,026,425 | |||||||||
Banco Supervielle Class D | 02/14/2018 | 08/14/2019 | Badlar + Spread 3.5% | - | 1,182,758 | |||||||||
Banco Supervielle Class E | 02/14/2018 | 02/14/2023 | Badlar + Spread 4.05% | 1,599,410 | 2,595,420 | |||||||||
Cordial Compañía Financiera Class XIV | 05/11/2017 | 05/11/2019 | Badlar + Spread 3.5% | - | 611,622 | |||||||||
Cordial Compañía Financiera Class XV | 08/24/2017 | 02/23/2019 | Badlar + Spread 4.75% | - | 562,105 | |||||||||
Cordial Compañía Financiera Class XVI | 11/22/2017 | 11/21/2019 | Floating TM20 + Spread 4.25% | - | 832,253 | |||||||||
Micro Lending Class II | 08/16/2016 | 08/16/2019 | Badlar + Spread 5% | - | 30,773 | |||||||||
Micro Lending Class III | 10/04/2017 | 10/05/2020 | Badlar + Spread 7% | 15,558 | 47,860 | |||||||||
Total | 6,086,475 | 14,317,445 |
Funds resulting from
b. | Subordinated Negotiable Obligations |
Program for the allocation of said negotiable obligations classes, net of issuance expenses, were assigned in full, pursuant to Article 36 of Negotiable Obligations Law 23,576,for up to nominal value $ 750,000,000 (increased to nominal value $ 2,000,000,000)
As of March 25, 2013, the settlementBank’s Extraordinary General shareholders’ meeting, approved the creation of a Global Program for the issuance of Negotiable Obligations for up to a maximum outstanding amount of 750,000,000 (seven hundred and fifty million pesos). On April 15, 2016, the Ordinary and Extraordinary Shareholders' meeting approved the increase the maximum outstanding amount of the Group’s financial liabilities.Program to 2,000,000,000 (two billion pesos) or its equivalent in foreign currency, passed by Resolution N° 18,224 from the National Securities Commission on September 22, 2016.
28.Non-controlling interest
F-64 |
GRUPO SUPERVIELLE S.A.
The breakdown of this caption is as follows:
|
| December31, |
| ||||
Company |
| 2017 |
| 2016 |
| ||
Banco Supervielle |
| 11,497 |
| 103,397 |
| ||
Total |
| Ps. | 11,497 |
| Ps. | 103,397 |
|
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years endedAs of December 31, 2017, 2016 and 20152018 presented in comparative format
(Expressed in thousands of Argentine pesos — unless otherwise stated)
29.Group’s Risk Management Policies
Comprehensive risk management constitutes a key discipline for financial institutions. Grupo Supervielle aims to create through its subsidiaries, a solid and efficient organization in risk management, the framework for an optimal use of its capital and for identifying business opportunities in the markets and geographical regions in which it operates, seeking the best risk-reward balance for its shareholders. The risk management framework is communicated to all the organization and strives for a balance between a solid culture in risk matters and being an innovative Company, focused on its customers, and recognized for its agile, straightforward and gentle operating style.pesos)
The Company’sfollowing chart provides the main terms and conditions of issuances underway as of December 31, 2019 and 2018:
Book Value | ||||||||||||||||||||||||||||||||
Issuance date | Currency | Class | Amount | Amortization | Term | Maturity date | Rate | 12/31/2019 | 12/31/2018 | |||||||||||||||||||||||
08/20/2013 | U$S | III | 22,500 | 100% at mat, | 84 Months | 08/20/20 | 7 | % | 1,308,192 | 1,340,759 | ||||||||||||||||||||||
11/18/2014 | U$S | IV | 13,441 | 100% at mat, | 84 Months | 11/18/21 | 7 | % | 811,696 | 788,000 | ||||||||||||||||||||||
Total | 2,119,888 | 2,128,759 |
On August 6, 2018, the Board of Directors considers that its criteriaresolved to request the CNV the Bank´s registration as a frequent issuer of negotiable obligations, and guidelines regarding risk management are a key partit´s consequent authorization to issue negotiable obligations under the aforementioned regime, in the terms set forth in the Resolution and submitting before said body all the necessary documentation for such purposes.
25. | RESTRICTIONS IMPOSED ON THE DISTRIBUTION OF DIVIDENDS |
The distribution of retained earnings in the form of dividends is governed by the Argentine Corporations Law. These rules require Grupo Supervielle to transfer 5% of its Corporate Governance. The risksnet income to whicha legal reserve until the Company is exposed, are inherentreserve equals to 20% of the financial industry, such as credit, market, interest rate, liquidity, operational, reputational and strategic risk. In addition, the Company is exposed to securitization risk, given the leadership role it has on this subject.company's outstanding capital stock.
Within this framework,In addition, with regard to Banco Supervielle and Cordial Compañía Financiera, follow20% of the guidelines set forthprofits shown by the BCRAincome statement for comprehensive risk management and corporate governancethe fiscal year, plus - minus the adjustments to prior year results, minus the accumulated loss, if any, at the end of the preceding year, must be transferred to the legal reserve.
30.Parent only Financial StatementsFurthermore, the distribution of dividends in these entities shall comply with a series of requirements established by the Argentine Central Bank. The amount to be distributed, shall not compromise the Company’s liquidity and solvency, which can be verified by not recording insufficiencies in the capital adequacy requirements at the end of the fiscal year from which dividends are to be paid out. In regards to minimum liquidity requirements, the average balance of liquid assets (in pesos, foreign currency or government securities) must exceed the liquidity requirement of the last closed period, or the projected period considering the dividend payment.
The Group may pay dividends to the extent that it has distributable retained earnings and distributable reserves calculated in accordance with the rules of the Argentine Central Bank described in Note 1.
Shareholders' equity under the rules of the Argentine Central Bank comprise the following are the parent company only financial statements of Grupo Supervielle ascaptions:
At December 31, 2019 | ||||
Capital Stock | 456,722 | |||
Paid in Capital | 8,997,297 | |||
Legal Reserve | 91,344 | |||
Other Reserves | 6,708,810 | |||
Other Comprehensive Income | 1,167,932 | |||
Net Income for the year | 4,257,932 | |||
Total shareholders’ equity under the rules of the Argentine Central Bank | 21,680,037 |
F-65 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015.
Balance sheet (Parent Company only)
| �� | December 31, |
| ||||
|
| 2017 |
| 2016 |
| ||
Assets |
|
|
|
|
| ||
Current assets |
|
|
|
|
| ||
Cash and due from banks |
| Ps. | 17,171 |
| Ps. | 4,050 |
|
Short - term investments |
| 4,321,803 |
| 830,955 |
| ||
Tax credits |
| 10 |
| — |
| ||
Other receivables |
| 80,885 |
| 13,147 |
| ||
Total current assets |
| Ps. | 4,419,869 |
| Ps. | 848,152 |
|
|
|
|
|
|
| ||
Non - current assets |
|
|
|
|
| ||
Long - term investments |
| Ps. | 10,792,345 |
| Ps. | 6,234,535 |
|
Premises and equipment |
| 397 |
| — |
| ||
Tax credits |
| 8,205 |
| 11,133 |
| ||
Other receivables |
| 1,682 |
| 4,630 |
| ||
Total non-current assets |
| Ps. | 10,802,629 |
| Ps. | 6,250,298 |
|
Total assets |
| Ps. | 15,222,498 |
| Ps. | 7,098,450 |
|
|
|
|
|
|
| ||
Liabilities |
|
|
|
|
| ||
Current Liabilities |
|
|
|
|
| ||
Trade accounts payable |
| Ps. | 2,275 |
| Ps. | 671 |
|
Financial indebtedness |
| 2,728 |
| 137,833 |
| ||
Taxes payable |
| 1,197 |
| 2,802 |
| ||
Other accounts payable |
| 25,675 |
| 2,723 |
| ||
Total current liabilities |
| Ps. | 31,875 |
| Ps. | 144,029 |
|
|
|
|
|
|
| ||
Non - current liabilities |
|
|
|
|
| ||
Financial indebtedness |
| Ps. | 22,870 |
| Ps. | 22,870 |
|
Other accounts payable |
| 22,955 |
| — |
| ||
Total non-current liabilities |
| Ps. | 45,825 |
| Ps. | 22,870 |
|
Total liabilities |
| Ps. | 77,700 |
| Ps. | 166,899 |
|
Shareholder’s equity |
| Ps. | 15,144,798 |
| Ps. | 6,931,551 |
|
Total liabilities and shareholders’ equity |
| Ps. | 15,222,498 |
| Ps. | 7,098,450 |
|
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 20152018 presented in comparative format
(Expressed in thousands of Argentine pesos — unless otherwise stated)pesos)
26. | LOANS AND OTHER FINANCING |
As of December 31, 2019 and 2018 the composition of the loan portfolio is as follows:
Statement of Income (Parent Company only)
|
| December 31, |
| |||||||
|
| 2017 |
| 2016 |
| 2015 |
| |||
Equity in earnings of controlled companies |
| Ps. | 1,891,777 |
| Ps. | 1,285,428 |
| Ps. | 788,490 |
|
Administrative expenses |
| (144,721 | ) | (69,914 | ) | (26,253 | ) | |||
Other income, net |
| 56,457 |
| 31,086 |
| 18,405 |
| |||
Financial results, net |
|
|
|
|
|
|
| |||
Generated by assets |
| Ps. | 643,273 |
| Ps. | 188,345 |
| Ps. | 49,176 |
|
Generated by liabilities |
| (9,727 | ) | (129,641 | ) | (155,709 | ) | |||
Income before income tax |
| Ps. | 2,437,059 |
| Ps. | 1,311,304 |
| Ps. | 674,109 |
|
Income tax |
| — |
| — |
| — |
| |||
Net income for the year |
| Ps. | 2,437,059 |
| Ps. | 1,311,304 |
| Ps. | 674,109 |
|
Assets Before Allowances | Total as of December 31, | |||||||||||||||
Stage 1 | Stage 2 | Stage 3 | 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 | ||||||||||||
Subtotal | 83,656,957 | 4,658,068 | 6,446,925 | 94,761,950 | ||||||||||||
Allowances for loan losses | (1,605,160 | ) | (838,710 | ) | (4,308,069 | ) | (6,751,939 | ) | ||||||||
Total | 82,051,797 | 3,819,358 | 2,138,856 | 88,010,011 |
Statement of Cash Flows (Parent Company only)
|
| December 31, |
| |||||||
|
| 2017 |
| 2016 |
| 2015 |
| |||
Changes in cash and cash equivalents |
|
|
|
|
|
|
| |||
Cash and cash equivalents at the beginning of the year |
| Ps. | 835,005 |
| Ps. | 22,042 |
| Ps. | 1,657 |
|
Net (decrease) / increase in cash and cash equivalents |
| (678,877 | ) | 812,963 |
| 20,385 |
| |||
Cash and cash equivalents at the end of year |
| Ps. | 156,128 |
| Ps. | 835,005 |
| Ps. | 22,042 |
|
|
|
|
|
|
|
|
| |||
Cash flow from operating activities |
|
|
|
|
|
|
| |||
Operating expenses paid |
| Ps. | (101,031 | ) | Ps. | (65,569 | ) | Ps. | (28,717 | ) |
Dividends received |
| 235,071 |
| 187,359 |
| 33,600 |
| |||
Other operating income received / (expenses paid) |
| 6,838 |
| 71,046 |
| (21,343 | ) | |||
Net cash provided by / (used in) operating activities |
| Ps. | 140,878 |
| Ps. | 192,836 |
| Ps. | (16,460 | ) |
|
|
|
|
|
|
|
| |||
Cash flow from investing activities |
|
|
|
|
|
|
| |||
Other investments |
| Ps. | (3,816,695 | ) | Ps. | — |
| Ps. | — |
|
Proceeds from sales of subsidiaries |
| 51,685 |
| 1,203 |
| Ps. | — |
| ||
Purchase from premises and equipment |
| (418 | ) | — |
| 190 |
| |||
Increase in long-term investments |
| (2,960,821 | ) | (2,248,250 | ) | (25,504 | ) | |||
Net cash used in investing activities |
| Ps. | (6,726,249 | ) | Ps. | (2,247,047 | ) | Ps. | (25,314 | ) |
|
|
|
|
|
|
|
| |||
Cash flow from financing activities |
|
|
|
|
|
|
| |||
Contributions received |
| 5,841,688 |
| 3,301,137 |
| — |
| |||
Dividends paid |
| (65,500 | ) | (25,162 | ) | (7,385 | ) | |||
Financing (paid) / received |
| (144,832 | ) | (594,048 | ) | 54,256 |
| |||
Net cash provided by financing activities |
| Ps. | 5,631,356 |
| Ps. | 2,681,927 |
| Ps. | 46,871 |
|
Net financial income from holdings of cash and cash equivalents |
| 275,138 |
| 185,247 |
| 15,288 |
| |||
Net (decrease) / increase in cash and cash equivalents |
| Ps. | (678,877 | ) | Ps. | 812,963 |
| Ps. | 20,385 |
|
Assets Before Allowances | Total as of December 31, | |||||||||||||||
Stage 1 | Stage 2 | Stage 3 | 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 | 916,400 | 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 | ||||||||||||
Subtotal | 108,775,822 | 11,151,663 | 6,437,740 | 126,365,225 | ||||||||||||
Allowances for loan losses | (2,212,268 | ) | (1,762,950 | ) | (3,618,372 | ) | (7,593,590 | ) | ||||||||
Total | 106,563,554 | 9,388,713 | 2,819,368 | 118,771,635 |
Table of ContentsExpected Credit Loss Allowances
Grupo Supervielle S.A.An analysis of changes in the gross carrying amount and Subsidiariesthe corresponding ECL allowance is, as follows:
Assets Before Allowances | ECL Allowance | |||||||||||||||||||||||||||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | |||||||||||||||||||||||||
Balance at the beginning of the year | 108,775,822 | 11,151,663 | 6,437,740 | 126,365,225 | 2,212,268 | 1,762,950 | 3,618,372 | 7,593,590 | ||||||||||||||||||||||||
Transfers | ||||||||||||||||||||||||||||||||
1 to 2 | (975,855 | ) | 975,855 | 0 | 0 | (61,394 | ) | 311,209 | 0 | 249,815 | ||||||||||||||||||||||
1 to 3 | (5,030,380 | ) | 0 | 5,030,380 | 0 | (92,597 | ) | 0 | 3,446,674 | 3,354,077 | ||||||||||||||||||||||
2 to 3 | 0 | (1,293,344 | ) | 1,293,344 | 0 | 0 | (217,452 | ) | 747,949 | 530,497 | ||||||||||||||||||||||
2 to 1 | 4,403,744 | (4,403,744 | ) | 0 | 0 | 54,696 | (336,834 | ) | 0 | (282,138 | ) | |||||||||||||||||||||
3 to 2 | 0 | 46,115 | (46,115 | ) | 0 | 0 | 9,708 | (31,725 | ) | (22,017 | ) |
F-66 |
GRUPO SUPERVIELLE S.A.
Notes to the Consolidated Financial Statements
For the years endedAs of December 31, 2017, 2016 and 20152018 presented in comparative format
(Expressed in thousands of Argentine pesos — unless otherwise stated)pesos)
Assets Before Allowances | ECL Allowance | |||||||||||||||||||||||||||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | |||||||||||||||||||||||||
3 to 1 | 160,733 | 0 | (160,733 | ) | 0 | 15,515 | 0 | (112,975 | ) | (97,460 | ) | |||||||||||||||||||||
Net changes of financial assets | (33,785,702 | ) | (2,107,933 | ) | (2,087,060 | ) | (37,980,695 | ) | (587,501 | ) | (715,925 | ) | 1,543,541 | 240,115 | ||||||||||||||||||
Write-Offs | 0 | 0 | (5,029,098 | ) | (5,029,098 | ) | 0 | 0 | (5,029,098 | ) | (5,029,098 | ) | ||||||||||||||||||||
Exchange Differences and Others | 10,108,595 | 289,456 | 1,008,467 | 11,406,518 | 64,173 | 25,054 | 125,331 | 214,558 | ||||||||||||||||||||||||
Gross carrying amount at December 31, 2019 | 83,656,957 | 4,658,068 | 6,446,925 | 94,761,950 | 1,605,160 | 838,710 | 4,308,069 | 6,751,939 |
Assets Before Allowances | ECL Allowance | |||||||||||||||||||||||||||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | |||||||||||||||||||||||||
Balance at the beginning of the year | 129,105,886 | 6,422,218 | 5,588,945 | 141,117,049 | 2,601,836 | 1,542,565 | 2,971,288 | 7,115,689 | ||||||||||||||||||||||||
Transfers | ||||||||||||||||||||||||||||||||
1 to 2 | (3,390,317 | ) | 3,390,317 | - | - | (111,310 | ) | 652,494 | - | 541,184 | ||||||||||||||||||||||
1 to 3 | (1,889,857 | ) | - | 1,889,857 | - | (113,691 | ) | - | 1,608,825 | 1,495,134 | ||||||||||||||||||||||
2 to 3 | - | (718,411 | ) | 718,411 | - | - | (234,756 | ) | 433,741 | 198,985 | ||||||||||||||||||||||
2 to 1 | 1,090,798 | (1,090,798 | ) | - | - | 35,469 | (144,782 | ) | - | (109,313 | ) | |||||||||||||||||||||
3 to 2 | - | 173,815 | (173,815 | ) | - | - | 27,351 | (116,916 | ) | (89,565 | ) | |||||||||||||||||||||
3 to 1 | 46,771 | - | (46,771 | ) | - | 4,421 | - | (56,700 | ) | (52,279 | ) | |||||||||||||||||||||
Net changes of financial assets | (26,451,011 | ) | 2,615,931 | 2,428,106 | (21,406,974 | ) | (214,161 | ) | (82,519 | ) | 2,787,456 | 2,490,776 | ||||||||||||||||||||
Write-Offs | - | - | (4,017,832 | ) | (4,017,832 | ) | - | - | (4,017,832 | ) | (4,017,832 | ) | ||||||||||||||||||||
Exchange Differences and Others | 10,263,552 | 358,591 | 50,839 | 10,672,982 | 9,704 | 2,597 | 8,510 | 20,811 | ||||||||||||||||||||||||
Gross carrying amount at December 31, 2018 | 108,775,822 | 11,151,663 | 6,437,740 | 126,365,225 | 2,212,268 | 1,762,950 | 3,618,372 | 7,593,590 |
27. | RISK MANAGEMENT POLICIES |
Financial risk factors
Cash and cash equivalents include cash and due from banks and highly liquid investments with an original maturity of less than three months according to the following detail:
|
| December 31, |
| |||||||
|
| 2017 |
| 2016 |
| 2015 |
| |||
Cash and due from banks |
| Ps. | 17,171 |
| Ps. | 4,050 |
| Ps. | 3,485 |
|
Time deposits |
| 138,957 |
| 830,955 |
| 18,557 |
| |||
Cash and cash equivalents |
| Ps. | 156,128 |
| Ps. | 835,005 |
| Ps. | 22,042 |
|
Reconciliation between balances as appearing on the Balance sheet and the items considered as Cash and cash equivalents:
|
| December 31, |
| |||||||
|
| 2017 |
| 2016 |
| 2015 |
| |||
Cash and due from banks |
|
|
|
|
|
|
| |||
As per the Balance sheet |
| Ps. | 17,171 |
| Ps. | 4,050 |
| Ps. | 3,485 |
|
As per the Statement of cash flows |
| Ps. | 17,171 |
| Ps. | 4,050 |
| Ps. | 3,485 |
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
Short term investments |
|
|
|
|
|
|
| |||
As per the Balance sheet |
| Ps. | 4,321,803 |
| Ps. | 830,955 |
| Ps | 43,720 |
|
Items that are not cash equivalents |
| (4,182,846 | ) | — |
| (25,163 | ) | |||
As per the Statement of cash flows |
| Ps. | 138,957 |
| Ps. | 830,955 |
| Ps | 18,557 |
|
31.Credit Line for Productive Investmentrisk
Pursuant to Communications “A” 5319The Integral Risk Committee approves credit risk strategies and policies submitted in accordance with recommendations provided by the Integral Risk Corporate Department, the Credit Corporate Department and commercial sectors and in compliance with regulations set by the Argentine Central Bank. The credit strategy and policy is aimed at the development of commercial opportunities within the framework and conditions of the BCRA, financial institutionsGroup´s business plan, while keeping suitable caution levels in face of the risk.
Policies and procedures enable the definition of accurate aspects aimed at the deployment of the Group´s Strategy related to the administration of credit risk; among them, the Group´s criteria to grant loans, credit benefits and powers, types of products and the way in which the structure is organized, among other aspects. Likewise, the Group relies on an integral risk policy where aspects related to general key risk governance as well as specific manuals and procedures that include, among others, all relevant regulations issued by the Argentine Central Bank.
The entity´s credit risk management policies are requiredapplied to offercorporate and individuals. To such ends, a credit line directedcustomer segmentation has been defined for corporate banking, retail banking and finance.
The Group is willing to finance investment projectscarry out a strategy that enable it to purchase capital goods and/oraddress its contractual commitments, both under normal market conditions and adverse situations. Therefore, the Entity relies on scoring and rating models to financeestimate probability of default (PD) for the constructiondifferent client portfolios. As for risk appetite framework, the Group relies on cut-offs for each risk-based segment that express the maximum risk to be assumed in terms of facilitiesprobability of default.
F-67 |
GRUPO SUPERVIELLE S.A.
Notes to produce goods and/or services and to market goods (excluding inventories). These credit lines were required to reach in aggregate an amount equal to 5%Consolidated Financial Statements
As of average deposits received from the non-financial private sector, at or before June 30, 2013. Communications “A” 5380, 5449, 5516 and 5600 further extended these requirements to new credit lines, with the last one being due on December 31, 2018.
32.Protection to users of financial services
On July 19, 2013, the BCRA issued Communication “A” 5460, granting a broad protection to consumers of financial services, including, among other aspects, the regulation of fees and commissions charged by financial institutions for services provided. Therefore, fees and charges must represent a real, direct and demonstrable cost and should have a technical and economic justification.
On June 10, 2014, the BCRA issued Communications “A” 5590, 5591 and 5592, through which it adopted a set of rules regarding the reference interest rate for personal loans and car loans granted to retail customers, that are not considered as micro, small and medium size companies. In addition, it established new rules regarding fees and charges for basic financial products and services, as defined by the BCRA. Beginning on the effective date of the rule, financial institutions must have prior authorization from the BCRA to implement increases to the cost of those services.
On December 17, 2015 the BCRA issued Communication “A” 5853 through which it established that interest rates shall be agreed freely between financial institutions and its customers, thus removing the reference interest rate for personal loans and car loans.
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 20152018 presented in comparative format
(Expressed in thousands of Argentine pesos — unless otherwise stated)pesos)
33.Adoption
In addition to PD parameters, the Group relies on estimates of exposure at default (EAD) and loss given default (LGD) parameters with the International Financial Reporting Standardspurpose of estimating Group’s allowance for loan losses and the necessary economic capital to face unexpected losses that may arise due to credit risk.
The NationalGroup is aimed at keeping a diversified and atomized portfolio, in order to minimize risk concentration. To such ends, loan originationand client portfolio profiles are adjusted to each different circumstance.
Our debt securities portfolio is mainly composed of Securities Commission (“CNV”) has established the application of Technical Pronouncement No. 26 of the Argentine Federation of Professional Councils in Economic Sciences, which adopts the International Financial Reporting Standards (“IFRS”) issued by the IASB (International Accounting Standards Board) for certain entities included within the public offering system, whether becauseBCRA that are highly liquid short-term instruments and a Government Security due in November 2020 (TN20), both without credit rating. The aforementioned instruments represents 91.3% and 74.1% of their capital or their negotiable obligations, or because they have requested to be included in such system, for financial statements corresponding to fiscal years started as from January 1, 2012. The adoption of such standards is not applicable to the Company since the CNV exempts banks, insurance companies and companies that invest in banks and insurance companies. Therefore, due to the fact that Banco Supervielle is the Company’s main equity investment, a financial institution subject to the BCRA regulations, the Company continued following the valuation and disclosure criteria applied by Banco Supervielle for the presentation of the consolidated financial statements.
On February 12, 2014, the BCRA approved a convergence roadmap to IFRS for financial statements of institutions under its supervision, with an effective date for fiscal years commenced on January 1, 2018.
In March 2015, Banco Supervielle and Cordial Compañía Financiera’s Board of Directors approved an implementation plan, following the guidelines set up by the BCRA, which shall have a six-month period review and update.
At the date of these financial statements, the Group had taken the necessary measures to fulfill the implementation plan.
In accordance with the requirements of the Technical Pronouncement No. 26 and 29 of the Argentine Federation of Professional Councils in Economic Sciences, the following are the reconciliations of the shareholders´ equity in accordance with Argentine GAAP and IFRS at December 31, 2017 and January 1, 2017, and the reconciliations of net income and comprehensive income for the fiscal year ended as December 31, 2017. The Company has considered, in the preparation of the reconciliations, those IFRS that it considers will be applicable for the preparation of its financial statementsour total portfolio as of December 31, 2019 and 2018, as it were adopted by the BCRA. The items and figures contained in this note are subject to change and only may be considered final when the annual financial statements for the year in which IFRS are applied for the first time.respectively.
Credit Risk Measurement Models
The itemsEntity relies on models aimed at estimating the distribution of potential credit losses in its credit portfolio, which depend on defaults by the counterparties (PD – Probability of Default), as well as the assumed exposure to such defaults (EAD –Exposure At Default) and amounts included in the reconciliation could be modified to the extent that, when preparing the financial statements asrecoveries of December 31, 2018, the standards used are different.each defaulted loan (LGD – Loss Given Default).
Reconciliation of Shareholders’ equity
|
| 12/31/2017 |
| 01/01/2017 |
|
Shareholders’ equity as stated |
| 15,144,798 |
| 6,931,551 |
|
Loan origination fees and costs | (a) | (223,248 | ) | (68,123 | ) |
Intangible assets | (b) | (69,142 | ) | (46,268 | ) |
Goodwill | (c) | 8,464 |
| — |
|
Transfers of financial assets | (d) | (105,939 | ) | (26,218 | ) |
Government securities and other investments | (e) | (15,368 | ) | (9,485 | ) |
Investments in other companies | (f) | 7,216 |
| — |
|
Vacation Provision | (g) | (265,497 | ) | (215,361 | ) |
Property, Plant and Equipment | (h) | 283,470 |
| 273,022 |
|
Deferred Income tax | (i) | 477,426 |
| 313,919 |
|
Special Termination Arrangements | (j) | (598,281 | ) | (290,025 | ) |
Customer loyality programs | (k) | (51,193 | ) | (44,091 | ) |
Accounting for Guarantees | (l) | (12,608 | ) | (9,111 | ) |
Initial Recognition at Fair Value | (m) | (182,161 | ) | (88,463 | ) |
Non-controlling interest | (n) | 11,497 |
| 103,397 |
|
Equity under IFRS |
| 14,409,434 |
| 6,824,744 |
|
Non-controlling interest |
| (10,583 | ) | (100,046 | ) |
The Group Shareholder’s equity under IFRS |
| 14,398,851 |
| 6,724,698 |
|
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
Reconciliation of Net Income
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Reconciliation of Comprehensive Income
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a) Loan origination fees and costs
Under Argentine GAAP, the Company does not defer loan origination fees and costs. In accordance with IFRS 9 “Financial Instruments”, loan origination fees net of certain direct loan origination costs should be recognized over the life of the related loan as an adjustments of to yield using the interest method.
The effects of the adjustments required to state such amounts in accordance with IFRS, decrease assets by 68,123 and 223,248 as of January 1, 2017 and December 31, 2017, respectively. At January 1, 2017, the adjustment was recognized against unallocated results, while for the fiscal year ended December 31, 2017 the adjustment for 155,125 was recognized in the statement of income.
b) Intangible assets
According to IFRS, an intangible asset is an identifiable non-monetary asset that does not possess physical substance. In order to be recognized, the Company must have control over it and the asset must generate future economic benefits.
Under Argentine Banking GAAP, the Company capitalizes costs relating to intangible assets that do not meet IFRS requirements for recognition. The adjustment corresponds to the derecognition of these assets and the reversal of accumulated amortization and amortization of the fiscal year.
The effects of the adjustments required to state such amounts in accordance with IFRS, decrease assets by 46,268 and 69,142 as of January 1, 2017 and December 31, 2017, respectively. At January 1, 2017,
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
the adjustment was recognized against unallocated results, while for the fiscal year ended December 31, 2017, a result of (22,874) was recognized in the income statement.
c) Goodwill
The Company has applied the exemption from IFRS 1 for business combinations. As a result, business combinations and acquisitions of non-controlling interests that ocurred prior to January 1, 2017, were not restated and the book value of the goodwill under IFRS at December 31, 2016, is equal to the book value under Argentine GAAP at that date, and amounts to 31,475. Intangible assets under Argentine GAAP that do not qualify for separate recognition under IFRS have not been recognized.
Under Argentine GAAP, the recognized goodwill is amortized over a maximum period of 120 months. In accordance with IFRS, the goodwill is not amortized, but is tested for impairment annually. The goodwill has been tested at the date of transition and no impairment has been recognized. The amortization charge of 8,464 has been adjusted in the income statement.
d) Transfers of financial assets
According to the Argentine Banking GAAP, for transfers of receivables with recourse, the Group recorded a gain in the income statement and accounted for the transaction as a sale of loans.
In accordance with IFRS 9 “Financial Instruments”, it must be analyzed whether it has substantially transferred all the risks and rewards inherent in the ownership of the transferred asset. If the aforementioned is not complied with, the entity will continue to recognize the transferred asset in its entirety, and will recognize a financial liability for the consideration received. In subsequent periods, the entity will recognize any income from the transferred financial asset and any expense incurred on the financial liability.
The Company recognized an asset for the transferred portfolios of 144,198 and 570,803, a liability for the consideration received of 170,416 and 676,742, and an adjustment to unallocated results of 26,218 and 26,218 as of January 1, 2017 and December 31, 2017, respectively. At January 1, 2017, the adjustment was recognized against unallocated results, while for the fiscal year ended December 31, 2017 the adjustment of (79,721) was recognized in the income statement.
e) Government securities and other investments
Under Argentine Banking GAAP the Group has recorded “Holding of trading securities”, “Unlisted Government Securities”, “Investments in listed corporate securities”, “Securities issued by the Argentine Central Bank listed” and “Securities receivable under spot and forward purchases pending settlement” at fair value, meanwhile the “Securities issued by the Argentine Central Bank unlisted” and “Unlisted corporate bonds” has been value at cost increased by their internal rate of return. Changes in valuation of these securities are included in earnings.
IFRS 9 “Financial Instruments” establishes an entity should classify its financial assets according to the business model that it uses to manage them and the characteristics of the contractual cash flows. Based on the aforementioned, the Group has classified its investmentdeveloped a Risk-Adjusted Return on Capital (RAROC) model.
Allowances for loan losses calculation
Allowances for loan losses calculation is based on models that analyzes the Group’s own portfolio into those heldinformation to estimate, in global terms, the average value of the loss distribution function over an annual term (expected credit loss).The expected credit loss is determined based on PD, EAD, and LGD loss factors.
Economic Capital Calculation
The economic capital for trading, which were valuedcredit risk is the difference between the portfolio’s value at risk (according to the confidence level for individuals of 99.9% and for companies of 99%) and the expected credit losses.
The Group relies on economic capital models for credit risk (one for individuals and another for companies). Such quantitative models include the exacerbation of capital by concentration risk and Securitization Risk. In the economic capital calculation models a one year holding period is used, except from factoring exposures where a six month holding period is used.
Counterparty Risk Management
The Group relies on a Counterparty’s Risk Map approved by the Credit Committee where the following limits are defined for each counterparty according to the Group’s risk appetite: credit exposure and settlement limits, foreign exchange settlement risk, securities settlement risk and Repo transactions settlement risk, among other.
Regarding the economic capital for the counterparty’s risk, it is included in the Economic Capital Quantitative Model for Credit Risk.
Impairment of Financial Instruments
The Group tests for impairment the financial assets measured at amortized cost, debt instruments measured at fair value through profit and loss and those held for investment, which were valued at fair value with changes in other comprehensive income.
The Company adjusted the value of its investment portfolio at fair value (9,485) and (15,368) at January 1, 2017 and December 31, 2017, respectively. At January 1, 2017, the adjustment was recognized by (2,958) against unallocated results and (6,527) against comprehensive income, while, for the fiscal year ended December 31, 2017, the adjustment was recognized in the statement of income. Results by (12,857) and in other comprehensive income, by 6,974.finance lease and financial guarantee contracts and loan commitments granted that are not measured at fair value.
TableAs 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 Contentspurchased or originated credit-impaired assets, this difference is discounted using the effective interest rate adjusted by credit rating.
Grupo Supervielle
F-68 |
GRUPO SUPERVIELLE S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years endedAs of December 31, 2017, 2016 and 20152018 presented in comparative format
(Expressed in thousands of Argentine pesos — unless otherwise stated)
f) Investments in other companies
Under IFRS, investments in which the Company has no control or significant influence should be measured at fair value. Under Argentine GAAP those investments are measured at cost value with the limit of the value through the equity metod.pesos)
The Company recognized an increase of assetsmovements in the allowance for 7,216loan losses as of December 31, 2017, which, by application of the exception of IFRS 1, was recognized2019 are detailed in the other comprehensive income.note 26.
g) Vacation Provision
Under IFRS, short-term employee benefits such as vacation, salary and social security contributions are recognized as a liability equivalent to the undiscounted amount that the Company expects to pay for that benefit.
Following Argentine Banking GAAP, the cost of vacations earned by employees is recorded by the Group when paid.
As a result, the Company recognized a liability for the outstanding vacation balances of 215,361 and 265,497 as of January 1, 2017 and December 31, 2017, respectively. At January 1, 2017, the adjustment was recognized against unallocated results, while, for the fiscal year ended December 31, 2017, the adjustment was recognized in the income statement by (50,136).
h) Property, Plant and Equipment
Through the application of IAS 16 and IAS 40, the Company adopted the revaluation model for its properties and the fair value model for its investment properties.
Under Argentine Banking GAAP, these assets were recorded at historical value less accumulated amortization.
As a result, the Company recognized an increase of assets due to the revaluation of its properties of 293,478 and 283,470 as of January 1, 2017 and December 31, 2017, respectively. At January 1, 2017, the adjustment was recognized in other comprehensive income, while for the fiscal year ended December 31, 2017, an adjustment was recognized for (109,171) in the income statement and 119,619 in the other comprehensive income.
i) Deferred Income tax
Under IFRS, the tax charge for the fiscal year includes current and deferred taxes. Current income tax is calculated based on laws approved or substantially approved at the balance sheet date. Deferred tax is recognized under the liability method, due to temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recorded if they arise from the initial recognition of Goodwill; or the initial recognition of an asset or liability in a transaction, other than a business combination, which at the time of the transaction, affects neither the accounting result nor the taxable profit or loss. Deferred tax is determined using tax rates (and laws) approved or about to be approved at the balance sheet date and expected to apply when the corresponding deferred tax asset is realized or the deferred tax liability is settled.
Under Argentine Banking GAAP, Banco Supervielle and Cordial Compañía Financiera (subsidiaries of the Group) recognize the current tax for the year.Write-Off
The Group recognizedreduce the gross carrying amount of a deferred tax netfinancial asset when it has no reasonable expectations of 313,919 and 477,426 asrecovering a financial asset in its entirety of January 1, 2017 anda portion thereof. A write-off constitues a derecognition event.
Maximum Credit Risk Exposure
Financial Instruments to which the impairment requirements in IFRS 9 are applied
December 31, 2019 | ||||||||||||||||
ECL Staging | ||||||||||||||||
Loan Type | Stage 1 12-month ECL | Stage 2 Lifetime ECL | Stage 3 Lifetime ECL | Total | ||||||||||||
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 | 27,183,947 | 441,780 | 1,168,592 | 28,794,319 | ||||||||||||
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 | 32,587,196 | 4,932,804 | 1,154,309 | 38,674,309 | ||||||||||||
Retail | 13,070,026 | 807,506 | 435,054 | 14,312,586 | ||||||||||||
Consumer Finance | 19,517,170 | 4,125,298 | 719,255 | 24,361,723 | ||||||||||||
Credit Card Loans | 31,059,187 | 911,868 | 545,659 | 32,516,714 | ||||||||||||
Retail | 26,906,451 | 772,705 | 272,095 | 27,951,251 | ||||||||||||
Consumer Finance | 4,152,736 | 139,163 | 273,564 | 4,565,463 | ||||||||||||
Foreign Trade Loans | 16,198,790 | 615,514 | 1,336,442 | 18,150,746 | ||||||||||||
Other Financings | 7,870,468 | 116,204 | 76,335 | 8,063,007 | ||||||||||||
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 | 144,376,623 | 9,203,046 | 6,471,020 | 160,050,689 |
December 31, 2018 | ||||||||||||||||
ECL Staging | ||||||||||||||||
Loan Type | Stage 1 12-month ECL | Stage 2 Lifetime ECL | Stage 3 Lifetime ECL | Total | ||||||||||||
Promissory Notes | 11,040,711 | 728,667 | 372,861 | 12,142,239 | ||||||||||||
Unsecured Corporate Loans | 9,566,109 | 2,115,731 | 277,614 | 11,959,454 | ||||||||||||
Overdrafts | 46,873,802 | 2,092,931 | 187,576 | 49,154,309 | ||||||||||||
Mortgage Loans | 8,362,500 | 216,941 | 14,937 | 8,594,378 | ||||||||||||
Automobile and other secured loans | 1,945,197 | 163,433 | 279,678 | 2,388,308 | ||||||||||||
Personal Loans | 24,712,372 | 3,388,933 | 2,630,600 | 30,731,905 | ||||||||||||
Retail | 20,024,331 | 1,359,665 | 506,605 | 21,890,601 | ||||||||||||
Consumer Finance | 4,688,041 | 2,029,268 | 2,123,995 | 8,841,304 | ||||||||||||
Credit Card Loans | 30,883,372 | 1,388,599 | 853,883 | 33,125,854 | ||||||||||||
Retail | 23,665,677 | 897,518 | 331,160 | 24,894,355 | ||||||||||||
Consumer Finance | 7,217,695 | 491,081 | 522,723 | 8,231,499 | ||||||||||||
Foreign Trade Loans | 18,771,655 | 854,199 | 1,561,733 | 21,187,587 | ||||||||||||
Other Financings | 14,841,096 | 1,389,182 | 177,773 | 16,408,051 | ||||||||||||
Other Receivables from Financial Transactions | 2,039,403 | 18,592 | 32,754 | 2,090,749 | ||||||||||||
Receivables from Financial Leases | 4,942,687 | 265,382 | 129,096 | 5,337,165 | ||||||||||||
Total | 173,978,904 | 12,622,590 | 6,518,505 | 193,119,999 |
F-69 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2017, respectively. At January 1, 2017, the adjustment was recognized against unallocated
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 20152018 presented in comparative format
(Expressed in thousands of Argentine pesos — unless otherwise stated)pesos)
results, while forFinancial Instruments to which the fiscal year ended December 31, 2017impairment requirements in IFRS 9 are not applied
The carrying amount of all financial instruments not subject to impairment is the adjustment was recognizedcorresponding fair value at the reporting date, as it best represents the maximum exposure to credit risk.
Market risk
Group defines Market Risk as the risk resulting from deviations in the statementtrading portfolio value as a result of income by 163,507 and (86,439) in the other comprehensive income.
j) Special Termination Arrangements
Special termination arrangements are principally postemployment benefits that a group of eligible employees receivemarket fluctuations during the period between their effective termination date and their retirement age, whe they voluntary accepts an irrevocable termination arrangement.
Under Argentine Banking GAAP, the cost of the special termination arrangement are recorded when paid.
Under IFRS, long-term benefits should be recorded as an expense recognized in the period the employees irrevocably accept the offer and the amount of the termination liability is reasonable estimable.
As a result, the Company recognized a liability corresponding to these arrangements of 290,025 and 598,281 as of January 1, 2017 and December 31, 2017, respectively. As of January 1, 2017, the adjustment was recognized against unallocated results, whilerequired for the fiscal year ended December 31, 2017, the adjustment was recognized in the statementsettlement of income by (308,256).
k) Customer loyalty programsportfolio positions.
The Risk Department’s measurement, control and follow-up perimeter covers those operations where certain loss risk in the Group offers reward programs that allow its cardholders to earn points that can be redeemed for´s shareholders equity value is assumed, as a broad rangeresult of rewards, including goodschanges in market factors. Such risk results from the variation in risk factors under evaluation (interest rate, exchange rate, market price of equity instruments and travels among others.options), as well as liquidity risk in the different products and markets where the Group operates.
Under Argentine Banking GAAP,According to its business strategy, Banco Supervielle is the component of the Group with the greatest exposure to this risk. On the other hand, Cordial Compañía Financiera has a minimum exposure to market risk and associated with liquidity management purposes. That is why market risk controls present a greater level of detail and emphasis on Banco Supervielle's trading portfolio.
With the purpose of measuring the risk of positions homogeneously and therefore, setting a limit and threshold structure to support management and control schemes, Banco Supervielle uses the VaR model (Value at Risk), which defines the maximum expected loss to be recorded in a liability basedfinancial asset portfolio in normal market conditions, within a certain period of time and at a pre-established confidence level. Indicators obtained from this enable the Group to identify a potential market risk and take preventive measures.
Market risk management is focused on the redemptions paid duringtrading portfolio managed by the last 12 months.
In accordanceTrading desk, although there is also a broader control including managed positions with IFRS 15, the Company establishes a liability based on the fair valueliquidity management objectives. For this reason, in terms of the points issued thatbroader trading portfolio, the controls are expectedlimited to be exchanged by customers. Pointsthe exposure to be redeemed are estimated based on the historical redemption behavior of each program. The liability is reduced asassumed risk, measured using the points are exchanged by customers or their due.
As a result,VaR methodology, in relation to the Company recognized a liability of 44,091 and 51,193 as of January 1, 2017 and December 31, 2017, respectively. As of January 1, 2017, the adjustment was recognized against unallocated results, while for the fiscal year ended December 31, 2017, the adjustment was recognized in the income statement by (7,102)regulatory capital (RC).
l) AccountingDuring 2019 it was approved the set up of a VaR limit for Guaranteesassets groups, in order to limit the risk the Entity could assume in each group considered in isolation.
Under IFRS,The objective is to incorporate an element of alert to credit events or break in the correlations between groups of assets, events that may escape the consideration of a diversified VaR. Another important event of the year was the modification of the methodology used for the execution of market risk stress tests, both for Banco Supervielle's total trading portfolio and for the portfolios managed by its Trading Desk and by Cordial Financial Company. The new methodology implies the selection of one or more historical events characterized by stress situations that could increase the assumed market risk. From there, the variances and covariances matrix of these historical moments are incorporated into the evaluation of current trading portfolios.
On the other hand, the controls over the trading desk are more exhaustive.
Approved strategies and policies are reflected in what is known internally as a unified risk map, where detailed operations enabled by the Money Table can be explained in detail. In the same document the entire framework of controls that translate the risk appetite with which the Entity is willing to operate is exposed. In this way, limitations are established on the open position in certain financial guarantees granted must initially be recognized at their fair value, which is equivalentinstruments, VaR limit on the diversified portfolio, maximum allowable loss amount before executing the stop loss policy and conditions that could lead to the commission chargedexecution of a stop strategy gain The entire control scheme is complemented by action plans that must be implemented once a violation occurs within the limits established therein.
F-70 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018 presented in most cases. This amount is subsequently amortizedcomparative format
(Expressed in a straight line overthousands of pesos)
Approved strategies and policies are included in the life of the contract. At each closing, the financial guarantees are measuredRisk Map document, which establishes authorized transactions to be carried out by the greater of: (i)trading desk and the valueauthorized officers. Such document specifies the maximum term of transactions, maximum amounts of position per product and maximum loss amounts involved (“stop loss”).
The exposure to the outstanding commissionGroup's exchange rate risk at the end of the fiscal year by currency type is detailed below:
Balances as of 12/31/2019 | Balances as of 12/31/2018 | |||||||||||||||||||||||||||||||
Currency | Monetary Financial Assets | Monetary Financial Liabilities | Derivatives | Net Position | Monetary Financial Assets | Monetary Financial Liabilities | Derivatives | Net Position | ||||||||||||||||||||||||
US Dollar | 37,455,139 | 36,825,985 | - | 629,154 | 63,782,427 | 62,036,482 | 20,621 | 1,766,566 | ||||||||||||||||||||||||
Euro | 593,090 | 575,147 | - | 17,943 | 713,445 | 730,092 | - | (16,647 | ) | |||||||||||||||||||||||
Others | 146,439 | 3,693 | - | 142,746 | 176,170 | 5,135 | - | 171,035 | ||||||||||||||||||||||||
Total | 38,194,668 | 37,404,825 | - | 789,843 | 64,672,042 | 62,771,709 | 20,621 | 1,920,954 |
Financial assets and (ii)liabilities are presented net of derivatives, which are disclosed separately. Derivative balances are shown at their Fair Value at the best estimateclosing price of the amount to be paid to settle the contract discounted to its present value at fiscal year closing.
Under Argentine GAAP the fees charged in the financial guarantee agreements are charged to income at the time they are collected.respective currency.
The Company recognized a liability correspondingtable above includes only Monetary Assets and Liabilities, since investments in equity instruments and non-monetary instruments does not generate foreign exchange risk exposure.
A sensitivity analysis was performed considering reasonably possible changes in foreign exchange rates in relation to the reversalGroup's functional currency. The percentage of variation used in this analysis is the non-accrued charge of 9,111same the Group used in its Business Plan and 12,608 as of January 1, 2017 and December 31, 2017, respectively. At January 1, 2017, the adjustment was recognized against unallocated results, while for the fiscal year ended December 31, 2017, the adjustment was recognized in the statement of income by 3,497.Projections.
12/31/2019 | 12/31/2018 | |||||||||||||||||||||||
Currency | Variation | P/L | Equity | Variation | P/L | Equity | ||||||||||||||||||
US Dollar | 31.9 | % | 200,700 | 200,700 | 29 | % | 518,252 | 518,252 | ||||||||||||||||
-31.9 | % | (200,700 | ) | (200,700 | ) | -29 | % | (518,252 | ) | (518,252 | ) | |||||||||||||
Euro | 31.9 | % | 5,724 | 5,724 | 29 | % | (4,884 | ) | (4,884 | ) | ||||||||||||||
-31.9 | % | (5,724 | ) | (5,724 | ) | -29 | % | 4,884 | 4,884 | |||||||||||||||
Other | 31.9 | % | 45,536 | 45,536 | 29 | % | 50,176 | 50,176 | ||||||||||||||||
-31.9 | % | (45,536 | ) | (45,536 | ) | -29 | % | (50,176 | ) | (50,176 | ) | |||||||||||||
Total | 31.9 | % | 251,960 | 251,960 | 29 | % | 563,543 | 563,543 | ||||||||||||||||
-31.9 | % | (251,960 | ) | (251,960 | ) | -29 | % | (563,543 | ) | (563,543 | ) |
Grupo Supervielle S.A. and SubsidiariesSensitivity Analysis
It is important to note that within the daily report provided to the trading desk for the monitoring of the exposure to assumed risk, the Financial Risk Management makes a comparison between the profitability obtained and the implicit risk for each asset. When using a diversified VaR methodology, it is important to provide information related to the contribution that each asset in the portfolio makes to the aggregate VaR measurement, and fundamentally if this asset generates risk diversification or not. That is why, within the variables included in the daily report, the VaR component of each asset is included, thus allowing a sensitivity analysis on the impact of each asset on the total risk.
With the aim of improving the assumed risk analysis through the use of alternative measurement metrics, the Group recognizes the change in market conditions on exposure to risk through an adjustment to the volatilities used in the VaR calculation. According to the methodology used, the returns of assets registered in more recent dates have a greater incidence in the calculation of volatilities. In parallel, the Entity performs a measurement and monitoring of the assumed risk through the application of an expected shortfall methodology, analyzing the universe of unexpected losses located in the distribution queue beyond the critical point indicated by VaR.
F-71 |
GRUPO SUPERVIELLE S.A.
Notes to the Consolidated Financial Statements
For the years endedAs of December 31, 2017, 2016 and 20152018 presented in comparative format
(Expressed in thousands of Argentine pesos — unless otherwise stated)pesos)
m) Initial Recognition at Fair ValueEconomic capital calculation
Under IFRS,Banco Supervielle adopts the Company must recognizediversified Parametric VaR methodology for the financial instruments in their initial measurementcalculation of market risk economic capital, both at their fair value. In the eventa consolidated and individual level. It should be noted that the Company originates loans that accumulate an interest rate that is unfavorable, the entity will recognize the loan at its fair value and the difference between that value and the transaction price as a loss in the income statement.
The Company originates some financing that meetscase of Cordial Compañía Financiera, according to the conditionsprovisions established by the IFRS, asArgentine Central Bank, its Board of Directors has chosen to quantify its needs for economic capital by applying a resultsimplified methodology. According to this methodology, the Company recognized a decrease of assets correspondingaggregate economic capital arises from the following expression:
EC = (1,05 x MC) + max [0; ΔEVE – 15 % x bS)]
Where, EC: economic capital according to the non-accrued negative interest of 88,463 and 182,161 as of January 1, 2017 and December 31, 2017, respectively. At January 1, 2017, the adjustment was recognized against unallocated results, while for the fiscal year ended December 31, 2017, the adjustment was recognized in the statement of income by (93,698)profile’s risk (ICAAP).
n) Non-controlling interest about adjustments
Differences in non-controlling interest include the effect of recording, if applicable, the respective effects of other differences between current accounting standards and IFRS.
34.Subsequent events
On April 6, 2018 the Company has agreed to acquire 100% (or 4,000,000 ordinary shares) of the share ownership of Micro Lending S.A. (“MILA”) for a cash price of US$20 million, subject to final adjustments. Specialized in car financing, particularly for used cars, MILA is estimated to rank 4th in the Argentine new and used car loan market, holding a total market share of approximately 6%, or 10% when considering the used car market on a stand-alone basis.
35. Summary of Significant Differences between Argentine Banking GAAP and US GAAP
The accompanying consolidated financial statements have been preparedMC: Minimum capital requirement in accordance with Argentine Banking GAAP, which differs in certain significant respectsCentral Bank regulations.
ΔEVE (Economic Value): measure of interest rate risk calculated according to the Standardized Framework
bS (Basic Shareholders’ equity) : Tier 1 capital.
Interest Rate Risk
Interest Rate Risk is the risk derived from US GAAP. Such differences involve methods of measuring the amounts shownlikelihood that changes in the consolidatedGroup’s financial statements,condition occur as a result of market interest rate fluctuations, having effect on its financial income and economic value. The following are such risk factors:
ü | Different terms maturity and interest rate re-adjustment dates for assets, liabilities and off balance sheet items. |
ü | Forecast, evolution and volatility of local interest rates and foreign interest rates. |
ü | The basis risk that results from the unsuitable correlation in the adjustment of assets and liabilities interest rates for instruments that contain similar revaluation features; |
ü | Embeded options in certain assets, liabilities and off balance sheet items of the Group. |
The Group’s interest rate risk management model, includes the analysis of interest rates gaps. Such analysis enables the basic explanation of the financial statement structure as well as additional disclosures required by US GAAP and Regulation S-Xthe detection of interest rate risk concentration along the SEC.different terms.
I. Differences in measurement methods
As indicated in Note 3.1, as from March 1, 2003, inflation accounting was discontinued. The following reconciliation does not includeinterest rate risk management is aimed at keeping the reversalGroup’s exposure within those levels of the adjustments to the consolidated financial statements for the effects of inflation, because, as permittedrisk appetite profile validated by the Securities and Exchange Commission (“SEC”), it represents a comprehensive measure of the effects of price-levelBoard upon changes in the Argentine economy, and as such, is considered a more meaningful presentation than historical cost-based financial reporting for both Argentine Banking GAAP and US GAAP.market interest rates.
To such ends, the interest rate risk management relies on the monitoring of two metrics:
ü | MVE – VaR Approach: measures the difference between the economic values estimated given the interest rate market curve and said value estimated given the interest rate curve resulting from the simulation of different stress scenarios. The Group uses this approach to calculate the economic capital for this risk. |
ü | NIM – EaR Approach: measures changes in expected accruals over a certain period of time (12 months) upon an interest rate curve shift resulting from a different stress situation simulation practices. |
During 2018, with the publication of Communication "A" 6397, the Argentine Central Bank presented the applicable guidelines for the treatment of interest rate risk in the investment portfolio. The main differences, other than inflation accounting,regulation makes a distinction between Argentine Banking GAAPthe impact of fluctuations in interest rate levels on the underlying value of the entity's assets, liabilities and US GAAP as they relateoff-balance sheet items (economic value or MVE), and the alterations that such movements in the interest rate may have on sensitive income and expenses, affecting net interest income (NII). This same criterion had already been adopted by Banco Supervielle, so that the new regulations implied a readaptation of the management model to the Group are described below, together with an explanation, where appropriate, of the method used in the determination of the necessary adjustments. References below to “ASC” are to Accounting Standard Codification issued by the Financial Accounting Standards Board in the United States of America.suggested measurement methodology, maintaining some criteria and incorporating others.
The following tables summarize the main reconciling items between Argentine Banking GAAP and US GAAP:
F-72 |
Table of ContentsGRUPO SUPERVIELLE S.A.
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years endedAs of December 31, 2017, 2016 and 20152018 presented in comparative format
(Expressed in thousands of pesos)
As established by the regulator, both Banco Supervielle and Cordial Compañia Financiera must use the Standardized Framework described in point 5.4. of the Communication "A" 6397 for the measurement of the impact on the economic value of the entities (ΔEVE) of six proposed disturbance scenarios. These scenarios include parallel movements in the curves of market interest rates upwards or downwards, flattening or steepening of the slope of these curves, as well as an increase or decrease in short-term interest rates. A base curve of market interest rates is considered for each of the significant currencies in the financial statement of each entity. According to the applicable regulation, Banco Supervielle has to use an internal measurement system (SIM) for measurement based on results (ΔNIM). This requirement is not applicable to Cordial Compañía Financiera. It is important to highlight that Banco Supervielle, which has not been qualified by the Argentine Central Bank as having a local systemic importance (D-SIB), is not legally bound to have its own internal measurement system (SIM) for the measurement based on economic value (ΔEVE).
Beyond the regulatory provisions, it is important to note that both Banco Supervielle and Cordial Comapñia Financiera have been working with internal measurement systems (SIM) to measure the impact of rate fluctuations, both on economic value (ΔEVE) and on results (ΔNIM). The development of these systems included the definition of assumptions for the determination of the maturity flow of different lines of assets and liabilities without defined maturity or with implicit or explicit options of behavior.
It is important to point out that, unlike what is established in the Standardized Framework provided by the regulator for measuring the impact of fluctuations in market rates on economic value, the internal measurement systems used by the Group consider assets and liabilities with Units of Purchasing Power (UVA) adjustment as susceptible to interest rate risk, so that the UVA variable is incorporated as an additional risk factor, as well as the asset and funding rates in pesos — unless otherwise stated)and dollars.
Reconciliation of net income:
|
|
|
| December 31, |
| |||||||
|
|
|
| 2017 |
| 2016 |
| 2015 |
| |||
Net income under Argentine Banking GAAP |
|
|
| Ps. | 2,437,059 |
| Ps. | 1,311,304 |
| Ps. | 674,109 |
|
|
|
|
|
|
|
|
|
|
| |||
US GAAP adjustments |
|
|
|
|
|
|
|
|
| |||
Loan origination fees and costs |
| Note 35.a |
| (155,125 | ) | (14,057 | ) | (4,254 | ) | |||
Intangible assets |
|
|
|
|
|
|
|
|
| |||
Differences in basis relating to purchase accounting |
| Note 35.b |
| 7,300 |
| 6,840 |
| 4,435 |
| |||
Other intangible assets |
| Note 35.b |
| (22,874 | ) | (3,439 | ) | (17,970 | ) | |||
Loan loss reserves |
| Note 35.c |
| (268,255 | ) | (133,988 | ) | 49,049 |
| |||
Transfers of financial assets |
| Note 35.d |
| (67,300 | ) | (245,952 | ) | (27,948 | ) | |||
Government securities and other investments |
| Note 35.e |
| 5,513 |
| (3,252 | ) | 162 |
| |||
Vacation Provision |
| Note 35.f |
| (84,682 | ) | (35,587 | ) | (12,825 | ) | |||
Special Termination Arrangements |
| Note 35.h |
| (308,256 | ) | (151,100 | ) | (69,271 | ) | |||
Customer Loyalty Programs |
| Note 35.i |
| (7,102 | ) | (15,995 | ) | 21,094 |
| |||
Credit Card Loans —Imputed Interest |
| Note 35.j |
| (93,698 | ) | 21,666 |
| (75,775 | ) | |||
Deferred Income tax |
| Note 35.k |
| 216,403 |
| 257,428 |
| 84,987 |
| |||
Accounting for Guarantees |
| Note 35.l |
| 2,495 |
| 526 |
| (10,997 | ) | |||
Non-controlling Interest |
| Note 35.m |
| 5,897 |
| 22,166 |
| 16,080 |
| |||
Net Income under US GAAP |
|
|
| Ps. | 1,667,375 |
| Ps. | 1,016,560 |
| Ps. | 630,876 |
|
|
|
|
|
|
|
|
|
|
| |||
Non-controlling Interest |
| Note 35.m |
| (22,783 | ) | (18,876 | ) | (12,522 | ) | |||
Net Income attributable to the Group in accordance with US GAAP |
|
|
| Ps. | 1,644,592 |
| Ps. | 997,684 |
| Ps. | 618,354 |
|
Basic earnings per share attributable to the Group |
| Note 35.II.i |
| 4.1865 |
| 3.1194 |
| 4.0416 |
| |||
Diluted earnings per share attributable to the Group |
| Note 35.II.i |
| 4.1865 |
| 3.1194 |
| 4.0416 |
|
Net income includes the consolidating financial trusts in which the Group does not have participation but conserve the risks and rewards of them (see Note 35.I.d.).
|
| December 31, |
| |||||||
|
| 2017 |
| 2016 |
| 2015 |
| |||
Net Income under US GAAP before consolidation of financial trusts without holding in “certificates of participation” |
| Ps. | 1,667,375 |
| Ps. | 1,016,560 |
| Ps. | 630,876 |
|
Net income corresponding to consolidated financial trusts, without holding in “certificates of participation” |
| 30,106 |
| 9,308 |
| 45,200 |
| |||
Net Income under US GAAP |
| Ps. | 1,697,481 |
| Ps. | 1,025,868 |
| Ps. | 676,076 |
|
|
|
|
|
|
|
|
| |||
Non-controlling interest corresponding to consolidated financial trusts, without holding in “certificates of participation” |
| Ps. | (30,106 | ) | Ps. | (9,308 | ) | Ps. | (45,200 | ) |
Non-controlling Interest |
| (22,783 | ) | (18,876 | ) | (12,522 | ) | |||
Net Income attributable to the Group in accordance with US GAAP |
| Ps. | 1,644,592 |
| Ps. | 997,684 |
| Ps. | 618,354 |
|
Reconciliation of Shareholders’ Equity:
|
|
|
| December 31, |
| December 31, |
| ||||
|
|
|
| 2017 |
| 2016 |
| ||||
Shareholders’ Equity as stated |
|
|
| Ps. |
| 15,144,798 |
| Ps. |
| 6,931,551 |
|
US GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
Loan origination fees and costs |
| Note 35.a |
|
|
| (223,248 | ) |
|
| (68,123 | ) |
Intangible assets |
|
|
|
|
|
|
|
|
|
|
|
Differences in basis relating to purchase accounting |
| Note 35.b |
|
|
| 52,897 |
|
|
| 45,597 |
|
Other intangible assets. |
| Note 35.b |
|
|
| (69,142 | ) |
|
| (46,268 | ) |
Loan loss reserves |
| Note 35.c |
|
|
| (386,580 | ) |
|
| (118,325 | ) |
Transfers of financial assets |
| Note 35.d |
|
|
| (418,083 | ) |
|
| (350,783 | ) |
Government securities and other investments. |
| Note 35.e |
|
|
| 3,302 |
|
|
| (9,485 | ) |
Vacation Provision |
| Note 35.f |
|
|
| (300,043 | ) |
|
| (215,361 | ) |
Special Termination Arrangements |
| Note 35.h |
|
|
| (598,281 | ) |
|
| (290,025 | ) |
Customer Loyalty Programs |
| Note 35.i |
|
|
| (51,193 | ) |
|
| (44,091 | ) |
Credit Card Loans—Imputed Interest |
| Note 35.j |
|
|
| (182,161 | ) |
|
| (88,463 | ) |
Deferred Income tax |
| Note 35.k |
|
|
| 787,954 |
|
|
| 571,551 |
|
Accounting for Guarantees |
| Note 35.l |
|
|
| (6,616 | ) |
|
| (9,111 | ) |
Non-controlling Interest |
| Note 35.m |
|
|
| 11,497 |
|
|
| 103,397 |
|
Equity under US GAAP |
|
|
| Ps. |
| 13,765,101 |
| Ps. |
| 6,412,061 |
|
Non-controlling Interest |
| Note 35.m |
|
|
| (9,895 | ) |
|
| (84,662 | ) |
The Group Shareholder’s Equity under US GAAP |
|
|
| Ps. |
| 13,755,206 |
| Ps. |
| 6,327,399 |
|
Grupo Supervielle S.A. and SubsidiariesEconomic Capital Calculation
NotesAs a first step to calculate economic capital, Banco Supervielle calculates its exposure to interest rate risk from the Consolidated Financial Statements
ForMVE-EaR (economic value) approach of its internal measurement system (SIM), using a holding period of three months (90 days) and a confidence level of 99%. This quantitative model includes the years ended December 31, 2017, 2016 and 2015
(Expressed in thousandsexacerbation of Argentine pesos — unless otherwise stated)
Equity and Shareholders Equity includecapital by securitization risk. The result obtained is compared with the consolidating financial trusts in which the Group does not have participation but conserve the risks and rewards of them (see Note 35.I.d.).
|
| December 31, |
| ||||
|
| 2017 |
| 2016 |
| ||
Equity under US GAAP before consolidation of financial trusts without holding in “certificates of participation” |
| Ps. | 13,765,101 |
| Ps. | 6,412,061 |
|
Net assets corresponding to consolidated financial trusts without holding in “certificates of participation” |
| 139,997 |
| 86,615 |
| ||
Equity under US GAAP |
| Ps. | 13,905,098 |
| Ps. | 6,498,676 |
|
|
|
|
|
|
| ||
Non-controlling interest corresponding to consolidated financial trusts without holding in “certificates of participation” |
| (139,997 | ) | (86,615 | ) | ||
Non-controlling Interest |
| (9,895 | ) | (84,662 | ) | ||
|
|
|
|
|
| ||
The Group Shareholder´s Equity under US GAAP |
| Ps. | 13,755,206 |
| Ps. | 6,327,399 |
|
Description of changes in Shareholder’s Equity:
|
| December 31, |
| |||||||
|
| 2017 |
| 2016 |
| 2015 |
| |||
Equity under US GAAP at the beginning of the year attributable to Parent Company |
| Ps. | 6,327,399 |
| Ps. | 2,090,136 |
| Ps. | 1,461,497 |
|
Distribution of dividends |
| (65,500 | ) | (25,162 | ) | (7,385 | ) | |||
Contributions from shareholders |
| 5,841,688 |
| 3,271,699 |
| — |
| |||
Other comprehensive income (see Note 35.II.a.) |
| 7,027 |
| (6,958 | ) | 17,670 |
| |||
Net Income under US GAAP |
| 1,644,592 |
| 997,684 |
| 618,354 |
| |||
Equity under US GAAP at the end of the year attributable to Parent Company |
| Ps. | 13,755,206 |
| Ps. | 6,327,399 |
| Ps. | 2,090,136 |
|
a. Loan origination fees and costs
Under Argentine Banking GAAP, the Group does not defer loan origination fees and costs. In accordance with US GAAP under ASC 310, loan origination fees net of certain direct loan origination costs should be recognized over the lifeworst result of the related loan as an adjustment of to yield using the interest method.
The effects of the adjustments required to state such amounts in accordance with US GAAP, would decrease assets by Ps. 223,248 as of December 31, 2017 and Ps. 68,123 as of December 31, 2016. Income would decrease by Ps. (155,125), Ps. (14,057) and Ps. (4,254) for the years ended December 31, 2017, 2016 and 2015, respectively.
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
b. Intangible assets:
i) Differences in basis relating to purchase accounting
Under Argentine Banking GAAP, net assets acquired are recorded at the book value of the acquired company at the acquisition date and goodwill is recognized based on the difference of the book value of the net assets acquired and the acquisition cost. Such goodwill is being amortized under the straight line method.
Under US GAAP, the Group applies the purchase method of accounting to its business combinations. The additional interest acquired was accounted for as a step acquisition applying the purchase method.
Accordingly, the excess of the purchase price over the fair value of assets acquired and liabilities assumed, if any, is considered as goodwill.
For acquisitions prior to December 15, 2008,alterations proposed in the event the fair value of the net assets acquired exceeds the consideration paid, the excess is allocated as a pro rata reduction of the amounts that otherwise would have been assigned to the acquired assets. For acquisitions after that date, if the net assets acquired exceed the consideration paid, the excess is recorded as gain in statement of income.
Under Argentine Banking GAAP, goodwill recognized is amortized on straight-line basis over its useful life.
Under US GAAP goodwill is not subject to amortization, but is subject to at least an annual assessment for impairment. The Group analyzes qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill.
Goodwill impairment exists when the fair value of the reporting unit to which the goodwill is allocated is not enough to cover the book value of its assets and liabilities and the goodwill. The fair value of the reporting unit is estimated using discounted cash flow techniques. The sustained value of the majority of the goodwill is supported ultimately by revenue from credit-card business, included in “Consumer Finance” reporting unit.
The evaluation methodology for potential impairment is inherently complex and involves significant management judgment in the use of estimates and assumptions. These estimates involve many assumptions, including the expected results of the reporting unit, an assumed discount rate and an assumed growth rate for the reporting unit.
The Group has reviewed Goodwill for impairment as of December 31, 2017 and 2016 and no impairment was recorded.
The following table summarizes the acquisitions madesix scenarios proposed by the CompanyStandardized Framework, with the resulting economic capital being the worst of both measurements (SIM and the calculation of goodwill under US GAAP.
|
| Supervielle |
| Cordial |
| Banco Regional |
| Tarjeta |
| Banco |
| |
|
| June 6, 2013 |
| August 1, 2011 |
| September 19, |
| December 15, |
| March 3, 2005 |
| |
Acquisition Date |
|
|
|
|
|
|
|
|
|
|
| |
Fair value of net tangible assets acquired |
| 2,409 |
| 126,386 |
| 48,350 |
| 6,371 |
| 39,054 |
| |
Intangible assets identified, net of related deferred income tax (a) |
| — |
| 9,466 |
| 23,244 |
| 6,780 |
| 25,175 |
| |
Net assets |
| Ps. | 2,409 |
| 135,852 |
| 71,594 |
| 13,151 |
| 64,229 |
|
% acquired |
| 100.00 | % | 100.00 | % | 99,94 | % | 51,00 | % | 91,54 | % | |
Net assets acquired |
| Ps. | 2,409 |
| 135,852 |
| 71,549 |
| 6,707 |
| 58,795 |
|
Consideration paid |
| Ps. | 4,543 |
| 168,047 |
| 97,542 |
| 15,835 |
| 37,209 |
|
Goodwill |
| Ps. | 2,134 |
| 32,195 |
| 25,993 |
| 9,128 |
| (21,586 | ) |
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
(a) Intangible assets identified consist of brand, core deposits, customer relationship and commercial relationship agreement. Brand is not amortized under US GAAP. The remaining intangibles identified are amortized over 10 years
In relation with Tarjeta Automática, on March 5, 2009 the Group acquired an additional 24% interest of this entity for a total consideration of Ps. 13,992. Under US GAAP this acquisition was accounted as an equity transaction when the control was previously obtained, following ASC 805 guidance.
The following table summarizes the shareholder´s equity adjustment computed to conform the accounting of these acquisitions to US GAAP as of December 31, 2017 and 2016
|
| December 31, |
| December 31, |
| ||
|
| 2017 |
| 2016 |
| ||
Elimination of Goodwill recognized under Argentine Banking GAAP |
| Ps. | (22,043 | ) | Ps. | (31,475 | ) |
Recognition of Goodwill under US GAAP |
|
| 69,450 |
|
| 69,450 |
|
Recognition of Intangible Assets under US GAAP |
|
| 81,745 |
|
| 81,745 |
|
Amortization of Intangible Assets under US GAAP |
|
| (61,897 | ) |
| (59,081 | ) |
Allocation of negative Goodwill to fixed assets |
|
| (23,247 | ) |
| (23,247 | ) |
Reversal of depreciation of fixed assets recognized under Argentine Banking GAAP due to differences in purchase accounting of Societé Generalé acquisition |
| 8,889 |
| 8,205 |
| ||
Total |
| Ps. | 52,897 |
| Ps. | 45,597 |
|
Net income impact related to the shareholder´s equity adjustment for the years ended December 31, 2017, 2016 and 2015 amounted to Ps. 7,300, Ps. 6,840 and Ps. 4,435, respectively.
The activity of the goodwill and intangible assets under US GAAP during the years ended December 31, 2017 and 2016 is as follows:
|
| December 31, |
| ||||
|
| 2017 |
| 2016 |
| ||
Goodwill at the beginning of the year |
| Ps. | 69,450 |
| Ps. | 69,450 |
|
Goodwill at the end of the year. |
| Ps. | 69,450 |
| Ps. | 69,450 |
|
|
|
|
|
|
| ||
Intangible assets identified in the Business Combination at the beginning of the year, net of the corresponding amortization |
| 22,664 |
| 25,793 |
| ||
Amortization under US GAAP. |
| (2,816 | ) | (3,129 | ) | ||
Intangible assets identified in the Business Combination at the end of the year, net of the corresponding amortization |
| Ps. | 19,848 |
| Ps. | 22,664 |
|
The following table shows the intangible assets gross carrying amount, detailed with their respective useful lives:
|
|
|
| ||||||
|
| December 31, 2017 |
| ||||||
|
| Gross carrying amount |
| Accumulated |
| Remaining |
| ||
Core Deposits |
| Ps. | 21,052 |
| Ps. | 21,052 |
| — |
|
Overdraft |
| 8,603 |
| 8,603 |
| — |
| ||
Customer Relationship |
| 17,679 |
| 17,679 |
| — |
| ||
Brand Name |
| 19,848 |
| — |
| — |
| ||
Commercial Agreement |
| 14,563 |
| 14,563 |
| — |
| ||
Total |
| Ps. | 81,745 |
| Ps. | 61,897 |
| — |
|
The aggregate amortization expense for intangible assets identified for the years ended December 31, 2017, 2016 and 2015 was Ps. 2,816, Ps. 3,129 and Ps. 5,250, respectively.
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
ii) Other intangible assets
ASC 350-40 defines three stages for the costs of computer software developed or obtained for internal use: the preliminary project stage, the application development stage and the post-implementation operation stage. Only the second stage costs are to be capitalized.
Under Argentine Banking GAAP, the Group capitalizes costs relating to all three of the stages of software development.
Shareholders’ equity adjustment between Argentine GAAP and US GAAP as of December 31, 2017 and 2016 amounted to Ps. (69,142) and Ps. (46,268), respectively. Net income adjustment for the years ended December 31, 2017, 2016 and 2015 amounted to Ps. (22,874), Ps. (3,439) and Ps. (17,970), respectively.
c. Loan loss reserves
Under Argentine Banking GAAP (see note 3.7), the allowance for loan losses is calculated following BCRA regulations. These criteria are different for commercial and consumer loans. For commercial such criteria are principally based on the debtors’ payment capacity and cash-flows analysis. Loan loss reserves for consumer loans and commercial loans are based on delinquency and BCRA established loss factors.
Increases in the reserve are based on the deterioration of the quality of existing loans, while decreases in the reserve are based on regulations requiring the charge off of non-performing loans classified as “non-recoverable”Standardized Framework). The Group charges-off non-performing loans on the month following the date on which such loans are classified as “irrecoverable without preferred guarantees” and fully provisioned.
In the case of Cordial Compañía Financiera, as mentioned above, the consumer portfolio,Entity's Board of Directors has chosen to quantify its needs for economic capital by applying a simplified methodology. With regard to interest rate risk, the charge-off takes place whenGroup measures the loan is approximately 360 days past due. For the commercial portfolio, the situation dependsimpact of fluctuations in market interest rates on the individual evaluationeconomic value based on the application of the credit risk. All charged-off loans are registered in off balance accounts whileStandardized Framework. In the Group continues its collection efforts.
In addition, under BCRA rules,event that the Group records recoveries on previously charged-off loans directly to income and recordsworst EVE of the amountsix scenarios proposed by the regulation exceeds 15% of charged-off loans in excessthe basic net worth (capital level one) of amounts specifically allocated as a direct chargethe Entity, the sum of the economic capital calculated according to the consolidated statement of income.simplified methodology would be increased by said excess.
The Group’s consumer portfolio consists principally exposure to interest rate risk is detailed in the table below. It presents the residual values of personal loansthe assets and credit card loans.liabilities, categorized by date of renegotiation of interest or expiration date, the lowest.
The Group’s commercial portfolio is currently diversified among clients of different size (small, medium-sized businesses and corporations) and who are active in different economic sectors (mainly the agricultural, construction, sugar, manufactured, foodstuff, automotive vehicles, among others). The risks associated with this portfolio are principally related to the specific economic performance of each individual client and to economic factors, such as the price and demand of products and services and competitiveness, among others.
Term in days | ||||||||||||||||||||||||
Assets and Liabilities | Up to 30 | From 30 to 90 | from 90 to 180 | from 180 to 365 | More than 365 | Total | ||||||||||||||||||
To 12/31/2019 | ||||||||||||||||||||||||
Total Financial Assets | 42,175,254 | 15,004,746 | 11,454,731 | 12,255,255 | 50,684,393 | 131,574,379 | ||||||||||||||||||
Total Financial Liabilities | 50,567,576 | 13,421,108 | 5,116,494 | 6,674,589 | 44,708,852 | 120,488,619 | ||||||||||||||||||
Net Amount | (8,392,322 | ) | 1,583,638 | 6,338,237 | 5,580,666 | 5,975,541 | 11,085,760 |
Term in days | ||||||||||||||||||||||||
Assets and Liabilities | Up to 30 | From 30 to 90 | from 90 to 180 | from 180 to 365 | More than 365 | Total | ||||||||||||||||||
To 12/31/2018 | ||||||||||||||||||||||||
Total Financial Assets | 83,738,836 | 20,431,857 | 17,987,509 | 14,342,770 | 71,590,305 | 208,091,277 | ||||||||||||||||||
Total Financial Liabilities | 115,241,413 | 32,447,944 | 2,305,325 | 2,307,951 | 38,522,658 | 190,825,291 | ||||||||||||||||||
Net Amount | (31,502,577 | ) | (12,016,087 | ) | 15,682,184 | 12,034,819 | 33,067,647 | 17,265,986 |
F-73 |
GRUPO SUPERVIELLE S.A.
Under BCRA rules, a minimum loan loss reserve is calculated primarily based upon the classification of commercial loan borrowers and upon delinquency aging (or the number of days the loan is past due) for consumer loan borrowers. Although the Group is required to follow the methodology and guidelines for determining the minimum loan loss reserve, as set forth by the BCRA, the Group is allowed to establish additional loan loss reserve.
For commercial loans, the Group is required to classify all commercial loan borrowers. In order to classify them, the Group must consider different parameters related to each of those customers.
Pursuant to BCRA regulations, commercial loans are classified as follows:
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years endedAs of December 31, 2017, 2016 and 20152018 presented in comparative format
(Expressed in thousands of Argentine pesos — unless otherwise stated)
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
For consumer loan portfolio, the Group classifies loans based upon delinquency aging, consistent with the requirements of the Central Bank. Minimum loss percentages required by the BCRA are also applied to the totals in each loan classification.
Under the BCRA regulations, consumer borrowers are classified as follows:
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
The tables above contain the loan portfolio classification by credit quality indicator set forth by the BCRA.
The following tables show the loan balances categorized by credit quality indicators for the years ended December 31, 2017 and 2016:
|
| As of December 31, 2017 |
| ||||||||||
|
| “1” |
| “2” |
| “3” |
| “4” |
| “5” |
| Total |
|
Consumer Loans |
| 28,539,809 |
| 1,185,729 |
| 865,815 |
| 955,536 |
| 46,901 |
| 31,593,790 |
|
Commercial Loans |
| 29,890,894 |
| 48,672 |
| 6,028 |
| 49,195 |
| 1,540 |
| 29,996,329 |
|
Total Financing Receivables |
| 58,430,703 |
| 1,234,401 |
| 871,843 |
| 1,004,731 |
| 48,441 |
| 61,590,119 |
|
|
| As of December 31, 2016 |
| ||||||||||
|
| “1” |
| “2” |
| “3” |
| “4” |
| “5” |
| Total |
|
Consumer Loans |
| 18,655,404 |
| 816,389 |
| 548,921 |
| 529,150 |
| 39,022 |
| 20,588,886 |
|
Commercial Loans |
| 18,876,383 |
| 9,877 |
| 7,859 |
| 33,388 |
| 358 |
| 18,927,865 |
|
Total Financing Receivables |
| 37,531,787 |
| 826,266 |
| 556,780 |
| 562,538 |
| 39,380 |
| 39,516,751 |
|
Under US GAAP, the loan losses reserve should be in amounts adequate to cover inherent losses in the loan portfolio at the respective balance sheet dates. Specifically:
a) Loans considered impaired in accordance with ASC 310-10 are valued at the present value of the expected future cash flows discounted at the loan’s effective contractual interest rate, except that as a practical expedient a creditor may measure impairment based on a loans observable market price or at the fair value of the collateral less estimated costs to sell if the loan is collateral dependent. Under ASC 310-10, a loan is considered impaired when, based on current information, it is probable that the borrower will be unable to pay contractual interest or principal payments as scheduled in the loan agreement. ASC 310-10 applies to all loans (including those restructured in a troubled debt
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
restructuring involving amendment of terms), except large groups of smaller-balance homogeneous loans that are collectively evaluated for impairment , loans carried at the lower of cost or fair value, debt securities, and leases.
The Group applies ASC 310-10 to all commercial loans classified as “With special follow-up or Low Risk”, “With problems”, “Insolvency Risks” and “Uncollectible”. The Group specifically calculates the present value of estimated cash flows for commercial loans. For commercial and other loans in legal proceedings are specifically reviewed either on a cash-flow or collateral-value basis, both considering the estimated time to settle the proceedings. The Group has also analyzed all the loans included into the scope of ASC 340-10 “Trouble Debt Restructuring” and calculates the present values of estimated cash flows of each of the loans being a trouble debt restructuring.
b) In addition, following ASC 450-20, the amount of losses incurred in the homogeneous loan pools is estimated based on the number of loans that will default and the loss in the event of default. Using modeling methodologies, the Group estimates the number of homogeneous loans that will default based on the individual loans’ attributes aggregated into pools of homogeneous loans with similar attributes. This estimate is based on the Group’s historical experience with the loan portfolio. The estimate is adjusted to reflect an assessment of environmental factors not yet reflected in the historical data underlying the loss estimates, such as changes in real estate values, local and national economies, underwriting standards and the regulatory environment. The probability of default on a loan is based on an analysis of the movement of loans with the measured attributes from either current or any of the delinquency categories to default over a 12-month period.
As a result of analysis performed, the shareholders’ equity adjustment between Argentine Banking GAAP and US GAAP as of December 31, 2017 and 2016 amounted to Ps. (386,580) and Ps. (118,325), respectively, as follows:
|
| December 31, 2017 |
| December 31, 2016 |
| ||||||||
|
| Allowances |
| Adjustment to |
| Allowances |
| Adjustment to |
| ||||
Modeling methodologies |
| Ps. | 2,041,510 |
| Ps. | (368,711 | ) | Ps. | 1,105,125 |
| Ps. | (121,715 | ) |
Impaired loans individually evaluated for impairment |
| 28,978 |
| (17,869 | ) | 1,201 |
| 3,390 |
| ||||
Total |
| Ps. | 2,070,488 |
| Ps. | (386,580 | ) | Ps. | 1,106,326 |
| Ps. | (118,325 | ) |
Net income adjustment between Argentine Banking GAAP and US GAAP for the years ended December 31, 2017, 2016 and 2015 amounted to Ps. (268,255), Ps. (133,988), and Ps. 49,049, respectively.
Recoveries and charge-offs
Under Argentine Banking rules, recoveries are recorded in a separate income line item under Other Income. Under US GAAP, recoveries and charge-offs would be recorded in the allowance for loan losses in the balance sheet; however there would be no net impact on net income or shareholder´s equity. The definition of charge-off under US GAAP described above does not differ from Argentine Banking rules.
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
Disclosure requirements
i)Allowance for Credit Losses and Recorded Investments in Financial Receivables
The following table presents the allowance for loan losses and the related carrying amount of Financial Receivables for the years ended December 31, 2017 and 2016 respectively:
|
| As of December 31, 2017 |
| |||||||
|
| Consumer |
| Commercial |
| Total |
| |||
Allowances for loan losses: |
| Ps. |
|
| Ps. |
|
| Ps. |
|
|
Beginning balance |
| 1,073,385 |
| 32,941 |
| 1,106,326 |
| |||
Charge-offs |
| (1,343,070 | ) | (61,294 | ) | (1,404,364 | ) | |||
Recoveries |
| 125,883 |
| 41,961 |
| 167,844 |
| |||
Provision |
| 2,106,212 |
| 94,470 |
| 2,200,682 |
| |||
|
|
|
|
|
|
|
| |||
Ending balance |
| 1,962,410 |
| 108,078 |
| 2,070,488 |
| |||
|
|
|
|
|
|
|
| |||
Ending balance- individually evaluated for impairment |
| — |
| 28,978 |
| 28,978 |
| |||
Ending balance- collectively evaluated for impairment |
| 1,962,410 |
| 79,100 |
| 2,041,510 |
| |||
|
|
|
|
|
|
|
| |||
Financing receivables: |
|
|
|
|
|
|
| |||
Ending balance |
|
|
|
|
|
|
| |||
Ending balance: individually evaluated for impairment |
| — |
| 63,095 |
| 63,095 |
| |||
Ending balance: collectively evaluated for impairment |
| 31,593,790 |
| 29,933,234 |
| 61,527,024 |
| |||
|
| As of December 31, 2016 |
| |||||||
|
| Consumer |
| Commercial |
| Total |
| |||
Allowances for loan losses: |
| Ps. |
|
| Ps. |
|
| Ps. |
|
|
Beginning balance |
| 622,083 |
| 57,219 |
| 679,302 |
| |||
Charge-offs |
| (659,091 | ) | (144,101 | ) | (803,192 | ) | |||
Recoveries |
| 98,240 |
| 32,747 |
| 130,987 |
| |||
Provision |
| 1,012,153 |
| 87,076 |
| 1,099,229 |
| |||
|
|
|
|
|
|
|
| |||
Ending balance |
| 1,073,385 |
| 32,941 |
| 1,106,326 |
| |||
|
|
|
|
|
|
|
| |||
Ending balance- individually evaluated for impairment |
| — |
| 1,201 |
| 1,201 |
| |||
Ending balance- collectively evaluated for impairment |
| 1,073,385 |
| 31,740 |
| 1,105,125 |
| |||
|
|
|
|
|
|
|
| |||
Financing receivables: |
|
|
|
|
|
|
| |||
Ending balance |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
Ending balance: individually evaluated for impairment |
| — |
| 21,089 |
| 21,089 |
| |||
Ending balance: collectively evaluated for impairment |
| 20,588,886 |
| 18,906,776 |
| 39,495,662 |
| |||
ii) Impaired Loans
ASC 310, requires a creditor to measure impairment of a loan based on the present value of expected future cash flows discounted at the loan’s effective interest rate, or at the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent.
This Statement is applicable to all loans (including those restructured in a troubled debt restructuring involving amendment of terms), except large groups of smaller-balance homogenous loans that are
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
collectively evaluated for impairment. Loans are considered impaired when, based on Management’s evaluation, a borrower will not be able to fulfill its obligation under the original loan terms.
The following table discloses the amounts of loans considered impaired in accordance with ASC 310, as of December 31, 2017 and 2016:
|
| As of December 31, 2017 |
| |||||||
|
| Recorded |
| Unpaid |
| Related |
| |||
With no related allowance recorded: |
| Ps. |
|
| Ps. |
|
| Ps. |
|
|
Commercial |
|
|
|
|
|
|
| |||
Impaired Loans |
| — |
| — |
| — |
| |||
|
|
|
|
|
|
|
| |||
With an allowance recorded: |
|
|
|
|
|
|
| |||
Commercial |
|
|
|
|
|
|
| |||
Impaired Loans |
| 63,095 |
| 60,913 |
| 28,978 |
| |||
|
|
|
|
|
|
|
| |||
Total |
| 63,095 |
| 60,913 |
| 28,978 |
| |||
|
| As of December 31, 2016 |
| ||||
|
| Recorded |
| Unpaid |
| Related |
|
With no related allowance recorded: |
| Ps. |
| Ps. |
| Ps. |
|
Commercial |
|
|
|
|
|
|
|
Impaired Loans |
| 13,429 |
| 12,247 |
| — |
|
|
|
|
|
|
|
|
|
With an allowance recorded: |
|
|
|
|
|
|
|
Commercial |
|
|
|
|
|
|
|
Impaired Loans |
| 6,049 |
| 5,881 |
| 1,201 |
|
|
|
|
|
|
|
|
|
Total |
| 19,478 |
| 18,128 |
| 1,201 |
|
The average recorded investments for impaired loans were Ps. 69,874 and Ps. 45,958 as of December 31, 2017 and 2016, respectively.
The interest income recognized on impaired loans amounted to Ps. 17,860, Ps. 8,695, and Ps. 8.807 for years ended December 31, 2017, 2016 and 2015, respectively.
iii) Non-accrual Loans
The method applied to recognize income on loans is described in Note 3.5.
Additionally, the Group has made use of the option granted by the BCRA authorizing financial entities to interrupt the accrual of interest for clients in the following categories:
· “With problems”; “With high risk of insolvency” and “Irrecoverable” in the commercial portfolio.
· “Medium risk”; “High risk” and “Irrecoverable” in the consumer portfolio.
According to the above, the threshold for suspending the accrual of interest is as from 91 days of arrears. Resumption of interest accrual takes place when the client improves its situation passing to situation:
· “Normal” or “With special tracking — Under observation” in the commercial portfolio.
· “Normal” or “Low risk” in the consumer portfolio.
The Group recognizes interest income on a cash basis for non-accrual loans. Under U.S. GAAP, recognition of interest on loans is generally discontinued when, in the opinion of management, there is an assessment that the borrower will likely be unable to meet all contractual payments as they become due.
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
As a general practice, this occurs when loans are 90 days or more overdue. Any accrued but uncollected interest is reversed against interest income at that time. Management believes that the difference in interest recognition does not have a material impact to the Group’s Consolidated Statements.
As consequence, non-accrual loans are defined as those loans in the categories of: (a) Consumer portfolio: “Medium Risk”, “High Risk” and “Uncollectible” and (b) Commercial portfolio: “With problems”, “High Risk of Insolvency” and “Uncollectible”.
The following table represents the amounts of non-accruals, segregated by class of loans, as of December 31, 2017 and 2016, respectively:
|
| As of December 31, |
| ||
|
| 2017 |
| 2016 |
|
|
| Ps. |
| Ps. |
|
Consumer |
| 1,868,252 |
| 1,117,094 |
|
Commercial |
| 56,763 |
| 41,606 |
|
Total Non-accrual loans |
| 1,925,015 |
| 1,158,700 |
|
An aging analysis of past due loans, segregated by class of loans, as of December 31, 2017 and 2016 were as follows:
|
| As of December 31, 2017 |
| ||||||||||||
|
| 30-90 Days |
| 91-180 |
| 181-360 |
| Greater |
| Total Past |
| Current |
| Total |
|
Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal Loans |
| 518,459 |
| 295,369 |
| 381,601 |
| 2,303 |
| 1,197,732 |
| 14,644,230 |
| 15,841,962 |
|
Credit Card Loans |
| 379,700 |
| 393,260 |
| 370,445 |
| 2,578 |
| 1,145,983 |
| 7,756,926 |
| 8,902,909 |
|
Other Loans |
| 89,762 |
| 35,532 |
| 36,132 |
| 10,524 |
| 171,950 |
| 6,676,969 |
| 6,848,919 |
|
Total Consumer Loans |
| 987,921 |
| 724,161 |
| 788,178 |
| 15,405 |
| 2,515,665 |
| 29,078,125 |
| 31,593,790 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing Loans |
| — |
| — |
| — |
| — |
| — |
| 28,954,226 |
| 28,954,226 |
|
Impaired loans |
| 928,446 |
| 45,099 |
| 52,730 |
| 15,828 |
| 1,042,103 |
| — |
| 1,042,103 |
|
Total Commercial Loans |
| 928,446 |
| 45,099 |
| 52,730 |
| 15,828 |
| 1,042,103 |
| 28,954,226 |
| 29,996,329 |
|
Total |
| 1,916,367 |
| 769,260 |
| 840,908 |
| 31,233 |
| 3,557,768 |
| 58,032,351 |
| 61,590,119 |
|
|
| As of December 31, 2016 |
| ||||||||||||
|
| 30-90 |
| 91-180 |
| 181-360 |
| Greater |
| Total Past |
| Current |
| Total |
|
Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal Loans |
| 488,235 |
| 316,478 |
| 282,866 |
| 23,620 |
| 1,111,199 |
| 10,593,959 |
| 11,705,158 |
|
Credit Card Loans |
| 143,132 |
| 104,059 |
| 95,990 |
| 1,022 |
| 344,203 |
| 6,218,394 |
| 6,562,597 |
|
Other Loans |
| 59,974 |
| 26,548 |
| 23,649 |
| 4,797 |
| 114,968 |
| 2,206,163 |
| 2,321,131 |
|
Total Consumer Loans |
| 691,341 |
| 447,085 |
| 402,505 |
| 29,439 |
| 1,570,370 |
| 19,018,516 |
| 20,588,886 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performing Loans |
| — |
| — |
| — |
| — |
| — |
| 18,359,178 |
| 18,359,178 |
|
Impaired loans |
| 442,775 |
| 59,232 |
| 25,380 |
| 41,300 |
| 568,687 |
| — |
| 568,687 |
|
Total Commercial Loans |
| 442,775 |
| 59,232 |
| 25,380 |
| 41,300 |
| 568,687 |
| 18,359,178 |
| 18,927,865 |
|
Total |
| 1,134,116 |
| 506,317 |
| 427,885 |
| 70,739 |
| 2,139,057 |
| 37,377,694 |
| 39,516,751 |
|
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
iv) Troubled debt restructuring (TDR)
A restructured loan is considered a TDR if the debtor is experiencing financial difficulties and the Group grants a concession to the debtor that would not otherwise be considered. Concessions granted could include but it not necessary limited to: reduction in interest rate to rates that are considered below market, extension of repayment schedules and maturity dates beyond original contractual terms.
The table below presents the December 31, 2017 and 2016 carrying value of loans that were modified in a TDR within the previous 12 months:
|
| Segment |
| Number of |
| Pre-modification |
| Post-modification |
|
December 31, 2017 |
| Consumer |
| 54,939 |
| 2,177,304 |
| 1,804,596 |
|
|
| Commercial |
| 7 |
| 8,138 |
| 5,391 |
|
December 31, 2016 |
| Consumer |
| 29,062 |
| 827,720 |
| 775,685 |
|
|
| Commercial |
| — |
| — |
| — |
|
The Group considers a TDR that have subsequently defaulted if the borrower has failed to make payments of either principal, interest or both for a period of 90 days or more from contractual due date. Loans considered TDR that have defaulted during the years ended December 31, 2017 and 2016, respectively were as follows:
|
| December 31, 2017 |
| ||
Troubled debt restructuring that subsequently defaulted |
| Number of |
| Recorded |
|
Consumer |
| 5,783 |
| 212,179 |
|
|
| December 31, 2016 |
| ||
Troubled debt restructuring that subsequently |
| Number of |
| Recorded |
|
Consumer |
| 3,481 |
| 88,575 |
|
d. Transfers of financial assets
The Group has securitized certain of their personal, pledge and credit card loans originated by the Bank and CCF on their behalf through the transfers of such loans to special purpose trusts which issues multiple classes of bonds and certificates of participation.
In addition, on November 7, 2007 the Group securitized certain properties through the transfer of such properties to a special purpose trust “Renta Inmobiliaria I” which issues multiple classes of bonds and
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
certificates of participation. As of December 2016, the Group had liquidated the mentioned trust and acquired the properties that were originally transferred.
Under Argentine Banking GAAP, securitizations were accounted for as sales. Debt securities issued by the trusts and retained by the Group are accounted for at cost plus accrued interest and participation certificates issued by the trusts and retained by the Group are accounted for under the equity method except the participation certificates of Real Estate trust that was accounted for at cost with the limit of the equity method and the participation certificates of CCF 3, 4 and 5 were accounted for at the recoverable value determined by the present value of net cash flows generated by the trusts with the limit of the equity method.
Under US GAAP, FASB ASC 810 “Consolidation” addresses consolidation of variable interest entities, as defined in the rules, which have certain characteristics.
The methodology for evaluating trust and transactions under the VIE requirements includes the following two steps:
1) Determine whether the entity meets the criteria to qualify as a VIE and;
2) Determine whether the Group is the primary beneficiary of a VIE.
In performing the first step the significant factors and judgments that were considered in making the determination as to whether an entity is a VIE includes:
· The design of the entity, including the nature of its risks and the purpose for which the entity was created, to determine the variability that the entity was designed to create and distribute to its interest holders;
· The nature of the involvement with the entity;
· Whether control of the entity may be achieved through arrangements that do not involve voting equity;
· Whether there is sufficient equity investment at risk to finance the activities of the entity and;
· Whether parties other than the equity holders have the obligation to absorb expected losses or the right to received residual returns.
For each VIE identified, the Group performs the second step and evaluates whether it is the primary beneficiary of the VIE by considering the following significant factors and criteria:
· Whether the Group has the power to direct the activities that most significantly impact the VIE’s economic performance and;
· Whether the Group absorb the majority of the VIE’s expected losses or the Group receive a majority of the VIE’s expected residual returns.
As of December 31, 2017 and 2016, under FASB ASC 810, financial trusts mentioned in Note 26 were considered variable interest entities. In accordance with FASB ASC 810, the Group was deemed to be the primary beneficiary of these trusts and, therefore, the Group included them in its consolidated financial statements. The impact in the US GAAP shareholders’ equity or net income reconciliation is disclosed below.
As of December 31, 2017 and 2016, the table below presents the carrying amount and classification of the VIE’s assets and liabilities which have been consolidated for US GAAP purposes. As mentioned in Note 26. under BCRA rules, those amounts were recorded under “Other receivables from financial intermediation — Other receivables not covered by debtors classification regulations.
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
|
| December 31, |
| December 31, |
| ||
|
| 2017 |
| 2016 |
| ||
Assets |
|
|
|
|
| ||
Cash and due from banks |
| Ps. | 6,276 |
| Ps. | 16,244 |
|
Trading securities assets |
| 75,843 |
| — |
| ||
Other receivable from financial transactions |
| 50,866 |
| 151,979 |
| ||
Loans |
| 1,459,617 |
| 1,515,729 |
| ||
Allowances related to Loans |
| (114,095 | ) | (67,905 | ) | ||
Other assets |
| 28,680 |
| 38,996 |
| ||
|
| Ps. | 1,507,187 |
| Ps. | 1,655,043 |
|
Liabilities |
|
|
|
|
| ||
Other liabilities from financial transactions: |
|
|
|
|
| ||
Debt Securities |
| Ps. | 811,018 |
| Ps. | 953,678 |
|
Certificates of Participation |
| 606,643 |
| 614,020 |
| ||
Other liabilities |
| 89,526 |
| 87,345 |
| ||
|
| Ps. | 1,507,187 |
| Ps. | 1,655,043 |
|
As a result of consolidating these trusts, total consolidated assets would increase by Ps. 978,852 and Ps. 982,651 as of December 31, 2017 and December 31, 2016, respectively.
Therefore, the Group recognized the loans and other assets under the financial trust included below and re-established its loan loss reserves under ASC 310. See Note 35.I.c. allowance for loan losses.
In addition, the Group had recognized a gain for the sale of the assets included in the trusts “Renta Inmobiliaria I” and “CCF Créditos Serie 5”. As a consequence that the Group had a controlling financial interest in trusts, the reconsolidation of the assets and liabilities was made and the gains recognized by the Group at the inception were reversed for US GAAP purposes. In addition, a reconciling adjustment was recognized in order to consolidate each trust assets and liabilities under US GAAP principles.
- Renta Inmobiliaria I
Renta Inmobiliaria I was liquidated on the second semester of 2016 and the Group reacquired the properties of this trust. Under Argentine Banking GAAP the Group recognized this assets for its market value at the moment of the readquisition and as consequence that the Group was consolidating the assets and liabilities of this trust, under US-GAAP this properties should be accounted for its historical cost minus amortization.
Shareholders´ Equity adjustment between Argentine Banking GAAP and US GAAP as of December 31, 2017 and 2016 amounted to Ps. (312,144) and Ps. (324,565). Net income adjustment as of December 31, 2017, 2016 and 2015 amounted to Ps. 12,421, Ps. (218,687), and Ps. (33,971), respectively.
- CCF Créditos Serie 5
Net Income adjustment as of December 31, 2015 amounted to Ps. 4,976.
Transfers of receivables with recourse
Under Argentine Banking GAAP, for transfers of receivables with recourse, the Group recorded a gain in the income statement and accounted for the transaction as a sale of loans.
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
Under US GAAP, ASC 860 “Transfers and servicing” establishes accounting and reporting standards for transfers and servicing of financial assets.
Transfers of financial receivables with recourse do not comply with the conditions prescribed in ASC 860-10-40 to be accounted for as a sale, as consequence, the transaction is considered a secured borrowing and, as a result of it, the Group should continue reporting the transferred financial receivables in its statement of financial position with no change in their measurement.
Shareholders´ Equity adjustment between Argentine Banking GAAP and US GAAP as of December 31, 2017 and 2016 amounted to Ps. (105,939) and Ps. (26,218) (corresponding to assets for an amount of Ps. 570,803 and Ps. 144,198 and liabilities for an amount of Ps. 676,742 and Ps. 170,416, respectively). Net income as of December 31, 2017, 2016 and 2015, amounted to Ps. (79,721), Ps. (27,265) and Ps. 1,047, respectively.
e. Government securities and other investments
Investments securities classified as trading and available for sale
Under Argentine Banking GAAP the Group has recorded “Holding of trading securities”, “Unlisted Government securities”, “Investments in listed corporate securities”, “Securities issued by the Argentine Central Bank listed” and “Securities receivable under spot and forward purchases pending settlement” at fair value, meanwhile the “Securities issued by the Argentine Central Bank unlisted” and “Unlisted corporate bonds” has been value at cost increased by their internal rate of return. Changes in valuation of these securities are included in earnings.
Under US GAAP “Holding of trading securities”, “Investments in listed corporate securities” and certain “Securities issued by the Argentine Central Bank” were considered “trading securities” and, as such, valued at fair value with changes in fair value recognized in the consolidated statement of income.pesos)
The table below shows the investments classifiedsensitivity to a reasonably possible additional variation in interest rates for the next year, taking into account the composition as trading securities:of December 31, 2019. Variations in rates were determined considering the scenarios set by Communication "A" 6397 for the calculation of the Interest Rate Risk in the Investment Portfolio.
|
| December 31, |
| December 31, |
| ||||||||||||
|
| 2017 |
| 2016 |
| ||||||||||||
|
|
|
|
|
| Shareholders’s |
|
|
|
|
| ||||||
|
| Carrying |
| Fair |
| Equity |
| Carrying |
| Fair |
| ||||||
|
| Amount |
| Value |
| Adjustment |
| Amount |
| Value |
| ||||||
Trading securities |
|
|
|
|
|
|
|
|
|
|
| ||||||
Holdings of trading securities |
| Ps. | 139,385 |
| Ps. | 139,385 |
| Ps. | — |
| Ps. | 158,341 |
| Ps. | 158,386 |
| |
Unlisted Government securities |
| 437 |
| 437 |
| — |
| — |
| — |
| ||||||
Investments in listed corporate securities |
| 38,624 |
| 38,624 |
| — |
| 1,895 |
| 1,895 |
| ||||||
Securities issued by Argentine Central Bank |
| 9,330,248 |
| 9,330,248 |
| — |
| 907,461 |
| 907,098 |
| ||||||
Total trading securities |
| Ps. | 9,508,694 |
| Ps. | 9,508,694 |
| Ps. | — |
| Ps. | 1,067,697 |
| Ps. | 1,067,379 |
| |
Additional variation in the interest rate | Increase / (decrease) in the income statement | |||||
Decrease in the interest rate | 4% ARS; 2% USD | (357,394 | ) | |||
Increase in the interest rate | 4% ARS; 2% USD | 260,313 |
Other “Securities issuedIf the market interest rates for instruments denominated in pesos decreased by Argentine Central Bank”, “Unlisted corporate bonds”, “Unlisted government securities”4 percentage points and “Securities receivable under spot and forward purchases pending settlement” were considered as “available for sale securities” for US GAAP purposes and, as such, were recorded at fair value withthose nominated in dollars, they would fall by 2 percentage points, the unrealized gain and losses reported asannual net loss of income tax includedwould be 357,394. On the contrary, if the interest rates increased in other comprehensive income in the Shareholders´ equity, in accordance with ASC 320 “Investment — Debt and Equity Securities”.
Table of Contentsequal measure, 260,313 would be earned.
Grupo Supervielle S.A. and SubsidiariesLiquidity Risk
The Group defines Liquidity Risk as the risk of assuming additional financing expenses upon unexpected liquidity needs. Such risk results from the difference of sizes and maturities between the Group’s assets and liabilities. Such risks involve the following:
ü | Funding Liquidity Risk means the risk that results when it is difficult to obtain funds at normal market cost when needed, based on the market’s perception of the Group. |
ü | Market Liquidity Risk means the risk resulting from the Group’s incapacity to offset an asset position at market price, as a consequence of the following two key factors: |
· | Assets are not liquid enough, |
· | Changes in the markets where those assets are traded. |
Liquidity and concentration indicators of funding sources are used to determine the tolerance to this risk, starting from the most restrictive definitions to the most comprehensive ones.
The following are the main core metrics used for the liquidity risk management:
ü | LCR (Liquidity Coverage Ratio): measures the relation between high quality liquid assets and total net cash outflows over a 30-day period. The Group estimates this indicator on a daily basis, having met the minimum forecasted value in 2017. |
ü | Net Stable Funding Ratio (NSFR): measures the ability of the Group to fund its activities with sufficiently stable sources to mitigate the risk of future stress situations arising from its funding. The Group calculates this indicator on a daily basis, having complied with the minimum value required by the regulator and that that established internally based on its risk appetite. |
ü | Coverage of Remunerated Accounts and Pre-Payable Term Depositsthis indicator is aimed to reduce funding dependence of unstable sources in non-liquid scenarios. |
In addition, the Assets and Liabilities Committee performs a daily monitoring of some follow-up metrics . Such indicators are used to analyze the main components of LCR while assessing the Group’s liquidity condition and warning upon trend changes that may affect the guidelines set by the risk appetite policy. Additionally, within these monitoring indicators, Committee assess for the availability of liquid assets to respond to an eventual withdrawal of more volatile deposits, such us remunerated sight accounts and deposits of the public sector in foreign currency.
Finally, suitable controls over intraday liquidity and the compliance of minimum cash regulations are established. With regard to intraday liquidity, the Financial Risk Management performs a historical monitoring of the intraday liquidity available at the beginning of each day, the amount of sensitive payments over time with a time segmentation according to the time of the day on which they are concentrated andalso calculates different ratios considering liquid assets available with gross payments or payments that are sensitive over time. From the analysis of this information, it was defined that the starting balance of the current account of Banco Supervielle in the Argentine Central Bank can never be lower than the average of sensitive payments in the time recorded in the immediately previous month, setting an alert when it is below 10% of that value.
F-74 |
GRUPO SUPERVIELLE S.A.
Notes to the Consolidated Financial Statements
For the years endedAs of December 31, 2017, 2016 and 20152018 presented in comparative format
(Expressed in thousands of pesos)
Liquidity risk management consist in a strict daily follow-up of liquidity coverage ratio (LCR), ensuring a suitable forecast of funding and free-availability liquid assets needs with the purpose of maintaining LCR within levels set by the risk appetite policy. As from 2018, the follow-up on the net stable funding ration (NSFR) is included in accordance with provisions set by the Argentine pesos — unless otherwise stated)Central Bank and Basle III criteria guidelines.
Below is an analysis of the assets and liabilities maturities, determined based on the remaining period as of December 31, 2019 and 2018 until the contractual maturity date, based on cash flows not discounted:
As of 12/31/2019 | Less than 1 month | From 1 to 6 months | From 6 to 12 months | From 1 to 5 years | More than 5 years | Total | ||||||||||||||||||
Assets | 71,187,751 | 47,432,628 | 28,940,376 | 87,483,052 | 33,914,944 | 268,958,751 | ||||||||||||||||||
Loans and other financings | 71,187,751 | 47,432,628 | 28,940,376 | 87,483,052 | 33,914,944 | 268,958,751 | ||||||||||||||||||
Liabilities | 92,522,913 | 12,105,324 | 10,051,246 | 4,112,193 | 3,371,710 | 122,163,386 | ||||||||||||||||||
Deposits | 79,694,146 | 7,578,111 | 4,996,317 | 2,245 | - | 92,270,819 | ||||||||||||||||||
Liabilities at fair value through profit or loss | 189,554 | - | - | - | - | 189,554 | ||||||||||||||||||
Derivatives | 319,817 | - | - | - | - | 319,817 | ||||||||||||||||||
Other financial liabilities | 4,918,670 | 408,985 | 556,549 | 946,443 | 533,279 | 7,363,926 | ||||||||||||||||||
Financing received from the Argentine Central Bank and other financial institutions | 7,400,726 | 966,831 | 202,593 | 355,116 | 912,434 | 9,837,700 | ||||||||||||||||||
Unsubordinated negotiable Obligations | - | 3,074,692 | 2,871,655 | 1,946,204 | 1,925,997 | 9,818,548 | ||||||||||||||||||
Subordinated negotiable obligations | - | 76,705 | 1,424,132 | 862,185 | - | 2,363,022 |
As of 12/31/2018 | Less than 1 month | From 1 to 6 months | From 6 to 12 months | From 1 to 5 years | More than 5 years | Total | ||||||||||||||||||
Assets | 60,838,057 | 61,629,897 | 27,010,721 | 66,650,566 | 4,649,995 | 220,779,236 | ||||||||||||||||||
Loans and other financings | 60,838,057 | 61,629,897 | 27,010,721 | 66,650,566 | 4,649,995 | 220,779,236 | ||||||||||||||||||
Liabilities | 137,317,043 | 29,386,623 | 5,359,150 | 7,627,122 | 23,185,768 | 202,875,706 | ||||||||||||||||||
Deposits | 130,152,328 | 17,095,079 | 1,665,000 | 202,313 | - | 149,114,720 | ||||||||||||||||||
Liabilities at fair value through profit or loss | 1,847,244 | - | - | - | - | 1,847,244 | ||||||||||||||||||
Derivatives | 144,944 | - | - | - | - | 144,944 | ||||||||||||||||||
Other financial liabilities | 4,447,175 | 101,685 | 145,916 | 241,109 | 365,112 | 5,300,997 | ||||||||||||||||||
Financing received from the Argentine Central Bank and other financial institutions | 725,352 | 9,620,332 | 1,079,990 | 660,801 | 2,398,649 | 14,485,124 | ||||||||||||||||||
Unsubordinated negotiable Obligations | - | 2,522,707 | 2,440,731 | 6,448,873 | 18,127,380 | 29,539,691 | ||||||||||||||||||
Subordinated negotiable obligations | - | 46,820 | 27,513 | 74,026 | 2,294,627 | 2,442,986 |
Economic capital calculation
The table below showsGroup relies on the investments classified as available for sale securities:following elements that ensure the suitable management of this type of risk:
|
| December 31, 2017 |
| |||||||||
|
|
|
|
|
|
|
| Accumulated |
| Shareholders’ |
| |
|
| Amortized |
| Book |
| Fair |
| Unrealized |
| equity |
| |
|
| Cost |
| Value |
| Value |
| (Loss)/Gain |
| Adjustment |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Securities issued by Argentine Central Bank |
| Ps. | 2,341,832 |
| 2,343,618 |
| 2,343,618 |
| 1,786 |
| — |
|
Unlisted Government Securities and holdings of trading securities |
| 1,803,747 |
| 1,799,367 |
| 1,802,131 |
| (1,616 | ) | 2,764 |
| |
Unlisted corporate bonds and Securities receivable under spot and forward purchases pending settlement (*) |
| 91,950 |
| 91,989 |
| 92,527 |
| 577 |
| 538 |
| |
Total |
| Ps. | 4,237,529 |
| 4,234,974 |
| 4,238,276 |
| 747 |
| 3,302 |
|
ü | Broad liquidity indicators dashboard, to monitor liquidity levels. Each indicator relies on its relevant threshold and limit, which are monitored on a daily basis by the Risk Area (sending due warnings upon violation cases), on a byweekly basis by the Assets and Liabilities Committee (ALCO) and on a monthly basis by the Integral Risk Committee. Likewise, a weekly report is drawn up and sent to members of the Integral Risk Committee, ALCO and the Board. |
(*)This line does not include forward transactions pending settlement for an amount of Ps. 20,610. These operations have not been included for US GAAP purposes. The Group records securities purchases and sales as of the trade date under US GAAP.
ü | Indicators that measure the concentration of funding sources, establishing the Group’s risk appetite. |
|
| December 31, 2016 |
| ||||||||
|
| Amortized |
| Book |
| Fair |
| Accumulated |
| Shareholders’ |
|
|
| Cost |
| Value |
| Value |
| (Loss)/Gain |
| Adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities issued by Argentine Central Bank |
| 1,486,805 |
| 1,485,743 |
| 1,484,288 |
| (2,517 | ) | (1,455 | ) |
Unlisted Government Securities |
| 818,853 |
| 818,853 |
| 811,195 |
| (7,658 | ) | (7,658 | ) |
Unlisted corporate bonds and Securities receivable under spot and forward purchases pending settlement (*) |
| 616,872 |
| 620,574 |
| 620,520 |
| 3,648 |
| (54 | ) |
Total |
| 2,922,530 |
| 2,925,170 |
| 2,916,003 |
| (6,527 | ) | (9,167 | ) |
F-75 |
(*)This line does not include forward transactions pending settlement for an amount of Ps. 8,250. These operations have not been included for US GAAP purposes. The Group records securities purchases and sales as of the trade date under US GAAP
GRUPO SUPERVIELLE S.A.
The amount of the unrealized gain or loss on available for sale securities, before tax, that have been included in accumulated other comprehensive income is as follows:
Securities |
| December |
| Increase |
| Decrease |
| December 31, |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Securities issued by Argentine Central Bank |
| Ps. | (2,517 | ) | Ps. | 11,338 |
| Ps. | (7,035 | ) | Ps. | 1,786 |
|
Unlisted Government Securities |
| (7,658 | ) | 7,284 |
| (1,242 | ) | (1,616 | ) | ||||
Unlisted corporate bonds and Securities receivable under spot and forward purchases pending settlement |
| 3,648 |
| 871 |
| (3,942 | ) | 577 |
| ||||
Total |
| Ps. | (6,527 | ) | Ps. | 19,493 |
| Ps. | (12,219 | ) | Ps. | 747 |
|
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years endedAs of December 31, 2017, 2016 and 20152018 presented in comparative format
(Expressed in thousands of Argentine pesos — unless otherwise stated)pesos)
Securities |
| December |
| Increase |
| Decrease |
| December 31, |
| ||||
Securities issued by Argentine Central Bank |
| Ps. | 10 |
| Ps. | 618 |
| Ps. | (3,145 | ) | Ps. | (2,517 | ) |
Unlisted Government Securities |
| — |
| — |
| (7,658 | ) | (7,658 | ) | ||||
Unlisted corporate bonds and Securities receivable under spot and forward purchases pending settlement |
| 705 |
| 3,661 |
| (718 | ) | 3,648 |
| ||||
Total |
| Ps. | 715 |
| Ps. | 4,279 |
| Ps. | (11,521 | ) | Ps. | (6,527 | ) |
ü | Development and monitoring of new liquidity coverage and leverage indicators set by the Argentine Central Bank in compliance with Basle III route map. |
ü | Different liquidity risk follow-up tools have been added, including a disaggregate assessment of contractual term mismatches and funding concentration reports, by counterparty, product and significant currency. The accuracy of the information required for such reports contributed to the improvement of our Risk Management Information System (MIS). |
ü | The liquidity coverage ratio is used to assess the Group’s capacity to meet liquidity needs over a 30-day period within a stress scenario described by the Argentine Central Bank. The follow-up of this indicator is carried out on a daily basis, keeping the Group’s liquidity director and officials updated on its evolution. |
ü | Permanent monitoring of limit and threshold compliance in virtue of the stable funding ratio (NSFR). |
ü | Individual stress tests, carried out on a daily basis upon an eventual critical scenario of a sudden withdrawal of deposits and its impact on the minimum cash position and LCR. |
ü | Regarding contingency plans, the Group follows a policy that ensures the application of its guidelines in stress tests, according to the decision taken by ALCO Committee and Integral Risk Committee. |
The maturitiesRisk management framework described herein enables a suitable liquidity condition; therefore, the Group considers the economic capital estimation unnecessary to cover such risk, as long as the Group’s solvency should not be affected once the stress tests contingency plan have been implemented.
28. | INTERNATIONAL FINANCING PROGRAMS |
Banco Supervielle S.A. keeps active the following agreements: 1) A Foreign Trade Credit Facility Program with Inter-American Development Bank (IDB), whose line amounts to USD 20,000,000 (USD 20 million) and 2) A Global Financial Exchange Program with the International Finance Corporation (IFC), whose line amounts to USD 30,000,000 (thirty million US dollars).
On the other hand, the FMO, a Netherlands Development Finance Company, and Proparco, an AFD (Agence Francaise de Développement) subsidiary, granted to the Bank on September a non-guaranteed senior sindicated loan of availableUSD 80,000,000 (eighty million US dollars) for sale securitiesa period of three years and with an interest rate of Libor + 3.40%. The funds received were quickly placed among the SME clients of our portfolio that work in regional export economies in various sectors.
It should be noted that these agreements are subject to compliance with certain financial covenants, certain obligations to do and not to do, as well as certain information requirements.
As of December 31, 2019, the Bank was not in compliance with the non-performing loans ratio and the coverage ratio of the IDB facility which generates a potential breach of the loan agreements with the FMO and Proparco by the cross default clauses included in those contracts. This breach would enable the aforementioned agencies to accelerate the payment of the loans for an amount of $7,167 millions as of December 31, 2017 are as follows:2019.
|
| December 31, 2017 |
| |||||||
|
|
|
|
|
| After 5 |
|
|
| |
|
|
|
| After 1 year |
| year but |
|
|
| |
|
| Within 1 |
| but within 5 |
| within 10 |
|
|
| |
Securities |
| year |
| years |
| years |
| Total |
| |
Securities issued by Argentine Central Bank |
| Ps. | 2,341,832 |
| — |
| — |
| 2,341,832 |
|
Unlisted government bonds |
| 1,803,747 |
| — |
| — |
| 1,803,747 |
| |
Unlisted corporate bonds |
| 1,010 |
| 65,569 |
| — |
| 66,579 |
| |
Securities receivable under spot and forward purchases pending settlement |
| 25,371 |
| — |
| — |
| 25,371 |
| |
Total |
| Ps. | 4,171,960 |
| 65,569 |
| — |
| 4,237,529 |
|
Consequently, on January 29, 2020, the Bank began the process to obtain a waiver with the IDB, which was obtained on February 18, 2020, by virtue of which the IDB waived its right to accelerate the debt due to non-compliance with the ratios of non-performing loans and coverage for the period from October 1, 2019 to December 31, 2019. Also on April 16, 2020, it requested a new waiver from the IDB, which was obtained on April 30, 2020, extending the aforementioned terms until May 31, 2020
29. | BUSINESS COMBINATIONS |
- | FUTUROS DEL SUR S.A. |
On December 18, 2019, the Group acquired 100% of the capital stock of Futuros del Sur S.A. for a total price of 6,964. Futuros del Sur main activity is to be negotiation agent.
F-76 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018 presented in comparative format
(Expressed in thousands of pesos)
The amounts recognized as of the date of acquisition for each main class of assets acquired and liabilities assumed are:
Fair Value | ||||
Cash and banks deposits | 2,618 | |||
Other financial assets | 651 | |||
Other assests | 54 | |||
Miscellaneous obligations | (125 | ) | ||
Net identifiable assets acquired | 3,198 | |||
Consideration of the acquisition: | ||||
- Amount paid net of expenses | 6,964 | |||
Net cash flow used - investment activities | 6.964 | |||
Goodwill by business combination | 3,766 |
The goodwill will not be deductible for tax purposes.
30. | ASSETS AND LIABILITIES IN FOREIGN CURRENCY |
At | At 12/31/2019 (per currency) | At | ||||||||||||||||||||||
Items | 12/31/2019 | Dollar | Euro | Real | Others | 12/31/2018 | ||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Cash and Due from Banks | 13,896,907 | 13,161,262 | 589,529 | 15,285 | 130,831 | 25,164,561 | ||||||||||||||||||
Government and corporate securities at fair value with changes in results | 704,916 | 704,916 | - | - | - | 4,296,153 | ||||||||||||||||||
Derivatives | - | - | - | - | - | 20,621 | ||||||||||||||||||
Other financial assets | 1,151,505 | 1,151,257 | 248 | - | 915,523 | |||||||||||||||||||
Loans and other financing | 21,482,922 | 21,479,286 | 3,313 | - | 323 | 32,505,333 | ||||||||||||||||||
Other Debt Securities | 65 | 65 | - | - | - | 1,599,586 | ||||||||||||||||||
Financial assets in guarantee | 4,503,242 | 4,503,242 | - | - | - | 711,530 | ||||||||||||||||||
Investments in subsidiaries, associates and joint ventures | - | - | - | - | - | 0 | ||||||||||||||||||
Other non-financial assets | 179,271 | 179,271 | - | - | - | 229,506 | ||||||||||||||||||
TOTAL ASSETS | 41,918,828 | 41,179,299 | 593,090 | 15,285 | 131,154 | 65,442,813 | ||||||||||||||||||
LIABILITIES | ||||||||||||||||||||||||
Deposits | 23,336,727 | 22,855,146 | 481,581 | - | - | 48,179,530 | ||||||||||||||||||
Non-financial public sector | 2,171,358 | 2,171,272 | 86 | - | - | 12,152,394 | ||||||||||||||||||
Financial sector | 9,062 | 9,062 | - | - | - | 4,581 | ||||||||||||||||||
Non-financial private sector and foreign residents | 21,156,307 | 20,674,812 | 481,495 | - | - | 36,022,555 | ||||||||||||||||||
Liabilities at fair value with changes in results | - | - | - | - | - | 235,188 | ||||||||||||||||||
Other financial liabilities | 4,091,775 | 3,998,209 | 93,566 | - | - | 774,926 | ||||||||||||||||||
Financing received from the Argentine Central Bank and other financial entities | 8,075,471 | 8,075,471 | - | - | - | 10,444,759 | ||||||||||||||||||
Subordinated negotiable obligations | 2,119,888 | 2,119,888 | - | - | - | 2,128,759 | ||||||||||||||||||
Other non-financial liabilities | 341,062 | 341,062 | - | - | - | 791,902 | ||||||||||||||||||
TOTAL LIABILITIES | 37,964,923 | 37,389,776 | 575,147 | - | - | 62,555,064 | ||||||||||||||||||
NET POSITION | 3,953,905 | 3,789,523 | 17,943 | 15,285 | 131,154 | 2,887,749 |
31. | CURRENT/NON-CURRENT DISTINCTION |
The group has adopted the presentation of all assets and liabilities in order of liquidity due to this presentation provides information that is reliable and more relevant.
F-77 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018 presented in comparative format
(Expressed in thousands of pesos)
As of December 31, 2019 and 2018, the amount expected to be recovered or settled after more than twelve months for each asset and liability line item is as follows:
12/31/2019 | 12/31/2018 | |||||||||||||||||||||||
ASSETS | No more than 12 months after the reporting period | More than 12 months after the reporting period | Total | No more than 12 months after the reporting period | More than 12 months after the reporting period | Total | ||||||||||||||||||
Cash and due from banks | 26,403,099 | - | 26,403,099 | 51,822,372 | - | 51,822,372 | ||||||||||||||||||
Cash | 8,751,111 | - | 8,751,111 | 7,368,112 | - | 7,368,112 | ||||||||||||||||||
Argentine Central Bank | 15,927,336 | - | 15,927,336 | 42,132,824 | - | 42,132,824 | ||||||||||||||||||
Other local financial institutions | 1,694,742 | - | 1,694,742 | 2,305,439 | - | 2,305,439 | ||||||||||||||||||
Others | 29,910 | - | 29,910 | 15,997 | - | 15,997 | ||||||||||||||||||
Debt Securities at fair value through profit or loss | 568,501 | - | 568,501 | 23,247,329 | - | 23,247,329 | ||||||||||||||||||
Derivatives | 257,587 | - | 257,587 | 24,496 | - | 24,496 | ||||||||||||||||||
Repo transactions | - | - | - | - | - | - | ||||||||||||||||||
Other financial assets | 2,096,866 | - | 2,096,866 | 2,612,157 | - | 2,612,157 | ||||||||||||||||||
Loans and other financing | 61,827,090 | 26,182,921 | 88,010,011 | 87,503,950 | 31,267,685 | 118,771,635 | ||||||||||||||||||
To the non-financial public sector | 7,020 | 21,852 | 28,872 | 11,577 | 38,883 | 50,460 | ||||||||||||||||||
To the financial sector | 32,867 | 31,655 | 64,522 | 550,993 | 62,108 | 613,101 | ||||||||||||||||||
To the Non-Financial Private Sector and Foreign residents | 61,787,203 | 26,129,414 | 87,916,617 | 86,941,380 | 31,166,694 | 118,108,074 | ||||||||||||||||||
Other debt securities | 10,106,598 | 351,958 | 10,458,556 | 1,875,097 | 4,756,764 | 6,631,861 | ||||||||||||||||||
Financial assets in guarantee | 5,333,704 | - | 5,333,704 | 3,082,974 | 4,776 | 3,087,750 | ||||||||||||||||||
Current income tax assets | 102,458 | - | 102,458 | 903,591 | 7,186 | 910,777 | ||||||||||||||||||
Inventories | 44,455 | - | 44,455 | 107,557 | - | 107,557 | ||||||||||||||||||
Investments in equity instruments | - | 14,579 | 14,579 | - | 16,005 | 16,005 | ||||||||||||||||||
Property, plant and equipment | - | 4,002,078 | 4,002,078 | - | 3,359,290 | 3,359,290 | ||||||||||||||||||
Investment Property | - | 4,054,737 | 4,054,737 | - | 635,877 | 635,877 | ||||||||||||||||||
Intangible assets | - | 4,372,514 | 4,372,514 | - | 4,170,146 | 4,170,146 | ||||||||||||||||||
Deferred income tax assets | 155,663 | 1,515,532 | 1,671,195 | 9,696 | 1,254,526 | 1,264,222 | ||||||||||||||||||
Non-current assets held for sale | - | - | - | 4,307 | - | 4,307 | ||||||||||||||||||
Other non-financial assets | 754,818 | 539,533 | 1,294,351 | 267,224 | 1,099,805 | 1,367,029 | ||||||||||||||||||
TOTAL ASSETS | 107,650,839 | 41,033,852 | 148,684,691 | 171,460,750 | 46,572,060 | 218,032,810 |
12/31/2019 | 12/31/2018 | |||||||||||||||||||||||
LIABILITIES | No more than 12 months after the reporting period | More than 12 months after the reporting period | Total | No more than 12 months after the reporting period | More than 12 months after the reporting period | Total | ||||||||||||||||||
Deposits | 89,006,977 | 1,200 | 89,008,177 | 145,863,016 | 133,185 | 145,996,201 | ||||||||||||||||||
Non-financial public sector | 5,470,177 | - | 5,470,177 | 17,083,822 | - | 17,083,822 | ||||||||||||||||||
Financial sector | 28,098 | - | 28,098 | 38,821 | - | 38,821 | ||||||||||||||||||
Non-financial private sector and foreign residents | 83,508,702 | 1,200 | 83,509,902 | 128,740,373 | 133,185 | 128,873,558 | ||||||||||||||||||
Liabilities at fair value through profit or loss | 189,554 | - | 189,554 | 412,403 | - | 412,403 | ||||||||||||||||||
Derivatives | - | - | - | 144,944 | - | 144,944 | ||||||||||||||||||
Repo Transactions | 319,817 | - | 319,817 | - | - | - | ||||||||||||||||||
Other financial liabilities | 8,555,100 | 560,465 | 9,115,565 | 6,294,616 | 269,780 | 6,564,396 | ||||||||||||||||||
Financing received from the Argentine Central Bank and other financial institutions | 8,688,059 | 329,538 | 9,017,597 | 11,013,248 | 1,343,858 | 12,357,106 | ||||||||||||||||||
Unsubordinated negotiable Obligations | 4,282,707 | 1,803,768 | 6,086,475 | 3,311,927 | 11,005,518 | 14,317,445 | ||||||||||||||||||
Current income tax liability | - | - | - | 1,217,233 | - | 1,217,233 | ||||||||||||||||||
Subordinated negotiable obligations | 1,314,985 | 804,903 | 2,119,888 | 40,227 | 2,088,532 | 2,128,759 | ||||||||||||||||||
Provisions | 21,720 | 655,298 | 677,018 | 17,908 | 115,795 | 133,703 | ||||||||||||||||||
Deferred income tax liability | 506,291 | - | 506,291 | 9,032 | 334,554 | 343,586 | ||||||||||||||||||
Other non-financial liabilities | 6,527,529 | 1,681,385 | 8,208,914 | 7,066,054 | 1,248,585 | 8,314,639 | ||||||||||||||||||
TOTAL LIABILITIES | 119,412,739 | 5,836,557 | 125,249,296 | 175,390,608 | 16,539,807 | 191,930,415 |
F-78 |
GRUPO SUPERVIELLE S.A.
Notes to Consolidated Financial Statements
As of December 31, 2018 presented in comparative format
(Expressed in thousands of pesos)
32. | OFFSETTING OF FINANCIAL ASSET AND LIABILITIES |
A financial asset and a financial liability shall be offset and the net amount presented in the statement of financial position when, and only when, the Group fulfill with paragraph 42 of IAS 32, and currently has a legally enforceable right to set off the recognized amounts; and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
In addition, the Group has evaluated whether there wasmaster netting arrangement that not satisfies the offsetting criteria but creates a declineright of set-off that becomes enforceable and affects the realization or settlement of individual financial assets and financial liabilities only following a specified event of default or in other circumstances not expected to arise in the valuenormal course of the security that is other-than temporary as defined by ASC 310-10.
The table below presents the fair value and the associated gross unrealized losses on AFS debt securities and whether these securities have had gross unrealized losses for less than 12 months or for 12 months or longer as of December 31, 2017 and 2016:
|
| Less than 12 months |
| Total |
| ||||||
|
| Gross Unrealized |
| Fair Value |
| Gross Unrealized |
| Fair Value |
| ||
December 31, 2017 |
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
| ||
Securities issued by Argentine Central Bank |
| Ps. | (7,035 | ) | 1,484,288 |
| Ps. | (7,035 | ) | 1,484,288 |
|
Unlisted government bonds |
| (1,242 | ) | 811,195 |
| (1,242 | ) | 811,195 |
| ||
Unlisted corporate bonds and Securities receivable under spot and forward purchases pending settlement |
| (3,942 | ) | 620,520 |
| (3,942 | ) | 620,520 |
| ||
Total |
| Ps. | (12,219 | ) | 2,916,003 |
| Ps. | (12,219 | ) | 2,916,003 |
|
|
| Less than 12 months |
| Total |
| ||||||
|
| Gross Unrealized |
| Fair Value |
| Gross Unrealized |
| Fair Value |
| ||
December 31, 2016 |
|
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
| ||
Securities issued by Argentine Central Bank |
| Ps. | (3,145 | ) | 903,654 |
| Ps. | (3,145 | ) | 903,654 |
|
Unlisted government bonds |
| (7,658 | ) | 811,195 |
| (7,658 | ) | 811,195 |
| ||
Unlisted corporate bonds and Securities receivable under spot and forward purchases pending settlement |
| (718 | ) | 11,040 |
| (718 | ) | 11,040 |
| ||
Total |
| Ps. | (11,521 | ) | 1,725,889 |
| Ps. | (11,521 | ) | 1,725,889 |
|
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
For purposes of determining whether the decline in fair value for these categories of securities qualifies as “other than temporary impairment,” the Group has considered the following factors:
· The decline in fair value is not attributable to credit quality. It solely derives from adverse interest rate fluctuations of observable inputs of similar instruments according to their fair value hierarchy.
· Future principal payments will be sufficient to recover the current amortized cost of these investments.
· The Group has the intention to hold these securities at least until their fair value recover to a level that exceeds their amortized cost.
· The extent to which the fair value has been less than the amortized cost is not relevant for these categories of securities.business.
As of December 31, 20172019 and 20162018, the Group has evaluated if an “other than temporary impairment” exists. As a result of its analysis, has determined that the decrease was temporary in nature and no impairment has to be recorded under US GAAP.
Net income adjustment between Argentine Banking GAAP and US GAAP for the year ended December 31, 2017, 2016 and 2015 amounted to Ps. 5,513, Ps. (3,252) and Ps. 162, respectively.
f. Vacation Provision
Following Argentine Banking GAAP, the cost of vacations earned by employees is recorded by the Group when paid.
US GAAP requires that this expense be recorded on an accrual basis as the vacations are earned.
Shareholders´ Equity adjustment between Argentine Banking GAAP and US GAAP as of December 31, 2017 and 2016 amounted to Ps. (300,043) and Ps. (215,361), respectively. Net income adjustment as of December 31, 2017, 2016 and 2015 amounted to Ps. (84,682), Ps. (35,587) and Ps. (12,825), respectively.
g. Derivative Instruments
The Group enters into derivative transactions, mainly, futures, forward, options and interest rate swaps.
Under Argentine Banking GAAP futures, forward and options are accounted at fair value and interest rate swap at its notional value. Over this value, the Group agrees to pay a fix interest rate and to receive a floating interest rate. The differences arising between fixed and floating rates of interest rate swaps are settled monthly and are recorded at their net position. This net position is calculated instrument by instrument. Differences arising between the spot price and the future price in futures and forwards transactions are settled daily through ROFEX.
Under US GAAP, ASC 815 “Derivatives and Hedging” establishes accounting and reporting standards for derivative instruments, including certain ones embedded in other contracts (collectively referred to as derivatives) and for hedging activities.
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
The standard requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The Group had no embedded derivatives and does not apply hedge accounting in accordance with FASB ASC 815.
There are no shareholders´ equity and net income adjustments between Argentine Banking GAAP and US GAAP as of December 31, 2017 and 2016.
Under US GAAP, FASB ASC 815 also requires additional disclosures, as follows:
|
| December 31, |
| December 31, |
| ||||
|
| 2017 |
| 2016 |
| ||||
Derivatives not designated as |
| Balance sheet |
| Fair |
| Balance sheet |
| Fair value |
|
|
|
|
|
|
|
|
|
|
|
Assets derivatives |
|
|
|
|
|
|
|
|
|
Foreign exchange contracts |
| Other receivables from financial intermediation |
| — |
| Other receivables from financial intermediation |
| 28,304 |
|
Total assets derivatives |
|
|
| — |
|
|
| 28,304 |
|
|
|
|
|
|
|
|
|
|
|
Liability derivatives |
|
|
|
|
|
|
|
|
|
Foreign exchange contracts |
| Other liabilities from financial intermediation |
| — |
| Other liabilities from financial intermediation |
| — |
|
|
|
|
|
|
|
|
|
|
|
Options |
| Other liabilities from financial intermediation |
| — |
| Other liabilities from financial intermediation |
| — |
|
Total liability derivatives |
|
|
| — |
|
|
| — |
|
(1) According to Central Bank rules.
See amounts of gain or (loss) recognized in income on derivatives in Note 25.c.
h. Special Termination Arrangements
Special termination arrangements are principally termination benefits that a group of eligible employees receive during the period between their effective termination date and their retirement age, when they voluntary accepts an irrevocable termination arrangement.
Under Argentine Banking GAAP, the costs of the special termination arrangement are recorded when paid.
Under ASC 712 “Special termination benefits” a liability should be recorded and an expense recognized in the period the employees irrevocably accept the offer and the amount of the termination liability is reasonably estimable.
Shareholders´ Equity adjustment between Argentine Banking GAAP and US GAAP as of December 31, 2017 and 2016 amounted to Ps. (598,281) and Ps. (290,025), respectively. Net income adjustment as of December 31, 2017 and 2016 and 2015 amounted to Ps. (308,256), Ps. (151,100) and Ps. (69,271), respectively.
i. Customer Loyalty Programs
The Group offers reward programs that allow its cardholders to earn points that can be redeemed for a broad range of rewards, including goods and travels among others.
Under Argentine Banking GAAP, the Group recorded a liability based on the redemptions paid during the last 12 months.
Under US GAAP the Group establishes a reward liability based upon the points earned that are expected to be redeemed and the average cost per point redeemed. The points to be redeemed are estimated based
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
on past redemption behavior, card product type, and other historical card performance. The liability is reduced as the points are redeemed.
Shareholders´ Equity adjustment between Argentine Banking GAAP and US GAAP as of December 31, 2017 and 2016 amounted to Ps. (51,193) and Ps. (44,091), respectively. Net income adjustment as of December 31, 2017, 2016 and 2015 amounted to Ps. (7,102), Ps. (15,995) and Ps. 21,094, respectively.
j. Credit Card Loans— Imputed Interest
As of December 31, 2017 and 2016, the Group has granted credit card loans with zero interest rates or preferential interest rates. Under Argentine Banking GAAP, the Group has recorded the investment at the amount granted without consideration of the market interest rate involved in the transaction.
Under US GAAP, ASC 835-30 establishes a method to determine the interest rate corresponding to these types of transactions. This Standard provides guidance for the appropriate accounting when the face amount of an account receivable does not reasonably represent the present value of the consideration given or received in the exchange.
The objective is to approximate the interest rate for an account receivable that would have resulted if an independent borrower and an independent lender had negotiated a similar transaction under comparable terms and conditions with the option to pay the cash price upon purchase for the amount of the purchase that bears the prevailing rate of interest to maturity.
Shareholders´ Equity adjustment between Argentine Banking GAAP and US GAAP as of December 31, 2017 and 2016 amounted to Ps. (182,161) and Ps. (88,463), respectively. Net income adjustment for the years ended December 31, 2017, 2016 and 2015 amounted to Ps. (93,698), Ps. 21,666 and Ps. (75,775), respectively.
k. Deferred Income Tax
Argentine Central Bank regulations do not require the recognition of deferred tax assets and liabilities and, therefore, income taxes for Banco Supervielle and Cordial Compañía Financiera S.A. are recognized on the basis of amounts due in accordance with Argentine tax regulations. However, Grupo Supervielle and Grupo Supervielle’s non-bank subsidiaries apply the deferred income tax method. As a result, Grupo Supervielle and its non-banking subsidiaries have recognized a deferred tax asset as of December 31, 2017 and 2016. As indicated in note 3.19, on the December 27, 2017 the Argentine Congress approved a comprehensive income tax reform that will become effective as of 2018.
In addition, the Group records as an asset the credit related with Minimum Presumed Income Tax amounting to Ps. 26,183 and Ps. 8,408 as of December 31, 2017 and 2016, respectively. The MPIT credit will be computable as a down payment of any income tax excess over minimum notional income tax through the next ten years.
For purposes of US GAAP reporting, the Bank and Cordial Compañía Financiera S.A. apply FASB ASC 740 “Income Taxes”. Under this method, income taxes recognized using the asset and liability method whereby deferred tax assets and liabilities are recorded for temporary differences between the financial reporting and their respective tax basis. Deferred tax assets are also recognized if it is more likely than not those assets will be realized.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recorded or settled. The effect of a change in tax rates is recognized in income statement in the period when enacted. A valuation allowance is recognized for that component of net deferred tax assets which is “more likely than not” that
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
it will not be realized. Under this pronouncement, an enterprise must use judgment in considering the relative impact of negative and positive evidence to determine if a valuation allowance is needed or not.
As of December 31, 2017 and 2016, and based on the analysis performed on the realizability of the deferred tax assets, the Group believes that is more likely than not that it will recover all the temporary differences and no portion of the net operating tax loss carryforward with future taxable income and, therefore, a valuation allowance was provided against the net operating tax loss carryforward based on the taxable income projections.
Legal entities in Argentina file their individual tax returns with the tax authority and consolidation of tax returns are not permitted. Consequently, deferred tax assets, deferred tax liabilities, and valuation allowances are determined based on the individual positions of each legal entity.
As such, the US GAAP adjustment included: a) Deferred Income Taxes for banking companies not recorded for local purposes and; b) tax effects on the US GAAP adjustments including in the reconciliation.
Deferred tax assets / (liabilities) are summarized as follows:
|
| December 31, 2017 |
| |||||||
|
| ASC 740-10 applied to |
| ASC 740-10 applied |
| ASC 740-10 |
| |||
Deferred tax assets |
|
|
|
|
|
|
| |||
Loan loss reserves |
| Ps. | 200,588 |
| Ps. | 115,974 |
| Ps. | 316,562 |
|
Loans origination fees and cost |
| — |
| 66,974 |
| 66,974 |
| |||
Provisions |
| 23,163 |
| 284,855 |
| 308,018 |
| |||
Transfer of Financial Assets |
| — |
| 125,425 |
| 125,425 |
| |||
Credit Card Loans — Imputed Interest |
| — |
| 54,648 |
| 54,648 |
| |||
Financial Guarantees |
| — |
| 1,985 |
| 1,985 |
| |||
Loss carry forward |
| 50,647 |
| — |
| 50,647 |
| |||
|
| Ps. | 274,398 |
| Ps. | 649,861 |
| Ps. | 924,259 |
|
|
|
|
|
|
|
|
| |||
Deferred tax liabilities |
|
|
|
|
|
|
| |||
Fixed Assets |
| Ps. | 48,997 |
| Ps. | (6,559 | ) | Ps. | 42,438 |
|
Intangible assets |
| 17,630 |
| (14,795 | ) | 2,835 |
| |||
Exchange rate differences |
| 39,394 |
| — |
| 39,394 |
| |||
Government Securities and other investments |
| — |
| 991 |
| 991 |
| |||
|
| Ps. | 106,021 |
| Ps. | (20,363 | ) | Ps. | 85,658 |
|
|
|
|
|
|
|
|
| |||
Net deferred income tax asset before valuation allowance |
| Ps. | 168,377 |
| Ps. | 670,224 |
| Ps. | 838,601 |
|
Valuation allowance |
| (50,647 | ) | — |
| (50,647 | ) | |||
Net deferred income tax assets |
| Ps. | 117,730 |
| Ps. | 670,224 |
| Ps. | 787,954 |
|
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
|
| December 31, 2016 |
| |||||||
|
| ASC 740-10 applied to |
| ASC 740-10 applied |
| ASC 740-10 |
| |||
Deferred tax assets |
|
|
|
|
|
|
| |||
Loan loss reserves |
| Ps. | 169,225 |
| Ps. | 41,414 |
| Ps. | 210,639 |
|
Loans origination fees and cost |
| — |
| 23,843 |
| 23,843 |
| |||
Provisions |
| 22,662 |
| 192,317 |
| 214,979 |
| |||
Transfer of Financial Assets |
| — |
| 122,774 |
| 122,774 |
| |||
Credit Card Loans — Imputed Interest |
| — |
| 30,962 |
| 30,962 |
| |||
Government securities and other investments |
| — |
| 3,320 |
| 3,320 |
| |||
Financial Guarantees |
| — |
| 3,189 |
| 3,189 |
| |||
Loss carry forward |
| 137,067 |
| — |
| 137,067 |
| |||
|
| Ps. | 328,954 |
| Ps. | 417,819 |
| Ps. | 746,773 |
|
Deferred tax liabilities |
|
|
|
|
|
|
| |||
Fixed Assets |
| Ps. | 29,983 |
| Ps. | (6,837 | ) | Ps. | 23,146 |
|
Intangible assets |
| 24,269 |
| (9,260 | ) | 15,009 |
| |||
|
| Ps. | 54,252 |
| Ps. | (16,097 | ) | Ps. | 38,155 |
|
|
|
|
|
|
|
|
| |||
Net deferred income tax asset before valuation allowance |
| Ps. | 274,702 |
| Ps. | 433,916 |
| Ps. | 708,618 |
|
Valuation allowance |
| (137,067 | ) | — |
| (137,067 | ) | |||
Net deferred income tax assets |
| Ps. | 137,635 |
| Ps. | 433,916 |
| Ps. | 571,551 |
|
The following table reconciles the statutory income tax rate in Argentina to the Group´s effective tax rate calculated on the basis of US GAAP for the years ended December 31, 2017, 2016 and 2015:
|
| December 31, |
| |||||||
|
| 2017 |
| 2016 |
| 2015 |
| |||
Pre-tax income in accordance with US GAAP (a) |
| Ps. | 2,352,923 |
| Ps. | 1,345,089 |
| Ps. | 931,395 |
|
Statutory income tax rate |
| 35 | % | 35 | % | 35 | % | |||
Tax on net income at statutory rate |
| Ps. | 823,523 |
| Ps. | 470,781 |
| Ps. | 325,988 |
|
Permanent tax differences |
| (81,661 | ) | (188,124 | ) | (78,743 | ) | |||
Changes in valuation allowance |
| (86,420 | ) | 36,563 |
| 8,074 |
| |||
Income tax in accordance with US GAAP |
| Ps. | 655,442 |
| Ps. | 319,221 |
| Ps. | 255,319 |
|
(a) Includes pre-tax income of trusts that are consolidated under US GAAP, as described in Note 35.I.d.
ASC 740-10 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition for uncertain tax positions taken or expected to be taken in a tax return. As of December 31, 2017 and 2016, there were no uncertain tax positions.
The following table shows the tax years open for examination as of December 31, 2017, in which the Group’s operate:
|
| |
|
|
l. Accounting for guarantees
The Bank issues financial guarantees, which are obligations to pay to a third party when a customer fails to repay its obligation.
Under Central Bank rules, guarantees issued are recognized as liabilities when it is probable that the obligation undertaken by the guarantor will be performed.
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
Under US GAAP, FASB ASC 460 “Guarantees” requires that at inception of a guarantee, a guarantor recognize a liability for the fair value of the obligation undertaken in issuing the guarantee. Such liability at inception is deemed to be the fee received by the Group with an offsetting entry equal to the consideration received. Subsequent reduction of liability is based on an amortization method as the Group is decreasing its risk. As of December 31, 2017 and 2016, the fair value of the guarantees less the estimated proceeds from collateral amounted to Ps. (6,616) and Ps. (9,111), respectively. Net income adjustment as of December 31, 2017, 2016 and 2015 amounted to Ps. 2,495, Ps. 526 and Ps. (10,997), respectively.
m. Non-controlling Interest
Argentine Banking GAAP requires to record non-controlling interests as a component of the liabilities. Under US GAAP, FASB ASC 810 requires to record such interests as shareholders’ equity. As consequence, consolidated net income and comprehensive income are reported with separate disclosure of the amounts attributable to the parent company and to the non-controlling interest. The non-controlling interest in accordance with Argentine Banking GAAP has been eliminated for US GAAP reconciliation purposes. Also, non-controlling interest under US GAAP reflects the effect in non-controlling interest of all the other US GAAP adjustments discussed.
Had US GAAP been applied, the Group’s shareholder’s equity would increase by Ps. 1,602 and Ps. 18,735 at December 31, 2017 and 2016, respectively. In addition, income for the fiscal years ended at December 31, 2017, 2016 and 2015 would have (decreased) / increased by Ps. (16,886), Ps. 3,290 and Ps. 3,558, respectively.
II. Additional disclosure requirements:
a)Comprehensive income
“Reporting Comprehensive Income” ASC 220 establishes standards for reporting and the display of comprehensive income and its components (revenues, expenses, gains and losses) in the financial statements. Comprehensive income is the total of net income and all transactions, and other events and circumstances from non-owner sources.
The following disclosure presents the Comprehensive Income according to ASC 220, for the years ended December 31, 2017, 2016 and 2015:
|
| December 31, |
| |||||||
|
| 2017 |
| 2016 |
| 2015 |
| |||
Income Statement |
|
|
|
|
|
|
| |||
Financial income |
| Ps. | 15,991,409 |
| Ps. | 10,981,488 |
| Ps. | 7,496,156 |
|
Financial expenses |
| (6,448,536 | ) | (5,191,330 | ) | (3,809,350 | ) | |||
Gross financial margin — gain |
| 9,542,873 |
| 5,790,158 |
| 3,686,806 |
| |||
Loan Loss provisions net of recoveries |
| (2,200,682 | ) | (1,099,229 | ) | (532,191 | ) | |||
Services fee income |
| 4,746,614 |
| 3,459,641 |
| 2,662,219 |
| |||
Services fee expense |
| (1,504,268 | ) | (1,097,632 | ) | (759,367 | ) | |||
Administrative expenses |
| (8,886,710 | ) | (6,159,154 | ) | (4,454,857 | ) | |||
Subtotal- Income from financial transactions |
| 1,697,827 |
| 893,784 |
| 602,610 |
| |||
Income from insurance activities |
| 479,061 |
| 606,143 |
| 175,947 |
| |||
Miscellaneous income |
| 545,898 |
| 298,897 |
| 367,165 |
| |||
Miscellaneous losses |
| (369,863 | ) | (453,735 | ) | (214,327 | ) | |||
Income before tax |
| 2,352,923 |
| 1,345,089 |
| 931,395 |
| |||
Income Tax |
| (655,442 | ) | (319,221 | ) | (255,319 | ) | |||
Net income under US GAAP |
| Ps. | 1,697,481 |
| Ps. | 1,025,868 |
| Ps. | 676,076 |
|
|
|
|
|
|
|
|
| |||
Less: Net Income attributable to the Non-controlling Interest. |
| (52,889 | ) | (28,184 | ) | (57,722 | ) | |||
Net Income attributable to the Group |
| Ps. | 1,644,592 |
| Ps. | 997,684 |
| Ps. | 618,354 |
|
(a) includes net income from participation in Financial Trust consolidated under US GAAP
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
Comprehensive income
|
| December 31, |
| |||||||
|
| 2017 |
| 2016 |
| 2015 |
| |||
Net income for the year |
| Ps. | 1,697,481 |
| Ps. | 1,025,868 |
| Ps. | 676,076 |
|
Other comprehensive income: |
|
|
|
|
|
|
| |||
Gross unrealized (loss) / gain, net |
| 7,274 |
| (7,242 | ) | 18,653 |
| |||
Estimated tax benefit / (loss) on unrealized (loss) / gain on available for sale securities |
| (2,546 | ) | 2,535 |
| (6,529 | ) | |||
Unrealized (loss) / gain, net of tax |
| 4,728 |
| (4,707 | ) | 12,124 |
| |||
Comprehensive income |
| 1,702,209 |
| 1,021,161 |
| 688,200 |
| |||
Less: Other comprehensive income attributable to non-controlling interest |
| (247 | ) | 284 |
| (983 | ) | |||
Less: Comprehensive income attributable to non-controlling interest |
| (52,889 | ) | (28,183 | ) | (57,722 | ) | |||
Comprehensive income attributable to the Group |
| Ps. | 1,649,073 |
| Ps. | 993,262 |
| Ps. | 629,495 |
|
|
| December 31, |
| |||||||
|
| 2017 |
| 2016 |
| 2015 |
| |||
Unrealized net (loss) / gains - Available for sale securities |
| Ps. | 747 |
| Ps. | (6,527 | ) | Ps. | 715 |
|
Estimated tax benefits / (loss) on unrealized net gains on available for sale securities |
| (262 | ) | 2,284 |
| (250 | ) | |||
Accumulated other comprehensive income, net |
| Ps. | 485 |
| Ps. | (4,243 | ) | Ps. | 465 |
|
b) Statements of Income and Balance Sheets
The presentation of financial statements according to the Argentine Banking GAAP differs significantly from the format required by the SEC under Rules 210.9 to 210.9-07 of Regulation S-X (Article 9). The income statements presented below disclose the categories required by Article 9 using Argentine Banking GAAP:
|
| December 31, |
| |||||||
|
| 2017 |
| 2016 |
| 2015 |
| |||
Interest income |
|
|
|
|
|
|
| |||
Interest and fees on loans |
| Ps. | 12,652,880 |
| Ps. | 8,887,937 |
| Ps. | 5,733,880 |
|
Interest and dividends on investment securities taxable |
| 2,373,059 |
| 1,241,555 |
| 689,472 |
| |||
Interest on other receivables from financial transactions |
| 364,836 |
| 412,467 |
| 273,657 |
| |||
|
| Ps. | 15,390,775 |
| Ps. | 10,541,959 |
| Ps. | 6,697,009 |
|
Interest expense |
|
|
|
|
|
|
| |||
Interest on deposits |
| 2,960,459 |
| 3,076,406 |
| 2,173,450 |
| |||
Interest on securities sold under agreements to repurchase |
| 108,712 |
| 94,143 |
| 38,085 |
| |||
Interest on short-term liabilities from financial intermediation |
| 1,933,596 |
| 792,419 |
| 480,079 |
| |||
Interest on long-term liabilities from financial intermediation |
| 128,237 |
| 128,027 |
| 81,282 |
| |||
|
| Ps. | 5,131,004 |
| Ps. | 4,090,995 |
| Ps, | 2,772,896 |
|
|
|
|
|
|
|
|
| |||
Net interest income |
| Ps. | 10,259,771 |
| Ps. | 6,450,964 |
| Ps. | 3,924,113 |
|
|
|
|
|
|
|
|
| |||
Provision for loan losses, Net of reversals |
| 1,652,325 |
| 926,650 |
| 483,645 |
| |||
Net interest income after provision for loan losses |
| Ps. | 8,607,446 |
| Ps. | 5,524,314 |
| Ps. | 3,440,468 |
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
Non-interest income |
|
|
|
|
|
|
| |||
Service charges on deposit accounts |
| Ps. | 1,435,289 |
| Ps. | 925,096 |
| Ps. | 678,531 |
|
Credit-card service charges and fees |
| 937,690 |
| 802,059 |
| 769,446 |
| |||
Other commissions |
| 868,288 |
| 594,910 |
| 881,083 |
| |||
Insurance commissions, fees and premiums |
| 1,162,677 |
| 1,120,921 |
|
|
| |||
Loans related commissions |
| 1,084,217 |
| 730,099 |
| 506,648 |
| |||
Income from equity in other companies |
| 27,648 |
| — |
| 3 |
| |||
Foreign exchange, net |
| 250,758 |
| 367,436 |
| 44,735 |
| |||
Other |
| 571,302 |
| 353,119 |
| 482,910 |
| |||
Total non-interest income |
| Ps. | 6,337,869 |
| Ps. | 4,893,640 |
| Ps. | 3,363,356 |
|
Non-interest expense |
|
|
|
|
|
|
| |||
Commissions |
| Ps. | 800,636 |
| Ps. | 559,391 |
| Ps. | 365,847 |
|
Personnel expenses |
| 5,475,674 |
| 3,860,094 |
| 2,767,111 |
| |||
Fees and external administrative services |
| 507,065 |
| 360,519 |
| 246,061 |
| |||
Depreciation of premises and equipment |
| 118,594 |
| 81,558 |
| 56,637 |
| |||
Renting |
| 249,934 |
| 225,363 |
| 148,381 |
| |||
Electricity and communications |
| 193,227 |
| 149,888 |
| 101,009 |
| |||
Advertising and publicity |
| 549,408 |
| 443,526 |
| 314,295 |
| |||
Taxes |
| 2,035,846 |
| 1,438,996 |
| 1,101,813 |
| |||
Amortization of other intangibles |
| 128,875 |
| 111,284 |
| 92,431 |
| |||
Loss from equity in others companies |
| — |
| 4,997 |
| — |
| |||
Repair maintenance and conservation |
| 356,500 |
| 308,276 |
| 147,845 |
| |||
Insurance |
| 35,498 |
| 26,476 |
| 14,204 |
| |||
Security Services |
| 191,282 |
| 132,122 |
| 95,751 |
| |||
Other Provisions and reserves |
| 44,797 |
| 76,627 |
| 23,863 |
| |||
Other |
| 998,655 |
| 766,003 |
| 362,173 |
| |||
Stationary and supplies |
| 43,885 |
| 38,762 |
| 29,055 |
| |||
Total non-interest expense |
| Ps. | 11,729,876 |
| Ps. | 8,583,880 |
| Ps. | 5,866,476 |
|
|
|
|
|
|
|
|
| |||
Income before tax expense |
| 3,215,439 |
| 1,834,074 |
| 937,350 |
| |||
Income tax expense |
| 772,483 |
| 500,603 |
| 247,161 |
| |||
Net Income attributable to Parent Company |
| Ps. | 2,442,956 |
| Ps. | 1,333,471 |
| Ps. | 690,189 |
|
Net Income attributable to non-controlling interest |
| Ps. | 5,897 |
| 22,166 |
| 16,080 |
| ||
Net Income |
| Ps. | 2,437,059 |
| Ps. | 1,311,304 |
| Ps. | 674,109 |
|
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
Argentine Banking GAAP also requires certain classifications of assets and liabilities which are different from those required by Article 9. The following balance sheet presents Grupo Supervielle’s balance sheetsubject to a master netting arrangement not offset is as of December 31, 2017 and 2016, as if they had followed Article 9 balance sheet disclosure requirements using Argentine Banking GAAP.
|
| December 31, |
| ||||
|
| 2017 |
| 2016 |
| ||
Assets |
|
|
|
|
| ||
Cash and due from banks |
| Ps. | 3,105,770 |
| Ps. | 2,048,348 |
|
Interest bearing deposits in other Banks |
| 8,023,716 |
| 6,115,561 |
| ||
Trading account assets |
| 1.734.409 |
| 945,991 |
| ||
Other short-term investments |
| 680,866 |
| 1,185,637 |
| ||
Available for sale securities (*) |
| 13,612,362 |
| 1,414,053 |
| ||
Loans |
| 58,613,161 |
| 36,664,087 |
| ||
Allowances for loan losses (Note 7) |
| (1,536,728 | ) | (888,677 | ) | ||
Loans, net |
| 57,076,433 |
| 35,775,410 |
| ||
Other receivables from financial transactions |
| 5,880,530 |
| 2,585,807 |
| ||
Miscellaneous receivables |
| 1,776,209 |
| 1,106,292 |
| ||
Premises and equipment |
| 694,430 |
| 620,003 |
| ||
Intangible Assets — Goodwill |
| 22,042 |
| 31,263 |
| ||
Intangible Assets — Other |
| 302,459 |
| 252,334 |
| ||
Assets held for sale (**) |
| — |
| 207,656 |
| ||
Other assets |
| 1,062,052 |
| 917,687 |
| ||
Total assets |
| Ps. | 93,971,278 |
| Ps. | 53,206,042 |
|
|
| December 31, |
| ||||
|
| 2017 |
| 2016 |
| ||
Liabilities and Shareholders’ Equity: |
|
|
|
|
| ||
Noninterest bearing Deposits |
| Ps. | 22,984,798 |
| Ps. | 12,265,395 |
|
Interest bearing Deposits |
| 33,502,231 |
| 23,632,468 |
| ||
Short-term borrowing |
| 3,796,719 |
| 3,344,884 |
| ||
Other liabilities |
| 60,512 |
| 134,158 |
| ||
Amounts payable for spot and forward purchases pending settlement |
| 3,764,064 |
| 592,386 |
| ||
Other liabilities from financial transactions |
| 2,685,835 |
| 2,193,928 |
| ||
Long-term debt |
| 8,882,608 |
| 1,697,360 |
| ||
Other Liabilities (***) |
| 3,058,053 |
| 2,173,223 |
| ||
Liabilities held for sale (**) |
| — |
| 74,687 |
| ||
Contingent liabilities |
| 80,163 |
| 62,596 |
| ||
Total Liabilities |
| Ps. | 78,814,983 |
| Ps. | 46,171,094 |
|
|
|
|
|
|
| ||
Total Parent Company shareholders´ equity |
| 15,144,798 |
| 6.931.551 |
| ||
Non-controlling Interest |
| 11,497 |
| 103.397 |
| ||
Total liabilities and shareholders’ equity |
| Ps. | 93,971,278 |
| Ps. | 53.206.042 |
|
Table of Contentsfollows:
Grupo Supervielle S.A. and Subsidiaries
Amounts subject to a master netting arrangement not offset | ||||||||||||||||||||||||
12/31/2019 | Gross amount (a) | Amount offset (b) | Net in Financial Statements (c) = (a) – (b) | Financial asset / (Financial liability) | Collateral | Net amount | ||||||||||||||||||
Credit cards transactions | - | - | - | (2,288,756 | ) | 607,592 | (1,681,164 | ) | ||||||||||||||||
Derivatives instruments | 310,969 | (53,382 | ) | 257,587 | - | - | - | |||||||||||||||||
Total | 310,969 | (53,382 | ) | 257,587 | (2,288,756 | ) | 607,592 | (1,681,164 | ) |
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
(*) The carrying value and market value of securities classified into “available-for-sale securities” have been mentioned in note 35.1.e. This line includes Ps. 735 corresponding to restricted investments.
(**) These lines includes the assets and liabilities of Cordial Microfinanzas that have been classified as held for sale as it met the criteria stablished by the ASC 360-45-9 and have been measured at its carrying value.
(***) These line include taxes payables, sundry accounts and social debts.
In the following table is a description of total loans by categories:
|
| December 31, |
| December 31, |
| ||||
|
| 2017 |
| 2016 |
| ||||
|
|
|
|
|
|
|
|
|
|
Financial Sector |
| 3,236,350 |
| 6 | % | 823,772 |
| 2 | % |
Services |
| 3,578,836 |
| 6 | % | 1,656,902 |
| 5 | % |
Primary Products |
| 6,275,915 |
| 11 | % | 3,069,654 |
| 8 | % |
Consumer |
| 30,420,943 |
| 51 | % | 20,343,028 |
| 55 | % |
Retail Trade |
| 1,540,861 |
| 3 | % | 1,324,768 |
| 3 | % |
Construction |
| 5,200,237 |
| 9 | % | 3,482,245 |
| 10 | % |
Manufacturing |
| 4,318,475 |
| 7 | % | 1,736,015 |
| 5 | % |
Other |
| 4,041,544 |
| 7 | % | 4,227,703 |
| 12 | % |
Total |
| 58,613,161 |
| 100 | % | 36,664,087 |
| 100 | % |
Transactions with related parties are described in note 18.
c) Fair Value Measurements Disclosures
ASC 820 -10 defines fair value, establishes a consistent framework for measuring fair value and expands disclosure requirements about fair-value measurements. ASC 820 -10, among other things, requires the Group to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
In addition, ASC 825 -10 provides an option to elect fair value as an alternative measurement for selected financial assets, financial liabilities, unrecognized firm commitments and written loan commitments not previously recorded at fair value. Under ASC 825 -10, fair value is used for both the initial and subsequent measurement of the designated assets, liabilities and commitments, with the changes in fair value recognized in net income. As a result of ASC 825 -10 analyses, the Group has not elected to apply fair value accounting for any of its financial instruments not previously carried at fair value.
Fair Value Hierarchy
ASC 820 -10, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
ASC 820 -10 establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:
· Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
Amounts subject to a master netting arrangement not offset | ||||||||||||||||||||||||
12/31/2018 | Gross amount (a) | Amount offset (b) | Net in Financial Statements (c) = (a) – (b) | Financial asset / (Financial liability) | Collateral | Net amount | ||||||||||||||||||
Credit cards transactions | - | - | - | (2,979,844 | ) | 816,006 | (2,163,838 | ) | ||||||||||||||||
Total | - | - | - | (2,979,844 | ) | 816,006 | (2,163,838 | ) |
| 33. |
| |
| |||
|
| ||
MINIMUM CAPITAL REQUIREMENTS |
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Determination of Fair Value
The Group identified and categorized different assets and liabilities measured at fair value in accordance with the requirements of FASB ASC 820.
Fair value is based upon quoted market prices, where available. If listed prices or quotes are not available, fair value is based upon internally developed models that use primarily market-based or independently-sourced market parameters, including interest rate yield curves, option volatilities and currency rates. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments include amounts to reflect counterparty credit quality, the Group’s creditworthiness, liquidity and unobservable parameters that are applied consistently over time.
The Group believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies, or assumptions, to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
The following section describes the valuation methodologies used by the Group to measure various financial instruments at fair value, including an indication of the level in the fair-value hierarchy in which each instrument is generally classified. Where appropriate, the description includes details of the valuation models, the key inputs to those models as well as any significant assumptions.
Description of the measurement processes
The Group uses fair value to measure certain assets and liabilities on a recurring basis when fair value is the primary measure for accounting. This is done primarily for government and private securities (debt instruments issued by National Government and Central Bank and other) classified as available for sale or trading account, forward transactions pending settlement and derivatives (forward transactions without delivery of underlying assets and interest rate swaps).
Grupo Supervielle S.A. and Subsidiaries
Notesrequires financial institutions to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
Assets
Government and corporate securities
Investment securities: as quoted market prices are available in an active market, securities are classified within level 1 of the valuation hierarchy. Level 1 securities include national and government bonds, instruments issued by BCRA and corporate securities.
Derivatives Financial Instruments
Forward transactions traded in Self-Regulated markets are made through recognized exchange markets, such as MAE and ROFEX. Therefore, they are classified in Level 1 of the fair-value hierarchy.
Itemsmaintain minimum capital amounts measured at fair value on a recurring basis
The following table presents the financial instruments carried at fair value as of December 31, 2017 and 2016, under US GAAP:
Balances as of December 31, 2017 |
| Total fair value |
| Quoted market |
| Internal models |
| Internal models |
| ||||
Assets |
|
|
|
|
|
|
|
|
| ||||
Government and corporate securities |
|
|
|
|
|
|
|
|
| ||||
Holdings of trading securities |
| Ps. | 139,385 |
| Ps. | 139,385 |
| Ps. | — |
| Ps. | — |
|
Unlisted government securities |
| 1,802,568 |
| 1,802,568 |
| — |
| — |
| ||||
Investments in listed corporate securities |
| 38,624 |
| 38,624 |
| — |
| — |
| ||||
Securities issued by the Argentine Central Bank (*) |
| 11,673,866 |
| 11,673,866 |
| — |
| — |
| ||||
Other receivables from financial transaction |
|
|
|
|
|
|
|
|
| ||||
Securities receivable under spot and forward purchases pending settlement |
| 25,371 |
| 25,371 |
| — |
| — |
| ||||
Unlisted corporate bonds |
| 67.156 |
| 67,156 |
| — |
| — |
| ||||
|
| Ps. | 13,773,886 |
| Ps. | 13,773,886 |
| Ps. | — |
| Ps. | — |
|
Liabilities |
|
|
|
|
|
|
|
|
| ||||
Securities to be delivered under spot and forward sales pending settlement |
| Ps. | 3,788,545 |
| Ps. | 3,788,545 |
| Ps. | — |
| Ps. | — |
|
|
| Ps. | 3,788,545 |
| Ps. | 3,788,545 |
| Ps. | — |
| Ps. | — |
|
(*) “Securities issued byeach month’s closing. The minimum capital is defined as the Argentine Central Bank” includes a reverse repo transaction operation for an amountgreater of Ps. 3,738,790 that it(i) the basic minimum capital requirement, which is adjusted in Note 35.II.f. “Repurchase agreements”.
Balances as of December 31, 2016 |
| Total fair value |
| Quoted market |
| Internal models |
| Internal models |
| ||||
Assets |
|
|
|
|
|
|
|
|
| ||||
Government and corporate securities |
|
|
|
|
|
|
|
|
| ||||
Holdings of trading securities |
| Ps. | 158,386 |
| Ps. | 158,386 |
| Ps. | — |
| Ps. | — |
|
Investments in listed corporate securities |
| 1,895 |
| 1,895 |
| — |
| — |
| ||||
Unlisted government securities |
| 811,195 |
| 811,195 |
| — |
| — |
| ||||
Securities issued by the Argentine Central Bank (*) |
| 2,391,386 |
| 2,391,386 |
| — |
| — |
| ||||
Other receivables from financial transaction |
|
|
|
|
|
|
|
|
| ||||
Derivative instruments |
| 28,304 |
| 28,304 |
| — |
| — |
| ||||
Securities receivable under spot and forward purchases pending settlement |
| 591,408 |
| 591,408 |
| — |
| — |
| ||||
Unlisted corporate bonds |
| 29,112 |
| 29,112 |
| — |
| — |
| ||||
|
| Ps. | 3,853,300 |
| Ps. | 3,853,300 |
| Ps. | — |
| Ps. | — |
|
Liabilities |
|
|
|
|
|
|
|
|
| ||||
Securities to be delivered under spot and forward sales pending settlement |
| Ps. | 29,979 |
| Ps. | 29,979 |
| Ps. | — |
| Ps. | — |
|
|
| Ps. | 29,979 |
| Ps. | 29,979 |
| Ps. | — |
| Ps. | — |
|
Tableexplained below, or (ii) the sum of Contents
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
(*) “Securities issued by the Argentine Central Bank” includes a reverse repo transaction operation for an amount of Ps. 37,840 that it is adjusted in Note 35.II.f. “Repurchase agreements”.
As of December 31, 2017 and 2016 there are not assets and liabilities recorded at fair value on a non-recurring basis.
As of December 31, 2017 and 2016, the Group has not made transfers in or out of Level 1, Level 2, and Level 3.
d) Disclosure about Fair Value of Financial Instruments.
ASC 825, “Disclosures about Fair Value of Financial Instruments” requires disclosures of estimates of fair value of financial instruments. These estimates were made as of December 31, 2017 and 2016. Because many of the Group’s financial instruments do not have a ready trading market from which to determine fair value, the disclosures are based upon estimates regarding economic and current market conditions and risk characteristics. Such estimates are subjective and involve matters of judgment and, therefore, are not precise and may not be reasonably comparable to estimates of fair value for similar instruments made by other financial institutions.
The estimated fair values do not include the value of assets and liabilities not considered financial instruments.
|
| December 31, |
|
|
|
|
|
|
| ||||
|
| 2017 |
|
|
|
|
|
|
| ||||
|
| Book Value |
| Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
| ||
Non derivative activities |
|
|
|
|
|
|
|
|
|
|
| ||
Assets |
|
|
|
|
|
|
|
|
|
|
| ||
Cash and due from banks (1) |
| Ps. | 11,129,475 |
| Ps, | 11,129,475 |
| 11,129,475 |
| — |
| — |
|
Government and Corporate securities(*) (2) |
| 11,607,246 |
| 11,609,195 |
| 11,609,195 |
| — |
| — |
| ||
Loans and leases (3) |
| 57,473,574 |
| 62,873,349 |
| — |
| — |
| 62,873,349 |
| ||
Others (**) (4) |
| 6,609,656 |
| 6,610,194 |
| 6,610,194 |
| — |
| — |
| ||
|
|
|
|
|
|
|
|
|
|
|
| ||
Liabilities |
|
|
|
|
|
|
|
|
|
|
| ||
Deposits (5) |
| Ps. | 56,487,027 |
| Ps, | 56,357,281 |
| — |
| — |
| 56,357,281 |
|
Other liabilities from financial transactions (6) |
| 10,136,152 |
| 10,136,152 |
| 3,820,334 |
| — |
| 6,315,818 |
| ||
Negotiable obligations (7) |
| 8,993,075 |
| 8,982,279 |
| — |
| — |
| 8,982,279 |
| ||
Others (8) |
| 3,058,053 |
| 3,058,053 |
| — |
| — |
| 3,058,053 |
|
(*)“Government and Corporate securities” includes an adjustment related a reverse repo transaction operation for an amount of for an amount of Ps. 3,738,790 that have been adjusted for US GAAP purposes.
(**)“Assets - Others” includes an adjustment related forward transactions pending settlement for an amount of Ps. 20,610 that have been adjusted for US GAAP purposes.
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
|
| December 31, |
|
|
|
|
|
|
| ||||
|
| 2016 |
|
|
|
|
|
|
| ||||
|
| Book Value |
| Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
| ||
Non derivative activities |
|
|
|
|
|
|
|
|
|
|
| ||
Assets |
|
|
|
|
|
|
|
|
|
|
| ||
Cash and due from banks (1) |
| Ps. | 8,166,132 |
| Ps. | 8,166,132 |
| 8,166,132 |
| — |
| — |
|
Government and Corporate securities (2) (*) |
| 2,360,044 |
| 2,351,580 |
| 2,351,580 |
| — |
| — |
| ||
Loans and leases (3) |
| 36,424,364 |
| 39,141,141 |
| — |
| — |
| 39,141,141 |
| ||
Others (**) (4) |
| 3,772,576 |
| 3,788,752 |
| 3,769,791 |
| — |
| 18,961 |
| ||
|
|
|
|
|
|
|
|
|
|
|
| ||
Liabilities |
|
|
|
|
|
|
|
|
|
|
| ||
Deposits (5) |
| Ps. | 35,897,864 |
| Ps. | 35,846,634 |
| — |
| — |
| 35,846,634 |
|
Other liabilities from financial transactions (6) |
| 4,547,898 |
| 4,547,898 |
| 627,331 |
| — |
| 3,920,567 |
| ||
Negotiable obligations (7) |
| 3,345,694 |
| 3,378,350 |
| — |
| — |
| 3,378,350 |
| ||
Others (8) |
| 2,182,228 |
| 2,182,228 |
| — |
| — |
| 2,182,228 |
|
(*)“Government and Corporate securities” includes an adjustment related to forward transactions pending settlement for an amount of Ps. 48,322 that have been adjusted for US GAAP purposes.
(**)“Assets - Others” include forward transactions pending settlement for an amount of Ps. 8,250 that have been adjusted for US GAAP purposes.
The following is a description of the estimating techniques applied:
(1) Cash and due from banks: By definition, cash and due from banks are short-term and do not possess credit risk. The carrying values as of December 31, 2017 and 2016 are a reasonable estimate of fair value.
(2) Government and Corporate securities: When available, the Group uses quoted market prices to determine the fair value. If market prices are not available, quoted prices for similar assets in active markets have been used to calculate the fair value.
(3) Loans: The fair values of loans are estimated for groups with similar characteristics, including type of loan, credit quality incorporating the credit risk, factor. For floating- or adjustable-rate loans, which mature or are repriced within a short period of time,operational risk and market risk. Financial institutions (including their domestic Argentine and international branches) must comply with the carrying values are considered to be a reasonable estimate of fair values. For fixed-rate loans, market prices are not generally available and the fair values are estimated discounting the estimated future cash flows based on the contracted maturity of the loans. The discount rates are based on the current market rates corresponding to the applicable maturity. For non-performing loans, the fair values are generally determinedminimum capital requirements both on an individual basis by discounting the estimated future cash flows and may be based on the appraisal value of underlying collateral as appropriate. The fair value of “loans” is classified as Level 3 of the valuation hierarchy where significant unobservable inputs were used to calculate the fair value. The valuation technique used to obtain the fair value was an income approach using discounted cash flows. No changes in the valuation technique took place during the year.
(4) Others: Includes other receivables from financial transactions and equity investments in other companies. This caption also includes financial trusts certificates of participation the fair value of which is estimated using valuation techniques to convert the future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The estimate of the cash flows is based on the future cash flows from the securitized assets, considering prepayments, historical loan performance, etc. Equity investments in companies where significant influence is exercised are not within the scope of ASC 825, Financial Instruments. Equity investments in other companies are carried at market value less costs to sell.
(5) Deposits: The fair value of deposit liabilities on demand and savings account deposits is similar to its book value. The fair value of time deposits was calculated by discounting contractual cash flows using current market rates for instruments with similar maturities.
(6) Other liabilities from financial transactions: Includes credit lines borrowed under different credit arrangements. As of December 31, 2017 and 2016, when no quoted market prices were available, the
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
estimated fair value has been calculated by discounting the contractual cash flows of these liabilities at estimated market rates.
(7) Negotiable obligations: As of December 31, 2017 and 2016, the fair value of the negotiable obligations was determined based on quoted market prices and when no quoted market prices were available, the estimated fair value has been calculated by discounting the contractual cash flows of these liabilities at estimated market rates.
(8) Others: Includes other liabilities from financial transactions. Their fair value was estimated at the expected future cash flows discounted at the estimated market rates at year-end.
e) Segment Reporting
The Group has disclosed its segment information in accordance with the “Disclosures about Segments of an Enterprise and Related Information” ASC 280-10. Operating segments are defined as components of an enterprise about which separate financial information is available and which is regularly reviewed by the Chief Operating Decision Maker (CODM) in deciding how to allocate resources and in assessing performance. Reportable segments consist of one or more operating segments with similar economic characteristics, distribution systems and regulatory environments. The information provided for Segment Reporting is based on internal reports used by management.
The Group measures the performance of each of its 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.”
Income from financial transactions and other segment information are based on Argentine Banking GAAP and are consistent with the presentation of the Group’s consolidated financial statements.
The Group operates its business along the following segments:
·Retail Banking: Through the Bank, we offer our retail customers a full range of financial products and services, including personal loans, deposit accounts, purchase and sale of foreign exchange and precious metals and credit cards, among others.
·Corporate Banking: Through the Bank, we offer large corporations, medium-sized companies and small businesses a full range of products, services and financial assessment including factoring, leasing, foreign trade finance and cash management.
·Treasury: The Treasury segment is primarily responsible for the allocation of the Bank’s liquidity according to the needs and opportunities of the Retail Banking segment, the Corporate Banking segment and its own needs and opportunities. 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.
·Consumer Finance: Through CCF and Tarjeta, we offer credit card services and loans to the middle and lower-middle-income sectors. We also offer consumer loans, credit cards and insurance products through an exclusive agreement with Walmart Argentina.
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
·Insurance: Through Supervielle Seguros, we offer insurance products, with a focus on life insurance, to targeted customer segments.
·Asset Management & Other Services: We also offer a variety of other services to our customers, including asset management, microcredit financing (through Cordial Microfinanzas), mutual fund products (through SAM) and non-financial products and services (through Espacio Cordial).
Below is a table with the information for each segment identified by the Group as of and for the years ended December 31, 2017, 2016 and 2015.
|
| As of December 31, 2017 |
| ||||||||||||||
|
| (in thousands of pesos) |
| ||||||||||||||
|
| Retail |
| Corporate |
| Treasury |
| Consumer |
| Insurance |
| Asset |
| Adjustments |
| Consolidated |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
| 2,799,066 |
| 260,107 |
| 8,000,292 |
| 74,143 |
| 3,012 |
| 340 |
| (7,485 | ) | 11,129,475 |
|
Government and corporate securities |
| — |
| — |
| 15,255,201 |
| — |
| 87,832 |
| 3,003 |
| — |
| 15,346,036 |
|
Loans |
| 20,868,845 |
| 27,605,696 |
| 2,302,233 |
| 6,093,736 |
| — |
| — |
| (1,916,137 | ) | 54,954,373 |
|
Other receivables from financial transactions |
| (4,251 | ) | 506,331 |
| 4,570,399 |
| 794,727 |
| 330,864 |
| 315,115 |
| 48,211 |
| 6,561,396 |
|
Receivables from financial leasing |
| 439,189 |
| 2,080,012 |
| — |
| — |
| — |
| — |
| — |
| 2,519,201 |
|
Other assets |
| 379,155 |
| 10,893 |
| 244,148 |
| 522,328 |
| 111,323 |
| 285,235 |
| 1,907,715 |
| 3,460,797 |
|
Total Assets |
| 24,482,004 |
| 30,463,039 |
| 30,372,273 |
| 7,484,934 |
| 533,031 |
| 603,693 |
| 32,304 |
| 93,971,278 |
|
|
| As of December 31, 2017 |
| ||||||||||||||
|
| (in thousands of Pesos) |
| ||||||||||||||
|
| Retail |
| Corporate |
| Treasury |
| Consumer |
| Insurance |
| Asset Mgmt & |
| Adjustments |
| Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial income |
| 6,186,492 |
| 3,719,565 |
| 2,261,049 |
| 3,032,272 |
| 96,017 |
| 49,354 |
| 149,922 |
| 15,494,671 |
|
Financial expenses |
| (1,816,992 | ) | (449,607 | ) | (3,017,638 | ) | (1,370,932 | ) | (1,789 | ) | (1,071 | ) | 463,741 |
| (6,194,288 | ) |
Distribution of Income (Expenses) for Treasury Funds(1) |
| 1,172,277 |
| (2,313,053 | ) | 1,140,776 |
| — |
| — |
| — |
| — |
| — |
|
Gross financial margin |
| 5,541,777 |
| 956,905 |
| 384,187 |
| 1,661,340 |
| 94,228 |
| 48,283 |
| 613,663 |
| 9,300,383 |
|
Services Fee Income |
| 2,835,892 |
| 806,289 |
| 64,768 |
| 1,284,466 |
| — |
| 561,712 |
| (579,855 | ) | 4,973,272 |
|
Services Fee Expenses |
| (1,177,104 | ) | (102,617 | ) | (22,818 | ) | (625,461 | ) | — |
| (8,411 | ) | 440,563 |
| (1,495,848 | ) |
Net Service Fee Income |
| 1,658,788 |
| 703,672 |
| 41,950 |
| 659,005 |
| — |
| 553,301 |
| (139,292 | ) | 3,477,424 |
|
Income from Insurance Activities |
| — |
| — |
| — |
| — |
| 375,443 |
| — |
| 103,618 |
| 479,061 |
|
Net Revenue |
| 7,200,565 |
| 1,660,577 |
| 426,137 |
| 2,320,345 |
| 469,671 |
| 601,584 |
| 577,989 |
| 13,256,868 |
|
Loan Loss Provisions |
| (737,284 | ) | (153,312 | ) | (3,642 | ) | (924,499 | ) | — |
| — |
| (1,432 | ) | (1,820,169 | ) |
Direct costs |
| (3,934,851 | ) | (359,172 | ) | (116,792 | ) | (1,149,235 | ) | (154,366 | ) | (264,494 | ) | (28,260 | ) | (6,007,170 | ) |
Indirect costs |
| (1,599,491 | ) | (546,087 | ) | (237,874 | ) | — |
| — |
| — |
| — |
| (2,383,452 | ) |
Income from financial transactions |
| 928,939 |
| 602,006 |
| 67,829 |
| 246,611 |
| 315,305 |
| 337,090 |
| 548,297 |
| 3,046,077 |
|
Miscellaneous Income / (Expenses) |
| 98,907 |
| 28,591 |
| 1,451 |
| 16,939 |
| 1,184 |
| 3,220 |
| 19,070 |
| 169,362 |
|
Non-controlling interests result |
| — |
| — |
| — |
| — |
| — |
| — |
| (5,897 | ) | (5,897 | ) |
Income Before Income Tax |
| 1,027,846 |
| 630,597 |
| 69,280 |
| 263,550 |
| 316,489 |
| 340,310 |
| 561,470 |
| 3,209,542 |
|
Income tax |
| (346,827 | ) | (92,381 | ) | (21,534 | ) | (84,110 | ) | (110,875 | ) | (116,756 | ) | — |
| (772,483 | ) |
Net income |
| 681,019 |
| 538,216 |
| 47,746 |
| 179,440 |
| 205,614 |
| 223,554 |
| 561,470 |
| 2,437,059 |
|
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
|
| As of December 31, 2016 |
| ||||||||||||||
|
| (in thousands of pesos) |
| ||||||||||||||
|
| Retail |
| Corporate |
| Treasury |
| Consumer |
| Insurance |
| Asset |
| Adjustments |
| Consolidated |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
| 1,718,821 |
| 161,375 |
| 6,208,483 |
| 78,394 |
| 3,807 |
| 6,800 |
| (11,548 | ) | 8,166,132 |
|
Government and corporate securities |
| — |
| — |
| 2,247,370 |
| 8,594 |
| 104,080 |
| — |
| — |
| 2,360,044 |
|
Loans |
| 13,869,169 |
| 16,958,277 |
| 1,352,717 |
| 4,403,552 |
| — |
| 193,915 |
| (1,521,121 | ) | 34,896,509 |
|
Other receivables from financial transactions |
| 174,633 |
| 317,461 |
| 1,639,240 |
| 439,471 |
| 284,796 |
| 179,115 |
| 738,020 |
| 3,772,736 |
|
Receivables from financial leasing |
| 266,305 |
| 1,261,942 |
| 7 |
| — |
| — |
| — |
| (399 | ) | 1,527,855 |
|
Other assets |
| 252,895 |
| 50,482 |
| 169,732 |
| 564,484 |
| 68,992 |
| 121,706 |
| 1,254,475 |
| 2,482,766 |
|
Total Assets |
| 16,281,823 |
| 18,749,537 |
| 11,617,549 |
| 5,134,495 |
| 461,675 |
| 501,536 |
| 459,427 |
| 53,206,042 |
|
|
| As of December 31, 2016 |
| ||||||||||||||
|
| (in thousands of pesos) |
| ||||||||||||||
|
| Retail |
| Corporate |
| Treasury |
| Consumer |
| Insurance |
| Asset |
| Adjustments |
| Consolidated |
|
Financial income |
| 4.482.498 |
| 2.920.526 |
| 1.589.736 |
| 1.769.292 |
| 52.916 |
| 119.960 |
| (140.349 | ) | 10.794.579 |
|
Financial expenses |
| (1.916.534 | ) | (374.446 | ) | (1.703.934 | ) | (1.028.048 | ) | (1.066 | ) | (50.284 | ) | 207.787 |
| (4.866.525 | ) |
Distribution of Income (Expenses) for Treasury Funds |
| 1.307.621 |
| (1.918.789 | ) | 611.169 |
| — |
| — |
| — |
| — |
| — |
|
Gross intermediation margin |
| 3.873.585 |
| 627.291 |
| 496.971 |
| 741.244 |
| 51.850 |
| 69.676 |
| 67.438 |
| 5.928.054 |
|
Provision for loan losses |
| (550.715 | ) | (153.078 | ) | (9.265 | ) | (338.869 | ) | — |
| (5.709 | ) | — |
| (1.057.637 | ) |
Services Fee Income |
| 2.306.782 |
| 559.866 |
| 46.545 |
| 931.082 |
| — |
| 261.703 |
| -578.462 |
| 3.527.516 |
|
Services Fee Expenses |
| (996.626 | ) | (63.472 | ) | (9.113 | ) | (433.721 | ) | — |
| (1.150 | ) | 423.422 |
| (1.080.660 | ) |
Net Service Fee Income |
| 1.310.156 |
| 496.394 |
| 37.432 |
| 497.361 |
| — |
| 260.553 |
| -155.040 |
| 2.446.856 |
|
Income from Insurance Activities |
| — |
| — |
| — |
| — |
| 476.349 |
| — |
| 129.794 |
| 606.143 |
|
Direct costs |
| (2.790.068 | ) | (213.622 | ) | (94.259 | ) | (839.258 | ) | (139.227 | ) | (228.613 | ) | 8.840 |
| (4.296.207 | ) |
Indirect costs |
| (1.188.127 | ) | (399.202 | ) | (176.745 | ) | — |
| — |
| — |
| — |
| (1.764.074 | ) |
Income from financial transactions |
| 654.831 |
| 357.783 |
| 254.134 |
| 60.478 |
| 388.972 |
| 95.907 |
| 51.032 |
| 1.863.135 |
|
Miscellaneous Income / (Expenses) |
| (130.372 | ) | 24.500 |
| (2.973 | ) | 8.177 |
| — |
| 93.990 |
| (22.384 | ) | (29.062 | ) |
Non-controlling interests result |
| — |
| — |
| — |
| — |
| — |
| — |
| (22.166 | ) | (22.166 | ) |
Income Before Income Tax |
| 524.459 |
| 382.283 |
| 251.161 |
| 68.655 |
| 388.972 |
| 189.897 |
| 6.482 |
| 1.811.907 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax |
| -161.897 |
| -45.109 |
| -88.258 |
| -973 |
| -136.570 |
| -65.123 |
| -2.673 |
| -500.603 |
|
Net income |
| 362.562 |
| 337.174 |
| 162.903 |
| 67.682 |
| 252.402 |
| 124.774 |
| 3.809 |
| 1.311.304 |
|
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
|
| As of December 31, 2015 |
| ||||||||||||||
|
| (in thousands of pesos) |
| ||||||||||||||
|
| Retail |
| Corporate |
| Treasury |
| Consumer |
| Insurance |
| Asset |
| Adjustments |
| Consolidated |
|
Financial income |
| 2,917,135 |
| 1,906,335 |
| 693,726 |
| 1,050,944 |
| 22,840 |
| 71,084 |
| 79,680 |
| 6,741,744 |
|
Financial expenses |
| (1,514,611 | ) | (350,635 | ) | (921,029 | ) | (529,309 | ) | (320 | ) | (30,609 | ) | (39,537 | ) | (3,386,050 | ) |
Distribution of Income (Expenses) for Treasury Funds |
| 664,487 |
| (1,119,721 | ) | 455,234 |
| — |
| — |
| — |
| — |
| — |
|
Gross intermediation margin |
| 2,067,011 |
| 435,979 |
| 227,931 |
| 521,635 |
| 22,520 |
| 40,475 |
| 40,143 |
| 3,355,694 |
|
Provision for loan losses |
| (299,135 | ) | (72,108 | ) | — |
| (166,326 | ) | — |
| (6,275 | ) | — |
| (543,844 | ) |
Services Fee Income |
| 1,953,001 |
| 391,853 |
| 23,891 |
| 573,838 |
| — |
| 126,596 |
| (233,471 | ) | 2,835,708 |
|
Services Fee Expenses |
| (581,199 | ) | (41,309 | ) | (6,126 | ) | (272,132 | ) | — |
| (1,047 | ) | 123,321 |
| (778,492 | ) |
Net Service Fee Income |
| 1,371,802 |
| 350,544 |
| 17,765 |
| 301,706 |
| — |
| 125,549 |
| (110,150 | ) | 2,057,216 |
|
Income from Insurance Activities |
| — |
| — |
| — |
| — |
| 130,607 |
| — |
| 45,340 |
| 175,947 |
|
Direct costs |
| (2,076,291 | ) | (158,438 | ) | (57,676 | ) | (638,493 | ) | (68,183 | ) | (141,958 | ) | 84,853 |
| (3,056,186 | ) |
Indirect costs |
| (812,083 | ) | (272,994 | ) | (120,139 | ) | — |
| — |
| — |
| — |
| (1,205,216 | ) |
Income from financial transactions |
| 251,304 |
| 282,983 |
| 67,881 |
| 18,522 |
| 84,944 |
| 17,791 |
| 60,186 |
| 783,611 |
|
Miscellaneous Income / (Expenses) |
| 12,610 |
| 73,601 |
| 5,117 |
| 47,893 |
| 91 |
| 75,023 |
| (60,597 | ) | 153,738 |
|
Non-controlling interests result |
| — |
| — |
| — |
| — |
| — |
| — |
| (16,079 | ) | (16,079 | ) |
Income Before Income Tax |
| 263,914 |
| 356,584 |
| 72,998 |
| 66,415 |
| 85,035 |
| 92,814 |
| (16,490 | ) | 921,270 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax |
| (42,137 | ) | (68,139 | ) | (21,711 | ) | (6,734 | ) | (30,953 | ) | (33,285 | ) | (44,202 | ) | (247,161 | ) |
Net income |
| 221,777 |
| 288,445 |
| 51,287 |
| 59,681 |
| 54,082 |
| 59,529 |
| (60,692 | ) | 674,109 |
|
f) Repurchase agreements
The Group entered into Repo and Reverse Repo agreements of financial instruments as disclose in Note 8.
In accordance with BCRA Rules, the Group derecognizes the securities transferred under the repurchase agreement and records an asset related to the future repurchase of these securities. Contemporaneously, the Group records a liability related to the cash received in the transaction. As mentioned in Note 3.8, the asset related to securities to be repurchased is measured as the same criteria as the transferred securities.
Similar treatment applies to reverse repo agreements.
Under US GAAP, ASC 860 “Transfers and Servicing”, these transactions have not qualified as sales and therefore these transactions are recorded as secured financings.
Had US GAAP been applied, the Group’s assets and liabilities would have decreased by approximately Ps. 3,352,217 and 594,764 as of December 31, 2017 and December 31, 2016, respectively.
In addition, the measurement adjustments of those securities are included in Note 35.I.e.
g) Acceptances
Under Argentine Banking GAAP, acceptances are accounted for in memorandum accounts, Under US GAAP, third party liability for acceptances should be included in “Other Receivables Resulting from Financial Transactions” representing Group customers’ liabilities on outstanding drafts or bills of exchange that have been accepted by the Group. Acceptances should be included in “Other Liabilities from Financial Transactions” representing the Group’s liability to remit payment upon the presentation of the accepted drafts or bills of exchange.
The Group’s assets and liabilities would be increased by approximately Ps. 48,554 and Ps. 55,711 had US GAAP been applied as of December 31, 2017 and 2016, respectively.
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2017, 2016 and 2015
(Expressed in thousands of Argentine pesos — unless otherwise stated)
h) Items in process of collection
The Group does not give accounting recognition to checks drawn on the Group or other banks, or other items to be collected until such time as the related item clears or is accepted. Such items are recorded by the Group in memorandum accounts, US GAAP, however, account for such items through balance sheet clearing accounts at the time the items are presented to the Group.
Grupo Supervielle’s assets and liabilities would be increased by approximately Ps. 1,045,459 and Ps. 1,985,525 applying US GAAP at December 31, 2017 and 2016, respectively.
i) Earnings per share
Argentine Banking GAAP rules do not require the disclosure of earnings per share or dividends per share.
Under US GAAP, ASC 260 “Earning Per Share”, it is required to present basic per-share amounts (basic EPS) which is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding during the period.
Diluted earnings per share (diluted EPS) measure the performance if the potential common shares that were dilutive had been issued. Potential common shares are securities that do not have a current right to participate fully in earnings but could do so in the future. No potential common shares exist, and therefore basic and diluted EPS are the same.basis.
The following table sets forth information regarding excess capital and selected capital and liquidity ratios of the computation of basic EPS:
|
| December 31, |
| |||||||
|
| 2017 |
| 2016 |
| 2015 |
| |||
Earnings per share under US GAAP |
|
|
|
|
|
|
| |||
Numerator |
|
|
|
|
|
|
| |||
Net income for the year attributable to the Group net of preferred dividends |
| Ps. | 1,644,591,926 |
| Ps. | 997,683,608 |
| Ps. | 613,669,000 |
|
Denominator |
|
|
|
|
|
|
| |||
Average number of shares outstanding |
| 392,831,769 |
| 319,827,519 |
| 151,839,052 |
| |||
Net income per common share |
|
|
|
|
|
|
| |||
Basic and diluted |
| Ps. | 4.1865 |
| Ps. | 3.1194 |
| Ps. | 4.0416 |
|
Table of ContentsBank, consolidated with CCF:
Grupo Supervielle S.A.As stated above under “Presentation of Financial and SubsidiariesOther Information”, we have prepared our audited consolidated financial statements for 2019, 2018 and 2017 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 | ||||||||||
Calculation of excess capital: | (in thousands of Pesos except percentages and ratios) | |||||||||||
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) | 11.6 | % | 11.90 | % | 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 | % |
(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.
F-79 |
GRUPO SUPERVIELLE S.A.
Notes to the Consolidated Financial Statements
For the years endedAs of December 31, 2015, 2014 and 20132018 presented in comparative format
(Expressed in thousands of Argentine pesos — unless otherwise stated)pesos)
34. | SUBSEQUENT EVENTS |
In December 2019, a novel strain of coronavirus (COVID-19) was reported to have surfaced in Wuhan, China. COVID-19 has since spread to over 100 countries, including Argentina. On March 11, 2020 the World Health Organization declared COVID-19 a pandemic. It is likely that the pandemic will cause an economic slowdown of potentially extended duration, and it is possible that it could cause a global recession.
j)Cash FlowSince February 2020, the Argentine government has adopted several measures in response to the COVID-19 outbreak in the country aimed at preventing mass contagion, including closure of Argentine borders, suspension of domestic flights, and, since March 19, 2020 the imposition of a nation-wide mandatory lockdown, whereby only exceptional and essential activities are allowed. Banking activities were considered essential since April 11, 2020 with attention in branches allowed only with pre-scheduled turns. From March 20 until April 10, 2020, branches were closed, opening only for pension payments in certain dates. During this period, banking activities were performed only through digital means.
The statementDuring this time, all transactions have been processed almost exclusively through digital channels. We also asked our staff areas and back office employees to work from home, providing the required hardware infrastructure and remote access, while commercial branches operate with additional safety measures to protect the health of cash flows under Argentine Banking GAAP differs from the statement of cash flows under US GAAP. According to ASC 230, the statement of cash flows for a period shall report net cash provided or used by operating, investingcustomers and financing activities.
The statement of cash flows under US GAAP is shown below:
|
| December 31, |
| |||||||
|
| 2017 |
| 2016 |
| 2015 |
| |||
Cash and cash equivalents at the beginning of the year |
| Ps. | 9,688,595 |
| Ps. | 7,873,684 |
| Ps. | 4,236,987 |
|
Cash and cash equivalents at the end of the period |
| 21,758,918 |
| 9,688,595 |
| 7,873,684 |
| |||
Net increase in cash and cash equivalents |
| Ps. | 12,070,323 |
| Ps. | 1,814,911 |
| Ps. | 3,636,697 |
|
|
|
|
|
|
|
|
| |||
Causes of changes in cash and cash equivalents |
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
| |||
Cash Flow from operating activities |
|
|
|
|
|
|
| |||
Net (payments)/collections related to: |
|
|
|
|
|
|
| |||
Interest received on loans, leases and government securities |
| 12,103,112 |
| 10,529,487 |
| 6,904,085 |
| |||
Interest paid |
| (6,201,233 | ) | (5,932,146 | ) | (3,025,342 | ) | |||
Purchases of Trading Securities |
| (110,449,801 | ) | (9,766,328 | ) | (3,852,865 | ) | |||
Proceeds from sales of Trading Securities |
| 111,249,348 |
| 8,965,170 |
| 3,844,751 |
| |||
Decrease in Other receivables from financial transactions |
| (1,125,516 | ) | 72,868 |
| (3,090 | ) | |||
Fees and commissions received |
| 5,789,970 |
| 4,436,397 |
| 3,040,982 |
| |||
Fees and commissions paid |
| (9,409,023 | ) | (6,691,853 | ) | (4,700,400 | ) | |||
Payments of income tax / minimun presumed income tax |
| (474,899 | ) | (345,561 | ) | (389,564 | ) | |||
Net collections / (payments) related to other operating activities |
| (1,151,138 | ) | (365,876 | ) | (133,641 | ) | |||
Net cash provided by operating activities |
| Ps. | 330,820 |
| 902,158 |
| 1,684,916 |
| ||
|
|
|
|
|
|
|
| |||
Cash Flow from investing activities |
|
|
|
|
|
|
| |||
(Payments)/collections related to: |
|
|
|
|
|
|
| |||
Payments to acquire bank premises and equipment |
| (196,408 | ) | (507,251 | ) | (105,043 | ) | |||
Receipts from sales of bank premises and equipment |
| 20,567 |
| 12,998 |
| 140,785 |
| |||
Increase in intangible assets |
| (156,309 | ) | (97,184 | ) | (100,886 | ) | |||
Increase in loans and leases, net |
| (20,940,436 | ) | (13,768,330 | ) | (6,610,515 | ) | |||
Purchases of available for sale securities |
| (48,298,116 | ) | (77,576,169 | ) | (4,651,357 | ) | |||
Proceeds from sales of available for sale securities |
| 47,866,004 |
| 76,563,334 |
| 5,478,396 |
| |||
Payments to acquire miscellaneous assets |
| (684,145 | ) | (489,105 | ) | (399,493 | ) | |||
Receipts from sales of miscellaneous assets |
| 542,153 |
| 530,193 |
| 179,206 |
| |||
Increase in deposits at the Argentine Central Bank |
| (319,910 | ) | (140,739 | ) | (190,070 | ) | |||
Receipts / (Payments) for sale of equity securities |
| 33,112 |
| (21 | ) | — |
| |||
Net cash used in investing activities |
| Ps. | (22,133,488 | ) | (15,472,273 | ) | (6,258,977 | ) | ||
|
|
|
|
|
|
|
| |||
Cash Flow from financing activities |
|
|
|
|
|
|
| |||
(Payments)/collections related to: |
|
|
|
|
|
|
| |||
Proceeds from issuance of unsubordinated negotiable obligations |
| 7,570,920 |
| 1,493,743 |
| 2,038,879 |
| |||
Repayment of unsubordinated negotiable obligations |
| (1,180,664 | ) | (769,060 | ) | (884,824 | ) | |||
Increase in deposits, net |
| 16,154,504 |
| 12,493,587 |
| 6,764,640 |
| |||
(Decrease) / Increase in other short term liabilities, net |
| 4,630,403 |
| 1,735,578 |
| (431,672 | ) | |||
Repayment of subordinated negotiable obligations |
| (876,835 | ) | — |
| — |
| |||
Financing received from Argentine financial institutions |
| (228,665 | ) | (1,686,277 | ) | — |
| |||
Proceeds from issuance of stocks |
| 5,841,688 |
| 3,301,137 |
| — |
| |||
Payment of dividends |
| (65,500 | ) | (25,503 | ) | (7,385 | ) | |||
Payments for debt issue cost |
| — |
| — |
| (4,391 | ) |
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, 2014 and 2013
(Expressed in thousands of Argentine pesos — unless otherwise stated)
|
| December 31, |
| |||||||||
|
| 2017 |
| 2016 |
| 2015 |
| |||||
Proceeds from debt securities related with consolidated financial trust |
| 2,513,424 |
| 1,307,005 |
| 2,090,646 |
|
| ||||
Repayment of debt securities related with consolidated financial trust |
| (1,663,099 | ) | (1,992,606 | ) | (1,836,124 | ) |
| ||||
Net cash provided by financing activities |
| Ps. | 32,696,176 |
| 15,857,604 |
| 7,729,769 |
|
| |||
|
|
|
|
|
|
|
|
| ||||
Financial income on cash and cash equivalents (including interest and monetary results) |
| 1,176,815 |
| 527,422 |
| 480,989 |
|
| ||||
Net increase / (decrease) in cash and cash equivalents |
| Ps. | 12,070,323 |
| Ps. | 1,814,911 |
| Ps. | 3,636,697 |
|
| |
Cash and cash equivalents reconciliation:
|
| December 31, |
| |||||||
|
| 2017 |
| 2016 |
| 2015 |
| |||
Cash and cash equivalents under Argentine Banking GAAP |
| Ps. | 25,421,865 |
| Ps | 9,688,554 |
| Ps | 7,616,502 |
|
Securities under repurchase agreements |
| (3,738,790 | ) | — |
| — |
| |||
Cash and cash equivalent from consolidated financial trusts |
| 75,843 |
| 41 |
| 257,182 |
| |||
Cash and cash equivalents under US-GAAP |
| 21,758,918 |
| 9,688,595 |
| 7,873,684 |
| |||
Set forth below is the reconciliation of net income to net cash flows from operating activities, as required by FASB ASC 230:
|
| December 31, |
| |||||||
|
| 2017 |
| 2016 |
| 2015 |
| |||
|
|
|
|
|
|
|
| |||
Net income for the fiscal year |
| Ps. | 1,697,481 |
| Ps. | 1,025,868 |
| Ps. | 676,076 |
|
|
|
|
|
|
|
|
| |||
Adjustments to reconcile net income to net cash from operating activities: |
|
|
|
|
|
|
| |||
US GAAP Reconciliation Adjustments |
| 792,467 |
| 313,620 |
| 55,755 |
| |||
Income Tax for the fiscal year |
| 871,845 |
| 576,649 |
| 340,306 |
| |||
Amortizations and depreciations |
| 267,875 |
| 210,521 |
| 166,384 |
| |||
Results from equity investments |
| — |
| 4,996 |
| (3 | ) | |||
Provision for loan losses, net of reversals |
| 1,809,323 |
| 1,042,814 |
| 545,101 |
| |||
Non-controlling interests |
| (52,889 | ) | (28,184 | ) | (57,722 | ) | |||
Gain for sale of premises and equipment |
| (3,147 | ) | (5,568 | ) | (93,830 | ) | |||
Increase in interest payable from negotiable obligations and debt securities of financial trust |
| 204,621 |
| 50,187 |
| 42,936 |
| |||
(Decrease) / Increase in government and private securities |
| (2,673,232 | ) | (695,590 | ) | 22,392 |
| |||
Increase in interest receivable from Loans |
| (623,897 | ) | (358,836 | ) | (149,055 | ) | |||
(Increase) / Decrease in other receivable from financial intermediation |
| (414,466 | ) | (543,391 | ) | 123,649 |
| |||
Increase from miscellaneous assets |
| (665,083 | ) | (506,650 | ) | (222,802 | ) | |||
Increase in balances from forward transactions without delivery of underlying asset |
| 1,388 |
| 5,929 |
| 12,662 |
| |||
Decrease / (Increase) in interest payable from Deposits |
| 271,222 |
| (49,643 | ) | 78,013 |
| |||
Increase of miscellaneous liabilities |
| 635,659 |
| 414,907 |
| 483,692 |
| |||
Decrease in Taxes Payables |
| (671,220 | ) | (234,554 | ) | (289,587 | ) | |||
Financial income on cash and cash equivalents |
| (1,117,127 | ) | (238,124 | ) | (49,051 | ) | |||
Net cash provided by operating activities |
| Ps: | 330,820 |
| Ps. | 902,158 |
| Ps. | 1,684,916 |
|
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, 2014 and 2013
(Expressed in thousands of Argentine pesos — unless otherwise stated)
k) New authoritative pronouncements
The last Accounting Standards Updates issued by the FASB applicable for the Group are mentioned below:
ASU No. 2014-09employees.
In May 2014,order to mitigate the FASBeconomic impact of the lockdown, the Central Bank issued a series of preventive measures, including the Accounting Standard Update No. 2014-09 “Revenue from Contracts with Customers (Topic 606)”. The guidancefollowing:
· | Communication “A” 6937 reduced the positions restrictions on the maximum position in liquidity notes from the Central Bank (LELIQ), in order to make available liquidity and encourage the provision of credit lines to SMEs to be granted at a preferential rate (not more than 24% per year). |
· | Communications “A” 6939 and “A” 6942, by means of which it was determined that: (i) financial institutions shall not be open to the public from March 20 through April 12, 2020, and (ii) the maturity of financings granted by local financial institutions that were to occur during that period were postponed. In this sense, Communication “A” 6949 also waived any punitory interest on unpayed balances in credits granted by financial entities. | |
· | Communication “A” 6939 also suspended, until June 30, 2020, the distribution of dividends by financial entities. | |
· | Communication “A” 6945 determined that until June 30, 2020, any operation effected through ATMs shall not be subject to any charges or fees. |
· | Communication “A” 6964 determined that the unpaid balances of credit cards financings that take place between April 13, 2020 and April 30, 2020, shall be automatically refinanced for at least one year with 3 grace months in 9 equal and consecutive monthly installments. 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. |
· | Communication “A” 6980 ruled that all non-adjustable time deposits under Ps. 1 million integrated by individuals as of April 20, 2020, shall have a minimum rate equivalent to the 70% of the average LELIQ’s tendering. |
Some of these measures may adversely affect our revenues, while the consequences of the lockdown in this update affects any entity that either enters into contracts withthe economic activity may impair the ability of some of our customers to transfer goods or services or enters into contractsrepay their loans, thus increasing loan loss provisions. Nonetheless, the extent to which our business will be impacted will depend on future developments, which are highly uncertain and cannot be predicted. As we continue to monitor the spread of COVID-19 and related risks, we believe we will be able to serve our financial obligations for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance contracts or lease contracts).next fiscal year.
The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
ASU No. 2015-14 defer the effective date of ASU 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period.
All other entities should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019.
The impact of this Update will not have any significant effect in the US GAAP disclosures and financial information.
ASU No. 2016-01
On January 2015, the FASB issued the Accounting Standard Update No. 2016-01 “Recognition and Measurement of Financial Assets and Financial Liabilities (Financial Instruments—Overall Subtopic 825-10)”.
The amendments in this Update make targeted improvements to generally accepted accounting principles (GAAP) as follows:
1. Require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.
2. Simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value.
3. Eliminate the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities.
4. Eliminate the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet.
5. Require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes.
F-80 |
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, 2014 and 2013
(Expressed in thousands of Argentine pesos — unless otherwise stated)
6. Require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments.
7. Require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements.
8. Clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets.
For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.
The impact of this Update did not have any significant effect in the present US GAAP financial statements.
ASU 2016-02
On February 2016, the FASB issued the Accounting Standard Update No. 2016-02 “Leases”. The amendments affects any entity that enters into a leas, with some specified scope exemptions. The main difference between previous GAAP and Topic 842 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP.
A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. When measuring assets and liabilities arising from a lease, a lessee (and a lessor) should include payments to be made in optional periods only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option to terminate the lease. Similarly, optional payments to purchase the underlying asset should be included in the measurement of lease assets and lease liabilities only if the lessee is reasonably certain to exercise that purchase option. Reasonably certain is a high threshold that is consistent with and intended to be applied in the same way as the reasonably assured threshold in the previous leases guidance. In addition, also consistent with the previous leases guidance, a lessee (and a lessor) should exclude most variable lease payments in measuring lease assets and lease liabilities, other than those that depend on an index or a rate or are in substance fixed payments.
The amendments in this Update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.
The Company is still evaluating the impact of this Update in the US GAAP financial statements.
ASU 2016-13
On June 2016, the FASB issued the Accounting Standard Update No. 2016-13 “Financial Instruments — Credit Losses: Measurement of Credit Losses on Financial Instruments”. The amendments affect entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The amendments in this Update affect an entity to varying degrees depending on the credit quality of the assets held by the entity, their duration, and how the entity applies current GAAP. There is diversity in practice in applying the incurred loss methodology, which means that before transition some entities may be more aligned, under current GAAP, than others to the new measure of expected credit losses.
The amendments in this Update require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The allowance for credit losses is a
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, 2014 and 2013
(Expressed in thousands of Argentine pesos — unless otherwise stated)
valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. The income statement reflects the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period.
The allowance for credit losses for purchased financial assets with a more-than insignificant amount of credit deterioration since origination (PCD assets) that are measured at amortized cost basis is determined in a similar manner to other financial assets measured at amortized cost basis; however, the initial allowance for credit losses is added to the purchase price rather than being reported as a credit loss expense. Only subsequent changes in the allowance for credit losses are recorded as a credit loss expense for these assets. Interest income for PCD assets should be recognized based on the effective interest rate, excluding the discount embedded in the purchase price that is attributable to the acquirer’s assessment of credit losses at acquisition
The amendments in this Update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. All entities may adopt the amendments in this Update earlier as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.
The Company is still evaluating the impact of this Update in the US GAAP financial statements.
ASU 2016-15
On August 2016, the FASB issued the Accounting Standard Update No. 2016-15 “Statement of Cash Flow — Classification of Certain Cash Receipt and Cash Prepayment”. The amendments in this Update apply to all entities, including both business entities and not-for-profit entities that are required to present a statement of cash flows under Topic 230. The amendments in this Update provide guidance on the following eight specific cash flow issues: i) Debt prepayment or debt extinguishment co sts, ii) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, iii) Contingent Consideration Payments Made after a Business Combination, iv) Proceeds from the Settlement of Insurance Claims, v) Proceeds from the Settlement of Corporate-Owned Life Insurance Policies, including Bank-Owned Life Insurance Policies, vi) Distributions Received from Equity Method Investees, vii) Beneficial Interests in Securitization Transactions and viii) Separately Identifiable Cash Flows and Application of the Predominance Principle .
The amendments in this Update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017.
The Company is still evaluating the impact of this Update in the US GAAP financial statements.
ASU 2016-18
On Novemeber 2016, the FASB issued the Accounting Standard Update No. 2016-18 “Statement of Cash Flow — Restricted Cash”. The amendments in this Update apply to all entities, including both business entities and not-for-profit entities that are required to present a statement of cash flows under Topic 230. The amendments in this Update require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this Update do not provide a definition of restricted cash or restricted cash equivalents.
The amendments in this Update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017.
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, 2014 and 2013
(Expressed in thousands of Argentine pesos — unless otherwise stated)
The Company is still evaluating the impact of this Update in the US GAAP financial statements.
ASU 2017-01
On January 2017, the FASB issued the Accounting Standard Update No. 2017-01 “Business Combinations — Clarifying the definition of a Business”. The amendments in this Update affect all reporting entities that must determine whether they have acquired or sold a business. The amendments in this Update provide a screen to determine when a set is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. If the screen is not met, the amendments in this Update (1) require that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) remove the evaluation of whether a market participant could replace missing elements. The amendments provide a framework to assist entities in evaluating whether both an input and a substantive process are present. The framework includes two sets of criteria to consider that depend on whether a set has outputs. Although outputs are not required for a set to be a business, outputs generally are a key element of a business; therefore, the Board has developed more stringent criteria for sets without outputs.
The amendments in this Update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017.
The impact of this Update will not have any significant effect in the present US GAAP financial statements.
ASU 2017-04
In January 2017, the FASB issued the Accounting Standards Update No. 2017-04 “Simplifying the Test for Goodwill Impairment”. The amendments in this Update simplify how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Instead, under the amendments in this Update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The amendments in this Update are required for public business entities and other entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill.
An entity should apply the amendments in this Update on a prospective basis. A public business entity that is an SEC filer should adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.
The Company considers this ASU will not have any significant effect in the US GAAP disclosures and financial information.
ASU 2017-05
In February 2017, the FASB issued the Accounting Standards Update No. 2017-05 “Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets”. The amendments in this Update clarify that a financial asset is within the scope of Subtopic 610-20 if it meets the definition of an in substance nonfinancial asset and add guidance for partial sales of nonfinancial assets. An entity may elect to apply the amendments in this Update either: a) retrospectively to each period presented in the financial statements in accordance with the guidance on accounting changes in paragraphs 250-10-45-5 through 45-
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, 2014 and 2013
(Expressed in thousands of Argentine pesos — unless otherwise stated)
10 (retrospective approach); or b) retrospectively with a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption (modified retrospective approach).
The amendments in this Update are effective at the same time as the amendments in Update 2014-09. Therefore, for public entities, the amendments are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period.
The Company considers this ASU will not have any significant effect in the US GAAP disclosures and financial information.
ASU 2017-11
On July 2017, the FASB issued the Accounting Standard Update No. 2017-11 “Earnings per share, Distinguishing liabilities from equity, derivatives and hedging”. The amendments in this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic 260).
The amendments in this Update are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.
The Company is still evaluating the impact of this Update in the US GAAP financial statements.
ASU 2017-12
In August 2017, the FASB issued an ASU that will improve and simplify accounting rules around hedge accounting. The new standard refines and expands hedge accounting for both financial (e.g., interest rate) and commodity risks. More hedging strategies will be eligible for hedge accounting. These include hedges of the benchmark rate component of the contractual coupon cash flows of fixed-rate assets or liabilities, hedges of the portion of a closed portfolio of prepayable assets not expected to prepay, and partial-term hedges of fixed-rate assets or liabilities (e.g., the first and second years of a five-year bond).
Public business entities, public not-for-profit entities, and financial institutions will have until the end of the first quarter in which a hedge is designated to perform an initial assessment of a hedge’s effectiveness. All other companies will have until their financial statements are available to be issued. After initial qualification, the new guidance permits a qualitative effectiveness assessment for certain hedges instead of a quantitative test, such as a regression analysis, if the company can reasonably support an expectation of high effectiveness throughout the term of the hedge. An initial quantitative test to establish that the hedge relationship is highly effective is still required. For cash flow hedges, if the hedge is highly effective, all changes in the fair value of the derivative hedging instrument will be recorded in other comprehensive income. They will be reclassified to earnings when the hedged item impacts earnings. On the other hand, for fair value hedges, because the change in fair value of the hedged item and the derivative hedging instrument will still be recorded in current earnings, if the hedge is not perfectly effective, there will be an Income Statement impact.
Grupo Supervielle S.A. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015, 2014 and 2013
(Expressed in thousands of Argentine pesos — unless otherwise stated)
The ASU is effective for public companies in 2019 and private companies in 2020. Early adoption is permitted.
The Company considers this ASU will not have any significant effect in the US GAAP disclosures and financial information.